<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
JPS PACKAGING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2671 31-1311495
(STATE OF OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER)
IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
9201 PACKAGING DRIVE, DESOTO, KANSAS 66018
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN T. CARPER, 9201 PACKAGING DRIVE, DESOTO, KANSAS 66018, (913) 583-8730
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
THOMAS W. VAN DYKE
BRYAN CAVE LLP
7500 COLLEGE BOULEVARD, SUITE 1100
OVERLAND PARK, KS 66210-4035
(913) 338-7700
(913) 338-7777 (TELECOPIER)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PRICE PER UNIT PRICE(2) FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share 5,599,889 $(2) $36,656,368.24 $10,813.63
- -----------------------------------------------------------------------------------------------
</TABLE>
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(1) Represents the estimated maximum number of shares of common stock, par
value $.01 per share, of JPS Packaging Company ("JPS Common Stock") to be
sold in exchange for the common stock, par value $.10 per share, of
Sealright Co., Inc. ("Sealright Common Stock") and an estimated number of
shares of JPS Common Stock which may be issued by JPS Packaging Company in
connection with the settlement of employee stock option agreements.
(2) Pursuant to Rule 457, the filing fee has been computed based on the market
value of the shares of Sealright Common Stock to be cancelled in the
exchange, using the average of the high and low sales price of Sealright
Common Stock as reported on the Nasdaq Stock Market, Inc. on June 1, 1998,
calculated in accordance with Rule 457(c) (a total of $36,577,677.18),
plus the offering price of 11,471 shares of JPS Common Stock which may be
issued in connection with the settlement of certain Sealright employee
stock option agreements, determined in accordance with the valuation of
$6.86 per share set forth in the amendments to such option agreements (a
total of $78,691.06), for an aggregate maximum offering price of
$36,656,368.24. No maximum offering price per unit for JPS Common Stock is
available.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
LOGO
June 9, 1998
To our Stockholders:
As you may be aware, Sealright Co., Inc. ("Sealright") has agreed to merge
with a subsidiary of Huhtamaki Oy ("Huhtamaki"), subject to the approval of
Sealright's stockholders (the "Merger"). At a special meeting of Stockholders
of Sealright to be held on June 29, 1998, at the offices of Bryan Cave LLP,
Suite 3700, One Kansas City Place, 1200 Main Street, Kansas City, Missouri
64105 at 10:00 a.m. Central Daylight Time (the "Special Meeting"), Sealright
stockholders will be asked to approve and adopt the Agreement and Plan of
Merger, dated March 2, 1998 among Sealright, Huhtamaki and Seal Acquisition
Corporation (the "Merger Agreement"). If the Merger is approved, stockholders
of Sealright will receive $11.00 in cash without interest per share of
Sealright common stock in connection with the Merger, and will also receive
one-half share of common stock of Sealright's subsidiary, JPS Packaging
Company ("JPS Packaging"), for each share of Sealright common stock in partial
redemption and exchange for Sealright common stock (the "Exchange"). Those
shares of JPS Packaging will represent your ownership in Sealright's flexible
packaging and labeling business. Additionally, JPS Packaging will
simultaneously redeem any partial shares of its common stock issued in
connection with the Exchange for $6.86 in cash per share.
Sealright's Board of Directors unanimously approved the Merger Agreement and
believes that the Merger with Huhtamaki and the Exchange for the JPS Packaging
common stock are in the best interests of Sealright and its stockholders. The
Board unanimously recommends that you adopt and approve the Merger Agreement
and the transactions contemplated therein, including the Exchange, at the
Special Meeting so that the Merger may be completed.
Sealright's Board of Directors has received an oral opinion, subsequently
confirmed in writing, from Goldman, Sachs & Co., its financial advisor, dated
March 2, 1998, to the effect that, as of such date, the $11.00 per share in
cash to be received by the holders (other than Huhtamaki, Sealright or any
direct or indirect subsidiary of Huhtamaki or Sealright) of Sealright Common
Stock for the Rigid Packaging Business is fair from a financial point of view
to such holders.
The Merger Agreement, the Merger and Exchange are more fully described in
the accompanying Proxy Statement/Prospectus, including factors which should be
considered in connection with your vote. Please review this information
carefully.
Your participation in the Special Meeting, whether by person or by proxy, is
important. To ensure that your shares are represented at the Special Meeting,
please complete, sign, date and promptly return your proxy card in the
enclosed envelope. If you are present at the Special Meeting, you may, if you
wish, withdraw your proxy and vote in person.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. DO NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Sincerely,
LOGO
Charles F. Marcy
President and Chief Executive
Officer
<PAGE>
SEALRIGHT CO., INC.
9201 PACKAGING DRIVE
DESOTO, KANSAS 66018
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1998
----------------
To our Stockholders:
Notice is hereby given that a Special Meeting of Stockholders will be held
on June 29, 1998, at 10:00 a.m. Central Daylight Time at the offices of Bryan
Cave LLP, Suite 3700, One Kansas City Place, 1200 Main Street, Kansas City,
Missouri 64105, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of March 2, 1998 (the "Merger Agreement") and the
transactions contemplated therein including the partial redemption of Common
Stock of Sealright (the "Exchange") and the merger of Seal Acquisition
Corporation, a wholly-owned subsidiary of Huhtamaki Oy ("Huhtamaki"), into
Sealright Co., Inc. ("Sealright") with Sealright surviving the merger as a
wholly-owned subsidiary of Huhtamaki (the "Merger"), pursuant to which
transactions each outstanding share of the common stock of Sealright, par
value $.10 per share (the "Sealright Common Stock") will be converted into the
right to receive $11.00 in cash without interest (the "Merger Consideration")
and one-half share of common stock, par value $.01 per share (the "Redemption
Consideration"), of Sealright's subsidiary, JPS Packaging Company ("JPS
Packaging"), with any partial shares of Common Stock of JPS Packaging issued
to a stockholder being redeemed by JPS Packaging for $6.86 in cash per share;
and
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof (including adjournment or
postponement of the Special Meeting to allow for additional solicitation of
stockholder votes).
Information regarding the proposed Merger, the Merger Agreement, the
issuance of JPS Packaging shares in partial redemption and exchange for
Sealright Common Stock and related matters is set forth in the accompanying
Proxy Statement/Prospectus and the appendices thereto. A copy of the Merger
Agreement is attached as Appendix A to the accompanying Proxy
Statement/Prospectus.
Only holders of Sealright Common Stock of record as of the close of business
on June 1, 1998 are entitled to notice of and to vote at the Special Meeting
or any adjournment or postponement thereof.
Whether or not you plan to attend the Special Meeting, please complete, date
and sign the enclosed proxy and return it in the enclosed envelope. If you
plan to attend the Special Meeting, please mark the appropriate space on the
enclosed proxy.
By Order of the Board of Directors
LOGO
Charles F. Marcy
President and Chief Executive
Officer
DeSoto, Kansas
June 9, 1998
<PAGE>
SEALRIGHT CO., INC.
PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 29, 1998
LOGO LOGO
JPS PACKAGING COMPANY
PROSPECTUS
A MAXIMUM OF 5,599,889 SHARES OF COMMON STOCK
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to the holders of the common stock, par value $.10 per share, (the
"Sealright Common Stock") of Sealright Co., Inc., a Delaware corporation
("Sealright"), in connection with the solicitation of proxies by the Board of
Directors of Sealright (the "Sealright Board") for use at the Special Meeting
of Stockholders of Sealright to be held at the offices of Bryan Cave LLP,
Suite 3700, One Kansas City Place, 1200 Main Street, Kansas City, Missouri
64105, on June 29, 1998 at 10:00 a.m. Central Daylight Time, and any
adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, holders of record as of June 1, 1998 (the "Record
Date") of Sealright Common Stock will be requested to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of
March 2, 1998 by and among Sealright, Huhtamaki Oy, a corporation organized
under the laws of Finland ("Huhtamaki") and Seal Acquisition Corporation, a
Delaware corporation ("Acquisition Sub"), a wholly-owned subsidiary of
Huhtamaki (the "Merger Agreement") and the transactions contemplated therein.
Pursuant to the Merger Agreement, (i) Sealright will exchange the issued and
outstanding common stock of its subsidiary, JPS Packaging Company ("JPS
Packaging"), in partial redemption for the issued and outstanding shares of
Sealright Common Stock (the "Exchange"), (ii) Acquisition Sub will be merged
with and into Sealright, with Sealright as the surviving corporation of the
Merger (the "Merger"), and (iii) each share of Sealright Common Stock (other
than those shares held by Huhtamaki, Sealright or any direct or indirect
wholly-owned subsidiary of Huhtamaki or any subsidiary of Sealright)
outstanding immediately prior to the effective time of the Merger ("Effective
Time") will be converted into the right to receive $11.00 in cash without
interest (the "Merger Consideration") and one-half share of common stock of
JPS Packaging (the "Redemption Consideration"). A copy of the Merger Agreement
is attached as Appendix A to this Proxy Statement/Prospectus and is
incorporated herein by reference. As of the Record Date, there were 11,082,564
shares of Sealright Common Stock issued and outstanding.
As of the Effective Time, JPS Packaging will redeem any partial shares of
the common stock of JPS Packaging, par value $.01 per share ("JPS Common
Stock") issued to a stockholder in connection with the Exchange for $6.86 in
cash per share. There is currently no public trading market for the shares of
JPS Common Stock. The JPS Common Stock is expected to trade on the National
Market Tier of The Nasdaq Stock Market.
After careful consideration, the Sealright Board has unanimously determined
that the terms of the proposed Merger and the proposed Exchange are fair to,
and in the best interests of, Sealright and its stockholders. In reaching its
determination, the Sealright Board considered, among other things, the opinion
of Goldman, Sachs & Co. ("Goldman Sachs"), Sealright's financial advisor, as
to the fairness of the consideration to be received by the holders (other than
Huhtamaki, Sealright or any direct or indirect subsidiary of Huhtamaki or
Sealright) of Sealright Common Stock for the Rigid Packaging Business from a
financial point of view. ACCORDINGLY, THE SEALRIGHT BOARD HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER AND EXCHANGE, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE MERGER AND EXCHANGE AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
<PAGE>
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Sealright Common Stock. Pursuant to
an Irrevocable Proxy and Stock Option Agreement dated March 2, 1998 (the
"Proxy and Option Agreement"), George K. Baum Group, Inc., The G. Kenneth Baum
Revocable Trust and The William D. Thomas Trust (collectively, with their
assigns, the "Stockholder Group") have granted proxies to representatives of
Huhtamaki, to vote 4,455,115 shares of Sealright Common Stock which were owned
by them (representing approximately 40% of outstanding Sealright Common
Stock). This agreement was approved by the Sealright Board prior to the
execution of the Merger Agreement. See "PROXY AND OPTION GRANTED TO
HUHTAMAKI."
Holders of Sealright Common Stock will be entitled to appraisal rights under
Delaware law in connection with the Merger, as described in the accompanying
Proxy Statement/Prospectus. Sealright stockholders who vote by proxy and wish
to seek appraisal rights must vote against the adoption of the Merger
Agreement and the transactions contemplated thereby or must abstain from
voting on the Merger Agreement and follow the other procedures summarized in
this Proxy Statement/Prospectus. See "APPRAISAL RIGHTS."
This Proxy Statement/Prospectus, in addition to constituting Sealright's
Proxy Statement relating to the Special Meeting, also includes and constitutes
the Prospectus of JPS Packaging with respect to the JPS Common Stock issuable
to Sealright stockholders pursuant to the Exchange, in partial redemption and
exchange for the Sealright Common Stock and the JPS Common Stock issuable in
connection with the settlement of outstanding employee stock options for the
purchase of Sealright Common Stock. All information concerning JPS Packaging
contained in this Proxy Statement/Prospectus has been furnished or prepared by
JPS Packaging, and all information concerning Sealright contained (or, as
permitted by applicable rules and regulations of the Securities and Exchange
Commission (the "Commission"), incorporated by reference with respect to
Sealright) in this Proxy Statement/Prospectus has been furnished or prepared
by Sealright.
SEALRIGHT STOCKHOLDERS SHOULD CAREFULLY CONSIDER THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE FACTORS DISCUSSED UNDER
THE HEADING "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROXY
STATEMENT/PROSPECTUS.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement/Prospectus, the Notice of Special Meeting and the
accompanying form of proxy are first being mailed to Sealright stockholders on
or about June 9, 1998.
The date of this Proxy Statement/Prospectus is June 9, 1998.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
AND INCORPORATION OF DOCUMENTS
Sealright files annual, quarterly and special reports, proxy statements and
other information with the Commission. Following the Exchange, JPS Packaging
will make similar filings with the Commission. You may read and copy any
reports, statements or other information that the companies file at the
Commission's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Sealright's filings with
the Commission are also available to the public from commercial document
retrieval services and at the Internet web site maintained by the Commission
at "http://www.sec.gov."
JPS Packaging filed a registration statement on Form S-4 (the "Registration
Statement") to register with the Commission the JPS Common Stock to be issued
to Sealright stockholders in the Exchange. This Proxy Statement/Prospectus is
a part of that Registration Statement and constitutes a prospectus of JPS
Packaging, as well as being a proxy statement of Sealright for the Special
Meeting. In addition, JPS Packaging filed a registration statement on Form 8-A
to register with the Commission the JPS Common Stock to be issued to Sealright
stockholders in the Exchange.
As allowed by Commission rules, this Proxy Statement/Prospectus does not
contain all the information you can find in the Registration Statement or the
exhibits to that Registration Statement.
The Commission allows Sealright to "incorporate by reference" information
into this Proxy Statement/Prospectus which means that important information
may be disclosed to you by referring you to another document filed separately
with the Commission. The information incorporated by reference is deemed to be
part of this Proxy Statement/Prospectus, except for any information superseded
by information contained directly in the Proxy Statement/Prospectus. This
Proxy Statement/Prospectus incorporates by reference the documents set forth
below that Sealright has previously filed with the Commission. These documents
contain important information about Sealright and its financial condition.
<TABLE>
<CAPTION>
SEALRIGHT'S COMMISSION
FILINGS (FILE NO. 0-14825) PERIOD
-------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarter ended March 31, 1998
Current Report on Form 8-K Filed on March 17, 1998
</TABLE>
In addition, JPS Packaging's registration statement on Form 8-A dated June
8, 1998 is incorporated by reference. Additionally, documents Sealright or JPS
Packaging may file with the Commission from the date of this Proxy
Statement/Prospectus to the date of the Special Meeting, including 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 and amendments to
Form 8-A, are incorporated by reference.
If you are a Sealright stockholder, you may have been sent some of the
documents incorporated by reference. Additionally, you can obtain any of them
by contacting Sealright, the Commission or through the Commission's Internet
web site as described above. THIS PROXY STATEMENT/PROSPECTUS INCORPORATES
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) WILL BE
PROVIDED WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS
IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO SEALRIGHT CO., INC., 9201
PACKAGING DRIVE, DESOTO, KANSAS 66018, ATTENTION: JOHN T. CARPER, CHIEF
FINANCIAL OFFICER (TELEPHONE NUMBER (913) 583-3025). IN ORDER TO ENSURE TIMELY
DELIVERY OF DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 20, 1998.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER AND
EXCHANGE. NEITHER SEALRIGHT NOR JPS PACKAGING HAS
i
<PAGE>
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT
IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED JUNE 9, 1998. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITY OTHER THAN THE JPS COMMON STOCK
TO WHICH IT RELATES OR AN OFFER OR SOLICITATION TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF DOCUMENTS......... i
SUMMARY.................................................................... 1
The Companies............................................................ 1
Reasons for the Merger and Exchange...................................... 1
Recommendation to Stockholders........................................... 2
The Merger and Exchange.................................................. 2
Answers to Some Common Questions......................................... 5
SEALRIGHT SUMMARY OF SELECTED FINANCIAL INFORMATION........................ 6
JPS PACKAGING SUMMARY OF SELECTED FINANCIAL INFORMATION.................... 8
COMPARATIVE AND PRO FORMA PER SHARE DATA................................... 10
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................. 11
RISK FACTORS............................................................... 11
No Operating History as an Independent Company; Operating Losses......... 11
Liquidity................................................................ 11
Ability to Attract and Retain Key Personnel.............................. 12
Implementation of New Information Systems and Year 2000 Compliance....... 12
Absence of Dividends..................................................... 12
Contingent Liabilities Associated with Flexible Packaging Business....... 12
Competition.............................................................. 12
No Prior Market for JPS Common Stock..................................... 13
Ongoing Relationship with Sealright...................................... 13
Exposure to Fluctuation in Raw Material Prices........................... 13
THE SPECIAL MEETING........................................................ 13
General.................................................................. 13
Matters to be Considered................................................. 14
Board of Director's Recommendation....................................... 14
Record Date; Voting Rights............................................... 14
Quorum................................................................... 14
Vote Required............................................................ 14
Dissenter's Rights....................................................... 15
Proxies.................................................................. 15
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE PROPOSED TRANSACTIONS................................................. 16
Background.............................................................. 16
Reasons for the Transactions; Recommendation of the Sealright Board..... 18
Opinion of Financial Advisor............................................ 18
Engagement of Financial Advisors........................................ 21
Irrevocable Proxy and Option............................................ 21
TERMS OF THE MERGER AGREEMENT AND EXCHANGE................................ 21
Terms of the Merger..................................................... 22
Terms of the Exchange................................................... 22
Effective Time; Closing................................................. 22
Payment of Merger Consideration and Redemption Consideration............ 22
Representations and Warranties.......................................... 23
Business of Sealright Pending the Merger................................ 24
Conduct of Flexible Packaging Business Pending the Merger............... 24
No Solicitation of Third Party Acquisition Proposals.................... 24
Certain Covenants of Huhtamaki.......................................... 25
Certain Other Covenants................................................. 25
Terms of Ancillary Agreements........................................... 26
Employment Matters...................................................... 27
Fees and Expenses....................................................... 27
Conditions.............................................................. 27
Treatment of Sealright Stock Options.................................... 28
Termination; Certain Fees............................................... 28
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF TRANSACTIONS.................. 29
PROXY AND OPTION GRANTED TO HUHTAMAKI..................................... 30
REGULATORY APPROVALS...................................................... 31
APPRAISAL RIGHTS.......................................................... 31
THE JPS PACKAGING REORGANIZATION.......................................... 33
LISTING AND TRADING OF JPS COMMON STOCK................................... 34
JPS PACKAGING CAPITALIZATION.............................................. 35
JPS PACKAGING SELECTED FINANCIAL DATA..................................... 36
JPS PACKAGING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................ 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Restructuring........... 38
Period Ended March 31,
1998 Compared to
1997................. 38
Year Ended December 31,
1997 Compared to
1996................. 38
Year Ended December 31,
1996 Compared to
1995................. 39
Liquidity and Capital
Resources............ 39
Effects of Inflation.... 40
New Accounting
Pronouncements....... 40
Year 2000 Compliance.... 40
JPS PACKAGING BUSINESS AND
PROPERTIES............. 40
Overview................ 40
Industry................ 41
Markets and Products.... 41
Sales, Marketing and
Distribution......... 41
Manufacturing Process... 42
Competition............. 43
Employees............... 43
Raw Materials........... 43
Governmental Regulation;
Environmental
Matters.............. 43
Research and
Development.......... 43
Patents and Trademarks.. 43
Seasonality of the JPS
Packaging Business... 44
Customers............... 44
Sales and Backlog....... 44
Properties.............. 44
Legal Proceedings....... 44
JPS PACKAGING MANAGEMENT.. 45
Board of Directors of
JPS Packaging........ 45
Directors' Meetings,
Fees and Committees.. 45
Executive Officers of
JPS Packaging........ 46
JPS PACKAGING EXECUTIVE
COMPENSATION........... 47
Introduction and
Summary.............. 47
Stock Options........... 48
Employment/Severance
Agreements........... 48
JPS Packaging Company
Savings Plan......... 48
JPS Packaging Incentive
Compensation Plan.... 49
CERTAIN TRANSACTIONS...... 49
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL
OWNERS OF SEALRIGHT
COMMON STOCK........... 50
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF JPS PACKAGING COMMON
STOCK.................................................................. 51
DESCRIPTION OF JPS PACKAGING CAPITAL STOCK................................ 52
Authorized Capital Stock................................................ 52
JPS Common Stock........................................................ 52
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW..................................... 53
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS OF SEALRIGHT AND JPS
PACKAGING.............................................................. 53
Size of the Board of Directors.......................................... 53
Removal of Directors; Filling Vacancies on the Board of Directors....... 54
Action by Written Consent............................................... 54
Meetings of Stockholders................................................ 54
Required Vote of Authorization of Certain Actions....................... 54
Amendment of Corporate Charter and Bylaws............................... 54
Limitation on Directors' Liability...................................... 55
Indemnification of Officers and Directors............................... 55
No Cumulative Voting.................................................... 55
Dividends and Other Distributions....................................... 55
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF JPS PACKAGING................ 56
STOCKHOLDER PROPOSALS..................................................... 56
EXPERTS................................................................... 56
INTERESTS OF NAMED EXPERTS AND COUNSEL.................................... 57
LEGAL OPINION REGARDING VALIDITY OF SHARES OF JPS PACKAGING............... 57
INDEX OF DEFINED TERMS.................................................... 58
INDEX TO JPS PACKAGING FINANCIAL STATEMENTS............................... F-1
</TABLE>
<TABLE>
<S> <C>
AGREEMENT AND PLAN OF MERGER........................................ APPENDIX A
OPINION OF GOLDMAN, SACHS & CO...................................... APPENDIX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW, REGARDING
APPRAISAL RIGHTS................................................. APPENDIX C
</TABLE>
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To better understand
the Merger and Exchange, and for a more complete understanding of the legal
terms of these transactions, you should read this entire document carefully, as
well as those additional documents referenced in this Proxy
Statement/Prospectus. See "WHERE YOU CAN FIND MORE INFORMATION AND
INCORPORATION OF DOCUMENTS."
THE COMPANIES
<TABLE>
<S> <C> <C>
Sealright Co., Inc. JPS Packaging Company Huhtamaki Oy
9201 Packaging Drive 9201 Packaging Drive Lansituulentie 7
DeSoto, Kansas 66018 DeSoto, Kansas 66018 02100 ESP00
(913) 583-3025 (913) 583-3025 FINLAND
(011) 358-9-6868-81
</TABLE>
Sealright is a manufacturer of round paperboard containers and packaging
machinery for premium ice cream and other food products (the "Rigid Packaging
Business") as well as flexible packaging and labeling primarily through its
wholly-owned subsidiary, JPS Packaging. Sealright's manufacturing facilities
for its Rigid Packaging Business are located in Fulton, New York, Los Angeles,
California, DeSoto, Kansas and Brisbane, Australia. Sealright's corporate
offices are located in DeSoto, Kansas.
JPS Packaging currently is a wholly-owned subsidiary of Sealright. JPS
Packaging owns and operates all of Sealright's flexible packaging and labeling
business for the food, dairy and beverage markets and the sleeve labeling
machinery business (collectively, the "Flexible Packaging Business"). JPS
Packaging has manufacturing facilities located in San Leandro, California and
Akron, Ohio, a sales office located in Raleigh, North Carolina and its
corporate offices located in DeSoto, Kansas. This Proxy Statement/Prospectus
describes JPS Packaging, including a number of risks associated with its
business. See "JPS PACKAGING BUSINESS AND PROPERTIES," "JPS PACKAGING
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," and "RISK FACTORS," as well as the other information concerning
JPS Packaging contained in this Proxy Statement/Prospectus.
Huhtamaki is an international confectionery and food packaging company based
in Finland which is listed on the Helsinki Exchange. The confectionery business
has manufacturing and sales operations in China, Finland, Germany, Holland,
India, Ireland, Italy, Poland, Spain, Sweden, U.K., Belarus, Belgium, Denmark,
the Baltic countries, Norway, Russia, Singapore, Switzerland, United Arab
Emirates and Ukraine. The food packaging business has manufacturing and sales
operations in Finland, Australia, China, France, Germany, Holland, Hong Kong,
Italy, Malaysia, New Zealand, Northern Ireland, Poland, Portugal, Russia, Saudi
Arabia, Singapore, Spain, Sweden, Turkey, U.K., Belgium, Czech Republic,
Hungary, the Baltic countries, Norway, Taiwan and Ukraine.
REASONS FOR THE MERGER AND EXCHANGE
During the third quarter of 1997, the non-management members of the Sealright
Board began considering various strategic alternatives for enhancing the value
of Sealright Common Stock. Among the alternatives considered were (i)
continuation of Sealright's restructuring plan implemented in 1995, (ii)
development of a new business plan, (iii) financial restructuring and (iv) the
sale or other strategic transaction involving Sealright or the Rigid Packaging
Business and/or the Flexible Packaging Business. As a result of these
discussions the Sealright Board engaged Goldman Sachs and George K. Baum &
Company on September 12, 1997 to evaluate Sealright's strategic alternatives.
1
<PAGE>
Following this analysis, the Sealright Board authorized Goldman Sachs and
George K. Baum & Company, Sealright's financial advisors, to identify possible
buyers for Sealright's businesses. With the help of Goldman Sachs and George K.
Baum & Company, Sealright solicited proposals for the acquisition of the entire
company, the Rigid Packaging Business and the Flexible Packaging Business.
Huhtamaki's proposal to acquire the Rigid Packaging Business was deemed to be
the most attractive among the proposals received from interested parties. The
Sealright Board believes that the Merger Consideration of $11.00 in cash
without interest per share reflects a fair price to, and is in the best
interests of, Sealright stockholders. In addition, Goldman Sachs has delivered
its oral opinion, subsequently confirmed in writing, to the Sealright Board
that as of March 2, 1998, the $11.00 per share to be received by the holders
(other than Huhtamaki, Sealright or any direct or indirect subsidiary of
Huhtamaki or Sealright) of Sealright Common Stock for the Rigid Packaging
Business is fair from a financial point of view to such holders. Based upon the
results to date of the solicitation process with respect to the sale of the
Flexible Packaging Business, the Sealright Board believes that the retention by
the Sealright stockholders of JPS Packaging (through the Exchange) is in the
best interests of the Sealright stockholders.
RECOMMENDATION TO STOCKHOLDERS
The Sealright Board has unanimously approved the Merger and Exchange. The
Board unanimously recommends that you vote FOR the proposal:
to approve the Merger and Exchange and approve and adopt the Merger
Agreement, pursuant to which (a) Sealright stockholders will receive
Merger Consideration of $11.00 in cash without interest and Redemption
Consideration of one-half share of JPS Common Stock for each share of
Sealright Common Stock held, and (b) Sealright will become a wholly-
owned subsidiary of Huhtamaki.
THE MERGER AND EXCHANGE
The Merger Agreement, which is the legal document that governs the Merger, is
attached as Appendix A to this Proxy Statement/Prospectus. You are encouraged
to read it carefully. In addition, Sealright and JPS Packaging have filed other
related agreements as exhibits to the Registration Statement filed with the
Commission by JPS Packaging with respect to the JPS Common Stock to be issued
in connection with the Exchange. These agreements will govern specific
relationships between Sealright and JPS Packaging after the Merger and Exchange
are complete. "WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF
DOCUMENTS" describes how to obtain copies of these exhibits.
How the Merger and Exchange Will Be Completed
Following the approval of the Merger and Exchange by the Sealright
stockholders, at the Effective Time, Sealright will merge with Acquisition Sub,
a subsidiary of Huhtamaki. Upon the effective date of the Merger (the
"Effective Date"), Sealright Manufacturing-West, Inc., a wholly-owned
subsidiary of Sealright and the sole stockholder of JPS Packaging ("Sealright-
West") will dividend all of the outstanding JPS Common Stock to Sealright and,
simultaneously with the Merger, Sealright will exchange one-half share of JPS
Common Stock for every outstanding share of Sealright Common Stock (other than
shares held by Huhtamaki, Sealright or any wholly-owned direct or indirect
subsidiary of Huhtamaki) in partial redemption of such shares. As a result,
Sealright stockholders (other than Huhtamaki, Sealright or any wholly-owned
direct or indirect subsidiary of Huhtamaki or any subsidiary of Sealright) will
receive the Merger Consideration of $11.00 per share in cash without interest
and the Redemption Consideration of one-half share of JPS Common Stock for
every share of Sealright Common Stock. Additionally, as of the Effective Time,
JPS Packaging will redeem any partial shares of JPS Common Stock issued to a
stockholder in connection with the Exchange for $6.86 in cash, per share.
Following the Merger and Exchange, Sealright will become a subsidiary of
Huhtamaki, and JPS Packaging will become a publicly traded company.
2
<PAGE>
Conditions to the Merger and Exchange
The Merger and Exchange will not be completed unless a number of conditions
are met (or waived), including, without limitation, the following:
. approval by stockholders holding a majority of the outstanding shares of
Sealright Common Stock of both the Merger and Exchange;
. clearance under applicable antitrust laws;
. the absence of any material adverse change or the threat of any material
adverse change to the Rigid Packaging Business or the Flexible Packaging
Business; and
. the offering of the JPS Common Stock to be issued in the Exchange has
been registered with the Commission.
The Merger will not occur unless the Exchange occurs and the Exchange will
not occur unless the Merger occurs. If all conditions to the Merger are met,
the Merger and Exchange will occur simultaneously.
Termination of the Merger Agreement
Sealright and Huhtamaki can terminate the Merger Agreement by mutual written
consent. Huhtamaki can terminate the Merger Agreement if the Sealright Board
withdraws its approval or materially modifies its approval of the Merger in a
manner adverse to Huhtamaki, or if a tender offer for 10% or more of the
Sealright Common Stock has been commenced by a third party or under certain
other specified circumstances. Either Sealright or Huhtamaki can terminate the
Merger Agreement if the Sealright stockholders do not approve the Merger, if
the Merger is not consummated by September 30, 1998, or under certain other
specified circumstances. See "TERMS OF THE MERGER AGREEMENT AND EXCHANGE--
Termination; Certain Fees."
Termination Fees
Sealright will pay Huhtamaki $3,800,000 in termination fees, plus $1,500,000
as reimbursement for out-of-pocket fees and expenses, if the Merger Agreement
fails for any of these five reasons:
. the Sealright stockholders fail to approve the Merger, or the Merger is
not consummated by September 30, 1998, and Sealright is acquired within
12 months thereafter by certain third parties;
. Sealright enters into an agreement to sell the company or the Rigid
Packaging Business to someone other than Huhtamaki;
. the Sealright Board withdraws, or materially modifies in a manner adverse
to Huhtamaki or Acquisition Sub, its approval of the Merger and there
then exists a third party proposal to acquire Sealright or the Rigid
Packaging Business;
. Sealright willfully fails to perform or comply with the material
obligations, agreements or covenants contained in the Merger Agreement;
or
. Sealright has willfully made representations and warranties in the Merger
Agreement which are materially untrue or incorrect. See "TERMS OF THE
MERGER AGREEMENT AND EXCHANGE-- Termination; Certain Fees."
Opinion of Goldman Sachs
Goldman Sachs has delivered its oral opinion, subsequently confirmed in
writing, to the Sealright Board that, as of March 2, 1998, the $11.00 per share
in cash without interest to be received by the holders (other than Huhtamaki,
Sealright or any direct or indirect subsidiary of Huhtamaki or Sealright) of
Sealright Common Stock for the Rigid Packaging Business is fair from a
financial point of view to such holders.
3
<PAGE>
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Appendix B and is
incorporated herein by reference. The opinion of Goldman Sachs referred to
herein does not constitute a recommendation as to how any holder of Sealright
Common Stock should vote with respect to the Merger Agreement. HOLDERS OF
SEALRIGHT COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. See "THE PROPOSED TRANSACTIONS--Opinion of Financial Advisor; The
Goldman Sachs Opinion."
Material Federal Income Tax Consequences
Upon the effectiveness of the Merger and Exchange, Sealright stockholders
will recognize a gain or loss in an amount equal to the difference between (i)
the sum of the fair market value of the JPS Common Stock received in the
Exchange and the cash Merger Consideration received, and (ii) such
stockholder's basis in the Sealright Common Stock exchanged. If such
stockholder held the Sealright Common Stock as a capital asset, such gain or
loss will be capital gain or loss. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF TRANSACTIONS."
Accounting Treatment
The Exchange will be accounted for at predecessor cost.
Interests of Officers and Directors in the Merger and Exchange
The officers and directors of Sealright may have interests in the
transactions that are different from, or in addition to those of other
Sealright stockholders. For example, some Sealright officers hold stock options
that will vest if the transactions are completed. See "CERTAIN TRANSACTIONS."
Proxy and Option Granted to Huhtamaki
Pursuant to the Proxy and Option Agreement, the Stockholder Group has granted
proxies to representatives of Huhtamaki to vote 4,555,115 shares (and certain
after acquired shares) of Sealright Common Stock which were owned by them
(representing approximately 40% of outstanding Sealright Common Stock).
Additionally, pursuant to the Proxy and Option Agreement, the Stockholder Group
has granted an irrevocable option to Acquisition Sub to purchase such shares.
This agreement was approved by the Sealright Board prior to the execution of
the Merger Agreement.
Markets and Market Prices
The shares of Sealright Common Stock are listed on the National Market Tier
of The Nasdaq Stock Market. On February 27, 1998, the last trading date prior
to the public announcement of the proposed transactions, Sealright's Common
Stock closed at $11.25. On June 1, 1998, Sealright's Common Stock closed at
$13.625.
Listing of JPS Common Stock
JPS Packaging has applied to list the shares of JPS Common Stock to be issued
in the Exchange on the National Market Tier of The Nasdaq Stock Market and has
been approved for listing, subject to official notice of issuance. However,
there is currently no public trading market for the JPS Common Stock, and there
can be no assurance that there will be an active market in shares of JPS Common
Stock after the Exchange.
4
<PAGE>
ANSWERS TO SOME COMMON QUESTIONS
What will I receive for my Sealright shares? Pursuant to the Merger, you will
receive $11.00 in cash without interest in exchange for each of your shares of
Sealright Common Stock. Additionally, pursuant to the Exchange, you will
receive one-half share of JPS Common Stock for each of your shares of Sealright
Common Stock. The JPS Common Stock represents a continuing interest in the
Flexible Packaging Business that is not being merged with Huhtamaki. If as a
result of your holdings of Sealright Common Stock, you receive a partial share
of JPS Common Stock in the Exchange, it will be redeemed by JPS Packaging for
$6.86 in cash per share.
Why is the sale structured as a Merger and Exchange? Since Huhtamaki wants to
buy only the Rigid Packaging Business of Sealright, the Exchange is necessary
to separate Sealright's Flexible Packaging Business, so that the Rigid
Packaging Business can then be acquired by Huhtamaki. Both the Merger and
Exchange will be taxable for Federal income tax purposes. See "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF TRANSACTIONS."
What do I need to do now? Just mail your completed, signed proxy card in the
enclosed return envelope as soon as possible, so that your shares of Sealright
Common Stock may be represented at the Special Meeting. The Special Meeting
will take place on June 29, 1998. The Sealright Board unanimously recommends
that you vote in favor of the proposed Merger and Exchange.
Can I change my vote after I have mailed in my signed proxy card? Yes. You
can change your vote at any time before your proxy is voted at the Special
Meeting. You can do so in one of three different ways. First, you can send a
written notice stating that you would like to revoke your proxy to the
Corporate Secretary of Sealright at the address given below. Second, you can
complete a new proxy card and send it to the Corporate Secretary of Sealright
at the address given below. Third, you can attend the Special Meeting and vote
in person. You should send any written notice or new proxy card to the
Secretary of Sealright at the following address: Sealright Co., Inc., 9201
Packaging Drive, DeSoto, Kansas 66018.
Should I send in my stock certificates now? No. If you continue to hold your
shares of Sealright Common Stock at the Effective Time of the Merger, you will
automatically receive written instructions for exchanging your shares of
Sealright Common Stock for the Merger Consideration of $11.00 per share in cash
and the Redemption Consideration of one-half share of JPS Common Stock per
share of Sealright Common Stock.
Am I entitled to appraisal rights? Yes. If (i) you file a written objection
to the Merger prior to the Special Meeting, (ii) you do not vote in favor of
the Merger Agreement, and (iii) you meet other legal requirements, you will
have the right to seek an appraisal and payment of the fair value of your
Sealright shares (taking into account the divestiture of the Flexible Packaging
Business through the Exchange, but otherwise exclusive of any element of value
arising from the accomplishment or expectation of the Merger). The requirements
for seeking appraisal rights are summarized in the Proxy Statement/Prospectus
(see "APPRAISAL RIGHTS"), and the provisions of Delaware law that govern
appraisal rights on the Merger are attached as Appendix C. If you wish to seek
an appraisal of your shares, you should read and follow those provisions
carefully. You should be aware that an appraisal may result in a merger price
for your shares that has more value or less value than the $11.00 per share in
cash without interest Merger Consideration.
5
<PAGE>
SEALRIGHT SUMMARY OF SELECTED FINANCIAL INFORMATION
SEALRIGHT STATEMENT OF OPERATIONS DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $262,383 $280,652 $280,667 $257,236 $255,198 $62,200 $57,208
Cost of Sales........... 202,865 215,967 227,399 213,502 218,840 53,898 49,500
-------- -------- -------- -------- -------- ------- -------
Gross Profit............ 59,518 64,685 53,268 43,734 36,358 8,302 7,708
SG&A Expense............ 34,750 37,523 38,035 33,766 31,462 8,264 8,148
Other Expense........... 1,830 1,671 1,452 990 1,025 249 253
Net Restructuring (Gain)
Expense................ -- -- 16,875 4,777 (2,041) (615) --
-------- -------- -------- -------- -------- ------- -------
Operating Income (Loss). 22,938 25,491 (3,094) 4,201 5,912 404 (693)
Interest Expense........ 3,648 3,218 5,017 5,466 5,574 1,249 1,369
-------- -------- -------- -------- -------- ------- -------
Income (Loss) from
Continuing Operations
before income taxes and
extraordinary loss..... 19,290 22,273 (8,111) (1,265) 338 (845) (2,062)
-------- -------- -------- -------- -------- ------- -------
Income Taxes............ 8,120 8,985 (3,276) (457) 126 (348) (765)
-------- -------- -------- -------- -------- ------- -------
Income (Loss) from
Continuing Operations
before extraordinary
loss................... 11,170 13,288 (4,835) (808) 212 (497) (1,297)
======== ======== ======== ======== ======== ======= =======
Discontinued Operation,
net of tax:
Operating Income
(Loss)............... (85) 47 (799) (2,140) -- -- --
Gain (Loss) on
Disposal............. -- -- -- (2,856) 54 54 593
-------- -------- -------- -------- -------- ------- -------
Income (Loss) from
Discontinued Operation. (85) 47 (799) (4,996) 54 54 --
Extraordinary Loss, net
of tax................. -- -- (94) -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Net Income (Loss)....... $ 11,085 $ 13,335 $ (5,728) $ (5,804) $ 266 $ (443) $ (704)
======== ======== ======== ======== ======== ======= =======
</TABLE>
6
<PAGE>
SEALRIGHT COMMON SHARE DATA
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS
ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
------------------------------------ --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Basic Earnings (Loss) Per
Share from:
Continuing Operations.. $ 1.00 $ 1.21 $(0.44) $(0.07) $ 0.02 $(0.04) $(0.11)
Discontinued Operation. * * (0.07) (0.45) * $ 0.00 $ 0.05
Extraordinary Loss..... -- -- (0.01) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Basic Earnings (Loss) per
share................... $ 1.00 $ 1.21 $(0.52) $(0.52) $ 0.02 $(0.04) $(0.06)
====== ====== ====== ====== ====== ====== ======
Diluted Earnings (Loss)
Per Share from:
Continuing Operations.. $ 1.00 $ 1.20 $(0.44) $(0.07) $ 0.02 $(0.04) $(0.11)
Discontinued Operation. * * (0.07) (0.45) * -- 0.05
Extraordinary Loss..... -- -- (0.01) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Diluted Earnings (Loss)
per share............... $ 1.00 $ 1.20 $(0.52) $(0.52) $(0.02) $(0.04) $(0.06)
====== ====== ====== ====== ====== ====== ======
Cash Dividends per Share. .455 .46 .48 .36 -- -- --
Average Number of Basic
Shares Outstanding (in
thousands).............. 11,063 11,063 11,068 11,072 11,072 11,072 11,078
Average Number of Diluted
Shares Outstanding (in
thousands).............. 11,075 11,075 11,083 11,072 11,080 11,072 11,078
</TABLE>
- --------
*Less than $0.01 per share.
SEALRIGHT BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Working Capital..... $42,170 $37,429 $37,992 $35,783 $38,801 $42,367 $43,387
Net Property, Plant &
Equipment.............. 118,197 146,828 135,854 136,253 128,067 129,604 125,107
Total Assets............ 212,455 239,654 227,841 223,285 215,021 221,829 214,030
Stockholders' Equity.... 104,647 112,892 102,016 91,969 91,395 91,526 90,816
Current Ratio........... 2.58:1 2.06:1 2.26:1 2.15:1 2.12:1 2.18:1 2.34:1
Long-Term Debt.......... 62,271 74,093 77,400 81,800 73,925 75,250 76,350
</TABLE>
OTHER SEALRIGHT DATA
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS
ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
--------------------------------------- -------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Depreciation and
Amortization Expense.... $15,343 $17,148 $19,320 $16,078 $18,131 $5,061 $4,620
Capital Expenditures..... 26,288 44,280 15,937 15,623 18,258 3,925 5,964
Average Number of
Employees............... 1,937 1,959 1,909 1,603 1,550
</TABLE>
7
<PAGE>
JPS PACKAGING SUMMARY OF
SELECTED FINANCIAL INFORMATION
The following tables set forth (i) historical summary financial and operating
data as of and for the five years ended December 31, 1997 and three month
periods ended March 31, 1997 and 1998 and (ii) as adjusted to reflect the
Exchange and the reorganization of JPS Packaging and the incurrence by JPS
Packaging of approximately $6,000,000 in short-term borrowings to pay
transaction costs and estimated amounts due to Huhtamaki pursuant to the Merger
Agreement. Approximately $2,000,000 of transaction and other costs will be
charged to operations in the third quarter of 1998. See "TERMS OF THE MERGER
AGREEMENT AND EXCHANGE" and "THE JPS PACKAGING REORGANIZATION." The information
set forth should be read in conjunction with "JPS PACKAGING MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and
the "JPS PACKAGING COMBINED FINANCIAL STATEMENTS" and the related notes
included elsewhere herein.
JPS PACKAGING STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $103,112 $110,987 $110,200 $100,299 $95,491 $25,186 $20,416
Cost of Sales........... 85,364 90,652 97,000 87,831 88,746 22,696 18,837
-------- -------- -------- -------- ------- ------- -------
Gross Profit............ 17,748 20,335 13,200 12,468 6,745 2,490 1,579
SG&A Expense............ 13,927 14,224 15,733 15,136 12,642 3,279 3,334
Net Restructuring (Gain)
Expense................ -- -- 6,866 1,893 (988) 191 --
-------- -------- -------- -------- ------- ------- -------
Operating Income (Loss). 3,821 6,111 (9,399) (4,561) (4,909) (980) (1,755)
Interest Expense........ 90 34 -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
Income (Loss) before
Taxes.................. 3,731 6,077 (9,399) (4,561) (4,909) (980) (1,755)
Income Taxes............ 1,489 2,428 (3,225) (1,542) (1,686) (337) (603)
-------- -------- -------- -------- ------- ------- -------
Net Income (Loss)....... $ 2,242 $ 3,649 $ (6,174) $ (3,109) $(3,233) $ (643) $(1,152)
======== ======== ======== ======== ======= ======= =======
Net Income (Loss) Per
Share (Note 1): Basic
and diluted............ $ 0.41 $ 0.66 $ (1.12) $ (0.55) $ (0.58) $ (0.12) $ (0.21)
======== ======== ======== ======== ======= ======= =======
</TABLE>
JPS PACKAGING BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ---------------------------
AS ADJUSTED
1993 1994 1995 1996 1997 1997 1998 1998
------- ------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Working Capital..... $16,541 $22,969 $20,924 $17,268 $18,006 $19,422 $17,239 $17,239
Net Property, Plant &
Equipment.............. 43,027 45,568 41,343 34,720 31,884 34,744 30,967 30,967
Total Assets............ 74,035 83,451 75,835 63,783 61,904 66,429 59,920 65,920
Short-Term Debt......... -- -- -- -- -- -- -- 6,000
Total Liabilities....... 13,247 14,863 12,405 10,551 12,026 11,303 11,947 17,947
Stockholder's Equity.... 60,788 68,588 63,430 53,232 49,878 55,126 47,973 47,973
Current Ratio........... 2.68:1 3.16:1 3.13:1 3.08:1 3.06:1 3.20:1 3.01:1 2.19:1
</TABLE>
8
<PAGE>
OTHER JPS PACKAGING DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE-
MONTH PERIODS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------ ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Income (Loss)
excluding
Restructuring.......... $3,821 $ 6,111 $(2,533) $(2,668) $(5,897) $ (789) $ (1,755)
Depreciation and
Amortization Expense... 5,189 5,924 6,619 6,693 5,832 1,530 1,326
EBITDA.................. 9,010 12,035 (2,780) 2,132 922 550 (429)
EBITDA excluding
Restructuring.......... 9,010 12,035 4,086 4,025 (66) 741 (429)
Capital Expenditures.... 4,982 6,560 6,849 1,363 5,432 1,482 358
</TABLE>
- --------
(1) Earnings (loss) per share for all periods has been computed under Statement
of Financial Accounting Standards No. 128. The number of shares used in the
computation is the number of outstanding common shares of Sealright
adjusted for the exchange ratio of one-half share of JPS Common Stock for
each share of Sealright Common Stock. The weighted average number of common
shares used in the computation were 5,536,000 in 1993 and 1994, 5,534,000
in 1995, 5,536,000 in 1996 and 1997, and 5,536,000 at March 31, 1997, and
5,539,000 at March 31, 1998. There were no dilutive securities.
(2) EBITDA is defined as operating profit (loss) before depreciation and
amortization. EBITDA does not represent cash flows as defined by generally
accepted accounting principles (GAAP) and does not necessarily indicate
that cash flows are sufficient to fund all of a company's cash needs.
EBITDA is presented because JPS Packaging believes it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation or as a substitute
for net income (loss) or cash flow data prepared in accordance with GAAP or
as a measure of a company's profitability or liquidity. EBITDA as defined
here may differ from EBITDA as defined in other similar offerings and as
such may not be comparable.
9
<PAGE>
COMPARATIVE AND PRO FORMA PER SHARE DATA
The following table sets forth Sealright per share data on an historical
basis and JPS Packaging per share data on an equivalent pro forma basis and a
pro forma basis. Equivalent pro forma JPS Packaging per share amounts are based
upon the number of shares outstanding before adjustment for the exchange ratio.
Pro forma JPS Packaging per share amounts represent historical results divided
by the number of shares that will be outstanding after the offering (5,534,000,
5,536,000, 5,536,000, 5,536,000, and 5,539,000 shares at December 31, 1995,
December 31, 1996, December 31, 1997, March 31, 1997, and March 31, 1998,
respectively) based upon an exchange ratio of one-half share of JPS Common
Stock for each share of Sealright Common Stock. The table below does not
account for additional cash of $11.00 per share that will be received for each
share of Sealright Common Stock outstanding. This table should be read in
conjunction with the historical financial statements and notes thereto for JPS
Packaging contained herein and for Sealright incorporated herein by reference
and identified under "WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF
DOCUMENTS."
<TABLE>
<CAPTION>
EQUIVALENT
HISTORICAL PRO FORMA PRO FORMA
SEALRIGHT JPS PACKAGING JPS PACKAGING
---------- ------------- -------------
<S> <C> <C> <C>
Net Income (Loss) from continuing
operations per common
share-diluted:
Twelve Months ended:
December 31, 1997.................. $0.02 $(0.29) $(0.58)
December 31, 1996.................. (0.07) (0.28) (0.55)
December 31, 1995.................. (0.44) (0.56) (1.12)
Three Months ended:
March 31, 1998..................... (0.11) (0.11) (0.21)
March 31, 1997..................... (0.04) (0.06) (0.12)
Dividends per common share:
Twelve Months ended:
December 31, 1997.................. $0.00 $ 0.00 $ 0.00
December 31, 1996.................. 0.00 0.00 0.00
December 31, 1995.................. 0.36 0.00 0.00
Three Months ended:
March 31, 1998..................... 0.00 0.00 0.00
March 31, 1997..................... 0.00 0.00 0.00
Book value per common share at:
December 31, 1997.................. $8.25 $ 4.50 $ 9.00
December 31, 1996.................. 8.30 4.81 9.62
December 31, 1995.................. 9.21 5.73 11.45
March 31, 1998..................... 8.20 4.33 8.66
March 31, 1997..................... 8.27 4.98 9.96
</TABLE>
10
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "JPS PACKAGING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," as well as
possible or assumed future results of operations of JPS Packaging set forth
elsewhere herein, including any forecasts, projections and synergies, and
certain statements incorporated by reference from documents filed with the
Commission by Sealright, and other statements contained or incorporated by
reference herein regarding matters that are not historical facts, are or may
constitute forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995). Such forward-looking statements are
not guarantees of future performance and are subject to known and unknown
risks, uncertainties and other factors which may cause or contribute to actual
results of JPS Packaging differing materially from those expressed in or
implied by the forward-looking statements. In addition to any such risks
expressly stated in this or other documents, other risks and uncertainties
include, but are not limited to, competitive pricing for JPS Packaging's
products, changes in raw material prices, fluctuations in customer demand,
changes in production capacities, and changes in exchange rates, particularly
in Latin America. See "RISK FACTORS."
RISK FACTORS
Stockholders should carefully review the following risk factors together
with the other information contained herein, in evaluating JPS Packaging and
the Flexible Packaging Business.
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY; OPERATING LOSSES
The Flexible Packaging Business historically has been operated as a division
of Sealright. As a result of Sealright's consolidation of the Flexible
Packaging Business, all of the Akron, Ohio operations and the San Leandro,
California operations, along with the Styrotech(TM) machine manufacturing
operations are being operated by and through JPS Packaging, Sealright's
wholly-owned subsidiary. See "THE JPS PACKAGING REORGANIZATION." As a result
of the Exchange, JPS Packaging will cease to be affiliated with Sealright.
There is no assurance that the Flexible Packaging Business can be operated
profitably as a stand-alone company. In each of the last three years JPS
Packaging has incurred significant operating losses and it is anticipated that
JPS Packaging will incur operating losses in 1998. See "JPS PACKAGING
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
LIQUIDITY
Historically, the Flexible Packaging Business has relied on internally
generated cash from Sealright's combined operations and/or its credit
arrangements for sources of cash. After the Exchange, JPS Packaging must
continue to maintain its own credit arrangements, which may be at interest
rates higher than those available to Sealright. See "JPS PACKAGING
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Liquidity and Capital Resources."
As of the Effective Time, it is expected that JPS Packaging will need to
borrow approximately $6,000,000. JPS Packaging is required to reimburse to
Sealright expenses of the Transactions incurred by Sealright in excess of
$4,000,000. These expenses, which consist of amounts due investment bankers,
attorneys, accountants, and other transaction-related items, are expected to
be approximately $2,000,000. This amount will be charged to JPS Packaging's
statement of operations in the fiscal quarter in which the Effective Date
occurs. In addition, JPS Packaging is required to repay Sealright the amount
of intercompany loans to fund operating losses, capital expenditures, and
other cash sources or uses of the Flexible Packaging Business incurred since
January 1, 1998. JPS Packaging has obtained a commitment for a $10,000,000
credit facility. The failure to have such a credit facility established by the
Effective Date would prevent the consummation of the Merger. See "TERMS OF THE
MERGER AGREEMENT AND EXCHANGE--Conduct of the Flexible Packaging Business
Pending the Merger" and "--Fees and Expenses."
11
<PAGE>
ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL
JPS Packaging initially will be dependent upon the services and management
experience of certain executive officers and other key management employees
previously employed by Sealright. While JPS Packaging intends to expand its
management team through recruitment of additional experienced individuals for
certain key positions, there is no assurance that JPS Packaging will be able
to attract, hire and retain such personnel. See "JPS PACKAGING MANAGEMENT."
Furthermore, there can be no assurance that any particular manager will remain
in JPS Packaging's employ. The failure of JPS Packaging to attract and retain
such key personnel could impair JPS Packaging's operations and thereby
adversely materially affect its business and results of operations.
IMPLEMENTATION OF NEW INFORMATION SYSTEMS AND YEAR 2000 COMPLIANCE
As a result of the Exchange, JPS Packaging is converting the information
systems, including its payroll system, fixed asset accounting system, general
ledger accounting system, and manufacturing planning and control system
currently used at the San Leandro facility, to those currently used at the
Akron facility. JPS Packaging is exposed to a number of risks inherent with
implementing any such conversion, including the inability to accurately record
accounting entries, the inability to produce accounting records in a timely
manner, and the inability to efficiently plan and produce customer orders. In
order to mitigate a number of these potential risks, Sealright has agreed to
continue to provide various services to JPS Packaging up to 90 days after the
Effective Date. See "RISK FACTORS--Ongoing Relationship with Sealright" and
"TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Terms of the Ancillary
Agreements."
JPS Packaging's information systems are not currently year 2000 compliant in
either of its two plant locations. The management of JPS Packaging currently
estimates that it will cost approximately $300,000 to become year 2000
compliant, which will be charged to operations as incurred. While JPS
Packaging is seeking to implement the necessary changes, there can be no
assurance that JPS Packaging's operating systems will be compliant prior to
the beginning of 2000. See "JPS PACKAGING MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Year 2000 Compliance."
ABSENCE OF DIVIDENDS
The Board of Directors of JPS Packaging (the "JPS Board") currently intends
that no cash dividends will be paid on the JPS Common Stock in order to make
funds available for working capital needs, future acquisitions, and capital
expenditures and such other purposes as the JPS Board may determine and as
allowed under credit arrangements. The payment and level of cash dividends by
JPS Packaging in the future, if any, will be at the discretion of the JPS
Board, based primarily upon earnings, cash flow and financial requirements of
its businesses at such time and as permitted by its then existing credit
facilities.
CONTINGENT LIABILITIES ASSOCIATED WITH FLEXIBLE PACKAGING BUSINESS
All of the liabilities related directly and exclusively to the Flexible
Packaging Business, many of which are contingent or are not presently
determinable, will be retained by JPS Packaging pursuant to the Merger and
Exchange. Such contingent liabilities include future claims, actions,
judgments and other litigation related to or arising from environmental,
product liability, employment or tax matters that are directly and exclusively
related to the Flexible Packaging Business. JPS Packaging is not currently
aware of any material contingent liabilities.
COMPETITION
There is intense competition in the flexible packaging industry on the basis
of price, service, quality and innovation in product design and graphics. The
markets for JPS Packaging's products, which include packaging for snack foods,
condiments, dried fruits, container decorations and lidding, are highly
fragmented with hundreds
12
<PAGE>
of producers of flexible packaging goods, many of which are large, well
established companies with financial resources far in excess of those of JPS
Packaging. See "JPS PACKAGING BUSINESS AND PROPERTIES--Competition" and "JPS
PACKAGING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
NO PRIOR MARKET FOR JPS COMMON STOCK
There has been no prior trading market for JPS Common Stock and there can be
no assurance as to the prices at which the JPS Common Stock will trade after
the Effective Date. Until the JPS Common Stock is fully distributed and an
orderly market develops, the prices at which the JPS Common Stock trades may
fluctuate significantly. Prices for the JPS Common Stock will be determined in
the trading markets and may be influenced by many factors, including the depth
and liquidity of the market for JPS Common Stock, investor perceptions of JPS
Packaging and the prospects for its businesses, the amount of JPS Packaging's
reported earnings or losses, JPS Packaging's dividend policy and general
economic and market conditions. In addition, there is no assurance that JPS
Packaging will become covered by equity analysts associated with brokerage
organizations, thus possibly limiting public exposure to JPS Common Stock. See
"LISTING AND TRADING OF JPS PACKAGING COMMON STOCK."
ONGOING RELATIONSHIP WITH SEALRIGHT
Following consummation of the Transactions, Sealright and JPS Packaging will
continue to have an ongoing business relationship with respect to Sealright
providing for a 90 day period various accounting, information services, human
resources functions and providing corporate office space at the DeSoto, Kansas
facility. Additionally, Sealright will continue to manufacture for JPS
Packaging Styrotech(TM) sleeve labeling machines and related spare parts for a
90 day period at its cost and JPS Packaging will continue to manufacture for
Searlight certain lidding products at its San Leandro plant for such 90 day
period at its cost. Conflicts of interest may arise between Sealright and JPS
Packaging with respect to these ongoing relationships, including the nature,
quality, and pricing of services rendered by Sealright or JPS Packaging. There
can be no assurance that Sealright and JPS Packaging will be able to resolve
any potential conflict that may arise. Additionally, there is no assurance
that the 90 day period (or 180 day period, if JPS Packaging elects to extend
the agreement) will be sufficient to allow JPS Packaging to independently
provide such services. See "TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Terms
of Ancillary Agreements."
EXPOSURE TO FLUCTUATION IN RAW MATERIAL PRICES
The Flexible Packaging Business requires a large volume of various raw
materials, including plastic, resin, film, paper, foil and ink. Although JPS
Packaging believes that adequate supplies of its raw material requirements are
available at the present time, it cannot predict future availability or prices
of such materials. There can be no assurance that JPS Packaging will be able
to pass increases in raw material costs through to its customers in the form
of price increases, and any such inability would have an adverse impact upon
JPS Packaging's profitability. See "JPS PACKAGING BUSINESS AND PROPERTIES--Raw
Materials."
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Sealright
Common Stock in connection with the solicitation of proxies by the Sealright
Board for use at the Special Meeting to be held at the offices of Bryan Cave
LLP, Suite 3700, One Kansas City Place, 1200 Main Street, Kansas City,
Missouri 64105, on June 29, 1998, at 10:00 a.m., Central Daylight Time, and
any adjournment or postponement thereof. This Proxy Statement/Prospectus and
the accompanying form of proxy are first being mailed to Sealright
stockholders on or about June 9, 1998.
13
<PAGE>
MATTERS TO BE CONSIDERED
At the Special Meeting, Sealright stockholders will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement and to approve
the transactions contemplated thereby, including the Exchange, whereby JPS
Common Stock will be distributed in partial redemption and exchange for
Sealright Common Stock (collectively, the "Transactions").
BOARD OF DIRECTOR'S RECOMMENDATION
THE SEALRIGHT BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
EXCHANGE AND RECOMMENDS THAT THE SEALRIGHT STOCKHOLDERS VOTE FOR APPROVAL OF
THE MERGER AND EXCHANGE AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; VOTING RIGHTS
The Sealright Board has fixed the close of business on June 1, 1998 as the
Record Date for determining holders entitled to notice of and to vote at the
Special Meeting. Accordingly, only holders of record of shares of Sealright
Common Stock on the Record Date will be entitled to notice of and to vote at
the Special Meeting. As of the Record Date, there were outstanding and
entitled to vote 11,082,564 shares of Sealright Common Stock held beneficially
by approximately 3,000 stockholders.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Sealright Common Stock
entitled to vote as of the Record Date is necessary to constitute a quorum at
the Special Meeting. Under the Sealright bylaws (the "Sealright Bylaws") and
the General Corporation Law of the State of Delaware ("DGCL"), abstentions and
"broker non-votes" (that is, proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares as to a matter with respect to which the
brokers or nominees do not have discretionary power to vote) will be treated
as present for purposes of determining the presence of a quorum at the Special
Meeting.
VOTE REQUIRED
Sealright stockholders are entitled to one vote at the Special Meeting for
each share of Sealright Common Stock held of record by them on the Record
Date. The affirmative vote of the holders of a majority of the outstanding
shares of Sealright Common Stock is required to approve and adopt the Merger
Agreement and to approve the Merger and Exchange contemplated therein.
Abstentions and broker non-votes will have the same effect as votes against
such approval.
As of the Record Date, Sealright's directors and executive officers as a
group may be deemed to be beneficial owners of approximately 44.5% of the
outstanding shares of Sealright Common Stock (excluding 103,270 shares which
may be acquired upon the exercise of options or warrants exercisable within 60
days of the Record Date). To the knowledge of Sealright, each of the directors
and executive officers intends to vote in favor of approval of the Merger and
Exchange. In addition, pursuant to the irrevocable Proxy and Option Agreement,
the Stockholder Group granted to representatives of Huhtamaki, an irrevocable
proxy to vote virtually all of their outstanding shares (representing
approximately 40% of the outstanding shares of Sealright Common Stock as of
the Record Date) in favor of approval and adoption of the Merger Agreement and
approval of the Transactions. See "PROXY AND OPTION GRANTED TO HUHTAMAKI."
14
<PAGE>
If fewer shares of Sealright Common Stock are voted in favor of approval and
adoption of the Merger Agreement than the number required for approval, it is
expected that the Special Meeting will be postponed or adjourned for the
purpose of allowing additional time for soliciting and obtaining additional
proxies or votes, and at any subsequent reconvening of the Special Meeting,
all proxies will be voted in the same manner as such proxies would have been
voted at the original convening of the Special Meeting, except for any proxies
which have theretofore been effectively withdrawn or revoked.
SEALRIGHT STOCKHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER AND EXCHANGE ARE CONSUMMATED, STOCK
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN
A LETTER OF TRANSMITTAL WHICH WILL BE SENT TO SEALRIGHT STOCKHOLDERS BY UMB
BANK, N.A. (THE "PAYING AGENT") PROMPTLY AFTER THE EFFECTIVE TIME.
DISSENTER'S RIGHTS
Record holders of Sealright Common Stock who properly demand appraisal prior
to the stockholder vote on the Merger Agreement, do not vote in favor of
approval and adoption of the Merger Agreement and otherwise comply with the
requirements of Section 262 of the DGCL, will be entitled to statutory
appraisal rights. See "APPRAISAL RIGHTS."
PROXIES
When a card is returned, properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card.
If a Sealright stockholder does not attend the Special Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If
a stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR approval and adoption of
the Merger Agreement and approval of the Merger and Exchange. As of the date
of this Proxy Statement/Prospectus, the Sealright Board does not know of any
matters other than those set forth in the Notice of Special Meeting that may
be presented at the Special Meeting. If any other matters are properly
presented at the Special Meeting for consideration, including a motion to
adjourn or postpone the Special Meeting for the purpose of, among other
things, soliciting additional proxies, the persons named in the enclosed form
of proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment; provided, however, that no proxy that is
voted against the Merger Agreement will be voted for any adjournment or
postponement of the Special Meeting for the purpose of soliciting additional
proxies.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Sealright, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares of
Common Stock and delivering it to the Secretary of Sealright before the taking
of the vote at the Special Meeting or (iii) attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not in and
of itself constitute a revocation of a proxy). In addition, brokers who hold
shares of Sealright Common Stock as nominees will not have discretionary
authorization to vote such shares on any of the matters to be voted thereon in
the absence of instructions from the beneficial owners. Any written notice of
revocation or subsequent proxy should be sent so as to be delivered to
Sealright Co., Inc., 9201 Packaging Drive, DeSoto, Kansas 66018, Attention:
Corporate Secretary, or hand-delivered to the Corporate Secretary of Sealright
at or before the taking of the vote at the Special Meeting.
Sealright will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of Sealright in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for out-
of-pocket expenses incurred in connection with such solicitation. Arrangements
also will be made with custodians, nominees and fiduciaries for the forwarding
of proxy solicitation materials to beneficial owners of shares held of record
by such custodians, nominees and fiduciaries, and Sealright will reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
15
<PAGE>
THE PROPOSED TRANSACTIONS
BACKGROUND
Between 1990 and 1995, Sealright experienced declining gross profit margins.
In 1995, the Sealright Board sought to reverse this trend through recruitment
of a new chief executive officer and senior management team for Sealright. In
the fourth quarter of 1995, Sealright's management announced a restructuring
plan which called for a functional reorganization through the centralization
of management and a consolidation of facilities aimed at reducing operating
costs and increasing overall profitability. Despite the implementation of the
plant consolidations and centralization of management, profit margins
continued to decline and it became apparent to the Sealright Board that the
1995 restructuring plan was not achieving the anticipated results.
During the third quarter of 1997, the non-management members of the
Sealright Board began discussing strategic alternatives for enhancing the
value of Sealright Common Stock. Among the alternatives considered were (i)
continuation of Sealright's restructuring plan that had been commenced in late
1995, (ii) development of a new business plan for Sealright, (iii) financial
restructuring, and (iv) a sale or other strategic transaction involving
Sealright, or the Rigid Packaging Business and/or the Flexible Packaging
Business. The Sealright Board determined that the prospects for a successful
outcome of the restructuring plan commenced in 1995 and corresponding
enhancement of the value of Sealright Common Stock was not likely in the near
term. The Sealright Board also determined that the success of any new business
plan would be in large part dependent upon the recruitment of additional
management expertise in order to devise and implement the administrative and
operational changes and would also be subject to the inherent risks associated
with the increased competition and consolidation in the packaging industry. As
a result of these discussions and determinations, the Sealright Board
interviewed investment banking firms and on September 12, 1997 ultimately
engaged Goldman Sachs and George K. Baum & Company to evaluate a financial
restructuring of Sealright or sale or other strategic transaction with respect
to the entire Company or a portion thereof. See "--Engagement of Financial
Advisors." G. Kenneth Baum and William D. Thomas are both directors of
Sealright and JPS Packaging. Mr. Baum is an employee and Mr. Thomas serves as
Vice President of George K. Baum & Company. See "CERTAIN TRANSACTIONS." George
K. Baum & Company was one of the underwriters of Sealright's initial public
offering in 1986 and has served as a financial advisor to Sealright in
connection with several past acquisitions and financings. See "--Engagement of
Financial Advisors."
Following an analysis by the financial advisors, in early November 1997 the
Sealright Board authorized Goldman Sachs and George K. Baum & Company to
solicit indications of interest for the acquisition of the entire company or
alternatively, the Rigid Packaging Business and/or the Flexible Packaging
Business in order to determine the potential for recognition of value through
a sale. The Sealright Board had determined that one or more potential sale
transactions was a better alternative for enhancing value of Sealright Common
Stock than a financial restructuring in light of the evaluation by the
financial advisors.
After the Sealright Board's authorization to solicit such indications of
interest, Goldman Sachs contacted Huhtamaki, among other interested parties.
On December 2, 1997, Sealright and Huhtamaki entered into a confidentiality
agreement, and Sealright began providing confidential information to Huhtamaki
with respect to the Rigid Packaging Business and Sealright. Sealright also
entered into confidentiality agreements and provided confidential information
to a number of other interested parties. Such confidential information
included tax and financial records, operating data, environmental compliance
information, business contracts, employee benefits and compensation data and
other business information. On December 17, 1997, Huhtamaki submitted a
preliminary indication of interest for the acquisition of the Rigid Packaging
Business. Based on preliminary indications of interest received from Huhtamaki
and several other parties, Sealright extended the opportunity to these parties
to conduct certain due diligence. Over the next several weeks, Huhtamaki
conducted a due diligence review of the Rigid Packaging Business, including
meeting with representatives of Sealright in Kansas City, Missouri, DeSoto,
Kansas, Fulton, New York and Los Angeles, California from January 14 to 20,
1998. In addition, counsel for Sealright provided counsel for Huhtamaki and
certain other interested parties with proposed drafts of definitive
agreements.
On February 16, 1998, Huhtamaki submitted a definitive proposal for the
acquisition of the Rigid Packaging Business. The definitive proposal also
included markups of Sealright's proposed agreement showing Huhtamaki's
requested changes to such agreement. Sealright also received definitive
proposals from other
16
<PAGE>
interested parties, including other proposals for the entire company and the
Flexible Packaging Business. Based upon an analysis of the definitive
proposals received, Sealright concluded that the cash purchase price and terms
offered in Huhtamaki's proposal would yield the best value for the Sealright
stockholders and that the proposal was likely to result in a definitive
agreement. Therefore, Sealright determined to proceed with discussions with
Huhtamaki for its acquisition of the Rigid Packaging Business and to continue
discussions with other parties interested in acquiring the Flexible Packaging
Business.
From February 16 to 24, 1998, Goldman Sachs and G. Kenneth Baum, on behalf
of Sealright, and representatives of Huhtamaki had telephonic discussions with
respect to Huhtamaki's definitive proposal. At the conclusion of these
discussions, representatives of the two companies agreed to meet to attempt to
negotiate the terms of a definitive agreement.
During this period, after continuing discussions with parties interested in
the acquisition of the Flexible Packaging Business, it was determined that
continued negotiations with respect to the sale of the Flexible Packaging
Business at that time could delay and/or jeopardize the negotiations with
Huhtamaki. It therefore was decided that it was in the best interests of the
Sealright stockholders to first complete negotiations with Huhtamaki and to
provide in the definitive agreement with Huhtamaki that the Flexible Packaging
Business could either be retained by the Sealright stockholders (through the
Exchange) or sold to a third party prior to the completion of the Merger.
Discussions with respect to the Flexible Packaging Business therefore were
temporarily suspended.
Beginning on February 26, 1998, members of the Sealright Board and
management, along with Sealright's legal counsel and representatives of
Goldman Sachs and George K. Baum Company, met with representatives of
Huhtamaki and its legal counsel and financial advisors in Kansas City,
Missouri to discuss Huhtamaki's proposal and to negotiate the proposed
agreements. By the afternoon of March 1, 1998 most open issues were resolved,
and the Sealright Board convened a meeting at which Goldman Sachs and George
K. Baum & Company made a financial presentation and reviewed the sales process
to date and Sealright's legal counsel reviewed the terms of the current draft
of the Merger Agreement. An in-depth discussion of the Merger Agreement then
followed. By the morning of March 2, 1998, the remaining open items were
resolved and the Sealright Board reconvened to consider the Merger Agreement,
the Exchange and the other Transactions. At this meeting, Goldman Sachs
delivered its oral opinion, subsequently confirmed in writing, described below
under "--Opinion of Financial Advisor," to the effect that as of March 2, 1998
the $11.00 per share in cash without interest to be received by the holders of
Sealright Common Stock (other than Huhtamaki, Sealright or any of their direct
or indirect subsidiaries) for the Rigid Packaging Business is fair from a
financial point of view to such holders. Sealright's legal counsel then
described those terms of the Merger Agreement that had been modified since the
prior meeting of the Sealright Board. Following the discussion at the Special
Meeting, the Sealright Board unanimously approved the Merger Agreement and the
Transactions. Thereafter on March 2, 1998, the Merger Agreement was executed
and delivered.
After March 2, 1998, Goldman Sachs, on behalf of Sealright, recommenced
discussions with two of the parties that had previously indicated interest in
the acquisition of the Flexible Packaging Business. Based on such discussions
and further discussions with legal counsel, it became apparent to the
Sealright Board that both such parties would require further lengthy due
diligence and extensive indemnification provisions that were not permitted
under the terms of the Merger Agreement, since they would impose continuing
liability upon Sealright, the survivor to the Merger. Additionally, certain of
the prospective purchasers sought to limit the liabilities related to the
Flexible Packaging Business that they would assume, which was not permissible
under the terms of the Merger Agreement. As set forth in the Merger Agreement,
all liabilities related to the Flexible Packaging Business will be retained by
JPS Packaging. See "RISK FACTORS--Contingent Liabilities Associated with
Flexible Packaging Business." The Sealright Board considered the likelihood of
reaching a definitive agreement with respect to the sale of the Flexible
Packaging Business prior to the consummation of the Merger; the risk that
further negotiations for such a sale might delay or jeopardize the
consummation of the Merger and receipt of the Merger Consideration by the
Sealright stockholders; and the prospects for operation of JPS Packaging as a
stand-alone business retained by the Sealright stockholders. Based upon such
considerations, the Sealright Board determined that the retention by the
Sealright stockholders of JPS Packaging through the Exchange was in the best
interests of the Sealright stockholders and approved the Exchange.
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<PAGE>
REASONS FOR THE TRANSACTIONS; RECOMMENDATION OF THE SEALRIGHT BOARD
The Sealright Board decided to approve the Merger and Exchange and enter
into the Merger Agreement in order to obtain for stockholders better value
than that which they could receive on the open market. The Sealright Board
considered many factors, the primary factors consisting of the following:
(a) The financial condition, historical and projected, of Sealright, the
results of operations of Sealright, market price information regarding
Sealright and the various alternatives for enhancing stockholder value;
(b) The scope of the efforts to sell the entire company, the Rigid
Packaging Business and/or the Flexible Packaging Business, including: the
number and identity of potential buyers from whom indications of interest
were solicited and the fact that no proposals acceptable to the Sealright
Board had been made for the acquisition of either the entire company or the
Flexible Packaging Business; the difficulties in three-party negotiations
that would be inherent in simultaneous sales of the Rigid Packaging
Business and the Flexible Packaging Business; and the desire to allow the
Sealright stockholders to realize the benefit afforded by the Huhtamaki
proposal;
(c) The Sealright Board's review with its legal advisors of the terms and
conditions of the Merger Agreement, including provisions that allow
Sealright to consider and the Sealright Board to approve an alternative
acquisition proposal from a third party, under certain conditions. See
"TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Terms of the Merger;" and
(d) The opinion of Goldman Sachs that the $11.00 per share in cash to be
received by the holders of Sealright Common Stock (other than Huhtamaki,
Sealright or any direct or indirect subsidiary of Huhtamaki or Sealright)
for the Rigid Packaging Business is fair to such holders from a financial
point of view (see "--Opinion of Financial Advisor," below).
FOR THE REASONS DISCUSSED ABOVE, THE SEALRIGHT BOARD HAS UNANIMOUSLY
APPROVED THE MERGER AND EXCHANGE AND THE TERMS OF THE MERGER AGREEMENT AND
RECOMMENDS THAT SEALRIGHT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AND
EXCHANGE AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
The Goldman Sachs Opinion. On March 2, 1998, Goldman Sachs delivered its
oral opinion, subsequently confirmed in writing, to the Sealright Board that,
as of the date of such opinion, the $11.00 per share in cash to be received by
the holders of Sealright Common Stock (other than Huhtamaki, Sealright or any
direct or indirect subsidiary of Huhtamaki or Sealright) for the Rigid
Packaging Business is fair from a financial point of view to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED MARCH 2, 1998,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. SEALRIGHT STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION
IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Annual Reports to Stockholders and Annual
Reports on Form 10-K of Sealright for the five years ended December 31, 1996;
(iii) a draft of the Annual Report on Form 10-K of Sealright for the year
ended December 31, 1997; (iv) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Sealright; (v) certain other communications
from Sealright to its stockholders; (vi) certain internal financial analyses
and forecasts prepared by Sealright's management for Sealright as well as the
Rigid Packaging Business; and (vii) certain pro forma historical financial
information with respect to the Rigid Packaging Business. Goldman Sachs also
held discussions with members of the senior management of Sealright and the
Rigid Packaging Business regarding the past and current business operations,
financial condition and future prospects of the Rigid Packaging Business. In
addition, Goldman Sachs reviewed the reported price and trading activity for
Sealright
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Common Stock, compared certain financial and stock market information for
Sealright and certain financial information for the Rigid Packaging Business
with similar information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations in the packaging industry specifically and in other industries
generally and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy
and completeness for purposes of rendering its opinion. In addition, Goldman
Sachs has not made an independent evaluation or appraisal of the assets and
liabilities of Sealright, JPS Packaging or the Rigid Packaging Business or any
of Sealright's subsidiaries and Goldman Sachs has not been furnished with any
such evaluation or appraisal. The advisory services of Goldman Sachs and the
opinion of Goldman Sachs referred to herein were provided for the information
and assistance of the Sealright Board in connection with its consideration of
the transaction contemplated by the Merger Agreement and such opinion does not
constitute a recommendation as to how any holder of Sealright Common Stock
should vote with respect to the Merger Agreement.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Sealright
Board on March 2, 1998. Goldman Sachs utilized substantially the same type of
financial analyses in connection with providing the written opinion attached
hereto as Appendix B.
(a) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Sealright Common Stock over a
10 year period from February 29, 1988 to February 27, 1998, and over a one
year period from February 27, 1997 to February 27, 1998. Such review
included a review of the volume of shares traded at specific prices and the
total volume of Sealright Common Stock traded as a percentage of Sealright
Common Stock outstanding during such 10 year and one year periods. Such
presentation indicated, for the 10 year and one year periods, weighted
average market prices of $13.35 and $11.82 per share of Sealright Common
Stock, respectively, based on trading prices for the Sealright Common Stock
during such periods, with the Sealright Common Stock traded in such 10 year
and one year periods amounting to 236.6% and 40.2%, respectively, of the
total Sealright Common Stock outstanding. Such review also included Goldman
Sachs' analysis of the indexed historical trading prices of the Sealright
Common Stock during the period from February 28, 1993 to February 27, 1998
(based on trading prices for Sealright Common Stock determined monthly
during such period) as compared to the Standard & Poors Index as well as
trading prices of shares of a group of companies in similar industries.
(b) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to Sealright to corresponding
financial information, ratios and public market multiples for 12 publicly
traded corporations: Ball Corporation, Bemis Company, Inc., Crown, Cork &
Seal Company, Inc., Owens-Illinois, Inc., Silgan Holdings, Inc., Caraustar
Industries, Inc., Rock-Tenn Company, Shorewood Packaging Corporation,
Sonoco Products Company, Aptar Group, Inc., Sealed Air Corporation and West
Company, Incorporated (the "Selected Companies"). The Selected Companies
were chosen because they are publicly traded companies with operations that
for purposes of analysis may be considered similar to the Rigid Packaging
Business. Goldman Sachs calculated and compared various financial multiples
and ratios. The multiples and ratios for Sealright were based on
information provided by Sealright's management and the multiples for each
of the Selected Companies were based on publicly available information or
selected research analyst estimates as of February 25, 1998. With respect
to the Selected Companies, Goldman Sachs considered levered market
capitalization (i.e., market value of common equity plus total debt less
cash) as a multiple of estimated 1997 and 1998 sales, as a multiple of
estimated 1997 and 1998 earnings before interest, taxes, depreciation and
amortization ("EBITDA") and as a multiple of estimated 1997 and 1998
earnings before interest and taxes ("EBIT"). Goldman Sachs' analyses of the
Selected Companies indicated levered multiples of estimated 1997 and 1998
sales, which ranged from 0.8x to 3.2x, and from 0.7x to 2.8x, respectively,
estimated 1997 and 1998 EBITDA, which ranged from 5.8x to 14.8x, and from
4.8x to 13.0x, respectively, and estimated 1997 and 1998 EBIT, which ranged
from 8.7x to 18.4x, and from 7.3x to 16.5x, respectively, compared to
levered estimated 1997 and 1998 sales multiples for Sealright of 0.8x and
0.7x, respectively, estimated 1997 and 1998 EBITDA multiples for Sealright
of
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6.0x and 5.3x, respectively, and estimated 1997 and 1998 EBIT multiples for
Sealright of 15.3x and 11.3x, respectively. Goldman Sachs also considered
for the Selected Companies estimated 1997 and 1998 price/earnings ratios,
which ranged from 14.1x to 32.1x, and from 11.8x to 28.4x, respectively,
compared to 32.1x and 16.1x, respectively, for Sealright; and 1997 EBITDA
margins, which ranged from 4.9% to 19.0%, compared to 4.9% for Sealright.
The multiples and ratios for Sealright reflect the Flexible Packaging
Business in addition to the Rigid Packaging Business. For purposes of the
Selected Companies analysis, Goldman Sachs did not attempt to hypothesize
what the various public market multiples and ratios for the Rigid Packaging
Business or any particular component of the businesses of the Selected
Companies would have been on a stand-alone basis. Goldman Sachs attributed
no specific significance to the inclusion of the Flexible Packaging
Business in the Sealright multiples and ratios since the multiples and
ratios for the Selected Companies reflected divisions and businesses not
directly comparable to the Rigid Packaging Business. Consequently, for
purposes of the Selected Companies analysis Goldman Sachs made no
particular adjustment in its analysis to account for the inclusion of the
Flexible Packaging Business in the Sealright multiples and ratios.
(c) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis of the Rigid Packaging Business using Sealright
management's projections. Goldman Sachs calculated a net present value of
free cash flows for the years 1998 through 2000 using discount rates
ranging from 10% to 15%. Goldman Sachs calculated terminal values of the
Rigid Packaging Business at the year ended 2000 based on trailing multiples
ranging from 6x EBITDA to 8x EBITDA. These terminal values were then
discounted to present value using discount rates from 10% to 15%.
Using terminal values of the Rigid Packaging Business in the year 2000
based on trailing multiples ranging from 6x EBITDA to 8x EBITDA and
discounting these terminal values to present value using discount rates
ranging from 10% to 15%, the implied per share values of the Rigid
Packaging Business ranged from $7.37 to $14.19.
(d) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the packaging industry
since 1995 (the "Selected Transactions"). Such analysis indicated that for
the Selected Transactions (i) levered aggregate consideration as a multiple
of the last twelve months' ("LTM") revenues ranged from 0.6x to 3.0x, as
compared to 1.3x 1997 estimated sales for the aggregate consideration to be
received for the Rigid Packaging Business, (ii) the multiple of LTM EBITDA
ranged from 5.2x to 10.7x, as compared to 9.3x 1997 estimated EBITDA for
the aggregate consideration to be received for the Rigid Packaging
Business, and (iii) levered aggregate consideration as a multiple of LTM
EBIT ranged from 9.9x to 16.4x, as compared to 21.9x 1997 estimated EBIT
for the aggregate consideration to be received for the Rigid Packaging
Business.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is directly
comparable to Sealright, the Rigid Packaging Business or Huhtamaki or the
contemplated transaction. The analyses were prepared solely for purposes of
Goldman Sachs' providing its opinion to the Sealright Board as to the fairness
from a financial point of view of the $11.00 per share in cash to be received
by the stockholders of Sealright (other than Huhtamaki or Sealright or any
direct or indirect subsidiary of Huhtamaki or Sealright) for the Rigid
Packaging Business, and do not purport to be appraisals or necessarily reflect
the prices at which businesses or securities actually may be sold. Analyses
based upon forecasts of future results are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
the parties or their respective advisors, none of Sealright, Huhtamaki,
Goldman Sachs or any other person assumes responsibility if future results are
materially different from those forecast. As described above, Goldman Sachs'
opinion to the Sealright Board was one of many factors taken into
consideration by the Sealright Board in making its determination to approve
the Merger Agreement. The foregoing summary does not purport to be a complete
description of the analysis performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs set forth in Appendix B
hereto.
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ENGAGEMENT OF FINANCIAL ADVISORS
Engagement of Goldman Sachs. Goldman Sachs, as part of its investment
banking business, is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. Sealright selected Goldman Sachs as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial experience in transactions similar to the Merger.
Pursuant to an engagement letter, dated September 12, 1997, Sealright
engaged Goldman Sachs to act as its financial advisor in connection with the
Merger Agreement. Pursuant to the terms of such engagement letter, Sealright
has agreed to pay Goldman Sachs a transaction fee of 1.15% of the aggregate
consideration of the Transactions, of which approximately $2,656,000 is
contingent upon the consummation of the Transactions. Sealright has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorney's fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the Federal securities laws.
Engagement of George K. Baum & Company. George K. Baum & Company is a
regional investment banking firm and, as a part of its investment banking
activities, is regularly engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. G. Kenneth Baum and William D. Thomas are both directors of
Sealright and JPS Packaging. Mr. Baum is an employee and Mr. Thomas serves as
Vice President of George K. Baum & Company.
George K. Baum & Company was retained to act as financial advisor to
Sealright in connection with the analysis and consideration of strategic
alternatives for Sealright in September 1997. It was selected by Sealright
because of its qualifications and experience in similar transactions and
familiarity with Sealright and with companies in the packaging industry in
which Sealright is engaged. George K. Baum & Company was one of the
underwriters of Sealright's initial public offering in 1986 and has served as
a financial advisor to Sealright in connection with several past acquisitions
and financings. In light of this extensive background and familiarity with
Sealright and its industry, the Sealright Board, including the six non-
management directors who are not affiliated with George K. Baum & Company,
approved the selection of George K. Baum & Company, along with Goldman Sachs,
to act as a financial advisor. In connection with the vote to approve the
engagement letters with the financial advisors, Messrs. Baum and Thomas
abstained. See "CERTAIN TRANSACTIONS."
For its financial advisory services in connection with the Transactions,
George K. Baum & Company will receive a fee of .25% of the aggregate
consideration of the Transactions, of which approximately $573,000 is
contingent upon the consummation of the Transactions. Sealright has also
agreed to reimburse George K. Baum & Company for its reasonable out-of-pocket
expenses, including the fees and expenses of legal counsel, and to indemnify
it and certain of its related persons against liabilities in connection with
its engagement, including certain liabilities under the Federal securities
laws.
George K. Baum & Company may actively trade in the equity securities of
Sealright (and, after the Effective Date, JPS Packaging) for its own account
or for the accounts of its customers, and, accordingly, may at any time hold
long or short positions in such securities.
IRREVOCABLE PROXY AND OPTION
The Stockholder Group, comprised of George K. Baum Group, Inc., The G.
Kenneth Baum Revocable Trust and The William D. Thomas Trust, and their
assigns, have granted to representatives of Huhtamaki an irrevocable proxy and
stock option for 4,455,115 shares of Sealright Common Stock. See "PROXY AND
OPTION GRANTED TO HUHTAMAKI."
TERMS OF THE MERGER AGREEMENT AND EXCHANGE
This section of the Proxy Statement/Prospectus describes certain aspects of
the Merger Agreement and the proposed Merger and Exchange. The following
descriptions do not purport to be complete and are qualified in
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their entirety by reference to the Merger Agreement or the ancillary
agreements thereto (the "Ancillary Agreements"), as the case may be. A copy of
the Merger Agreement is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. Copies of the
Ancillary Agreements have been filed as exhibits to the Registration
Statement. All Sealright stockholders are urged to read the Merger Agreement
and the Ancillary Agreements in their entirety.
TERMS OF THE MERGER
General. At the Effective Time, Huhtamaki, Sealright and Acquisition Sub
will consummate the Merger, in which Acquisition Sub will merge into Sealright
and the separate corporate existence of Acquisition Sub will cease. Sealright
will be the surviving corporation in the Merger (the "Surviving Corporation")
and will continue to be governed by the laws of the State of Delaware. The
name of the Surviving Corporation will be "Sealright Co., Inc."
Certificate of Incorporation and Bylaws. The Merger Agreement provides that
the certificate of incorporation and bylaws of Acquisition Sub in effect at
the Effective Time will be the certificate of incorporation and bylaws of the
Surviving Corporation.
Directors and Officers. The Merger Agreement provides that the directors and
officers of Acquisition Sub at the Effective Time will be the directors and
officers of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected or appointed
and qualified.
Conversion of Sealright Common Stock. Pursuant to the Merger Agreement, as
of the Effective Time, each issued and outstanding share of Sealright Common
Stock, other than (a) shares held by Huhtamaki, Acquisition Sub, or any other
wholly-owned subsidiary of Huhtamaki or (b) any shares owned by Sealright or
any of its subsidiaries, which shares will be canceled in accordance with the
provisions of the Merger Agreement and (c) shares held by stockholders who
have properly complied with the provisions of Section 262 of the DGCL with
respect to appraisal rights ("Dissenting Shares"), will be converted into the
right to receive the Merger Consideration of $11.00 per share in cash without
interest, and the Redemption Consideration, of one-half of a share of JPS
Common Stock. See "--Terms of the Exchange."
TERMS OF THE EXCHANGE
Because Huhtamaki only desired to acquire the Rigid Packaging Business, the
distribution of the Flexible Packaging Business to the holders of Sealright
Common Stock through the Exchange is to occur simultaneous with the
consummation of the Merger. The issuance of one-half share of JPS Common Stock
per share of Sealright Common Stock, as the Redemption Consideration, has been
structured as a partial redemption of the outstanding Sealright Common Stock,
occurring simultaneously with the effectiveness of the Merger. See "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF TRANSACTIONS." The Exchange will be
effected by Sealright with its stockholders on a pro rata basis. Additionally,
in connection with the Exchange, JPS Packaging will redeem any partial shares
of JPS Common Stock otherwise issuable for $6.86 in cash per share. Although
the Exchange will be effected simultaneously with the Merger and will not
occur unless the Merger is approved and about to occur, the JPS Common Stock
to be received by the holders of Sealright Common Stock in the Exchange will
not constitute a part of the Merger Consideration.
EFFECTIVE TIME; CLOSING
The Merger Agreement provides that the Merger will become effective and the
Effective Time will occur upon the filing of a Certificate of Merger or other
appropriate documents with the Delaware Secretary of State or at such other
time as Sealright and Huhtamaki agree. The Merger Agreement provides that the
Closing will take place as promptly as practicable after the satisfaction or
waiver of the conditions to the Merger (other than, but subject to, those
conditions to be performed at the Closing). The effectiveness of the Merger
and the Exchange will occur simultaneously at the Effective Time.
PAYMENT OF MERGER CONSIDERATION AND REDEMPTION CONSIDERATION
Pursuant to the Merger Agreement, at the Effective Time, Huhtamaki will make
available to the Paying Agent the aggregate amount of the cash Merger
Consideration payable pursuant to the Merger Agreement, and
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certificates for JPS Common Stock representing the aggregate Redemption
Consideration will be deposited with the Paying Agent by Sealright in
connection with the Exchange, in exchange for certificates formerly
representing outstanding shares of Sealright Common Stock. As soon as
reasonably practicable after the Effective Time, the Surviving Corporation
will cause the Paying Agent to mail a transmittal form and instructions to
each holder of record of certificates which immediately prior to the Effective
Time represented outstanding shares of Sealright Common Stock (the "Stock
Certificates"), which form and instructions are to be used in forwarding the
Stock Certificates for surrender and exchange for (a) the Merger Consideration
which such holder is entitled to receive pursuant to the Merger, (b)
certificates representing the number of shares of JPS Common Stock which such
holder has the right to receive pursuant to the Exchange, and (c) if
applicable, payment of cash ($6.86 per share) in redemption of any partial
shares of JPS Packaging issued in connection with the Exchange. SEALRIGHT
STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR STOCK CERTIFICATES FOR
EXCHANGE UNTIL SUCH TRANSMITTAL FORM AND INSTRUCTIONS ARE RECEIVED. Until
surrendered as provided above, Stock Certificates will be deemed to represent
the right to receive (i) cash in an amount equal to the Merger Consideration
and (ii) that number of shares of JPS Common Stock equal to the Redemption
Consideration, for the shares of Sealright Common Stock formerly represented
by such Stock Certificates.
Based on the number of shares of Sealright Common Stock outstanding at June
1, 1998, up to a maximum of 5,595,313 shares of JPS Packaging would be
delivered by Sealright as Redemption Consideration. Such maximum number
consists of 5,541,282 shares of JPS Common Stock, based on the current number
of issued and outstanding shares of Sealright Common Stock and up to 51,635
shares of JPS Common Stock which may be delivered by Sealright as Redemption
Consideration in the event of the exercise of outstanding vested stock options
for Sealright Common Stock between the Record Date and the Effective Date. All
shares of JPS Common Stock will be fully paid, nonassessable and free of
preemptive rights.
Additionally, to the extent that outstanding stock options for Sealright
Common Stock (the "Sealright Stock Options") are not exercised prior to the
Effective Date, it is anticipated that 11,471 shares of JPS Common Stock will
be issued in connection with their settlement. See "--Treatment of Options."
Following the Exchange, approximately 9,400,111 shares of JPS Common Stock
will remain authorized but unissued, of which 550,000 will be reserved for
issuance pursuant to incentive compensation awards to the employees of JPS
Packaging.
No holders of Sealright Common Stock will be required to pay any cash or
other consideration (other than the partial exchange of Sealright Common
Stock) for the shares of JPS Common Stock to be received in the Exchange or to
take any action, other than delivery of their Stock Certificates to the Paying
Agent, in order to receive JPS Common Stock.
If after the Effective Date but prior to the surrender of a Stock
Certificate, the record date for a dividend or other distribution with respect
to JPS Common Stock is set, then, such dividend or other distribution will be
(a) paid in connection with the issuance of JPS Common Stock if such dividend
or other distribution became payable prior to the surrender, or (b) paid by
JPS Packaging on the payment date if the surrender precedes the payment date.
In no event will the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties. The Merger Agreement includes representations and warranties by
Sealright (in general, with respect to both Sealright and its subsidiaries) as
to (a) the corporate organization, standing and power of Sealright and its
subsidiaries, (b) Sealright's capitalization, (c) the authorization, due
execution and enforceability of the Merger Agreement, (d) authorization by the
Sealright Board of the Merger and Exchange and the other Transactions, (e)
noncontravention of laws and agreements and the absence of the need (except as
specified) for governmental or third-party consents, (f) the accuracy of
Sealright's financial statements, filings with the Commission and certain
press releases, (g) the accuracy of information to be supplied by Sealright
for inclusion in this Proxy Statement/Prospectus and in certain other filings
with the Commission, (h) the conduct of Sealright's business in the ordinary
course and the absence of any material adverse change with respect to
Sealright and the business,
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assets, liabilities, operations, conditions, results of operations or
prospects of Sealright and its subsidiaries, taken as a whole, (i) pending or
threatened litigation, (j) Sealright's compliance with applicable laws, (k)
brokers and finders employed by Sealright, (l) certain matters relating to the
Employee Retirement Income Security Act of 1974, as amended, and certain
employment and labor relations matters, (m) the solvency of JPS Packaging, the
preparation of the pro forma balance sheet of JPS Packaging and certain other
matters related to JPS Packaging, (n) material contracts and (o) various other
matters relating to Sealright, its subsidiaries and the Rigid Packaging
Business.
The Merger Agreement also includes representations and warranties by
Huhtamaki and Acquisition Sub as to (a) the corporate organization, standing
and power of Huhtamaki and Acquisition Sub, (b) the authorization, due
execution and enforceability of the Merger Agreement, (c) authorization by the
Board of Directors of Huhtamaki and Acquisition Sub and the sole stockholder
of Acquisition Sub of the Merger and the Other Transactions, (d)
noncontravention of laws and agreements and the absence of the need (except as
specified) for governmental or third-party consents, (e) the accuracy of
information to be supplied by Huhtamaki for inclusion in this Proxy
Statement/Prospectus, (f) the sufficiency of funds of Huhtamaki and
Acquisition Sub, as of the Effective Date, to consummate the Merger, (g) the
absence of conduct of any business activities or operations by Acquisition Sub
prior to the Closing other than in connection with the Merger or the other
Transactions, and (h) brokers and finders employed by Huhtamaki.
BUSINESS OF SEALRIGHT PENDING THE MERGER
The Merger Agreement provides that, during the period from the date of the
Merger Agreement and continuing until the Effective Time, except for the
transactions contemplated therein, or to the extent that Huhtamaki otherwise
consents in writing, Sealright and its subsidiaries will conduct the Rigid
Packaging Business in the ordinary course, including, without limitation,
using reasonable efforts to preserve beneficial relationships between the
Rigid Packaging Business and its customers, suppliers, and employees in
connection with the Rigid Packaging Business. The Merger Agreement also
includes limitations, prohibitions and other provisions relating to
Sealright's conduct of business during this period with respect to, among
other matters, (a) capital projects, (b) contracts and agreements outside the
ordinary course of business, (c) changes in or issuances, repurchases or
redemption of capital stock, (d) charter or bylaw amendments, (e) acquisitions
and dispositions, (f) borrowings and issuance of debt securities, (g) changes
in employee compensation or the adoption or amendment of benefit plans or
arrangements, (h) incurrence of liens, (i) actions that would impair
consummation of the Transactions, (j) transition arrangements with brokers,
and (k) settlement of claims or litigation.
CONDUCT OF FLEXIBLE PACKAGING BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Flexible Packaging Business and Rigid
Packaging Business are to be treated for accounting purposes as if they were
separate stand-alone businesses as of December 31, 1997. Any cash provided by
the Rigid Packaging Business to the Flexible Packaging Business will be
treated as an advance which must be repaid by JPS Packaging in cash on or
prior to the Effective Time or vice versa. Such advances will arise primarily
from allocation of expenses and advances to fund cash operating losses,
capital expenditures, and other cash sources or uses. Huhtamaki and Sealright
have agreed that otherwise unallocated expenses will be charged to the
Flexible Packaging Business as follows: 38% of corporate expenses not directly
attributable to either business and 42.5% of severance costs associated with
unallocated personnel not retained by either Sealright or JPS Packaging. As a
result of the required accounting procedures and expense allocations, it is
anticipated that at the Effective Time, JPS Packaging will be required to pay
Sealright approximately $4,000,000 at the Effective Time.
NO SOLICITATION OF THIRD PARTY ACQUISITION PROPOSALS
Pursuant to the Merger Agreement, neither Sealright nor any of its
directors, officers, employees or other affiliates will, and Sealright will
use its best efforts to ensure that none of its representatives of their
affiliates will, take any action to encourage, solicit or initiate any
inquiries or proposals from or with any person that constitute, or could
reasonably be expected to lead to an Acquisition Proposal. An "Acquisition
Proposal", as defined in the Merger Agreement, is any inquiry, proposal or
offer from any person relating to (a) any direct or
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indirect acquisition or purchase of a substantial amount of the assets of
Sealright or any of its subsidiaries or of over 10% of any class of equity
securities of Sealright or its subsidiaries, (b) any tender offer or exchange
offer that if consummated would result in any person beneficially owning 10%
or more of any class of equity securities of Sealright or any of its
subsidiaries, (c) any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving Sealright or any of its subsidiaries (other than
the Reorganization) or any other transaction, the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or which would reasonably be expected to dilute materially the
benefits to Huhtamaki of the Merger.
The Merger Agreement provides that, in connection with an unsolicited
Acquisition Proposal, and provided Sealright advises Huhtamaki of such
Acquisition Proposal, Sealright may furnish or cause to be furnished
information and may participate in such discussions and negotiations directly
or through its representatives if the Sealright Board reasonably determines
that the Acquisition Proposal is likely to result in a "Superior Proposal" if
the Sealright Board believes (based upon the advice of independent outside
counsel) that the failure to provide such information or participate in such
negotiations and discussions would constitute a breach of its fiduciary duties
under applicable law. A "Superior Proposal" is defined in the Merger Agreement
as a bona fide proposal made by a third party to acquire all of the
outstanding Sealright Company Stock pursuant to a tender offer, to acquire all
of Sealright's assets (either including or excluding JPS Common Stock), or to
enter into a merger agreement with Sealright, in each case (a) on terms which
a majority of the members of the Sealright Board determines in good faith
reasonable judgment (based on the advice of independent outside financial and
legal advisors) to be more favorable to Sealright and its stockholders than
the Merger and Exchange and (b) for which financing, to the extent required,
is then committed or which is reasonably capable of being obtained by such
third party on commercially reasonable terms as determined in the good faith
reasonable judgment of the Sealright Board (based on the advice of independent
outside financial and legal advisors). Sealright is obligated to notify
Huhtamaki as soon as practicable if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations
or discussions are sought to be initiated or continued with, it, which notice
will provide the identity of the third party or parties and the terms of any
such proposal or proposals.
Sealright may recommend to its stockholders an Acquisition Proposal, and in
connection therewith withdraw or modify its approval or recommendation of the
Merger, if (a) the Sealright Board has determined that the Acquisition
Proposal is a Superior Proposal, (b) all conditions to Sealright's right to
terminate the Merger Agreement pursuant to its terms have been satisfied
(including the expiration of a five day period, during which time Huhtamaki
may seek to modify the terms and conditions of the Merger Agreement so that
the Merger may be effected; and payment of a $3,800,000 termination fee plus
$1,500,000 expense reimbursement to Huhtamaki), and (c) simultaneously with
such withdrawal, modification or recommendation, the Merger Agreement is
terminated in accordance with its terms. Except as set forth above, under the
Merger Agreement, in connection with an Acquisition Proposal the Sealright
Board may not withdraw or modify or propose to withdraw or modify, in a manner
adverse to Huhtamaki or Acquisition Sub, the Sealright Board's approval and
recommendation or the adoption and approval of the Merger Agreement and the
approval of the Merger. Sealright will not take any action to approve any
transaction under any anti-takeover provision of the DGCL in connection with
any Acquisition Proposal unless and until the Merger Agreement is terminated
in accordance with the provisions thereof. See "--Termination; Certain Fees."
CERTAIN COVENANTS OF HUHTAMAKI
Under the Merger Agreement, Huhtamaki has agreed to limitations,
prohibitions and other provisions, applicable during the period from the date
of the Merger Agreement and continuing until the Effective Time, relating to
actions that would impair consummation of the Merger or the Exchange.
CERTAIN OTHER COVENANTS
Exchange. The Merger Agreement provides that the Exchange shall occur
simultaneously with the Merger.
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Ancillary Agreements. The Merger Agreement provides that, prior to the
Effective Time, Sealright will enter into the Ancillary Agreements. See "--
Terms of Ancillary Agreements."
Sale of Flexible Packaging Business. The Merger Agreement provides that,
prior to the Effective Date, Sealright may enter into and consummate
agreements with respect to the sale of the Flexible Packaging Business or its
assets. If such were to occur, the net proceeds from any such sales (less
certain tax liabilities) would be distributed to the Sealright stockholders as
the Redemption Consideration in lieu of the JPS Common Stock. Sealright has
not entered into any such agreements, is not presently engaged in any
negotiations with respect thereto and does not anticipate that any such sale
or negotiations shall occur prior to the Effective Time.
Indemnification of Sealright Directors and Officers. The Merger Agreement
provides that Sealright, as the Surviving Corporation, shall continue to
provide indemnification of its directors and officers for a period of six
years after the Effective Time in a manner consistent with Sealright's
practices prior to the Effective Time, so as to not materially adversely
affect the rights to indemnification in respect of actions or omissions
occurring at or prior to the Effective Time of persons who, at any time prior
to the Effective Time, were directors or officers of Sealright. Huhtamaki is
obligated to guarantee this obligation or to cause the Surviving Corporation
to extend Sealright's existing directors and officers insurance coverage
through the purchase of coverage for runoff claims.
TERMS OF ANCILLARY AGREEMENTS
In connection with the Merger and Exchange, Sealright and JPS Packaging have
entered into certain agreements to facilitate the operations of JPS Packaging
following the Exchange.
The Tax Procedures Agreement. The Tax Procedures Agreement will be entered
into as of the Effective Date by Sealright and JPS Packaging. The Tax
Procedures Agreement generally sets forth the responsibility of Sealright and
JPS Packaging with respect to the filing of Federal and state income tax
returns and the payment of Federal and state income tax liabilities. Under the
Tax Procedures Agreement, JPS Packaging generally is obligated to reimburse
Sealright for the amount, if any, of Federal and state income tax payable by
Sealright with respect to JPS Packaging's income during the period beginning
January 1, 1998 and ending on the Effective Date (the "Interim Period"), and
Sealright generally is obligated to pay JPS Packaging the amount, if any, of
Federal and state income tax benefit realized by Sealright with respect to JPS
Packaging's income or loss during the Interim Period. JPS Packaging and
Sealright are responsible for their respective income tax obligations after
the Exchange. In addition, JPS Packaging will be responsible for certain
additional income taxes incurred by Sealright as a result of an audit
adjustment to JPS Packaging's income prior to the Exchange. Both Sealright and
JPS Packaging agree to indemnify the other for the respective income tax
obligations assumed by the respective parties. Under the Tax Procedures
Agreement, JPS Packaging agrees that it will carry any future net operating
loss forward and will not be allowed to carry any such loss back against
Sealright's prior years income.
The Intellectual Property License Agreement. The Intellectual Property
License Agreement will be entered into as of the Effective Date by and between
Sealright and JPS Packaging. It will facilitate the license of certain
trademarks, including the Sealright and Liftright trademarks and the stylized
S, SR and SSS trademarks and the registrations and applications for
registrations relating thereto (collectively, the "Trademarks"). As of the
Effective Date, Sealright will grant to JPS Packaging a non-exclusive
worldwide, royalty-free right to use the Trademarks solely in the Flexible
Packaging Business for a period of six months following the Effective Date.
The Intellectual Property License Agreement provides certain limitations on
the ability of JPS Packaging and its affiliates to use certain Trademarks. JPS
Packaging may not register or apply for registration of the Trademarks
anywhere in the world, or take any action whatsoever to contest the validity
of the Trademarks, Sealright's ownership of the Trademarks or which in any way
diminishes Sealright's ownership, validity or use of the Trademarks. Further,
JPS Packaging will not be permitted to use the Trademarks in combination with
any name, mark or logo such that the total combination is likely to cause
confusion that JPS Packaging does business outside of the Flexible Packaging
Business. However, during the term of the Intellectual Property License
Agreement JPS Packaging and its affiliates will be permitted to use the
Trademarks in connection with legally permissible promotion and advertising of
products and services.
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The Transitional Services Agreement. The Transitional Services Agreement
provides that after the Effective Date, Sealright shall provide, to the extent
reasonably requested by JPS Packaging, ongoing services related to information
systems, human resources and accounting, treasury and credit/collection to JPS
Packaging for a period of up to 90 days.
Additionally, to the extent reasonably requested by JPS Packaging, Sealright
will manufacture and supply Styrotech(TM) sleeve labeling machines and related
spare parts for JPS Packaging during such 90 day period, and to the extent
reasonably requested by Sealright, JPS Packaging will manufacture and supply
certain lidding products at its San Leandro plant for Sealright during such 90
day period, both at cost.
At the request of JPS Packaging, the Transitional Services Agreement may be
renewed for an additional 90 day period. Any charges incurred during such
renewal period will be twice the actual direct costs for such services or
products.
EMPLOYMENT MATTERS
Pursuant to the Merger Agreement, Huhtamaki has agreed that the Surviving
Corporation shall honor, without modification, certain employment agreements,
executive termination agreements and individual benefit arrangements existing
and in effect on the date of the Merger Agreement.
FEES AND EXPENSES
Except as provided in the Merger Agreement with respect to termination of
the Merger Agreement under certain circumstances, all fees, costs and expenses
incurred in connection with the Merger and Exchange, the Merger Agreement, and
the other Transactions will be paid by the party incurring such fees, costs or
expenses, whether or not the Merger is consummated, provided that JPS
Packaging shall only be obligated to pay that portion, if any, of the
aggregate out-of-pocket expenses incurred by Sealright in connection with the
Transactions, including the Exchange (such as investment banking, legal and
accounting fees and expenses, printing costs and Commission filing fees) in
excess of $4,000,000.
CONDITIONS
The respective obligations of each party to the Merger Agreement to effect
the Merger is subject to the satisfaction or waiver on or prior to the
Effective Date of a number of conditions, including the following: (a)
approval and adoption of the Merger Agreement by the affirmative vote or
consent of the holders of shares of Sealright Common Stock representing a
majority of the shares of Sealright Common Stock issued and outstanding and
entitled to vote; (b) the absence of any law or judgment by any governmental
entity that would prohibit or restrain the consummation of the Transactions;
(c) the expiration or earlier termination of any waiting periods under the HSR
Act (or other similar foreign laws); (d) the Registration Statement shall have
become effective and JPS Packaging shall have received all state securities
law authorizations necessary for the Exchange; and (e) Sealright shall have
amended all outstanding agreements granting options for the purchase of
Sealright Common Stock so as to effect the cancellation, extinguishment and/or
conversion of all such options.
In addition, the obligation of Huhtamaki and Acquisition Sub to effect the
Merger is further subject to the following conditions unless waived in writing
by Huhtamaki: (a) the performance in all material respects of Sealright's
covenants, agreements and obligations under the Merger Agreement; (b) the
truthfulness and correctness of the representations and warranties of
Sealright set forth in the Merger Agreement that are qualified as to
materiality, and the truthfulness and correctness in all material respects of
the representations and warranties of Sealright set forth in the Merger
Agreement that are not so qualified; (c) the absence of any material adverse
change and any event that could reasonably be expected to result in a material
adverse change, to the business, assets, liabilities, operations, prospects,
results of operations, or condition (financial or otherwise) of either
Sealright and its subsidiaries, taken as a whole, or JPS Packaging; (d) the
delivery of certain certificates by Sealright as to fulfillment of certain
conditions; (e) the receipt of all consents, approvals and authorizations
legally required to be obtained to consummate the Merger from all governmental
entities; (f) JPS Packaging shall own all of the Flexible Packaging Assets and
related Flexible Packaging Liabilities and all amounts payable by JPS
Packaging to Sealright shall have been paid in cash; (g) the execution and
delivery by JPS Packaging and
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the Surviving Corporation of all Ancillary Agreements; and (h) the absence of
pending or threatened litigation challenging the Merger or seeking to prohibit
or materially limit the ownership or operation by Huhtamaki of the Rigid
Packaging Business.
In addition, the obligation of Sealright to effect the Merger is further
subject to the following conditions unless waived in writing by Sealright: (a)
the performance in all material respects of the covenants, agreements and
obligations of Huhtamaki and Acquisition Sub under the Merger Agreement; (b)
the truthfulness and correctness of the representations and warranties of
Huhtamaki set forth in the Merger Agreement that are qualified as to
materiality, and the truthfulness and correctness in all material respects of
the representations and warranties of Huhtamaki set forth in the Merger
Agreement that are not so qualified; (c) the delivery of certain certificates
by Huhtamaki as to fulfillment of certain conditions; and (d) the execution
and delivery by JPS Packaging and the Surviving Corporation of all Ancillary
Agreements.
TREATMENT OF SEALRIGHT STOCK OPTIONS
As of the Record Date, options to acquire approximately 235,800 shares of
Sealright Common Stock are held by employees of Sealright. Prior to the
Effective Date, each of the agreements governing these options will be amended
to provide that the vesting of any then unvested options will be accelerated
to the Effective Time and that all options will be settled and canceled at the
Effective Time. As settlement, the option holders will receive a per share
amount, in cash and JPS Common Stock, (subject to any applicable withholding
taxes) equal to the positive difference, if any, between (i) the per share
exercise price of the option and (ii) the sum of the Merger Consideration plus
the Redemption Consideration. For purposes of such settlements, the value of
the Redemption Consideration has been set at $3.43 per half-share.
The Surviving Corporation shall bear the cash portion of such settlement
amount and JPS Packaging will pay the balance in JPS Common Stock and cash to
be paid in lieu of fractional shares of JPS Common Stock. It is anticipated
that 11,471 shares of JPS Common Stock will be issued in connection with the
settlement of the outstanding options for Sealright Common Stock.
TERMINATION; CERTAIN FEES
The Merger Agreement may be terminated: (a) by mutual written consent of
Huhtamaki and Sealright; (b) by either Huhtamaki or Sealright if (i) the
Sealright stockholders do not approve the Merger Agreement and the Merger (a
"Stockholder Termination"), (ii) any court or governmental entity has 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,
(iii) the Merger has not been consummated by September 30, 1998, unless the
failure to consummate the Merger is a result of the party seeking to terminate
failing to fulfill its obligations under the Merger Agreement (a "9/30/98
Termination"), or (iv) if the Sealright Board determines that an Acquisition
Proposal constitutes a Superior Proposal and the Sealright Board believes
(based upon the advice of independent outside counsel) that a failure to
terminate the Merger Agreement, in accordance with its terms and provisions,
and enter into an agreement to effect the Superior Proposal would constitute a
breach of its fiduciary duties, and Sealright enters into a definitive
agreement to effect the Superior Proposal and Huhtamaki has received the
amounts required to be paid to it pursuant to the terms of the Merger
Agreement (a "Superior Proposal Termination"); (c) by Huhtamaki if (i) any of
the representations or warranties made by Sealright in the Merger Agreement
are untrue or incorrect in any material respect or if Sealright has failed to
perform, or to comply, in any material respect with its material obligations,
agreements or covenants under the terms of the Merger Agreement, and after 30
days written notice such misrepresentation or breach shall not have been cured
by Sealright (a "Huhtamaki Special Termination"), (ii) any person, other than
Huhtamaki and its affiliates, shall have commenced a tender offer for 10% or
more of any class of equity securities of Sealright, (iii) the Sealright Board
has withdrawn or materially modified or changed its recommendation of the
Merger Agreement or the Merger in a manner adverse to Huhtamaki or Acquisition
Sub and there exists at such time an Acquisition Proposal for Sealright (a
"Modified Recommendation Termination"), or (iv) if the number of Dissenting
Shares exceeds 5% of the outstanding
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Sealright Common Stock; or (d) by Sealright if any of the representations or
warranties made by Huhtamaki or Acquisition Sub in the Merger Agreement are
untrue or incorrect in any material respect or, if Huhtamaki or Acquisition
Sub have failed to perform, or to comply, in any material respect with their
material obligations, agreements or covenants under the terms of the Merger
Agreement, and after 30 days written notice such misrepresentation or breach
shall not have been cured by them.
In the event the Merger Agreement is terminated (a) by Sealright or
Huhtamaki pursuant to a Superior Proposal Termination; (b) by Sealright
pursuant to a Stockholder Termination or a 9/30/98 Termination, and Sealright
enters into an agreement with respect to a Third Party Acquisition (as defined
below), or a Third Party Acquisition occurs, within 12 months of such
termination; (c) by Huhtamaki pursuant to a Huhtamaki Special Termination,
unless Sealright's failure to perform or comply is beyond its control; or (d)
by Huhtamaki pursuant to a Modified Recommendation Termination, then Sealright
shall pay to Huhtamaki an amount equal to $3,800,000 in termination fees, plus
$1,500,000 as reimbursement for out-of-pocket fees and expenses incurred by
Huhtamaki or on its behalf in connection with the Transactions. Pursuant to
the Merger Agreement, a "Third Party Acquisition" is any merger or any other
business combination, sale or other disposition of any material amount of
assets, sale of shares of capital stock, tender offer or exchange offer or
similar transaction (x) involving Sealright or any of its subsidiaries and any
third party, with whom Sealright or any of its representatives had discussions
or furnished information with respect to any such transaction, or who had
submitted a proposal or expressed interest with respect thereto (in each such
case, after the date of the Merger Agreement and prior to its termination) (y)
which provides for direct or indirect consideration of the Sealright Common
Stock in excess of the Merger Consideration (or in the case of a Third Party
Acquisition for the whole company, including the Flexible Packaging Business,
in excess of the Merger Consideration plus the Redemption Consideration).
Other than the payment of the amounts described above, in the event of
termination of the Merger Agreement pursuant to its terms, the Merger
Agreement shall become void (except with respect to certain designated
provisions) and have no effect, without any liability on the part of any
party.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF TRANSACTIONS
The Transactions involve the Merger of Acquisition Sub with and into
Sealright, pursuant to which the Sealright stockholders will receive Merger
Consideration, consisting of cash, and Redemption Consideration, consisting of
JPS Common Stock, in exchange for their Sealright Common Stock. With respect
to the cash received as Merger Consideration, the Sealright stockholders are
treated for Federal income tax purposes as selling a portion of their
Sealright Common Stock to Huhtamaki in exchange for the cash. With respect to
the receipt of JPS Common Stock received as Redemption Consideration, the
Sealright stockholders are treated for Federal income tax purposes as having a
portion of their Sealright Common Stock redeemed by Sealright for the JPS
Common Stock as part of an integrated plan that terminated their entire
interest in the Sealright Common Stock. Accordingly, as a result of the
Transactions, each Sealright stockholder will recognize gain or loss in an
amount equal to the difference between (i) the sum of the fair market value of
JPS Common Stock received and the cash received as Merger Consideration and
(ii) such stockholder's basis in the Sealright Common Stock exchanged.
The fair market value of the JPS Common Stock on the Effective Date will be
determined by the best available evidence as to its value on that date.
Assuming there are no aberrations in the trading of the JPS Common Stock, and
absent special factors bearing on the value of a particular stockholder's
share of JPS Common Stock, the best available evidence of the fair market
value of the JPS Common Stock on the Effective Date should be its value as
reflected by its average trading price on the Effective Date. A when-issued
market in shares of JPS Common Stock may develop on, before, or shortly after
the Effective Date.
If the Sealright Common Stock is held as a capital asset by such
stockholder, the gain or loss will be capital gain or loss. Capital gain
recognized by an individual holder of Sealright Common Stock generally will be
subject to a maximum Federal income tax rate of (i) 39.6% if the holder held
the Sealright Common Stock for
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not more than one year, (ii) 28% if the holder held the Sealright Common Stock
for more than one year but not more than 18 months, and (iii) 20% if the
holder held the Sealright Common Stock for more than 18 months. The
deductibility of capital losses is subject to certain limitations.
The tax basis of the JPS Common Stock received in the Transactions for
purposes of determining gain or loss on a subsequent disposition of such
shares will be its fair market value as of the Effective Date as determined
above. The holding period of the JPS Common Stock received in the Transactions
will begin as of the Effective Date.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. EACH SEALRIGHT STOCKHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE TRANSACTIONS TO SUCH STOCKHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL LAW OR OTHER TAX LAWS. THE FOREGOING
DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR LISTING OF ALL
POTENTIAL TAX CONSEQUENCES AND DOES NOT ADDRESS THE FEDERAL INCOME TAX
CONSEQUENCES TO SPECIAL CLASSES OF TAXPAYERS INCLUDING, WITHOUT LIMITATIONS,
FOREIGN CORPORATIONS, TAX-EXEMPT ENTITIES AND PERSONS WHO ACQUIRED THEIR
SHARES OF SEALRIGHT COMMON STOCK PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK
OPTION OR OTHERWISE AS COMPENSATION.
PROXY AND OPTION GRANTED TO HUHTAMAKI
As a condition to Huhtamaki's execution of the Merger Agreement, the
Stockholder Group, consisting of George K. Baum Group, Inc., The G. Kenneth
Baum Revocable Trust, dated February 28, 1989, as amended December 8, 1994,
and The William D. Thomas Trust, dated July 9, 1996, and their assigns,
entered into the Proxy and Option Agreement dated as of March 2, 1998 with
Huhtamaki and Acquisition Sub. In connection therewith, the Stockholder Group
granted certain executive officers of Huhtamaki, an irrevocable proxy to vote
4,455,115 shares of Sealright Common Stock which were owned by the Stockholder
Group, plus any other shares of Sealright Common Stock subsequently acquired
by the Stockholder Group (collectively, the "Group Shares") and an irrevocable
option to Acquisition Sub to purchase all the Group Shares.
The Proxy and Option Agreement provides that the representatives of
Huhtamaki may vote all the Group Shares at any time prior to the termination
of the Merger Agreement, (i) in favor of the Merger and the Merger Agreement;
(ii) against other actions or agreements inconsistent therewith; and (iii)
against any (a) extraordinary corporation transaction; (b) sale, lease or
transfer of a material amount of assets of Sealright or its subsidiaries, or
reorganization, recapitalization, dissolution or liquidation of Sealright or
its subsidiaries; or (c) change in a majority of the persons who constitute
the Sealright Board, change in the present capitalization of Sealright,
amendment of Sealright's Certificate of Incorporation or Bylaws, other
material change in Sealright's corporate structure or business, or other
action involving Sealright or its subsidiaries which is intended, or could
reasonably be expected to impede, delay, postpone, or materially adversely
affect the Merger and the other Transactions.
In addition, the Proxy and Option Agreement provides that Acquisition Sub
has an irrevocable option to purchase the Group Shares upon the occurrence of
any of the following events: (i) the Stockholder Group fails to vote or cause
to be voted all the Group Shares in favor of the Merger and the Merger
Agreement; (ii) the Stockholder Group attempts to revoke the Stockholder Group
Proxy; (iii) there occurs an Acquisition Proposal; or (iv) the Sealright Board
determines that a proposal to acquire Sealright is a Superior Proposal. Such
option to purchase extends until the earlier of the Effective Time or 90 days
following the termination of the Merger Agreement. The purchase price for the
Group Shares pursuant to the Proxy and Option Agreement is the lesser of (i)
the amount proposed to be paid in connection with a Superior Proposal, or (ii)
$14.43 per share in cash, provided, however, if the Group Shares are
subsequently sold by Acquisition Sub to a person who made an Acquisition
Proposal prior to the exercise of the option, the Stockholder Group
additionally shall be paid one-half of the amount by which the net proceeds
from such subsequent sale exceed $14.43 per share.
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As a result of the Proxy and Option Agreement, the Group Shares,
representing approximately 40% of the outstanding shares of Sealright Common
Stock, will be voted in favor of the Merger and Exchange. The Proxy and Option
Agreement was approved by the Sealright Board pursuant to Section 203 of the
DGCL.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions may not be
consummated unless notice has been given and certain information has been
furnished to the Antitrust Division (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The Merger is subject
to these requirements.
Huhtamaki and Sealright each filed with the Antitrust Division and the FTC a
Notification and Report Form with respect to the Merger on March 19, 1998.
Under the HSR Act, the Merger may not be consummated until the expiration of a
waiting period of at least 30 days following receipt of each filing, unless
the waiting period is earlier terminated by the FTC and the Antitrust Division
or unless the waiting period is extended by a request for additional
information. On March 30, 1998, the FTC notified the parties that the waiting
period was terminated as of that date.
APPRAISAL RIGHTS
Holders of Sealright Common Stock are entitled to appraisal rights under
Section 262 of the DGCL ("Section 262"). Section 262 is reprinted in its
entirety as Appendix C to this Proxy Statement/Prospectus and the summary
herein is qualified by reference to the full text thereof. All references in
Section 262 to a "stockholder" are to the record holder and all references in
this summary to a "stockholder" are to the record holder of Sealright Common
Stock as to which appraisal rights are being asserted. A person having a
beneficial interest in Sealright Common Stock that is 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 whatever appraisal rights the beneficial owner may
have.
Under the DGCL, holders of Sealright Common Stock who follow the procedures
set forth in Section 262 will be entitled to have their shares appraised by
the Delaware Court of Chancery and to receive payment of the "fair value" of
such shares of Sealright Common Stock, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, as determined by
such court. In order for a stockholder to perfect his appraisal rights, his
shares of Sealright Common Stock must not be voted in favor of adopting the
Merger Agreement. BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS
WILL, UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A
STOCKHOLDER WHO VOTES BY PROXY AND WHO WISHES TO EXERCISE HIS APPRAISAL RIGHTS
MUST (I) VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT, OR (II) ABSTAIN FROM
VOTING ON ADOPTION OF THE MERGER AGREEMENT.
Under Section 262, where a merger is to be submitted for approval at a
meeting of the stockholders, the corporation, not less than 20 days prior to
the meeting, must notify each of its stockholders entitled to appraisal rights
that such appraisal rights are available and include in such notice a copy of
Section 262. This Proxy Statement/Prospectus shall constitute such notice to
the Sealright stockholders and the applicable statutory provisions of the DGCL
are attached to this Proxy Statement/Prospectus as Appendix C. 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 attached to this Proxy Statement/Prospectus. ANY STOCKHOLDER WHO
WISHES TO EXERCISE SUCH APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS RIGHT
TO DO SO, SHOULD REVIEW THE FOLLOWING DISCUSSION AND APPENDIX C CAREFULLY
BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED
WILL RESULT IN THE COMPLETE LOSS OF APPRAISAL RIGHTS UNDER THE DGCL.
Each stockholder electing to demand the appraisal of his shares of Sealright
Common Stock must deliver to Sealright, before the taking of the vote on the
Merger, a written demand for appraisal of his Sealright Common Stock. Such
written demand (i) should be sent to Sealright, 9201 Packaging Drive, DeSoto,
Kansas 66018,
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Attention: Corporate Secretary, (ii) must be received by Sealright prior to
the Special Meeting, and (iii) will be sufficient if it reasonably informs
Sealright of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his Sealright Common Stock. Appraisal
rights may be exercised only by a stockholder who holds his Sealright Common
Stock on the date of making the demand for appraisal and who continuously
holds such Sealright Common Stock through the Effective Time. A VOTE AGAINST
ADOPTION OF THE MERGER AGREEMENT, IN PERSON OR BY PROXY, WILL NOT IN AND OF
ITSELF CONSTITUTE A DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF
SECTION 262.
Only a holder of record of Sealright Common Stock is entitled to assert
appraisal rights for the shares of Sealright Common Stock registered in that
holder's name. A demand for appraisal should be exercised by or on behalf of
the holder of record, fully and correctly, as his name appears on his Stock
Certificates. If the Sealright Common Stock is owned of record in a fiduciary
capacity, and if the Sealright Common Stock is owned of record by more than
one person, as in a joint tenancy or a tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including
one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record; 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 Sealright Common Stock as nominee for several beneficial owners may
exercise appraisal rights with respect to Sealright Common Stock held for one
or more beneficial owners while not exercising such rights with respect to
Sealright Common Stock held for other beneficial owners. In such case, the
written demand should set forth the number of shares of Sealright Common Stock
as to which appraisal is sought. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares of Sealright Common
Stock held in the name of the record owner. Stockholders who hold their
Sealright 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 the appraisal procedures for the making of a demand for appraisal by
such a nominee.
Within 10 days after the Effective Time, the Surviving Corporation must send
a notice as to the effectiveness of the Merger to each person who has made
demand for appraisal and otherwise satisfied the foregoing provisions of
Section 262. Within 120 days after the Effective Time, but not thereafter, the
Surviving Corporation or any stockholder entitled to appraisal rights under
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the "fair value" of the Sealright Common Stock.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Date any stockholder has the right to withdraw his previously made demand for
appraisal and accept the Merger Consideration. After such 60 day period, a
stockholder may only withdraw his demand for appraisal with the approval of
Sealright. SEALRIGHT, AS THE SURVIVING CORPORATION, WILL NOT FILE A PETITION
WITH RESPECT TO THE APPRAISAL OF THE "FAIR VALUE" OF THE SEALRIGHT COMMON
STOCK. ACCORDINGLY, IT IS THE OBLIGATION OF STOCKHOLDERS TO INITIATE ALL
NECESSARY ACTION TO PERFECT THEIR APPRAISAL RIGHTS WITHIN THE TIME PERIODS
PRESCRIBED IN SECTION 262.
Within 120 days after the Effective Time, any stockholder who has complied
with the requirements for exercise of appraisal rights will be entitled, upon
written request, to receive from the Surviving Corporation a statement setting
forth the aggregate number of shares of Sealright Common Stock not voted in
favor of adoption of the Merger and with respect to which demands for
appraisal have been received and the aggregate number of holders of such
shares. Such statement must be mailed within 10 days after a written request
therefor has been received by the Surviving Corporation.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will determine the "fair value" of their
shares of Sealright Common Stock, taking into account the divestiture of the
Flexible Packaging Business through the Exchange, but otherwise 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 Sealright Common Stock
as determined under Section 262 could be more than, the same as, or less than
the Merger Consideration they would receive pursuant to the Merger Agreement
if they did not seek appraisal of their Sealright Common
32
<PAGE>
Stock, and that investment banking opinions as to fairness are not necessarily
opinions as to "fair value" under Section 262. The Delaware Supreme Court has
stated 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 in the appraisal proceeding. The Court will also
determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of Sealright Common Stock have been
appraised. The costs of the action may be determined by the Court and borne by
the parties as the Court deems equitable. The Court may also order that all or
a portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all the shares of Sealright Common Stock
entitled to appraisal.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Sealright Common Stock subject to such demand for any purpose or be
entitled to the payment of dividends or other distributions on such shares
(except dividends or other distributions payable to stockholders of record as
of a date prior to the Effective Time).
Under the DGCL, appraisal rights are available only with respect to that
portion of Sealright Common Stock for which the Merger Consideration is
payable. Sealright stockholders are not entitled to appraisal rights on the
portion of the Sealright Common Stock being redeemed in the Exchange for
Redemption Consideration. Any Sealright stockholder who chooses to seek
appraisal rights will receive the appraised value of the shares (taking into
account the divestiture of the Flexible Packaging Business through the
Exchange, but otherwise exclusive of any element of value arising from the
accomplishment or expectation of the Merger) plus the Redemption Consideration
upon conclusion of the appraisal process and tender of the shares of Sealright
Common Stock.
If any stockholder who demands appraisal of his Sealright Common Stock under
Section 262 fails to perfect, or effectively withdraws or loses, his right to
appraisal, the Sealright Common Stock of such holder will be converted into
the right to receive the Merger Consideration in accordance with the Merger
Agreement. A stockholder will fail to perfect, and therefore lose, his right
to appraisal if no petition for appraisal is filed within 120 days after the
Effective Time, or if the stockholder delivers to the Surviving Corporation a
written withdrawal of his demand for appraisal and his acceptance of the
Merger, except that any such attempt to withdraw made more than 60 days after
the Effective Time will require the written approval of the Surviving
Corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH
EVENT A STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE MERGER CONSIDERATION).
THE JPS PACKAGING REORGANIZATION
Sealright initially developed its Flexible Packaging Business through
acquisitions of three independent operations, located in San Leandro,
California, Akron, Ohio and Charlotte, North Carolina. As a result, each of
these operations were owned and operated by different direct, and indirect,
subsidiaries of Sealright. Sealright, as the ultimate parent corporation,
historically maintained ownership of much of the intellectual property and
many contractual rights and obligations associated with the Flexible Packaging
Business.
Sealright consolidated the Flexible Packaging Business (excluding
Sealright's Australian operations which will be acquired by Huhtamaki through
the Merger) into one principal operating company, by having assets and
liabilities of the Flexible Packaging Business (including the capital stock of
its inactive, indirect subsidiary, Venture Packaging, Inc.) transferred to JPS
Packaging. In anticipation of the Exchange, JPS Packaging was reincorporated
in Delaware and changed its name from Sealright Manufacturing-East, Inc. to
JPS Packaging Company (the transfers, reincorporation and name change,
collectively referred to as the "Reorganization").
JPS Packaging currently owns, directly or indirectly, all of the assets that
are exclusively related to the Flexible Packaging Business including: (a) the
San Leandro plant and all equipment and inventory currently used to conduct
the San Leandro Flexible Packaging Business operations; (b) the Akron plant
and all equipment and inventory used in connection with the Akron Flexible
Packaging Business Operations; (c) all equipment and
33
<PAGE>
inventory used exclusively in connection with the Styrotech Flexible Packaging
Business operations; (d) all contracts and accounts receivable related to the
Flexible Packaging Business; and (e) certain contract and intellectual
property rights related solely to or exclusively used in the Flexible
Packaging Business (the "Flexible Packaging Assets"). Sealright's Australian
flexible packaging operations are being retained by Sealright and are not
deemed to be part of the Flexible Packaging Assets or the Flexible Packaging
Business.
As a result of the Reorganization, JPS Packaging has assumed or retained,
and indemnified Sealright with respect to, all of the liabilities arising out
of, relating to or resulting from the ownership, use or possession of the
Flexible Packaging Assets or the operation of the Flexible Packaging Business,
including those certain scheduled liabilities identified in the Merger
Agreement (the "Flexible Liabilities"). The Flexible Liabilities include
product liability claims relating to Flexible Packaging Business products
produced prior to the Reorganization, and employee, environmental,
occupational safety, health and similar liabilities related to any facility
engaged in the Flexible Packaging Business, other than the DeSoto plant
(unless related exclusively to Sealright's Styrotech(TM) operations which are
a part of the Flexible Packaging Business).
Representations and Warranties of JPS Packaging. In the Reorganization and
the Exchange, JPS Packaging has made, and/or will make, certain
representations and warranties to Sealright with respect to: (a) its due
organization, good standing and corporate power; (b) its power and authority
to execute an assignment and assumption agreement and any Ancillary Agreements
to which it is or will be party and to consummate the transactions
contemplated thereby; (c) the enforceability of such agreements; and (d) the
noncontravention of laws and agreements and the absence of the need for
governmental or third-party consents in connection with the execution,
delivery and performance by it of such agreements.
LISTING AND TRADING OF JPS COMMON STOCK
The JPS Common Stock has been approved for listing on the National Market
Tier of The Nasdaq Stock Market, subject to official notice of issuance, under
the symbol "JPSP". There is currently no public trading market for JPS Common
Stock. Prices at which JPS Common Stock may trade prior to the Exchange on a
"when-issued" basis, or after the Exchange, cannot be predicted. A "when-
issued" trading market may develop on or about the Effective Date. The term
"when-issued" means that shares can be traded prior to the time certificates
are actually available or issued. Prices at which the shares of JPS Common
Stock may trade on a "when-issued" basis or after the Exchange cannot be
predicted. See "RISK FACTORS--No Prior Market for JPS Common Stock."
As of the Effective Date, JPS Packaging expects to have approximately 316
stockholders of record, based upon the number of holders of record of
Sealright Common Stock as of the Record Date. The Transfer Agent and Registrar
for the JPS Common Stock will be UMB Bank, n.a., located at 1010 Grand Avenue,
Kansas City, Missouri, 64105.
The shares of JPS Common Stock to be issued to Sealright stockholders in
connection with the Exchange will have been registered under the Securities
Act of 1933, as amended (the "Securities Act") pursuant to this Proxy
Statement/Prospectus, thereby allowing such shares to be freely traded without
restriction by persons who will not be "affiliates" of JPS Packaging after the
Exchange or who were not "affiliates" (as that term is defined in the
Securities Act) of Sealright on the date of the Special Meeting. All directors
and certain officers and Sealright stockholders may be deemed to have been
"affiliates" of Sealright within the meaning of such rules. Any such person
may resell JPS Common Stock received by him or her in the Exchange if such
shares are registered for resale under the Securities Act or if an exemption
from registration under the Securities Act is available. Such persons may be
able to effect resales under the safe harbor provisions of Rule 145 under the
Securities Act (or Rule 144, under the Securities Act in the case of such
persons who become "affiliates" of JPS Packaging) or as otherwise permitted
under the Securities Act. Persons who may be deemed "affiliates" of Sealright
or JPS Packaging generally include individuals or entities that control, are
controlled by or are under common control with, such party, and may include
certain officers and directors of such party as well as principal stockholders
of such party. It is recommended that any such person obtain advice of
securities counsel prior to effecting any resales. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT REGISTER RESALES OF JPS COMMON STOCK RECEIVED BY
ANY PERSON WHO MAY BE DEEMED TO BE AN "AFFILIATE" OF SEALRIGHT OR JPS
PACKAGING.
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<PAGE>
JPS PACKAGING CAPITALIZATION
The following table sets forth the capitalization of JPS Packaging as of
March 31, 1998 (i) on a historical basis and (ii) as adjusted to reflect the
incurrence by JPS Packaging of approximately $6,000,000 in short-term
borrowings to pay transaction costs and estimated amounts due Huhtamaki
pursuant to the Merger Agreement. This table should be read in conjunction
with the "JPS PACKAGING COMBINED FINANCIAL STATEMENTS" and related notes and
other financial and operating data appearing elsewhere in this Proxy
Statement/Prospectus and "JPS PACKAGING MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
Short-Term Debt:
Revolving Credit Facility.................................. $ -- $ 6,000
------- -------
Stockholder's Equity:
Common stock, JPS Packaging $0.01 par value, 15,000,000
shares authorized, 5,539,116 shares issued and
outstanding............................................... -- 55
Common stock, Sealright Manufacturing--East, Inc. $.10 par
value, 750 shares authorized, 100 shares issued and
outstanding............................................... * --
Common stock, Venture Packaging, Inc. $.01 par value,
30,000 shares authorized, 100 shares issued and
outstanding............................................... * --
Additional paid-in capital................................. 49,587 49,532
Retained deficit........................................... (1,614) (1,614)
------- -------
Total Stockholder's Equity............................... 47,973 47,973
------- -------
Total Capitalization................................... $47,973 $53,973
======= =======
</TABLE>
- --------
*Less than $1,000.
35
<PAGE>
JPS PACKAGING SELECTED FINANCIAL DATA
The following tables set forth (i) historical selected financial and
operating data as of and for the five years ended December 31, 1997 and the
three month periods ended March 31, 1997 and 1998 and (ii) as adjusted to
reflect the Exchange, the Reorganization and the incurrence by JPS Packaging
of approximately $6,000,000 in short-term borrowings to pay transaction costs
and estimated amounts due to Huhtamaki pursuant to the Merger Agreement.
Approximately $2,000,000 of transaction and other costs will be charged to
operations in the third quarter of 1998. See "TERMS OF THE MERGER AGREEMENT
AND EXCHANGE" and "THE JPS PACKAGING REORGANIZATION." The information set
forth should be read in conjunction with "JPS PACKAGING MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and
the "JPS PACKAGING COMBINED FINANCIAL STATEMENTS" and the related notes
included elsewhere herein.
JPS PACKAGING STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $103,112 $110,987 $110,200 $100,299 $95,491 $25,186 $20,416
Cost of Sales........... 85,364 90,652 97,000 87,831 88,746 22,696 18,837
-------- -------- -------- -------- ------- ------- -------
Gross Profit............ 17,748 20,335 13,200 12,468 6,745 2,490 1,579
SG&A Expense............ 13,927 14,224 15,733 15,136 12,642 3,279 3,334
Net Restructuring (Gain)
Expense................ -- -- 6,866 1,893 (988) 191 --
-------- -------- -------- -------- ------- ------- -------
Operating Income (Loss). 3,821 6,111 (9,399) (4,561) (4,909) (980) (1,755)
Interest Expense........ 90 34 -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
Income (Loss) before
Taxes.................. 3,731 6,077 (9,399) (4,561) (4,909) (980) (1,755)
Income Taxes............ 1,489 2,428 (3,225) (1,542) (1,686) (337) (603)
-------- -------- -------- -------- ------- ------- -------
Net Income (Loss)....... $ 2,242 $ 3,649 $ (6,174) $ (3,109) $(3,233) $ (643) $(1,152)
======== ======== ======== ======== ======= ======= =======
Net Income (Loss) Per
Share (Note 1): Basic
and diluted............ $ 0.41 $ 0.66 $ (1.12) $ (0.55) $ (0.58) $ (0.12) $ (0.21)
======== ======== ======== ======== ======= ======= =======
</TABLE>
JPS PACKAGING BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ------------------------
AS
ADJUSTED
1993 1994 1995 1996 1997 1997 1998 1998
------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Working Capital..... $16,541 $22,969 $20,924 $17,268 $18,006 $19,422 $17,239 $17,239
Net Property, Plant &
Equipment.............. 43,027 45,568 41,343 34,720 31,884 34,744 30,967 30,967
Total Assets............ 74,035 83,451 75,835 63,783 61,904 66,429 59,920 65,920
Short-Term Debt......... -- -- -- -- -- -- -- 6,000
Total Liabilities....... 13,247 14,863 12,405 10,551 12,026 11,303 11,947 17,947
Stockholder's Equity.... 60,788 68,588 63,430 53,232 49,878 55,126 47,973 47,973
Current Ratio........... 2.68:1 3.16:1 3.13:1 3.08:1 3.06:1 3.20:1 3.01:1 2.19:1
</TABLE>
36
<PAGE>
OTHER JPS PACKAGING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE-
MONTH PERIODS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------ ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Income (Loss)
excluding
Restructuring.......... $3,821 $ 6,111 $(2,533) $(2,668) $(5,897) $ (789) $ (1,755)
Depreciation and
Amortization Expense... 5,189 5,924 6,619 6,693 5,832 1,530 1,326
EBITDA.................. 9,010 12,035 (2,780) 2,132 922 550 (429)
EBITDA excluding
Restructuring.......... 9,010 12,035 4,086 4,025 (66) 741 (429)
Capital Expenditures.... 4,982 6,560 6,849 1,363 5,432 1,482 358
</TABLE>
- --------
(1) Earnings (loss) per share for all periods has been computed under
Statement of Financial Accounting Standards No. 128. The number of shares
used in the computation is the number of outstanding common shares of
Sealright adjusted for the exchange ratio of one-half share of JPS Common
Stock for each share of Sealright Common Stock. The weighted average
number of common shares used in the computation were 5,536,000 in 1993 and
1994, 5,534,000 in 1995, 5,536,000 in 1996 and 1997, and 5,536,000 at
March 31, 1997, and 5,539,000 at March 31, 1998. There were no dilutive
securities.
(2) EBITDA is defined as operating profit (loss) before depreciation and
amortization. EBITDA does not represent cash flows as defined by generally
accepted accounting principles (GAAP) and does not necessarily indicate
that cash flows are sufficient to fund all of a company's cash needs.
EBITDA is presented because JPS Packaging believes it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation or as a substitute
for net income (loss) or cash flow data prepared in accordance with GAAP
or as a measure of a company's profitability or liquidity. EBITDA as
defined here may differ from EBITDA as defined in other similar offerings
and as such may not be comparable.
37
<PAGE>
JPS PACKAGING
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESTRUCTURING
In the fourth quarter of 1995, Sealright announced a functional
reorganization and facilities consolidation plan to significantly reduce the
cost structure of Sealright and JPS Packaging and to improve profitability.
The statement of operations for 1995 includes $6,866,000 of pretax charges
($4,395,000 after tax) relating to JPS Packaging's portion of this plan.
During 1996, JPS Packaging moved the machine manufacturing operations formerly
conducted in Raleigh, North Carolina to the DeSoto, Kansas facility and
consolidated the manufacturing operations conducted at Charlotte, North
Carolina into the Akron, Ohio facility. The costs associated with moving these
manufacturing operations and personnel were $1,893,000 during 1996. During the
second quarter of 1997, JPS Packaging sold the Charlotte, North Carolina
facility for a gain of $1,235,000, offsetting expenses of $247,000 related to
completing the consolidation of the Charlotte facility.
PERIOD ENDED MARCH 31, 1998 COMPARED TO 1997
Consolidated net sales were $20,400,000 for the first quarter of 1998, a
decrease of $4,800,000, or 18.9%, from 1997. The decline in revenue resulted
primarily from a decline in the end-market demand of four key customers of JPS
Packaging's San Leandro, California facility resulting in approximately
$2,400,000 of reduced revenue. In addition, approximately $1,800,000 of the
decline in revenue was from lost customers associated with the closure of the
Charlotte, North Carolina facility, and resulting transfer of production to
JPS Packaging's Akron, Ohio facility as part of the restructuring program. JPS
Packaging also experienced a decline of approximately $600,000 in sleeve
labeling equipment sales due to competitive pressures.
Consolidated gross profit was $1,700,000 for the first quarter of 1998 as
compared to $2,600,000 during 1997. The resulting gross margin was 8.1% in
1998, a decline from 10.2% in 1997. Gross profit at JPS Packaging's San
Leandro, California facility decreased approximately $1,000,000 as a result of
the reduced sales volume for the quarter. In addition, JPS Packaging
experienced a decline of approximately $200,000 in gross profit from reduced
sleeve labeling equipment sales. These declines were partially offset by
improved margins at JPS Packaging's Akron, Ohio facility, which was adversely
affected by production inefficiencies and capacity constraints experienced
early in 1997.
JPS Packaging recorded tax benefits of 34% during the first quarter of 1998
and 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
Consolidated net sales were $95,500,000 during 1997, a decrease of
$4,800,000, or 4.8%, from 1996. The decline in revenue resulted primarily from
lost customers associated with the closure of the Charlotte, North Carolina
facility and resulting transfer of production to JPS Packaging's Akron, Ohio
facility as part of the restructuring program. JPS Packaging subsequently
experienced capacity constraints during the first half of the year in Akron,
thus further constraining revenues. JPS Packaging also experienced a decline
of approximately $1,400,000 in sleeve labeling equipment sales due to
competitive pressures. In addition, JPS Packaging experienced a reduction in
average selling prices for various food packaging products due to competitive
pressures, further reducing revenues.
Consolidated gross profit was $7,000,000 in 1997 as compared to $12,700,000
during 1996. The resulting gross margin was 7.4% in 1997, a decline from 12.7%
in 1996. Due to production inefficiencies at the Akron, Ohio facility early in
the year, and reduced sales volume during the latter half of the year, JPS
Packaging suffered a reduction in gross profit of approximately $5,000,000.
Gross profit at JPS Packaging's San Leandro, California facility increased
$1,500,000 during the year as a result of improved manufacturing efficiencies
from the previous year and a reduction in material costs. These gains,
however, were offset by lost business and consolidation issues in JPS
Packaging's sleeve labeling equipment operation, which was relocated from
Raleigh, North Carolina, to DeSoto, Kansas during 1996.
38
<PAGE>
Selling, general and administrative expenses decreased by $2,500,000, or
16.5%, as JPS Packaging realized full year savings related to staffing
reductions made during 1996. JPS Packaging also benefited from other cost
savings initiatives.
JPS Packaging recorded income tax benefits for 1997 and 1996 at a 34%
effective tax rate.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995
Consolidated net sales were $100,300,000 during 1996, a decrease of
$9,900,000, or 9.0%, from 1995. The reduction in sales was primarily
attributable to exiting certain unprofitable lines of business, such as diaper
bags, and the discontinuation of certain unprofitable customer relationships.
In addition, JPS Packaging experienced a decline in bottle label sales for two
customers of approximately $2,800,000 at JPS Packaging's Akron, Ohio facility.
To a lesser degree, reduced volume in smaller, non-strategic product lines
also contributed to the revenue decline.
Consolidated gross profit was $12,700,000 in 1996 as compared to $13,500,000
during 1995. The resulting gross margin was 12.7% of sales in 1996, an
increase from 12.2% in 1995. The increase in gross margin percentage is
attributable to exiting certain unprofitable lines of business and the
discontinuation of certain unprofitable customer relationships. In addition,
JPS Packaging experienced improvements in material waste at the San Leandro,
California, and Akron, Ohio, facilities.
Selling, general and administrative expenses decreased by $600,000, or 3.8%,
as a result of reduced headcount from the company-wide facility consolidation
and reorganization plan announced in 1995. JPS Packaging also benefited from
other cost saving initiatives.
JPS Packaging recorded tax benefits of 34% during 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
JPS Packaging has historically relied on internally generated cash from
operations as well as funding from Sealright. For the year ended December 31,
1997, JPS Packaging's net loss was $3,200,000 compared to a net loss of
$3,000,000 in 1996. After adjusting for non-recurring restructuring items,
cash generated from operations was $3,400,000 in 1997 as compared to
$6,000,000 in 1996. For the three month period ended March 31, 1998, JPS
Packaging's cash generated from operations was $1,000,000 compared to
$1,200,000 used in operations in the first quarter of 1997. The primary change
year over year resulted from a reduction in inventory and accounts receivable.
During 1997, JPS Packaging invested $5,400,000 in property, plant and
equipment. Major capital investments included building additions and
improvements of approximately $4,000,000 in Akron, Ohio to accommodate the
consolidation from the Charlotte, North Carolina facility as well as additions
of various production-related equipment and other cost-savings initiatives.
JPS Packaging sold one idle facility during 1997, generating cash of
$3,200,000. The proceeds from this sale were used to fund working capital
needs.
Upon consummation of the Exchange, JPS Packaging expects to incur
approximately $6,000,000 in short term borrowings to pay transaction costs and
estimated amounts due to Huhtamaki pursuant to the Merger Agreement.
Approximately $2,000,000 of this amount will be charged to operations in the
fiscal quarter in which the Effective Date occurs. JPS Packaging has obtained
a commitment for a $10,000,000 revolving credit facility with a bank. The
facility is expected to be secured by certain assets of JPS Packaging,
principally property, plant and equipment. The initial interest rate is the
prime rate of Harris Trust and Savings Bank or LIBOR plus 275 basis points.
Management believes that cash generated by operations and funds available
under the revolving credit facility will be sufficient to meet JPS Packaging's
expected operating needs, planned capital expenditures and debt service
requirements.
39
<PAGE>
EFFECTS OF INFLATION
During the last three fiscal periods, inflation has not had a material
effect on JPS Packaging. Increases in raw material costs to JPS Packaging
typically lag movements in the markets for such materials. Thus, in a period
of rising prices, the effects of such increases are delayed several months.
JPS Packaging's ability to pass these price increases to its customers also is
subject to similar lags.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. This statement establishes standards
for reporting and display of items that may affect shareholder equity but are
not components of reported net income. JPS Packaging does not have any items
that would require additional reporting but did adopt SFAS No. 130 in the
first quarter of 1998.
In June 1997, the FASB also issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. This statement supersedes and
expands on the segment disclosure requirements of SFAS No. 14. The statement
requires certain financial disclosures about business segments. The definition
of business segments had been changed from an industry definition to that of a
management definition. JPS Packaging will adopt the provisions of SFAS No. 131
effective December 31, 1998. JPS Packaging does not expect implementation to
have any effect on JPS Packaging's financial position, results of operations,
or segment reporting.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. The statement standardizes and
expands the disclosure requirements of the prior pronouncements in order to
facilitate enhanced financial analysis. JPS Packaging will adopt the
provisions of SFAS No. 132 effective December 31, 1998.
YEAR 2000 COMPLIANCE
JPS Packaging's information systems are not currently year 2000 compliant in
either of its two plant locations. Management currently estimates that it will
cost approximately $300,000 to modify the information systems and become year
2000 compliant. While JPS Packaging is seeking to implement the necessary
changes, there can be no assurance that the information systems will be
compliant prior to the beginning of year 2000 and could therefore have an
adverse effect on the future financial results of JPS Packaging.
JPS PACKAGING BUSINESS AND PROPERTIES
OVERVIEW
JPS Packaging is a manufacturer and converter of flexible packaging and
labeling products for use by customers in the food and beverage industry and
other niche markets. Additionally, JPS Packaging manufactures sleeve labeling
machinery under the Styrotech(TM) trade name. JPS Packaging was originally
incorporated in Ohio on November 1, 1990 and known as Sealright Manufacturing-
East, Inc. On April 3, 1998, Sealright Manufacturing-East, Inc. was
reincorporated in Delaware and thereafter changed its name to "JPS Packaging
Company."
In order to diversify its operations, Sealright began acquiring flexible
packaging companies in 1986. Sealright purchased Indopak (d/b/a Packaging
Industries, Inc.), a flexible plastic packaging manufacturer, located in San
Leandro, California in 1986. In 1990, Sealright acquired substantially all the
assets of Jaite Packaging, Inc., a flexible packaging manufacturer based in
Akron, Ohio. In 1992, Sealright acquired substantially all the assets of
Venture Packaging, Inc., a flexible packaging and machinery manufacturer,
based in North Carolina. These three acquisitions collectively comprise the
Flexible Packaging Business. In 1997, Sealright divested itself of its plant
facility in Charlotte, North Carolina that had been acquired in 1992 with the
Venture Packaging, Inc. assets. The operations of the Charlotte, North
Carolina facility were consolidated into the Akron, Ohio facility. In
connection with this divestiture and consolidation, Sealright retained its
Styrotech(TM) sales office in Raleigh, North Carolina. Pursuant to the
Reorganization, the Flexible Packaging Business was consolidated into the
operations of JPS Packaging. For further information on the restructuring, see
"THE JPS PACKAGING REORGANIZATION."
40
<PAGE>
Over the last three years, the Flexible Packaging Business has incurred
operating losses and experienced declining revenue. JPS Packaging expects to
focus on growing revenues, reducing costs, improving plant utilization and
improving manufacturing efficiencies in order to generate operating profits.
See "RISK FACTORS--No Operating History as an Independent Company; Operating
Losses."
See the information under the Section titled "CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS."
INDUSTRY
Flexible printed packaging products are thin, pliable bags, pouches, labels
or wraps for food and other non-food consumer goods and related containers,
which are generally produced from single web and multi-web laminates of
various types of plastic, paper, film and foil. Flexible packaging products
are manufactured to provide a broad range of protection for packaged goods
while also providing packaging that is visually appealing, cost-effective,
space-saving, lightweight, tamper evident, convenient and disposable. Over the
last several years, end users of flexible packaging have increasingly sought
higher quality and lower cost packaging alternatives to meet changing
demographics and customer needs. Growing food categories such as low-fat and
non-fat foods require more sophisticated packaging structures to improve
freshness, shelf life and resealability. Packaging must have specific barrier
characteristics against light, moisture, gas (primarily oxygen) and aroma
consistent with the type of food packaged. In addition, packaging and changes
in packaging graphics, often for short-term promotions, increasingly are used
to attract customers and differentiate products at the point of sale. Major
end users in the food and other consumer product industries are generally
reducing the number of suppliers, which places an emphasis on cultivating
strong customer relationships.
JPS Packaging estimates, based upon available industry and trade
information, that the flexible packaging industry had annual sales of
approximately $17 billion in 1997 and has grown faster than the packaging
industry generally over recent years. The 10 largest flexible packaging
companies account for approximately 33% of total 1997 industry sales, with the
balance shared by several hundred other competitors. JPS Packaging believes
recent industry growth has been and will continue to be driven by (i) the
shift from rigid containers (paperboard, glass and plastic) to lower cost and
lighter weight flexible packaging, (ii) changing demographic trends which have
increased the demand for more convenient forms of packaging, including single
servings and packaging that extends product shelf life, (iii) the growth in
several major end use market segments (such as snack foods), (iv) the growth
of low-fat and non-fat foods which require more complex packaging barriers,
(v) concerns over waste and resource reduction, and (vi) increasing demands
for specialized packaging with enhanced barrier properties and distinctive
graphics.
MARKETS AND PRODUCTS
JPS Packaging manufactures and sells a broad variety of flexible packaging
products, most of which are printed by the company. JPS Packaging's labeling
products for carbonated beverages, dairy beverages and juices are principally
manufactured at its Akron, Ohio facility. JPS Packaging also manufactures and
sells liquid novelty packaging, peelable lidding for single servings of
pudding, gelatin and cultured dairy products, and pouch packaging for dried
fruit and nut products, which are produced primarily at its San Leandro,
California facility. These products collectively accounted for approximately
70% of JPS Packaging's fiscal 1997 sales. JPS Packaging also produces and
sells a variety of other products, including packaging for single-serve
condiments, film-based products for the medical and construction industries
and equipment for the application of sleeve labels.
SALES, MARKETING AND DISTRIBUTION
JPS Packaging products are marketed directly to customers by JPS Packaging's
sales force. JPS Packaging currently has 25 sales, technical support and
marketing associates in the U.S. These flexible packaging sales associates are
divided among geographic regions and are generally located near the Akron and
San Leandro
41
<PAGE>
plants. JPS Packaging also maintains a Styrotech(TM) sales office in Raleigh,
North Carolina. All JPS Packaging sales force personnel and customer service
representatives undergo training programs before assuming account
responsibilities.
MANUFACTURING PROCESS
JPS Packaging is a fully integrated converter and manufacturer of value-
added flexible packaging products. JPS Packaging manufactures a wide variety
of products, including laminates made of various layers of plastic, film,
foil, paper and specialized coatings, as well as blown monolayer and co-
extruded films. The flexible packaging produced by JPS Packaging uses a
variety of raw materials. These raw materials consist primarily of plastic
resin, film, paper, foil and ink which typically represent 50-60% of the sales
price of the final products. Flexible packaging manufacturers typically are
able to pass increases in raw material costs on to their customers, although
the pass-through generally lags several months. Significant and abrupt
increases in raw material prices, particularly those on low-density and linear
low-density polyethylene and polypropylene, could have adverse short-term
effects on JPS Packaging's margins.
Film Manufacturing. JPS Packaging uses resin in its production of blown
monolayer and co-extruded films. Blown film is produced by extruding resin
through a circular die and stretching the "bubble" with air pressure. JPS
Packaging focuses on the co-extrusion process that produces higher value-
added, multi-layer film structures for specific customer applications. Through
this co-extrusion process, films can be manufactured with a wide range of
properties depending on the number of layers and combinations of resins used.
JPS Packaging manufactures its film products exclusively at its San Leandro,
California facility.
Printing. Flexography is the primary printing process utilized by JPS
Packaging. Flexographic printing process uses printing plates made of rubber
or photopolymer. The flexographic process has lower initial costs than
rotogravure printing to prepare the printing plates, which speeds production
and facilitates lower initial cost changes in the packaging for short-term
marketing promotions. Flexographic printing is performed at both JPS
Packaging's Akron, Ohio and San Leandro, California facilities.
Laminating and Coating. Extrusion (or co-extrusion) and adhesive processes
are the principal methods of laminating or coating flexible substrates.
Extrusion lamination combines substrates using molten resins as adhesives,
while co-extrusion, which uses more than one resin simultaneously, allows
additional resin properties to be cost-effectively added to the structure.
Adhesive lamination uses various chemical mixtures to combine layers.
Generally speaking, extrusion lamination creates a stiffer and less pliable
structure than adhesive lamination. JPS Packaging utilizes extrusion
lamination processes at its San Leandro, California facility and adhesive
lamination processes at both its Akron, Ohio and San Leandro, California
facilities.
Finishing. Finishing or "slitting" is the process of converting master rolls
of printed and/or laminated film into separate rolls that are generally one
impression wide and that have roll diameters specified by customers for use on
their machines. These converted rolls of film are loaded by the end users into
high-speed machinery that forms the package, inserts the contents and cuts and
seals the package in an automatic process.
Machine Manufacturing. JPS Packaging manufactures and sells machinery for
the application of sleeve labels under the Styrotech(TM) trade name. This
machinery will be produced for JPS Packaging by Sealright for a period of 90
days. Prior to the end of this period, JPS Packaging will decide to either
continue contracting for such manufacturing, with Sealright or another
machinery producer, or will have incorporated the machine manufacturing
operations into its Akron or San Leandro plant operations. The sleeve label
machine manufacturing industry is very concentrated. JPS Packaging's principal
competitors in this industry are Automated Labeling Systems, PDC and COMAG.
42
<PAGE>
COMPETITION
The flexible packaging industry includes several hundred competitors.
Currently available trade and industry information indicates that the 10
largest flexible packaging companies account for almost 33% of total industry
sales in 1997. Competitors in this industry include American National Can,
Bemis, Bryce, Cryovac, Huntsman Packaging, Printpack, Reynolds Metals, and
Sonoco Products, many of which are well capitalized and maintain a strong
market presence in the various markets in which JPS Packaging competes. All of
these competitors are substantially larger, more diversified and have greater
financial, personnel and marketing resources than the Company, and therefore
may have significant competitive advantages versus JPS Packaging. See "RISK
FACTORS--Competition."
EMPLOYEES
After the Exchange, JPS Packaging will employ approximately 440 people in
the United States. Of these, eight will be employed at JPS Packaging's
headquarters in DeSoto, Kansas and 10 are employed at the Raleigh, North
Carolina sales office. At the Akron, Ohio facility, which employs
approximately 250 people, the hourly employees are covered under a collective
bargaining agreement that expires in 2000. At the San Leandro, California
facility, which employs approximately 170 people, the hourly employees are
covered under a collective bargaining agreement that expires in 2001. Overall,
JPS Packaging believes its relations with its employees, including union
employees, are good.
RAW MATERIALS
JPS Packaging purchases raw materials from a variety of suppliers at
competitive prices and aligns its operations with suppliers who lead the
market in product innovation of packaging materials technology. The principal
raw materials used by JPS Packaging are plastic, resin, film, paper, foil and
ink. JPS Packaging has experienced little or no difficulty obtaining adequate
supplies of raw materials. See "RISK FACTORS-- Exposure to Fluctuation in Raw
Material Prices."
GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS
Since most of JPS Packaging's packaging products are used in the food
industry, JPS Packaging is subject to the manufacturing standards of and
inspection by the U.S. Food and Drug Administration. Historically, compliance
with the standards of the food industry has not had a material effect on JPS
Packaging's earnings, capital expenditures or competitive position.
The manufacturing operations of JPS Packaging are subject to Federal, state
and local regulations governing the environment and the discharge of materials
into air, land and water, as well as the handling and disposal of solid and
hazardous wastes. JPS Packaging believes it is in substantial compliance with
applicable environmental regulations and does not believe that costs of
compliance will have a material adverse effect on its earnings, capital
expenditures, or competitive position.
RESEARCH AND DEVELOPMENT
JPS Packaging is engaged in designing and developing new products and
adapting existing products for new uses. It is estimated that Sealright
expended approximately $547,000, $829,000 and $1,070,000 for research and
development in 1997, 1996 and 1995, respectively in connection with the
Flexible Packaging Business.
PATENTS AND TRADEMARKS
JPS Packaging's products are manufactured using machinery and processes
covered by patents owned or controlled by JPS Packaging. JPS Packaging has
domestic and foreign registered trademarks which are used in connection with
both product names and distinctive designs. However, JPS Packaging views its
business as one which is not primarily dependent on patent or trademark
protection.
43
<PAGE>
SEASONALITY OF THE JPS PACKAGING BUSINESS
Due to the beverage and dried fruit markets, JPS Packaging may experience
some revenue increases in the second and third quarters.
CUSTOMERS
JPS Packaging has relationships with numerous customers in each of its
product categories. Although JPS Packaging does not have a single customer
that accounts for 10% or more of its sales, the loss of certain of JPS
Packaging's largest customers, while not anticipated, could have a material
adverse effect on JPS Packaging's financial condition or results of
operations.
SALES AND BACKLOG
JPS Packaging does not have an accurate methodology to track backlog, and
does not believe recorded sales backlog to be a significant factor in its
business. Customers generally place annual orders in quantities covering
demand for one to three months with shipments scheduled during that period.
PROPERTIES
JPS Packaging's principal properties are its manufacturing locations. Shown
below are the locations of the principal properties which will be owned or
leased by JPS Packaging following the Exchange. The management of JPS
Packaging believes its facilities are suitable and adequate for the purposes
for which they are used and are adequately maintained. JPS Packaging intends
to relocate its corporate offices within 90 days of the Effective Date from
Sealright's DeSoto, Kansas facility to office space in Johnson County, Kansas.
OWNED FACILITIES
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET PRINCIPAL USE
-------- ------ -------------
<S> <C> <C>
San Leandro, California 129,000 Manufacturing and Warehouse
Akron, Ohio 125,000 Manufacturing and Warehouse
LEASED FACILITIES
<CAPTION>
SQUARE
LOCATION FEET PRINCIPAL USE
-------- ------ -------------
<S> <C> <C>
San Leandro, California 12,000 Warehouse
Raleigh, North Carolina 7,500 Office
DeSoto, Kansas 1,500 Corporate Offices
</TABLE>
LEGAL PROCEEDINGS
Sealright is currently a party to various legal proceedings in various
Federal and state jurisdictions arising out of the operations of the Flexible
Packaging Business. Liability for these proceedings will be assumed by JPS
Packaging. The amount of alleged liability, if any, from these proceedings
cannot be determined with certainty; however, in the opinion of JPS Packaging
management, based on the information presently known, the ultimate liability
of JPS Packaging, if any, arising from the pending legal proceedings, as well
as from asserted legal claims and known potential legal claims which are
probable of assertion, taking into account established accruals for estimated
liabilities, should not be material to JPS Packaging's financial condition or
results of operations.
44
<PAGE>
JPS PACKAGING MANAGEMENT
BOARD OF DIRECTORS OF JPS PACKAGING
Pursuant to the JPS Certificate of Incorporation and Bylaws, the JPS Board
will consist of three to eleven individuals, each serving a one year term. The
exact number of directors will be set from time to time by resolution of the
JPS Board. Initially, following the Exchange, the JPS Board will consist of
five individuals, only one of whom will be an employee of JPS Packaging. The
following table sets forth information as to the persons who are, and will
serve as, directors of JPS Packaging following the Exchange and their terms.
Each of the current directors has been a director of JPS Packaging since March
1998.
<TABLE>
<CAPTION>
DIRECTOR'S NAME AGE INFORMATION
--------------- --- -----------
<C> <C> <S>
G. Kenneth Baum 67 Mr. Baum has been a director of Sealright Co., Inc.
since 1983. He has been Chairman of George K. Baum
Group, Inc., an investment company in Kansas City,
Missouri since May 1994. He was Chairman of the Board
of George K. Baum & Company, an investment banking
firm from April 1982 until May 1994. Mr. Baum is also
a director of H & R Block, Inc., Unitog Company, and
Interstate Bakeries Corporation.
John T. Carper 46 Mr. Carper has been President of JPS Packaging since
March 1998. Mr. Carper has been Senior Vice President
of Finance and Chief Financial Officer of Sealright
Co., Inc. since May 1996. From May 1994 to May 1996,
Mr. Carper was Vice President--Finance and CFO of
Sealright Co., Inc. From July 1989 to May 1994, he was
a partner with KPMG Peat Marwick LLP, independent pub-
lic accountants.
D. Patrick Curran 53 Mr. Curran has been a director of Sealright Co., Inc.
since 1992. He has been Chairman of the Board and
President of Curran Companies, a manufacturer and sup-
plier of specialty chemicals, since August 1979. Mr.
Curran is also a director of Unitog Company,
Applebee's International, Inc. and American Safety Ra-
zor Co.
Charles A. Sullivan 62 Mr. Sullivan has been a director of Sealright Co.,
Inc. since 1992. He has been Chairman of the Board of
Interstate Bakeries Corporation since 1991 and Presi-
dent and CEO of Interstate Bakeries since 1989. Mr.
Sullivan is also a director of UMB Bank, n.a., and The
Andersons, Inc.
William D. Thomas 54 Mr. Thomas has been a director of Sealright Co., Inc.
since 1983. He has been President of George K. Baum
Group, Inc. since May 1994, and Senior Managing
Director of George K. Baum Merchant Banc LLC since May
1995. He was Vice Chairman of George K. Baum & Company
from June 1991 until May 1994. Mr. Thomas is also a
director of Unitog Company.
</TABLE>
DIRECTORS' MEETINGS, FEES AND COMMITTEES
The JPS Board expects to have a minimum of four regularly scheduled meetings
per year, and will hold such special meetings as it deems advisable, to review
significant matters affecting JPS Packaging and to act upon matters requiring
Board approval. Non-management directors will receive an annual retainer of
$5,000 and will also be paid $500 for attending each regular or special Board
meeting and $500 for attending each standing committee meeting and for each
telephonic meeting and consent to action without a meeting. JPS Packaging also
has purchased a directors' and officers' liability insurance policy insuring
directors.
The JPS Packaging 1998 Incentive Compensation Plan (the "JPS Incentive
Plan") also provides that directors may be granted, non-qualified stock
options, incentive stock options (as defined in Section 422(b) of the Internal
Revenue Code of 1986, as amended), restricted stock, performance shares and
performance units to acquire shares of JPS Common Stock. For a more complete
description of the JPS Incentive Plan, see "JPS PACKAGING EXECUTIVE
COMPENSATION--JPS Packaging Incentive Compensation Plan."
45
<PAGE>
The JPS Board has established and designated specific functions and areas of
oversight to two committees of the Board. A director who is also an employee
or officer of JPS Packaging will not be permitted to serve on either
committee. A description of these standing committees and the identity of
their members follows:
Audit Committee--D. Patrick Curran and William D. Thomas.
The audit committee (the "Audit Committee"), consisting entirely of non-
management directors, is responsible for matters relating to accounting
policies and practices, financial reporting, and internal controls. It will
recommend to the JPS Board the appointment of a firm of independent
accountants to examine the financial statements of JPS Packaging and will
review with representatives of the independent accountants the scope of the
examination of JPS Packaging's financial statements, results of audits, audit
costs, and recommendations with respect to internal controls and financial
matters. It will also review nonaudit services rendered by JPS Packaging's
independent accountants and will periodically meet with or receive reports
from principal corporate officers.
Nominating and Compensation Committee--G. Kenneth Baum and William D.
Thomas.
The nominating and compensation committee (the "Compensation Committee")
shall consist entirely of non-management directors free from interlocking or
other relationships that might be considered a conflict of interest. It will
recommend to the JPS Board nominees for election as directors and executive
officers of JPS Packaging. Additionally, it will make recommendations to the
JPS Board regarding election of directors to positions on committees of the
JPS Board and compensation and benefits for directors. The Compensation
Committee will also consider suggestions from stockholders regarding possible
director candidates. This committee will also set the compensation of all of
JPS Packaging's senior management (the "Executive Officers") and administer
the JPS Incentive Plan, including the granting of awards under the JPS
Incentive Plan. It will also review the competitiveness of management
compensation and benefit programs, and principal employee relations policies
and procedures.
EXECUTIVE OFFICERS OF JPS PACKAGING
JPS Packaging's Executive Officers currently consist primarily of
individuals currently responsible for the management of the Flexible Packaging
Business as conducted by Sealright. All of such individuals will resign from
their positions with Sealright effective as of the Effective Time. The
following table sets forth information as to JPS Packaging's executive
officers.
<TABLE>
<CAPTION>
NAME AGE INFORMATION
---- --- -----------
<C> <C> <S>
John T. Carper 46 President of JPS Packaging since March 1998. He has
been Senior Vice President of Finance and Chief Finan-
cial Officer of Sealright Co., Inc. since May 1996.
From May 1994 to May 1996, Mr. Carper was Vice Presi-
dent--Finance and CFO of Sealright Co., Inc. From July
1989 to May 1994, he was a partner with KPMG Peat
Marwick LLP, independent public accountants.
Steven D. Saucier 46 Senior Vice President of Manufacturing of JPS Packaging
since May 1998. He has been Senior Vice President of
Manufacturing of Sealright since April 1996. He was
previously with Mobil Chemical Co. for over 20 years in
the Petrochemicals and Films Division. Immediately
prior to joining Sealright, he was General Manager Man-
ufacturing--Americas for Mobil's OPP Films Division in
Pittsford, New York.
A. Lawrence Walton 53 Vice President of Sales and Marketing of JPS Packaging
since March 1998. He has been Vice President of Food
and Beverage Sales of Sealright since August 1996. From
February 1996 to August 1996, he was Vice President of
Research and Development for Sealright. From June 1994
to February 1996, Mr. Walton was Vice President, Mar-
keting and Technical Services of Packaging Industries,
a wholly-owned subsidiary of Sealright. From July 1991
to June 1994, he was Vice President of Marketing and
Sales of Glenroy, Inc., a flexible packaging company.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NAME AGE INFORMATION
---- --- -----------
<C> <C> <S>
David S. Boylan 28 Vice President--Finance and Chief Financial Officer of JPS
Packaging since March 1998. He has been Director of Inter-
nal Audit of Sealright since August 1995. Mr. Boylan was a
senior accountant for Deloitte & Touche LLP from August
1994 to August 1995, and a senior accountant with Ernst &
Young LLP from June 1991 to August 1994.
</TABLE>
JPS Packaging intends to increase its senior management by the addition of
two to three additional individuals with experience in the flexible packaging
industry. The JPS Board has engaged an executive recruiter to assist in the
recruitment of a Chief Executive Officer for JPS Packaging.
JPS PACKAGING EXECUTIVE COMPENSATION
INTRODUCTION AND SUMMARY
All direct and indirect remuneration of all Executive Officers and certain
other executives will be approved by the Compensation Committee of the JPS
Packaging Board. The Compensation Committee will consist entirely of non-
management directors free from interlocking or other relationships that might
be considered a conflict of interest. It is anticipated that compensation for
the JPS Packaging Executive Officers and for other executives will consist
primarily of base salary, annual cash bonus and long-term stock-based
incentive awards.
The following tables and narrative text discuss the compensation paid by
Sealright in fiscal years 1997, 1996 and 1995 to JPS Packaging's President and
JPS Packaging's other most highly compensated executive officers whose salary
and bonus exceeded $100,000 (determined as of December 31, 1997)
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION (AWARDS)
---------------- ------------
SECURITIES ALL OTHER
NAME & PRINCIPAL SALARY UNDERLYING COMPENSATION
POSITION YEAR ($) BONUS OPTIONS (#) ($)
---------------- ---- -------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
John T. Carper................. 1997 $168,000 $ -0- $ 1,500 $ 6,800(1)
President 1996 168,000 -0- -0- 4,406(2)
1995 164,670 12,000 -0- 2,450(3)
Steven D. Saucier.............. 1997 150,000 -0- 900 1,875(3)
Senior Vice President-- 1996 87,500 -0- 15,000 20,000(4)
Manufacturing 1995 N/A N/A N/A N/A
A. Lawrence Walton............. 1997 145,000 -0- 1,200 4,134(5)
Vice President-- 1996 134,352 -0- 10,000 82,559(6)
Sales and Marketing 1995 130,800 -0- -0- 4,361(3)
</TABLE>
- --------
(1) Sealright's payments pursuant to the Sealright Long-Term Savings Plan (the
"LTSP") ($4,200) and deferred compensation ($2,600).
(2) Sealright's payments pursuant to the LTSP ($3,971) and deferred
compensation ($435).
(3) Sealright's payments pursuant to the LTSP.
(4) Sealright's payment of a signing bonus.
(5) Sealright's payments pursuant to the LTSP ($3,474) and deferred
compensation ($660).
(6) Sealright's reimbursement of moving expenses ($79,233) and payments
pursuant to the LTSP ($3,326).
The Named Executive Officers also participate in Sealright's Retirement
Income Plan and the supplemental executive retirement provisions of the
Sealright Deferred Compensation Plan. Pursuant to these plans, they will
receive lump-sum distributions upon their termination of employment with
Sealright. The Named Executive Officers of JPS Packaging do not participate in
any pension, defined benefit or other similar plans.
47
<PAGE>
STOCK OPTIONS
The following table sets forth fiscal year end option values for options for
Sealright Common Stock currently held by the Named Executive Officers. No
options were exercised by any of the Named Executive Officers during fiscal
year 1997. Sealright has never granted stock appreciation rights. JPS
Packaging has not granted any stock options or stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)
------------------------- -------------------------
NAME AND PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John T. Carper 13,500 8,000 $2,250 $ -0-
President
Steven D. Saucier 3,900 12,000 $1,350 $ -0-
Senior Vice President--Manufac-
turing
A. Lawrence Walton 3,200 8,000 $3,280 $5,920
Vice President--Sales and Mar-
keting
</TABLE>
Pursuant to the Merger Agreement, immediately prior to the Effective Time
outstanding stock options for Sealright Common Stock held by Sealright
employees, including those who will be JPS Packaging employees following the
Exchange (including the Named Executive Officers), will become fully vested.
See "TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Treatment of Options."
EMPLOYMENT/SEVERANCE AGREEMENTS
JPS Packaging has assumed the obligations under Sealright's severance
policies with respect to those employees of Sealright who will become
employees of JPS Packaging upon the Exchange. Pursuant to these policies, if
the employment of any of the Executive Officers of JPS Packaging is terminated
by JPS Packaging without cause within 12 months of the Effective Date certain
severance payments will become due and payable. Under such severance policies,
the amounts payable to John T. Carper, Steven D. Saucier and A. Lawrence
Walton in the event of their terminations would be $168,000, $150,000 and
$145,000, respectively. Additionally, for certain of its employees including
Mr. Carper, Mr. Saucier and Mr. Walton, JPS Packaging has assumed additional
obligations of Sealright to provide extended insurance coverage and the cost
of outplacement services pursuant to retention arrangements between those
employees and Sealright.
JPS PACKAGING COMPANY SAVINGS PLAN
As of the Effective Date, JPS Packaging will have adopted the JPS Packaging
Savings Plan (the "JPS Savings Plan"), a defined contribution plan which is
intended to be a 401(k) plan. All salaried employees of JPS Packaging and
current salaried employees of Sealright who, as of the Effective Date, will
become employees of JPS Packaging will become eligible for participation in
the JPS Savings Plan.
Participants in the JPS Savings Plan may elect to have up to 15% of their
pre-tax compensation and 7% of their after tax compensation contributed to the
JPS Savings Plan. Such contributions are limited by Federal law (currently
$10,000 per year). For employees who have completed one year of service, JPS
Packaging will match 50% of each participant's pre-tax contribution, but only
to the extent that the participant's contribution does not exceed 5% of
compensation. A participant's election deferrals will be vested from the time
made. JPS Packaging's matching contributions will vest at the rate of 20% for
each of the participant's first five years of service and will be fully vested
after five years of employment or upon retirement, disability or death.
For those current employees of Sealright who will become employees of JPS
Packaging as of the Effective Date and have balances in the Sealright Long
Term Savings Plan, these balances will be rolled over into the JPS Savings
Plan. The status of such employees with respect to eligibility and vesting
will not be affected by the rollover of their account to the JPS Savings Plan.
In addition to JPS Packaging's matching contributions, JPS Packaging may
contribute additional amounts determined by the Compensation Committee in its
sole discretion, which amounts will be allocated to each participant's account
in the proportion that such participant's compensation bears to the total
compensation of
48
<PAGE>
all participants for that plan year. These additional JPS Packaging
contributions vest in the same manner as the JPS Packaging matching
contributions.
JPS PACKAGING INCENTIVE COMPENSATION PLAN
Sealright-West, as the sole stockholder of JPS Packaging, has approved the
JPS Incentive Plan, which is administered by the Compensation Committee. The
JPS Incentive Plan provides for the granting of stock options, restricted
stock, performance shares and performance units payable to employees of JPS
Packaging, including the Named Executive Officers or members of the JPS Board.
The purpose of the JPS Incentive Plan is to provide incentives and rewards and
to encourage ownership of JPS Common Stock by JPS Packaging employees and
directors. Under the JPS Incentive Plan, the Compensation Committee has sole
discretion to determine those employees eligible to receive awards and the
amount and type of awards. Grants of awards to directors of JPS Packaging must
be authorized by the JPS Board.
The maximum number of shares of JPS Common Stock subject to award will be
550,000 (approximately 10% of the issued and outstanding shares of JPS Common
Stock as of the Effective Date). No more than 55,000 shares may be issued
pursuant to restricted stock awards under the JPS Incentive Plan. Terms and
conditions will be set forth in written agreements, the terms of which will be
consistent with the JPS Incentive Plan.
Under the JPS Incentive Plan, the Compensation Committee is authorized (i)
to grant stock options that qualify as "Incentive Stock Options" under Section
422 of the Internal Revenue Code of 1986, as amended, and (ii) to grant stock
options that do not so qualify. The option price for any stock options shall
not be less than 100% of the fair market value of JPS Common Stock on the date
of grant. No stock option may be exercised more than 10 years after its date
of grant. In the case of Incentive Stock Options, the aggregate fair market
value of the stock with respect to which options are exercisable for the first
time by any recipient during any calendar year cannot, under present tax
rules, exceed $100,000. The Compensation Committee has discretion to determine
the treatment of awards under the JPS Incentive Plan in the event of a change
in ownership or a change in control of JPS Packaging.
After the Effective Date, the Compensation Committee is expected to grant
stock options and possibly restricted stock awards to the Named Executive
Officers and other members of JPS Packaging management.
A copy of the JPS Incentive Plan has been filed as an exhibit to the
Registration Statement, of which this Proxy Statement/Prospectus forms a part.
The foregoing description of the JPS Incentive Plan is intended only as a
summary and is qualified in its entirety by reference to the JPS Incentive
Plan.
CERTAIN TRANSACTIONS
The Flexible Packaging Business has in the past engaged in numerous
transactions with Sealright. See "NOTES TO JPS PACKAGING FINANCIAL
STATEMENTS--6. Related Party Transactions." Such transactions have included,
among other things, the extension of intercompany loans, purchases of raw
materials, the provision of various other types of financial support by or to
Sealright, and the sharing of services and administration and the costs
thereof. See "TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Terms of Ancillary
Agreements."
G. Kenneth Baum and William D. Thomas are both directors of Sealright and
JPS Packaging. Mr. Baum is an employee and Mr. Thomas serves as Vice President
of George K. Baum & Company. In connection with the Transactions, Sealright
has agreed to pay George K. Baum & Company a fee of approximately $610,000, of
which $573,000 is contingent upon the consummation of the Transactions. See
"THE PROPOSED TRANSACTIONS--Engagement of Financial Advisors."
49
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF SEALRIGHT COMMON STOCK
The following table sets forth Sealright Common Stock ownership information
with respect to each of Sealright's directors, five highest paid executive
officers, and all directors and executive officers as a group and with respect
to each person who owns more than 5% of Sealright Common Stock as of June 1,
1998. An asterisk in the column listing the percentage of shares beneficially
owned indicates the person owns less than 1% of the Sealright Common Stock as
of such date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
---------------------------------------------------------
DIRECT, INDIRECT
AND PROFIT RIGHT TO % OF SHARES
NAME AND ADDRESS SHARING PLAN(2) ACQUIRE(3) OTHER(4) OUTSTANDING
- ---------------- ---------------- ---------- -------- -----------
<S> <C> <C> <C> <C>
G. Kenneth Baum 743,575 -- 3,412,500(5) 37.5%
William D. Thomas 300,960 -- 3,512,700(5)(6) 34.4%
George K. Baum Group, Inc. 120 3,412,500(7) -- -- 30.8%
West 12th Street
Kansas City, Missouri 64105
T. Rowe Price Associates, Inc. 740,000(8) -- -- 6.7%
100 East Pratt Street
Baltimore, Maryland 21202
Marvin W. Ozley 104,500 -- 61,629(9) 1.5%
Frederick O. DeSieghardt 20,960 -- 60,000(10) 1.1%
Charles F. Marcy 10,500 43,000 4,680(11)(12) *
John T. Carper 15,918 13,500 3,652(11) *
J. Patrick Muldoon -- 7,250 419 *
Charles A. Sullivan 5,960 -- -- *
John T. Slattery -- 4,200 380 *
A. Lawrence Walton -- 3,200 574 *
Robert F. Hagans 5,160 -- -- *
Steven D. Saucier -- 6,900 172 *
T. Carl Walker -- 3,650 201 *
Mark E. Dowey -- 2,000 51 *
D. Patrick Curran 1,960 -- -- *
Arthur R. Schulze 1,960 -- -- *
Directors and Executive Officers
as a Group (16 persons) 4,936,611 44.5%
</TABLE>
- --------
(1) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Nature of beneficial
ownership of securities is direct unless indicated otherwise by footnote.
Beneficial ownership as shown in the table arises from sole voting power
and sole investment power unless otherwise indicated by footnote.
(2) Includes shares held in personal trusts where the director or officer has
sole discretion as to voting of shares. Also includes shares held in the
LTSP where the participant has voting discretion.
(3) Unless otherwise noted, includes shares issuable pursuant to vested stock
options.
(4) Unless otherwise noted, includes shares held in the LTSP which are voted
by the Plan's administrative committee. Mr. Marcy, Mr. Carper and Mr.
Walker are members of such committee.
50
<PAGE>
(5) Includes 3,412,500 shares owned by George K. Baum Group, Inc. Mr. Baum
and Mr. Thomas are each a director, officer and stockholder of George K.
Baum Group, Inc. and have shared voting and investment power over these
shares.
(6) Includes 100,000 shares held by his spouse and 200 shares held by his
spouse as custodian for their children, in which he disclaims beneficial
ownership.
(7) Excludes shares owned by officers and employees of George K. Baum Group,
Inc. and its subsidiaries.
(8) Ownership information is as of December 31, 1997.
(9) Includes 41,750 shares held by his spouse as trustee of a revocable trust
established by her; 19,500 shares held in trust for the benefit of Mr.
Ozley's daughter, of which his spouse is trustee; 379 shares which are
owned in the LTSP.
(10) Includes 46,500 shares held indirectly by Mr. DeSieghardt as a joint
trustee with his wife of a unit trust established by him and 13,500
shares held by a foundation, of which Mr. DeSieghardt is a trustee.
(11) Includes 3,000 shares held by the Sealright Foundation, Inc., a 501(c)(3)
foundation of which Mr. Marcy and Mr. Carper are trustees.
(12) Includes 1,000 shares held jointly with his wife and 680 shares in the
LTSP.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF JPS PACKAGING COMMON STOCK
All outstanding shares of JPS Common Stock are currently held by Sealright.
To the best knowledge of JPS Packaging, the following table sets forth
projected JPS Common Stock ownership information with respect to each of the
JPS Packaging directors, Named Executive Officers and all JPS Packaging
directors and Executive Officers as a group and with respect to each person
who is projected to own more than 5% of the JPS Common Stock immediately after
the Exchange as of June 1, 1998. Such projections are based on the anticipated
issuance of one-half share of JPS Common Stock for every share of Sealright
Common Stock beneficially owned by such parties as of the Effective Date in
connection with the Merger and Exchange. Except as noted, all such parties
will possess sole voting and investment powers with respect to the shares
noted. An asterisk in the column listing the percentages of shares to be
beneficially owned indicates the person will own less than 1% of JPS Common
Stock. See "TERMS OF THE MERGER AGREEMENT AND EXCHANGE--Payment of Merger
Consideration and Redemption Consideration;" and "JPS PACKAGING EXECUTIVE
COMPENSATION."
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
-----------------------------------------------------------
DIRECT, INDIRECT
AND PROFIT RIGHT TO % OF SHARES
NAME AND ADDRESS SHARING PLAN(2)(3) ACQUIRE(4) OTHER OUTSTANDING
- ---------------- ------------------ ---------- ----- -----------
<S> <C> <C> <C> <C>
G. Kenneth Baum 371,787 -- 1,706,250(5) 37.5%
William D. Thomas 150,480 -- 1,756,350(5)(6) 34.4%
George K. Baum Group, Inc. 120 1,706,250(7) -- -- 30.8%
West 12th Street
Kansas City, Missouri 64105
T. Rowe Price Associates, Inc. 370,000(8) -- -- 6.7%
100 East Pratt Street
Baltimore, Maryland 21202
John T. Carper 7,662(4)(9) -- -- (10) *
D. Patrick Curran 980 -- -- *
Charles A. Sullivan 2,980 -- -- *
David S. Boylan -- -- -- --
Steven D. Saucier 531(4)(9) -- -- *
A. Lawrence Walton 1,128(4)(9) -- -- *
Directors and Executive Officers
as a Group (8 persons) 2,241,267 40.4%
</TABLE>
51
<PAGE>
- --------
(1) Calculated in accordance with Rule 13d-3 under the Exchange Act. Nature
of beneficial ownership of securities is direct unless indicated
otherwise by footnote. Beneficial ownership as shown in the table arises
from sole voting power and sole investment power unless otherwise
indicated by footnote.
(2) Based on holdings of Sealright Common Stock as of March 31, 1998 and the
issuance of JPS Common Stock in partial redemption therefor in connection
with the Merger and Exchange.
(3) Includes shares held in personal trusts where the director or officer has
sole discretion as to voting of shares.
(4) The table reflects the issuance of JPS Common Stock in connection with
the Settlement of Sealright Stock Options (Mr. Carper: 662 shares, Mr.
Saucier, 531, Mr. Walton: 1,128). There are no outstanding options to
acquire JPS Common Stock.
(5) Includes 1,706,250 shares owned by George K. Baum Group, Inc. Mr. Baum
and Mr. Thomas are each a director, officer and stockholder of George K.
Baum Group, Inc. and have shared voting and investment power over these
shares.
(6) Includes 50,000 shares held by his spouse and 100 shares held by his
spouse as custodian for their children, in which he disclaims beneficial
ownership.
(7) Excludes shares owned by officers and employees of George K. Baum Group,
Inc. and its subsidiaries.
(8) Ownership information is as of December 31, 1997.
(9) Does not reflect shares of JPS Packaging Common Stock to be issued
pursuant to the Exchange for shares of Sealright Common Stock which are
held by the LTSP, as such shares are an ineligible investment pursuant to
the LTSP and will therefore be sold by the LTSP.
(10) Does not reflect 1,500 shares held by the Sealright Foundation, Inc., a
501(c)(3) foundation of which Mr. Carper is currently a trustee, since
Mr. Carper will resign from such position as of the Effective Date.
DESCRIPTION OF JPS PACKAGING CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under JPS Packaging's Certificate of Incorporation (the "JPS Certificate"),
the total number of shares of all classes of stock that JPS Packaging will
have authority to issue under the JPS Certificate is 15,000,000 which will all
be shares of JPS Common Stock. Based on the number of shares of Sealright
Common Stock outstanding at June 1, 1998, up to 5,599,889 shares of JPS Common
Stock will be issued to Sealright stockholders in the Exchange and in
connection with the settlement of the Sealright Stock Options. See "TERMS OF
THE MERGER AGREEMENT AND EXCHANGE--Payment of Merger Consideration and
Redemption Consideration" and "--Treatment of Sealright Stock Options." All of
the shares of JPS Common Stock issued in the Exchange will be validly issued,
fully paid and nonassessable.
JPS COMMON STOCK
The holders of JPS Common Stock will be limited to one vote for each share
held of record date on all matters voted on by stockholders, including
elections of directors. The JPS Certificate does not provide for cumulative
voting in the election of directors or any preemptive rights to purchase or
subscribe for any stock or other securities and there are no conversion rights
or redemption or sinking fund provisions with respect to such stock. The
holders of JPS Common Stock on the applicable record date will be entitled to
such dividends as may be declared from time to time by the JPS Board from
funds available therefor, and upon liquidation will be entitled to receive all
assets of JPS Packaging available for distribution to such holders. See "RISK
FACTORS--Absence of Dividends."
52
<PAGE>
The JPS Certificate and JPS Packaging bylaws (the "JPS Bylaws") contain
certain provisions which may have the effect of discouraging certain types of
transactions that involve an actual or threatened change of control of JPS
Packaging. See "ANTI-TAKEOVER EFFECTS OF DELAWARE LAW."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
The DGCL contains certain provisions that have the effect of delaying,
deferring or preventing a change in control of JPS Packaging by various means
such as a tender offer or merger not approved by the JPS Board. The
description set forth below is intended as a summary of these provisions only
and is qualified in its entirety by reference to such provisions. Unless
otherwise noted, references to "stock" includes shares issuable pursuant to
vested stock options.
Section 203 of the DGCL prevents an "interested stockholder" (defined in
Section 203, generally as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (as
defined in Section 203) with a publicly held Delaware corporation for three
years following the date such person became an interested stockholder unless
(i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
OF SEALRIGHT AND JPS PACKAGING
Upon consummation of the Exchange, the Sealright stockholders will become
stockholders of JPS Packaging and their rights will be governed by the JPS
Certificate and JPS Bylaws, which differ in certain material respects from the
Sealright Certificate of Incorporation (the "Sealright Certificate") and the
Sealright Bylaws. As stockholders of JPS Packaging, the rights of former
Sealright stockholders will continue to be governed by the DGCL.
The following comparison of the JPS Certificate of Incorporation and JPS
Bylaws, on the one hand, and the Sealright Certificate and Sealright Bylaws,
on the other, is not intended to be complete and is qualified in its entirety
by reference to the JPS Certificate, the JPS Bylaws, the Sealright Certificate
and the Sealright Bylaws. Copies of the JPS Certificate and JPS Bylaws are
available for inspection at the offices of JPS Packaging and copies will be
sent to the holders of Sealright Common Stock upon request. Copies of the
Sealright Certificate and Sealright Bylaws are available for inspection at the
principal executive offices of Sealright and copies will be sent to holders of
Sealright Common Stock, upon request. See also "DESCRIPTION OF JPS PACKAGING
CAPITAL STOCK."
SIZE OF THE BOARD OF DIRECTORS
Pursuant to both the Sealright Certificate, and the JPS Certificate, the
number of directors of Sealright and JPS Packaging, respectively, will be
fixed by their respective bylaws. The Sealright Bylaws and JPS Bylaws each
provide that their respective Boards must consist of not less than three nor
more than eleven members. Both Sealright and JPS Packaging directors are
elected to serve one year terms. The current Sealright Board consists of nine
members and the current JPS Packaging Board consists of five members.
53
<PAGE>
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Directors either of Sealright or JPS Packaging may be removed with or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors. Vacancies in either the Sealright Board or the
JPS Board resulting from death, resignation, disqualification, increase in
number of Directors, or any other cause may be filled by a majority of the
remaining directors, though less than a quorum, at any regular or special
meeting of the directors.
ACTION BY WRITTEN CONSENT
Under the DGCL, unless otherwise provided in the corporation's certificate
of incorporation, stockholders may take action without a meeting without prior
notice and without a vote, upon the written consent of stockholders having not
less than the minimum number of votes that would be necessary to authorize the
proposed action at a meeting at which all shares entitled to vote were present
and voted. Both the Sealright Bylaws and the JPS Bylaws provide for
stockholder action as permitted by DGCL.
MEETINGS OF STOCKHOLDERS
Sealright. A special meeting of Sealright stockholders may be called for any
purpose or purposes only by the affirmative vote of a majority of the entire
Sealright Board or by the President or Secretary of Sealright. At any meeting
of stockholders, a majority of the outstanding shares entitled to vote and
present in person or represented by proxy constitutes a quorum. A majority of
the votes cast is generally required for action by the Sealright stockholders.
JPS Packaging. A special meeting of the stockholders may be called for any
purpose or purposes by the Chairman of the JPS Board, President, Secretary or
by resolution of the JPS Board. At any meeting of stockholders, a majority of
the outstanding shares entitled to vote and present in person or represented
by proxy constitutes a quorum. A majority of the votes cast is generally
required for action by the stockholders of JPS Packaging.
REQUIRED VOTE OF AUTHORIZATION OF CERTAIN ACTIONS
Under the DGCL, the recommendation of the board of directors and the
approval of a simple majority of the outstanding shares of Sealright or JPS
Packaging entitled to vote thereon are required to effect a merger or
consolidation or to sell, lease or exchange substantially all of the assets of
Sealright or JPS Packaging, respectively. Subject to Section 203 of the DGCL
described below under "ANTI-TAKEOVER EFFECTS OF CERTAIN TRANSACTIONS," a vote
of stockholders is not required with respect to a merger or consolidation; if
Sealright or JPS Packaging were the surviving corporation of such merger or
consolidation and (a) the related agreement of merger or consolidation did not
amend the certificate of incorporation of Sealright or JPS Packaging, as
applicable, (b) each share of stock of the respective corporation outstanding
immediately prior to the Merger was an identical outstanding or treasury share
of the respective corporation after the Merger, and (c) the number of shares
of common stock to be issued in such merger or consolidation (or to be
issuable upon conversion of any convertible instruments to be issued in such
merger or consolidation) did not exceed 20% of the shares of common stock
outstanding immediately prior to such merger or consolidation.
AMENDMENT OF CORPORATE CHARTER AND BYLAWS
The DGCL permits amendment of the certificate of incorporation by a
resolution of the corporation's board of directors, followed by a majority
vote of the outstanding stock entitled to vote thereon. The Sealright Bylaws
and JPS Bylaws may be amended either by the affirmative vote of a majority of
the whole board of directors of Sealright or JPS Packaging, respectively, at
any regular or special meeting.
54
<PAGE>
LIMITATION ON DIRECTORS' LIABILITY
Section 102 of the DGCL allows a corporation to limit or eliminate the
personal liability of directors to the corporation and its stockholders for
monetary damages for breach of fiduciary duty as a director. However, this
provision excludes any limitation on liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) for intentional or negligent payment of
unlawful dividends, stock purchase or redemption, or (d) for any transaction
from which the director derived an improper personal benefit. Both Sealright's
and JPS Packaging's Certificates of Incorporation provide for the limitation
on directors' liability as permitted by this statute.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the DGCL provides that a corporation may indemnify any of its
officers or directors party to any action, suit or proceeding by reason of the
fact that such person was a director, officer, or employee of the corporation
by, among other things, a majority vote of a quorum consisting of directors
who were not parties to such action, suit, or proceeding provided that such
officer or director acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation.
The Sealright Bylaws and JPS Bylaws provide that Sealright and JPS
Packaging, respectively, will indemnify any person against all expenses,
liabilities and losses arising by reason of the fact that such person is or
was a director, officer, employee or agent of the respective corporation
(other than arising in an action by or in the right of the corporation), if a
determination that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful is made by (a)
the respective corporation's board of directors by a majority vote of a quorum
consisting of directors who were not parties to the action in question, or (b)
if a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders. No indemnification will be made in
respect of any claim, issue or matter as to which a person has been adjudged
to be liable to the respective corporation unless and only to the extent that
the court in which such action or suit was brought determines upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court will deem proper.
NO CUMULATIVE VOTING
Neither Sealright nor JPS Packaging permits cumulative voting.
DIVIDENDS AND OTHER DISTRIBUTIONS
The DGCL generally allows dividends to be paid out of surplus of the
corporation or out of the net profits of the corporation for the current
fiscal year and/or the prior fiscal year. No dividends may be paid if they
would result in the capital of the corporation being less than the capital
represented by the preferred stock of the corporation. The Sealright Bylaws
and JPS Bylaws give their respective boards of directors the power to declare
lawful dividends when it deems it expedient to do so.
55
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF JPS PACKAGING
Under Section 102 of the DGCL and the JPS Certificate, JPS Packaging must
indemnify any person who is or was a director or officer of JPS Packaging, or
is or was serving at the request of JPS Packaging as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
trade or industry association or other enterprise, to the maximum extent
permitted by law, against any and all expenses (including attorney's fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such person in connection with any civil, criminal, administrative
or investigative action, proceeding or claim (including an action by or in the
right of JPS Packaging), by reason of the fact that such person is or was
serving in such capacity, provided that such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, with respect to an action or suit by or in the
right of JPS Packaging, such indemnification shall only be against expenses
(including attorneys' fees) and in such cases no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to JPS Packaging, unless, and only to the extent that the
court in which such action or suit was brought determines upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling JPS Packaging
pursuant to the foregoing provisions, JPS Packaging has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
STOCKHOLDER PROPOSALS
JPS Packaging Stockholders desiring to nominate candidates for directors or
to present a proposal or bring other business before a JPS Packaging
stockholders meeting must provide notice to the Secretary of JPS Packaging,
whose address is 9201 Packaging Drive, DeSoto, Kansas 66018. To be considered,
notice of any such nomination or proposal must be received before December 18,
1998. To be included in JPS Packaging's proxy statement and form of proxy for
that meeting, any such proposal must also comply in all respects with the
Commission.
EXPERTS
KPMG Peat Marwick LLP serves as Sealright's independent accountants.
Representatives of KPMG Peat Marwick LLP are currently expected to be at the
Special Meeting to answer questions by stockholders and will have the
opportunity to make a statement, if so desired.
The financial statements of Sealright as of December 31, 1997 and 1996 and
for each of the years in the two year period ended December 31, 1997 have been
incorporated by reference herein based upon the report of KPMG Peat Marwick
LLP, independent accountants, and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of Sealright for the year ended December 31, 1995
have been incorporated by reference herein based upon the report of Arthur
Andersen & Co. LLP, independent accountants, and upon the authority of said
firm as experts in accounting and auditing.
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<PAGE>
The financial statements of JPS Packaging as of December 31, 1996 and 1997
and for each of the years in the three year period ended December 31, 1997
have been included herein based upon the report of KPMG Peat Marwick LLP,
independent accountants, and upon the authority of said firm as experts in
accounting and auditing.
The JPS Board has appointed KPMG Peat Marwick LLP as JPS Packaging's
independent accountants to audit JPS Packaging's financial statements for the
fiscal year ending December 31, 1998.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Partners of Bryan Cave LLP, counsel to JPS Packaging, who will pass on the
validity of the shares of JPS Common Stock to be issued pursuant to the
Exchange, owned as of March 31, 1998, 58,900 shares of Sealright Common Stock.
LEGAL OPINION REGARDING VALIDITY OF SHARES OF JPS PACKAGING
The validity of the shares of JPS Common Stock to be issued pursuant to the
Exchange will be passed upon for by Bryan Cave LLP, Kansas City, Missouri,
special counsel for JPS Packaging.
57
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Proposal........... 24
Acquisition Sub................ Cover
Ancillary Agreements........... 22
Antitrust Division............. 31
Audit Committee................ 46
Commission..................... Cover
Compensation Committee......... 46
DGCL........................... 14
Dissenting Shares.............. 22
EBIT........................... 19
EBITDA......................... 19
Effective Date................. 2
Effective Time................. Cover
Exchange....................... Cover
Exchange Act................... 50
Executive Officers............. 46
Flexible Liabilities........... 34
Flexible Packaging Assets...... 34
Flexible Packaging Business.... 1
FTC............................ 31
Goldman Sachs.................. Cover
Group Shares................... 30
HSR Act........................ 31
Huhtamaki...................... Cover
Huhtamaki Special Termination.. 28
Interim Period................. 26
JPS Packaging.................. Cover
JPS Board...................... 12
JPS Bylaws..................... 53
JPS Certificate................ 52
JPS Common Stock............... Cover
JPS Incentive Plan............. 45
JPS Savings Plan............... 48
LTM............................ 20
LTSP........................... 47
</TABLE>
<TABLE>
<S> <C>
Merger......................... Cover
Merger Agreement............... Cover
Merger Consideration........... Cover
Modified Recommendation
Termination................... 28
Named Executive Officers....... 47
9/30/98 Termination............ 28
Paying Agent................... 15
Proxy and Option Agreement..... Cover
Proxy Statement/Prospectus..... Cover
Record Date.................... Cover
Redemption Consideration....... Cover
Registration Statement......... i
Reorganization................. 33
Rigid Packaging Business....... 1
Sealright...................... Cover
Sealright Board................ Cover
Sealright Bylaws............... 14
Sealright Certificate.......... 53
Sealright Common Stock......... Cover
Sealright Stock Options........ 23
Sealright-West................. 2
Section 262.................... 31
Securities Act................. 34
Selected Companies............. 19
Selected Transactions.......... 20
Special Meeting................ Cover
Stock Certificates............. 23
Stockholder Group.............. Cover
Stockholder Termination........ 28
Superior Proposal.............. 25
Superior Proposal Termination.. 28
Surviving Corporation.......... 22
Third Party Acquisition........ 29
Trademarks..................... 26
Transactions................... 14
</TABLE>
58
<PAGE>
INDEX TO JPS PACKAGING FINANCIAL STATEMENTS
<TABLE>
<S> <C>
JPS Packaging Financial Statements:
Independent Auditors' Report............................................ F-2
Combined Balance Sheets as of December 31, 1996 and 1997................ F-3
Combined Statements of Operations for Years 1995, 1996, and 1997........ F-4
Combined Statements of Stockholder's Equity............................. F-5
Combined Statements of Cash Flows for Years 1995, 1996 and 1997......... F-6
Notes to Combined Financial Statements.................................. F-7
Combined Condensed Balance Sheets as of December 31, 1997 and March 31,
1998 (unaudited)....................................................... F-13
Combined Condensed Statements of Operations for the Three months ended
March 31, 1997 and 1998 (unaudited).................................... F-14
Combined Condensed Statements of Cash Flows for the Three months ended
March 31, 1997 and 1998 (unaudited).................................... F-15
Notes to Combined Condensed Financial Statements (unaudited)............ F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of JPS Packaging Company:
We have audited the accompanying combined balance sheets of JPS Packaging
Company as of December 31, 1996 and December 31, 1997, and the related
combined statements of operations, stockholder's equity and cash flows for
each of the years in the three year period ended December 31, 1997. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of JPS Packaging
Company as of December 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the years in the three year period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
April 21, 1998
F-2
<PAGE>
JPS PACKAGING COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
----------------
1996 1997
------- -------
ASSETS
------
<S> <C> <C>
Current Assets
Cash............................................................ $ 173 $ 333
Accounts receivable, less allowance for doubtful accounts of
$321 in 1996 and $334 in 1997.................................. 11,524 13,108
Inventories..................................................... 13,168 12,795
Other current assets............................................ 695 505
------- -------
Total current assets........................................ 25,560 26,741
Property, Plant and Equipment
Land............................................................ 1,910 1,490
Buildings and improvements...................................... 11,978 11,710
Machinery and equipment......................................... 47,850 49,867
Furniture and fixtures.......................................... 5,153 4,055
------- -------
Property, plant and equipment................................... 66,891 67,122
Less accumulated depreciation................................. 32,171 35,238
------- -------
Property, plant and equipment, net.......................... 34,720 31,884
Other Assets
Goodwill, net................................................... 2,937 2,644
Prepaid pension (Note 4)........................................ 489 478
Other........................................................... 77 157
------- -------
Total other assets.......................................... 3,503 3,279
------- -------
Total assets................................................ $63,783 $61,904
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable................................................ $ 4,293 $ 3,697
Accrued vacation................................................ 577 565
Restructuring liability (Note 5)................................ 728 --
Accrued customer rebates........................................ 852 1,477
Other accrued liabilities....................................... 1,842 2,996
------- -------
Total current liabilities................................... 8,292 8,735
Deferred income taxes (Note 2).................................... 2,259 3,291
Commitments and contingencies (Note 3)............................ -- --
------- -------
Total liabilities........................................... 10,551 12,026
Stockholder's Equity (Note 1)
Common stock, Sealright Manufacturing-East, Inc. $.10 par value,
750 shares authorized, 100 shares issued and outstanding....... * *
Common stock, Venture Packaging, Inc. $.01 par value, 30,000
shares authorized, 100 shares issued and outstanding........... * *
Additional paid-in capital...................................... 49,718 49,587
Retained earnings............................................... 3,514 291
------- -------
Total stockholder's equity.................................. 53,232 49,878
------- -------
Total liabilities and stockholder's equity.................. $63,783 $61,904
======= =======
</TABLE>
- --------
* Less than $1,000.
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
JPS PACKAGING COMPANY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net Sales........................................ $110,200 $100,299 $ 95,491
Cost of Sales.................................. 97,000 87,831 88,746
-------- -------- --------
Gross Profit..................................... 13,200 12,468 6,745
SG&A Expense................................... 15,733 15,136 12,642
Net Restructuring (Gain) Expense............... 6,866 1,893 (988)
-------- -------- --------
Operating Loss................................... (9,399) (4,561) (4,909)
Income Taxes (Note 2).......................... (3,225) (1,542) (1,686)
-------- -------- --------
Net Loss......................................... $ (6,174) $ (3,019) $ (3,223)
======== ======== ========
Net loss per share (Note 1):
Basic and diluted.............................. $ (1.12) $ (0.55) $ (0.58)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
JPS PACKAGING COMPANY
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PAID IN
CAPITAL TOTAL
COMMON (NOTE RETAINED STOCKHOLDER'S
STOCK 6) EARNINGS EQUITY
------ ------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994............ * $55,881 $12,707 $68,588
Net loss.............................. -- -- (6,174) (6,174)
Contributions from Parent............. -- 1,016 -- 1,016
--- ------- ------- -------
Balance at December 31, 1995............ * 56,897 6,533 63,430
Net loss.............................. -- -- (3,019) (3,019)
Distribution to Parent................ -- (7,179) -- (7,179)
--- ------- ------- -------
Balance at December 31, 1996............ * 49,718 3,514 53,232
Net loss.............................. -- -- (3,223) (3,223)
Distribution to Parent................ -- (131) -- (131)
--- ------- ------- -------
Balance at December 31, 1997............ * $49,587 $ 291 $49,878
=== ======= ======= =======
</TABLE>
- --------
*Less than $1,000.
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
JPS PACKAGING COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................... $(6,174) $(3,019) $(3,223)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation & amortization...................... 6,619 6,693 5,832
Deferred income taxes............................ (1,745) (118) 1,032
Gain from disposal of assets..................... (35) -- (53)
Restructuring expense (gain)..................... 6,866 1,893 (988)
Changes in assets and liabilities:
Accounts receivable, net......................... 1,451 1,721 (1,584)
Inventories...................................... (950) 2,725 373
Accounts payable................................. (279) (1,866) (596)
Net restructuring liability...................... (127) (1,839) (728)
Other............................................ (2,186) (170) 1,640
------- ------- -------
Total adjustments.............................. 9,614 9,039 4,928
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... $ 3,440 $ 6,020 $ 1,705
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................. (6,849) (1,363) (5,432)
Proceeds from disposal of assets................. 90 193 3,567
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES.............. $(6,759) $(1,170) $(1,865)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt...................... $(1,009) $ -- $ --
Contributions from (distributions to) Parent,
net............................................. 2,639 (4,880) 320
------- ------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES... 1,630 (4,880) 320
------- ------- -------
Net increase (decrease) in cash.................... $(1,689) $ (30) $ 160
CASH, Beginning of Year............................ $ 1,892 $ 203 $ 173
------- ------- -------
CASH, End of Year.................................. $ 203 $ 173 $ 333
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF COMBINATION--The accompanying financial statements include
the accounts of two wholly owned subsidiaries of Sealright Co., Inc. (the
Parent) and the accounts of a portion of the Parent and another subsidiary.
The resulting entity operates the San Leandro, California, Charlotte and
Raleigh, North Carolina, and Akron, Ohio, facilities and is collectively
referred to as JPS Packaging Company or the Company. All significant
intercompany accounts and transactions have been eliminated in combination.
Subsequent to December 31, 1997, the Company was reorganized and
incorporated as a Delaware corporation. Upon consummation of the
reorganization, the Company is authorized to issue 15,000,000 shares of common
stock, $0.01 par value. The Company has one wholly owned subsidiary,
incorporated in North Carolina.
A portion of selling, general and administrative expenses have been included
in the statements of operations based on management's estimate of an equitable
allocation of shared corporate services. These expenses may not be indicative
of the Company's cost structure in the future. The estimated expense was
approximately $2,000,000 in 1995, $3,200,000 in 1996 and $5,700,000 in 1997.
The amount of allocated corporate expense has increased, in part, due to
continued centralization of various functions as a result of restructuring the
Parent and the Company.
B. DESCRIPTION OF BUSINESS--The Company manufactures flexible packaging
material and label application machinery primarily for the food and beverage
industries. The Company was formed as the result of acquisitions by the
Parent.
C. INVENTORIES--Inventories are stated at the lower of cost or market.
Finished products, work in process and raw material inventories are carried at
last-in, first-out (LIFO) cost. Certain machine parts and supplies inventories
are carried at first-in, first-out (FIFO) cost. Inventories include the cost
of material, labor and factory overhead required in the production of the
Company's products as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
---------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Inventories carried on LIFO basis
Raw materials................................................ $ 2,898 $ 3,639
Work in process.............................................. 1,909 1,418
Finished goods............................................... 6,555 5,492
------- -------
Total FIFO basis........................................... $11,362 $10,549
FIFO basis in excess of LIFO basis........................... 139 231
------- -------
Total LIFO basis........................................... 11,501 10,780
Inventories carried on FIFO basis.............................. 1,667 2,015
------- -------
Total.................................................... $13,168 $12,795
======= =======
</TABLE>
D. PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment has been
recorded at cost. Such assets are being depreciated over their estimated
useful lives using the straight-line method as follows:
<TABLE>
<S> <C>
Buildings and improvements 5 to 45 years
Machinery and equipment 3 to 15 years
Furniture and fixtures 3 to 8 years
</TABLE>
Maintenance and repairs are charged to expense as incurred. The cost and
accumulated depreciation of assets retired are removed from the accounts, and
any resulting gains or losses are reflected in current income.
F-7
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
E. GOODWILL--The excess of purchase price over fair value of net assets
acquired is being amortized on a straight-line basis over 20 years.
Accumulated amortization was $2,937,000 and $3,231,000, as of December 31,
1996 and 1997, respectively. The related amortization expense charged to
operations during each of the years ended December 31, 1995, 1996 and 1997 was
$294,000.
The Company assesses the recoverability of long-lived assets by determining
whether the amortization of the balance over its remaining life can be
recovered through undiscounted future operating cash flows. The amount of
impairment, if any, is measured based on expected discounted future operating
cash flows using a discount rate reflecting the Company's expected cost of
borrowing. The assessment of the recoverability of long-lived assets will be
impacted if estimated future operating cash flows are not achieved.
F. INCOME TAXES--Pursuant to the allocation policy of the Parent, income
taxes are provided on a stand- alone basis (Note 2). Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
G. RESEARCH AND DEVELOPMENT--Research and development costs are charged to
expense as incurred, and were $1,070,000, $830,000, and $547,000 in 1995,
1996, and 1997, respectively. Research and development costs are classified as
part of Selling, General and Administrative expense.
H. EARNINGS PER SHARE--In February 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 128, Earnings Per Share, which revised the
calculation and presentation of earnings per share. SFAS No. 128 became
effective for the Company's fiscal year ending December 31, 1997. Net loss per
share amounts have been presented under SFAS No. 128.
The number of shares used in the computation of earnings per share is the
number of outstanding common shares of the Parent adjusted for the Exchange
Ratio of one-half share of the Company for each share of the Parent. The
weighted average number of common shares used in the computation were
5,534,000 in 1995 and 5,536,000 in 1996 and 1997. There were no dilutive
securities.
I. REVENUE RECOGNITION--Revenue from the sale of packaging and packaging
equipment is recognized at the time of shipment to the customer.
J. FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company has various financial
instruments comprised of cash, trade and notes receivable and trade and other
payables. The carrying amounts of short-term assets and liabilities,
approximate fair value due to the short duration of these instruments.
K. USE OF ESTIMATES--Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results may differ from those estimates.
L. NEW ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS No. 130, Reporting Comprehensive Income.
This statement establishes standards for reporting and display of items that
may affect shareholder equity but are not components of reported net income.
The Company does not have any items that would require additional reporting
but will adopt SFAS No. 130 in the first quarter of 1998.
F-8
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This statement supersedes and expands on
the segment disclosure requirements of SFAS No. 14. The statement requires
certain financial disclosures about business segments. The definition of
business segments has been changed from an industry definition to that of a
management definition. The Company will adopt the provisions of SFAS No. 131
effective December 31, 1998. It is not expected that the statement will
require additional financial statement disclosure.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. The statement standardizes and
expands the disclosure requirements of prior pronouncements in order to
facilitate enhanced financial analysis. The Company will adopt the provisions
of SFAS No. 132 effective December 31, 1998.
2. INCOME TAXES
Taxes from operations were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1996 1997
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal........................................... $(1,445) (855) $ --
State and local................................... (35) (134) 39
------- -------- -------
Total current tax provision (benefit)........... (1,480) (989) 39
Deferred
Federal........................................... (1,535) (104) 898
State and local................................... (210) (14) 134
------- -------- -------
Total deferred tax provision (benefit).......... (1,745) (118) 1,032
------- -------- -------
Total tax provision (benefit)................. $(3,225) $ (1,107) $ 1,071
======= ======== =======
</TABLE>
A reconciliation of the income tax provision (benefit) from operations to
the statutory Federal rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Statutory Federal tax rate......................... $(3,196) $(1,551) $ (1,669)
Non-deductible expenses............................ 133 107 97
State income and franchise taxes................... (162) (98) (114)
------- ------- --------
Total.......................................... $(3,225) $(1,542) $ (1,686)
======= ======= ========
</TABLE>
The operations of the Company were historically included in the consolidated
Federal income tax returns of the Parent. The policy of the Parent was to
allocate consolidated Federal income tax expense to members of the affiliated
group, including the Company on a stand-alone basis. The tax benefit on net
operating losses is credited by the Parent through intercompany
payables/receivables (Note 6).
F-9
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
--------------
1996 1997
------ -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued restructuring liability............................... $ 269 $ --
Accrued vacation and other compensation....................... 215 289
Accrued workers' compensation reserve......................... 73 98
Other reserves................................................ 783 613
------ -------
Total gross deferred tax assets............................. 1,340 1,000
------ -------
Deferred tax liabilities:
Property, plant and equipment................................. 3,113 3,741
Inventories................................................... 301 373
Prepaid pension, net.......................................... 185 177
------ -------
Total gross deferred tax liabilities........................ 3,599 4,291
------ -------
Net deferred tax liability.................................. $2,259 $ 3,291
====== =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax asset will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which the temporary differences become deductible. Management
believes it is more likely than not the Company will realize the benefits of
these deductible differences. Accordingly, no valuation allowance was recorded
at December 31, 1996 and 1997.
3. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments required under the terms of operating leases
that have initial or remaining non-cancelable lease terms in excess of one
year from December 31, 1997, are as follows
<TABLE>
<CAPTION>
(IN THOUSANDS)
<C> <S> <C>
December 31, 1998............ $128
1999............ 117
2000............ 111
2001............ 107
2002............ 47
</TABLE>
Principal operating leases are for equipment, warehouse facilities and
office space. Rent expense related to operations for all operating leases was
$377,000, $244,000 and $182,000 in 1995, 1996 and 1997, respectively.
At December 31, 1997, the Parent had a stand-by letter of credit outstanding
totaling $400,000 securing an environmental liability related to the
Charlotte, North Carolina facility, formerly owned by the Company. The Parent
also had a stand-by letter of credit outstanding securing a workers'
compensation policy, of which an estimated $186,000 is for the benefit of the
Company.
The Company is a party to various legal and environmental matters incidental
to its business. In the opinion of management, these matters will not have a
material impact on the Company's financial statements. Liabilities for loss
contingencies are recorded when it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated.
F-10
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined benefit pension plan covering the hourly
employees at its Akron, Ohio location. Benefits are based on a flat rate per
year of service.
The funded status of the plan was as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER
31,
------------
1996 1997
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................................... $ 721 $ 853
Non-vested benefits............................................... 29 106
----- -----
Projected benefit obligation...................................... 750 959
Estimated fair value of plan assets............................... 1,275 1,565
----- -----
Plan assets in excess of the projected benefit obligation......... 525 606
Unrecognized prior service cost................................... 66 62
Unrecognized gain................................................. (102) (190)
----- -----
Net pension asset............................................... $ 489 $ 478
===== =====
</TABLE>
Pension expense consisted of the following:
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER
31,
----------------
1995 1996 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Benefits earned during the year............................... 62 $58 $ 63
Interest cost on projected benefit obligation................. 62 53 54
Actual return on assets....................................... (116) (94) (100)
Net amortization.............................................. 3 3 3
---- --- ----
Net pension expense........................................... $ 11 $20 $ 20
==== === ====
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the assumed discount rate was 7.75% in 1996 and 7.25% in 1997,
respectively. The expected long-term rate of return on assets was 9.25% in
1996 and 1997.
The Company makes contributions to a defined benefit multi-employer pension
plan for certain union employees at its San Leandro, California, manufacturing
facility. Amounts contributed to the plan totaled $239,000, $350,000 and
$239,000 in 1995, 1996 and 1997, respectively.
5. RESTRUCTURING EXPENSE
In the fourth quarter of 1995, the Parent announced a functional
reorganization and facilities consolidation plan to significantly reduce the
cost structure of the Parent and the Company and to improve profitability. The
statement of operations for 1995 includes $6,866,000 of pretax charges
($4,395,000 after tax) relating to the Company's portion of this plan. As of
December 31, 1995, $128,000 had been paid, $4,721,000 was reflected on the
1995 combined balance sheet as a write down of long-term assets, $1,211,000
was reflected as a write down of current assets and $806,000 of this amount
remained in accrued liabilities representing $715,000 related to severance,
and $91,000 related to exiting the corporate office lease and legal expenses.
F-11
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
During 1996, the Company moved the machine manufacturing operations formerly
conducted in Raleigh, North Carolina, to the DeSoto, Kansas facility and
consolidated the manufacturing operations conducted at Charlotte, North
Carolina into the Akron, Ohio facility. The costs associated with moving these
manufacturing operations and personnel were $1,893,000 during 1996. At
December 31, 1996, $728,000 remained on the balance sheet as accrued
restructuring liability. Of this amount, $714,000 related to severance, and
$14,000 related to legal expenses. These amounts were paid during 1997.
During the second quarter of 1997, the Company sold the Charlotte, North
Carolina facility for a gain of $1,235,000, offsetting expenses of $247,000
related to completing the consolidation of the Charlotte facility.
The net number of employees affected as a result of the restructuring during
1996 was 100, or a reduction of 6%. Affected employees are from the salaried
and hourly groups of the Company and include senior management, middle
management, clerical, and production employees.
6. RELATED PARTY TRANSACTIONS
During the prior three years, the Company recorded gross profit from sales
to the Parent in the following amounts:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales................................................ $1,280 $1,595 $1,781
Gross Profit......................................... 441 615 197
</TABLE>
The Company has historically relied on funding from the Parent. Generally,
funding was in the form of intercompany receivables/payables that were not,
and will not be, settled in cash. Accordingly, such amounts are reflected
additional paid-in capital in the accompanying combined financial statements.
The Company contributed machinery and equipment to the Parent of $1,623,000
and $2,299,000 in 1995 and 1996, respectively. Capital contributions of
machinery and equipment of $451,000 were made from the Parent to the Company
in 1997.
7. SUMMARIZED QUARTERLY DATA
The Company's unaudited quarterly data for 1997 is as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
----------- ----------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales............... 25,186 25,742 22,944 21,619 95,491
Gross Profit............ 2,490 2,422 914 919 6,745
Operating Profit (Loss). (980) 553 (1,838) (2,644) (4,909)
Net Income (Loss)....... (643) 363 (1,213) (1,730) (3,223)
Net Income (Loss) Per
Share--Basic & Diluted. (0.12) 0.07 (0.22) (0.31) (0.58)
</TABLE>
F-12
<PAGE>
JPS PACKAGING COMPANY
COMBINED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash................................................ $ 333 $ 289
Accounts receivable, less allowance for doubtful
accounts of $327 in 1997 and $333 in 1998.......... 13,108 11,242
Inventories......................................... 12,795 12,987
Other current assets................................ 505 1,227
------- -------
Total current assets.............................. 26,741 25,745
Property, Plant and Equipment, net.................... 31,884 30,967
Other Assets
Goodwill, net....................................... 2,644 2,571
Other............................................... 635 637
------- -------
Total assets...................................... $61,904 $59,920
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable.................................... $ 3,697 $ 4,152
Other current liabilities........................... 5,038 4,354
------- -------
Total current liabilities......................... 8,735 8,506
Deferred income taxes................................. 3,291 3,441
------- -------
Total liabilities................................. 12,026 11,947
Stockholder's Equity (Note 1)
Common stock, Sealright Manufacturing--East, Inc.
$.10 par value, 750 shares authorized, 100 shares
issued and outstanding * *
Common stock, Venture Packaging, Inc. $.01
par value, 30,000 shares authorized, 100 shares
issued and outstanding * *
Additional paid-in capital.......................... 49,587 48,834
Retained earnings (deficit)......................... 291 (861)
------- -------
Total stockholder's equity........................ 49,878 47,973
------- -------
Total liabilities and stockholder's equity........ $61,904 $59,920
======= =======
</TABLE>
- --------
* Less than $1,000.
The accompanying notes are an integral part of these statements.
F-13
<PAGE>
JPS PACKAGING COMPANY
COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE-MONTH
PERIODS ENDED
MARCH 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Net Sales.................................................... $25,186 $20,416
Cost of Sales.............................................. 22,696 18,837
------- -------
Gross Profit................................................. 2,490 1,579
SG&A Expense............................................... 3,279 3,334
Net Restructuring Expense.................................. 191 --
------- -------
Operating Loss............................................... (980) (1,755)
Income Taxes............................................... (337) (603)
------- -------
Net Loss..................................................... $ (643) $(1,152)
======= =======
Net loss per share:
Basic and diluted.......................................... $ (0.12) $ (0.21)
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE>
JPS PACKAGING COMPANY
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE-MONTH
PERIODS ENDED
MARCH 31,
----------------
1997 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $ (643) $(1,152)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation & amortization............................... 1,530 1,326
Other..................................................... 202 150
Changes in assets and liabilities, net...................... (2,317) 722
------- -------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES........................................ $(1,228) $ 1,046
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (1,482) (358)
Proceeds from disposal of assets.......................... -- 21
------- -------
NET CASH USED IN INVESTING ACTIVITIES....................... $(1,482) $ (337)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributions from (distributions to) parent......... 2,537 (753)
------- -------
Net decrease in cash........................................ $ (173) $ (44)
CASH, Beginning of Period................................... $ 173 $ 333
------- -------
CASH, End of Period......................................... $ -- $ 289
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE>
JPS PACKAGING COMPANY
NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION--The accompanying financial statements include the
accounts of two wholly owned subsidiaries of Sealright Co., Inc. (the Parent)
and the accounts of a portion of the Parent and another subsidiary. The
resulting entity operates the San Leandro, California, Charlotte and Raleigh,
North Carolina, and Akron, Ohio, facilities and is collectively referred to as
JPS Packaging Company or the Company. All significant intercompany accounts
and transactions have been eliminated in combination.
The information included in these combined condensed financial statements
reflects all adjustments (consisting only of normal recurring accruals) which,
in the opinion of management, are necessary for a fair statement of the
results for the interim periods presented.
A portion of selling, general and administrative expenses have been included
in the statements of operations based on management's estimate of an equitable
allocation of shared corporate services. These expenses approximate what the
Company would have incurred had it operated on a stand-alone basis for all
periods presented, but may not be indicative of the Company's cost structure
in the future. The estimated expense was approximately $1,470,000 in 1997 and
$1,640,000 in 1998. The amount of allocated corporate expense has increased,
in part, due to continued centralization of various functions as a result of
restructurings by the Parent and the Company.
Subsequent to March 31, 1998, the Company was reorganized and incorporated
as a Delaware corporation. Upon consummation of the reorganization, the
Company is authorized to issue 15,000,000 shares of common stock, $0.01 par
value, and 1,000,000 shares of preferred stock, $0.01 par value. The Company
has one wholly owned subsidiary, incorporated in North Carolina.
2. EARNINGS PER SHARE--In February 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 128, "Earnings Per Share," which revised the
calculation and presentation of earnings per share. SFAS No. 128 became
effective for the Company's fiscal year ending December 31, 1997. Basic and
diluted net loss per share amounts have been presented under SFAS No. 128.
The number of shares used in the computation of earnings per share is the
number of outstanding common shares of the Parent adjusted for the Exchange
Ratio of one-half share of the Company for each share of the Parent. The
weighted average number of common shares used in the computation were
5,536,000 in 1997 and 5,539,000 in 1998. There were no dilutive securities.
3. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT--The Company adopted Financial
Accounting Standards Board No. 130, "Reporting Comprehensive Income," in the
first quarter of 1998, however the Company had no items that would be
considered components of comprehensive income.
4. INCOME TAXES--The operations of the Company were historically included in
the consolidated Federal income tax returns of the Parent. The policy of the
Parent was to allocate consolidated Federal income tax expense to members of
the affiliated group, including the Company, on a stand-alone basis. The
Agreement and Plan of Merger, dated as of March 2, 1998 provides for the
reimbursement of 1998 tax benefits to the Company provided that Huhtamaki Oy
is able to realize the benefit. In the event that Huhtamaki Oy is able to
utilize this benefit, the benefit associated with the Company's tax losses
from January 1, 1998 to March 31, 1998, the Company will receive a
commensurate cash payment from Huhtamaki Oy. Due to the uncertainty of
realization of this payment from Huhtamaki Oy, such payment has not been
reflected as a receivable from Huhtamaki Oy in the accompanying financial
statements.
F-16
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HUHTAMAKI OY,
SEAL ACQUISITION CORPORATION
AND
SEALRIGHT CO., INC.
MARCH 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS..................................................... 1
1.1 Defined Terms..................................................... 1
1.2 Additional Terms.................................................. 6
ARTICLE II TERMS OF THE MERGER............................................ 6
2.1 The Merger........................................................ 6
2.2 Effective Time.................................................... 6
2.3 Closing........................................................... 6
2.4 Ancillary Agreements.............................................. 6
ARTICLE III CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
COMPANY................................................................ 7
3.1 Certificate of Incorporation...................................... 7
3.2 The Bylaws........................................................ 7
ARTICLE IV DIRECTORS AND OFFICERS OF THE SURVIVING COMPANY................ 7
4.1 Directors......................................................... 7
4.2 Officers.......................................................... 7
ARTICLE V MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY
SHARES IN THE MERGER................................................... 7
5.1 Merger Consideration.............................................. 7
5.2 Cancellation of Company Shares.................................... 7
5.3 Payment for Company Shares........................................ 8
5.4 Dissenting Shares................................................. 9
5.5 Transfer of Company Shares After the Effective Time............... 9
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 10
6.1 Capitalization.................................................... 10
6.2 Corporate Organization, Qualification and Power................... 10
6.3 Authorization of Agreement and Merger............................. 11
6.4 Enforceable Agreement............................................. 11
6.5 No Conflicts, Violations, Breaches or Defaults.................... 11
6.6 Company SEC Reports............................................... 11
6.7 Financial Statements; Accounting Matters.......................... 12
6.8 Absence of Certain Changes........................................ 12
6.9 Proxy Statement; S-4 Registration Statement....................... 12
6.10 Litigation........................................................ 12
6.11 Taxes............................................................. 13
6.12 Employee Matters.................................................. 13
6.13 Environmental Laws and Regulations................................ 14
6.14 Compliance with Applicable Laws................................... 15
6.15 Title to Properties............................................... 15
6.16 Intellectual Property............................................. 15
6.17 Insurance......................................................... 16
6.18 DGCL Section 203.................................................. 16
6.19 Material Contracts................................................ 16
6.20 Authorization of Flexible Shares.................................. 17
6.21 Broker's Fees..................................................... 17
6.22 Opinions of Financial Advisors.................................... 17
6.23 Liabilities....................................................... 17
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.24 Sufficiency of Assets............................................. 17
6.25 Solvency of the Flexible Company.................................. 17
6.26 Flexible Company.................................................. 18
6.27 Venture Packaging................................................. 18
6.28 Permitted Asset Sale.............................................. 18
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....... 18
7.1 Corporate Organization, Qualification and Power................... 18
7.2 Authorization of Agreement and Merger............................. 18
7.3 Enforceable Agreement............................................. 18
7.4 No Conflicts, Violations, Breaches or Defaults.................... 18
7.5 Proxy Statement; S-4 Registration Statement....................... 19
7.6 Financing......................................................... 19
7.7 Broker's Fees..................................................... 19
7.8 Interim Operations of Merger Sub.................................. 19
ARTICLE VIII CONDUCT PENDING THE CLOSING AND COVENANTS.................... 20
8.1 Conduct of Business by Company.................................... 20
8.2 Conduct of the Company as to Employee Matters..................... 21
8.3 Sale of Certain Assets............................................ 21
8.4 Conduct of Business of Merger Sub................................. 21
8.5 Acquisition Proposals............................................. 22
8.6 Stockholders' Approval; Proxy Statement........................... 22
8.7 Reasonable Best Efforts........................................... 23
8.8 Notification of Certain Matters................................... 23
8.9 HSR............................................................... 23
8.10 Representations and Warranties.................................... 24
8.11 Access to/Confidentiality of Information.......................... 24
8.12 Publicity......................................................... 24
8.13 Indemnification of Directors and Officers......................... 24
8.14 Employees......................................................... 24
8.15 Amendment of Options.............................................. 24
8.16 Conduct of Flexible Business...................................... 25
ARTICLE IX CONDITIONS..................................................... 25
9.1 Conditions to Each Party's Obligation to Close.................... 25
9.2 Additional Conditions to the Obligations of Parent and Merger Sub
to Close............................................................... 25
9.3 Additional Conditions to the Company's Obligation to Close........ 27
ARTICLE X TERMINATION AND REMEDIES........................................ 27
10.1 Termination....................................................... 27
10.2 Effect of Termination............................................. 28
ARTICLE XI GENERAL PROVISIONS............................................. 29
11.1 Expenses.......................................................... 29
11.2 Nonsurvival....................................................... 29
11.3 Further Documents................................................. 29
11.4 Modification or Amendment......................................... 29
11.5 Waiver............................................................ 30
11.6 Notices........................................................... 30
11.7 Governing Law..................................................... 30
11.8 Entire Agreement.................................................. 31
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
11.9 Construction....................................................... 31
11.10 Binding Effect..................................................... 31
11.11 Assignment......................................................... 31
11.12 Counterparts....................................................... 31
11.13 Obligation of Parent............................................... 31
11.14 Validity........................................................... 31
</TABLE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.4(a) Tax Procedures Agreement
Exhibit 2.4(b) Intellectual Property License Agreement
LIST OF SCHEDULES
Schedule 1.1 Excluded Assets
Schedule 1.2 Excluded Liabilities
Schedule 1.3 Term Sheet for a Permitted Transaction
Schedule
8.1(e) Permitted Restructuring
Schedule
8.1(h) Permitted Capital Expenditures
Schedule 8.3 Permitted Asset Sales
Schedule
8.14(a) Company Employment Agreements and Termination Agreements
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of March 2,
1998, by and among HUHTAMAKI OY, a corporation organized under the laws of
Finland ("Parent"), SEAL ACQUISITION CORPORATION, a Delaware corporation,
which is a wholly owned indirect subsidiary of Parent ("Merger Sub"), and
SEALRIGHT CO., INC., a Delaware corporation (the "Company").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the Company
each have determined that it is in the best interests of their companies and
respective stockholders that Merger Sub be merged with and into the Company,
and, to that end, have approved the merger of Merger Sub with and into the
Company in accordance with the laws of the State of Delaware and the
provisions of this Agreement and Plan of Merger.
B. Parent, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with, and establish
certain conditions precedent to, the Merger.
C. Parent and Merger Sub are unwilling to enter into this Agreement unless
certain stockholders of the Company concurrently with the execution and
delivery of this Agreement enter into Irrevocable Proxy and Option Agreements
(each an "Irrevocable Proxy") between Parent and George K. Baum Group, Inc.,
G. Kenneth Baum Trust, William D. Thomas Trust, among other things the grant
by such stockholders of (i) an irrevocable proxy in favor of Parent with
respect to all shares of Common Stock owned by such Persons, and (ii) the
option, under certain circumstances, to purchase all shares of Common Stock
owned by such Persons, and the Board of Directors of the Company has approved
the execution and delivery of the Irrevocable Proxies.
AGREEMENT
In consideration of the mutual agreements, promises and covenants set forth
herein and the recitals set forth above, and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the parties
hereto, intending to be legally bound, agree as follows.
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein the following terms shall have the
following meanings:
Acquisition Proposal: Any inquiry, proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of a substantial
amount of assets of the Company or any of its Subsidiaries (other than with
respect to a Permitted Transaction) or of over 10% of any class of equity
securities of the Company or any of its Subsidiaries (other than the
Flexible Company), any tender offer or exchange offer that if consummated
would result in any Person beneficially owning 10% or more of any class of
equity securities of the Company or any of its Subsidiaries (other than the
Flexible Company), any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries (other
than the Transactions or a Permitted Transaction), or any other transaction
(other than a Permitted Transaction) the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially
delay the Merger or which would reasonably be expected to dilute materially
the benefits to Parent of the Transactions.
Additional Agreements: Those agreements listed in this Agreement and
attached hereto, either as of the date hereof or, subject to the mutual
agreement of the parties, prior to Closing, as exhibits and incorporated
herein by reference, including but not limited to the Confidentiality
Agreement, as well as all assignments and Ancillary Agreements necessary to
effectuate the Merger, but excluding any assignments or agreements
associated with Permitted Restructuring or Permitted Transactions.
A-1
<PAGE>
Agreement: This Agreement and Plan of Merger, including the preamble,
recitals, exhibits and schedules hereto, all of which are hereby
incorporated herein by reference and made a part hereof, as may be amended
from time to time pursuant to the terms hereof.
Ancillary Agreements: Those agreements described in Section 2.4.
Certificates: The certificates representing Company Shares to be
surrendered pursuant to Section 5.3 in exchange for the Merger
Consideration and the Redemption Consideration.
Certificate of Merger: The document to be prepared by the parties hereto,
in compliance in all respects with the requirements of the DGCL and the
provisions of this Agreement and which shall be filed with the Secretary of
State of the State of Delaware.
Closing: A meeting for the purpose of concluding the Transactions to be
held at the place and on the date fixed in accordance with Section 2.3.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
Company: Shall have the meaning set forth in the preamble to this
Agreement.
Company Disclosure Letter: That letter from the Company to Parent to be
delivered upon the execution of this Agreement, and updated, subject to the
approval of Parent, and redelivered at the Closing, which sets forth
certain disclosures concerning the Company and its business.
Company Intellectual Property Rights: All the domestic and foreign
patents, trademarks (registered or unregistered), trade names, service
marks and copyrights registered and unregistered and applications relating
to any of the foregoing, computer software, data bases, inventions, trade
secrets and proprietary information of any type owned by or licensed to the
Company or any of its Subsidiaries, except those Intellectual Property
Rights that are Excluded Assets.
Company Permits: All permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Authorities necessary for the
lawful conduct of the businesses of the Company and its Subsidiaries,
except those that relate exclusively to the Flexible Business.
Company SEC Reports: The forms, reports and documents filed by the
Company with the SEC since January 1, 1993, together with any amendments or
supplements thereto, any exhibits or schedules thereto and any materials or
information incorporated by reference therein.
Company Shares: The Company Stock issued and outstanding immediately
prior to the Effective Time.
Company Stock: The shares of common stock, $.10 par value per share, of
the Company.
Company Stockholders Meeting: The meeting of the stockholders of the
Company to be held in connection with the vote of such stockholders with
respect to the Merger.
Company Transaction Expenses: That portion, if any, of the aggregate out-
of-pocket expenses incurred by the Company in connection with the
Transactions, Permitted Restructuring or the Permitted Transactions
(including but not limited to investment banking, legal and accounting fees
and expenses, printing costs and SEC filing fees) in excess of four million
dollars ($4,000,000).
Confidentiality Agreement: The confidentiality agreement between Parent
and the Company, dated December 2, 1997.
DGCL: The General Corporation Law of the State of Delaware.
Dissenting Shares: Company Shares which are held by stockholders who have
properly complied with the provisions of Section 262 of the DGCL with
respect to appraisal rights.
Effective Time: The date and time at which the Certificate of Merger has
been duly filed with the Secretary of State of the State of Delaware or
such other time as is agreed upon by the parties and specified in the
Certificate of Merger.
Environmental Claim: Any action, cause of action, claim, investigation,
demand or notice by any Person alleging liability under or non-compliance
with any environmental Law.
A-2
<PAGE>
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Exchange Act: The Securities Exchange Act of 1934, as amended (15 U.S.C.
(S) 78a et. seq.).
Excluded Assets: The stock of the Flexible Company and those assets used
exclusively in the Flexible Business, and described on Schedule 1.1, which
are owned by the Flexible Company, or which shall be transferred to it in
connection with the Permitted Restructuring, or, in the alternative may be
sold by the Company prior to the Closing pursuant to a Permitted
Transaction.
Excluded Liabilities: Those liabilities directly and exclusively related
to the Excluded Assets and the Flexible Business, and described on Schedule
1.2, which are the liability of the Flexible Company or which shall be
assumed by the Flexible Company in connection with the Permitted
Restructuring, or, in the alternative, may be assumed in connection with
the Excluded Assets in connection with a Permitted Transaction.
Flexible Business: The business of manufacturing and selling flexible
packaging and labeling for the food, dairy and beverage market (excluding
the Company's Australian operations), and machines for the application of
sleeve labels to plastic bottles, operated by the Company, directly and
through certain of its subsidiaries.
Flexible Buyer: A buyer of the Excluded Assets and Excluded Liabilities
pursuant to a Permitted Transaction.
Flexible Company: Sealright Manufacturing-East, Inc., a wholly-owned
Subsidiary of the Company, incorporated under the Laws of the State of
Ohio.
Flexible Company Material Adverse Effect: Any adverse change in the
business, assets, liabilities, operations, prospects, condition (financial
or otherwise), or results of operations of the Flexible Company, including
any of its Subsidiaries, which is material to the Flexible Company and its
Subsidiaries, taken as a whole.
Flexible Shares: The outstanding capital stock of the Flexible Company
which shall be distributed to the Company's stockholders as the Redemption
Consideration.
Governmental Authority: The federal government, any state, county,
municipal, local or foreign government and any agency, bureau, commission,
authority or body of any of the foregoing.
HSR: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Intellectual Property Rights: Domestic and foreign patents, trademarks
(registered or unregistered), trade names, service marks and copyrights
(registered and unregistered) and applications relating to any of the
foregoing, computer software, databases, inventions, trade secrets and
proprietary information of any type.
Judgment: Any judgment, writ, injunction, order or decree of or by any
court, judge, justice or magistrate, including any bankruptcy court or
judge, having appropriate jurisdiction, and any binding adjudicative order
of or by a Governmental Authority.
Law: The common law and any statute, ordinance, code or other law, rule,
regulation, order, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
Lien: Any mortgage, lien or encumbrance of any kind whatsoever, which (i)
creates or confers or purports to create or confer an interest in property
to secure payment or performance of a liability, obligation or claim, or
which retains or reserves or purports to retain or reserve such an interest
for such purpose; (ii) grants to any Person the right to purchase or
otherwise acquire, or obligates any Person to sell or otherwise dispose of,
or otherwise results or may result in any Person acquiring, any property or
interest in property; (iii) restricts the transfer of, or the exercise of
any rights in or the enjoyment of any benefits arising by reason of
ownership of, any property; or (iv) otherwise constitutes an interest in,
or claim against, property, whether arising pursuant to any Law, Judgment
or any binding contract.
A-3
<PAGE>
Material Adverse Effect: Any adverse change in the business, assets,
liabilities, operations, prospects, condition (financial or otherwise), or
results of operations of the Company or any of the Company's Subsidiaries
which is material to the Company and its Subsidiaries, taken as a whole,
but shall exclude any adverse change in the Flexible Business.
Merger: The merger of Merger Sub into and with the Company at Closing, as
set forth in Section 2.1.
Merger Consideration: $11.00 per Company Share, in cash.
Merger Payment Fund: That amount of (i) cash equal to the aggregate
amount of the Merger Consideration and the cash portion of the Redemption
Consideration payable, if any, pursuant to Section 5.1 and, if applicable,
(ii) all of the issued and outstanding Flexible Shares, all of which shall
be delivered to the Paying Agent in accordance with the provisions of this
Agreement.
Merger Sub: Shall have the meaning set forth in the preamble of this
Agreement.
Option: Each option to purchase Company Stock issued pursuant to any of
the Company's Option Plans, or otherwise granted by agreement to the
Company's employees, outstanding immediately prior to the Effective Time,
whether or not vested.
Option Plans: The Company's 1995 Stock Option Plan and The Company's
Amended and Restated 1987 Stock Option Plan.
Parent: Shall have the meaning set forth in the preamble of this
Agreement.
Paying Agent: Shall have the meaning set forth in Section 5.3(a) of this
Agreement.
Permitted Restructuring: The transfer of Excluded Assets and Excluded
Liabilities to the Flexible Company from the Company and its other
Subsidiaries, for the purpose of facilitating the distribution of the
Flexible Shares as a part of the Redemption Consideration or the Permitted
Transactions, as described on Schedule 8.1(e), provided that all such
transfers shall qualify as Tax free transfers and no deferred gains shall
be created by such transfers.
Permitted Transaction: Sale, in one or more transactions, of all, but not
less than all, of Excluded Assets (including the stock of the Flexible
Company), to, and the assumption of all of the Excluded Liabilities by,
Flexible Buyers prior to the Closing, consistent with the provisions set
forth on Schedule 1.3 to the Company Disclosure Letter.
Person: Any natural person, corporation, general or limited partnership,
limited liability company, joint venture, trust, association,
unincorporated entity of any kind or Governmental Authority.
Proxy Statement: The proxy statement and form of proxy in connection with
the vote of the stockholders of the Company with respect to the Merger and
this Agreement, together with any amendments thereof or supplements thereto
and all materials incorporated by reference therein, in the form mailed to
the Company's stockholders.
Redemption Consideration: One-half of a Flexible Share per Company Share,
or in lieu thereof, a pro rata share of the net sales proceeds reduced by
Tax liabilities resulting from the sale of the Excluded Assets pursuant to
Permitted Transactions, which shall be distributed to the holders of
Company Shares with respect to each such share owned at the Effective Time,
in partial redemption of the outstanding Company Stock. The aggregate after
Tax sales proceeds shall be reduced by the amount of Company Transaction
Expenses, if any. The calculation of such after Tax sale proceeds shall
assume that such proceeds are taxed at the highest combined federal, state,
local, municipal and foreign Tax rates which are applicable to any taxable
gain or income on sale. In the event the Flexible Business is sold in a
Permitted Transaction prior to the Closing, such proration of such net
sales proceeds shall be calculated based on the aggregate number of Company
Shares outstanding as of the Effective Time, on a fully-diluted basis.
Representatives: Directors, officers, employees, legal counsel, financial
advisors, accountants or other authorized representatives of any of the
parties hereto.
A-4
<PAGE>
S-4 Registration Statement. The Company's registration statement on Form
S-4, as amended or supplemented, containing the Proxy Statement, filed by
the Company with the SEC in connection with the registration under the
Securities Act of the Flexible Shares distributable in connection with the
Merger.
SEC: The United States Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended (15 U.S.C. (S) 77a
et. seq.).
Stock Plan: Any plan, agreement, program or arrangement providing for the
issuance, transfer or grant of any capital stock of the Company or any
interest or right in respect of any capital stock of the Company, including
but not limited to the Option Plans or any provisions regarding the
foregoing contained as a part of any plan, program, agreement or
arrangement.
Subsidiary: In reference to any Person, any corporation or other legal
entity (x) a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity or (y) of which such Person
controls or has the power to elect or appoint a majority of the Board of
Directors or equivalent body of any such Person, or any partnership of
which such Person is a general partner.
Superior Proposal: A bona fide proposal made by a third party to acquire
all of the outstanding Company Stock pursuant to a tender offer, to acquire
all of the assets of the Company, or all of the assets of the Company,
other than the Excluded Assets, or to enter into a merger agreement with
the Company, in each case (a) on terms which a majority of the members of
the Board of Directors of the Company determines in its good faith
reasonable judgment (based on the advice of independent outside financial
and legal advisors) to be more favorable to the Company and its
stockholders than the Transactions and (b) for which financing, to the
extent required, is then committed or which is reasonably capable of being
obtained by such third party on commercially reasonable terms as determined
in the good faith reasonable judgment of the Board of Directors of the
Company (based on the advice of independent outside financial and legal
advisors).
Surviving Company: The Company, which shall be the survivor of the
Merger, as set forth in Section 2.1.
Taxes: All taxes, assessments, charges, duties, fees, levies or other
governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, franchise, profits, capital gains, capital
stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of
any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Tax Return), all estimated taxes,
deficiency assessments, additions to tax, penalties and interest and shall
include any liability for such amounts as a result either of being a member
of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any Person or other entity.
Tax Returns: All returns, declarations, reports, information returns and
statements with respect to Taxes of whatsoever kind.
Third Party Acquisitions: Any merger or any other business combination,
sale or other disposition of any material amount of assets, sale of shares
of capital stock, tender offer or exchange offer or similar transaction
involving the Company or any of its Subsidiaries (other than exclusively
related to the Excluded Assets, the Flexible Business or the Flexible
Shares) which (a) involves any party (or any affiliates or associates
thereof) (i) with whom the Company or its Representatives, had any
discussions with respect to any of the foregoing transactions, (ii) to whom
the Company or its Representatives, furnished information with respect to
or with a view toward any of the foregoing transactions, (iii) who had
submitted a proposal or expressed any interest, either to the Company, the
Company's Representatives, or publicly, in any of the foregoing
transactions (in each such case, after the date hereof and prior to the
termination of the Agreement) and (b) provides for direct or indirect
consideration for the Company Stock in excess of the Merger Consideration
(or in the case of a Third Party Acquisition for the whole Company,
including the Flexible Business, in excess of the Merger Consideration plus
the Redemption Consideration).
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Transactions: The transactions contemplated by this Agreement, including
the Merger, the distribution of the Flexible Shares, and those contemplated
by the Additional Agreements, but excluding any Permitted Transactions or
Permitted Restructuring.
Voting Debt: Bonds, debentures, notes or other indebtedness the holders
of which have the right to vote (or convertible or exchangeable into or
exercisable for securities having the right to vote) with the stockholders
of the Company or any of its Subsidiaries on any matter.
1.2 Additional Terms. Terms not set forth in Section 1.1, but otherwise
defined in the body of this Agreement, shall have the specific meanings
attributed to them in the text. Terms in the singular shall have the same
meanings when used in the plural and vice versa.
ARTICLE II
TERMS OF THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, the Company and Merger Sub shall consummate
the Merger in which (a) Merger Sub shall be merged into and with the Company
in accordance with the DGCL, (b) the separate existence of the Merger Sub
shall thereupon cease, (c) the Company shall be the survivor of the Merger
and, as the Surviving Company, shall continue its corporate existence under
the DGCL as a Subsidiary of Parent, retaining its corporate name, and its
other rights, privileges, immunities, powers and franchises, unaffected by the
Merger, and shall assume all the rights and obligations of Merger Sub. The
Merger shall have the effects set forth in the DGCL.
2.2 Effective Time. Subject to the terms and conditions of this Agreement,
the parties hereto shall prepare and execute a Certificate of Merger setting
forth the terms hereof. The Certificate of Merger shall be filed on the date
of Closing (or such other date as agreed by Parent and the Company) with the
Secretary of State of the State of Delaware in the manner provided in the DGCL
and the Merger shall be effective at the Effective Time.
2.3 Closing. The Closing of the Merger shall occur at the offices of Bryan
Cave LLP, 1200 Main Street, Suite 3500, Kansas City, MO 64105, commencing at
10:00 A.M., local time, on the third business day following the date on which
the last of the conditions set forth in Article IX hereof shall have been
fulfilled or waived, or at such other place, time and date as Parent and the
Company may agree.
2.4 Ancillary Agreements. To the extent that the Ancillary Agreements are
not attached as exhibits hereto as of the date hereof, Parent and the Company
shall each use their respective reasonable best efforts to negotiate and reach
agreement regarding the terms of each of the following Ancillary Agreements:
(a) Tax Procedures Agreement between the Surviving Company and the
Flexible Company substantially in the form of Exhibit 2.4(a) attached
hereto, to the allocation of past and future tax liabilities;
(b) Intellectual Property License Agreement between the Surviving Company
and the Flexible Company substantially in the form of Exhibit 2.4(b)
attached hereto, with respect to the interim use of certain shared
intellectual property by the Flexible Company; and
(c) Transitional Agreement between the Surviving Company and the Flexible
Company to be negotiated with respect to the provision of certain services
by the Surviving Company to the Flexible Company and/or the provision of
certain services by the Flexible Company to the Surviving Company.
Unless Parent otherwise consents in its sole discretion, each such Ancillary
Agreement, not attached as an Exhibit hereto, shall be entered into on an
arm's length basis, shall not extend for a duration in excess of six months
(other than the Tax Procedures Agreement) and will otherwise be on terms
reasonably satisfactory to Parent. In the event of any inconsistency between
the terms set forth in any of the Ancillary Agreements and the terms of this
Agreement, the terms of this Agreement shall govern. In the event the Flexible
Business is sold in one or more Permitted Transactions prior to the Closing,
if requested by the Flexible Buyer(s), Parent and the Company shall each use
their respective reasonable best efforts to negotiate and reach agreement
regarding the terms of agreements with respect to the matters addressed by the
Ancillary Agreements referred to in clauses (a) through (c) of this Section
2.4 with such Flexible Buyer.
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ARTICLE III
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING COMPANY
3.1 Certificate of Incorporation. At the Effective Time and in accordance
with the DGCL, and without any further action on the part of the Surviving
Company, Parent, or the Merger Sub, the Certificate of Incorporation of the
Merger Sub, as may be amended by the Certificate of Merger, shall become the
Certificate of Incorporation of the Surviving Company.
3.2 The Bylaws. At the Effective Time and without any further action on the
part of the Surviving Company, Parent, or the Merger Sub, the Bylaws of Merger
Sub shall be the Bylaws of the Surviving Company.
ARTICLE IV
DIRECTORS AND OFFICERS OF THE SURVIVING COMPANY
4.1 Directors. The directors of Merger Sub at the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Company until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Company's Certificate of Incorporation and Bylaws.
4.2 Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Company until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Company's Certificate of Incorporation and Bylaws.
ARTICLE V
MERGER CONSIDERATION; CONVERSION OR CANCELLATION
OF COMPANY SHARES IN THE MERGER
5.1 Merger Consideration. Subject to the provisions of this Agreement, at
the Effective Time, each Company Share, by virtue of the Merger and without
any action on the part of the holder thereof, other than (a) Company Shares
owned by Parent, Merger Sub, or any direct or indirect wholly owned Subsidiary
of Parent, (b) any shares of Company Stock owned by the Company or any of its
Subsidiaries, and (c) any Dissenting Shares, shall be converted into the right
to receive the Merger Consideration, without interest thereon, plus the
Redemption Consideration, upon surrender of the Certificate representing such
Company Share, in accordance with Section 5.3.
5.2 Cancellation of Company Shares.
(a) All Company Shares to be converted into the right to receive the Merger
Consideration, plus the Redemption Consideration, pursuant to Section 5.1
shall, by virtue of the Merger and without any action on the part of the
holders thereof, cease to be outstanding, be canceled and cease to exist, and
each holder of a Certificate shall thereafter cease to have any rights with
respect to such Company Shares, except the right to receive for each of the
Company Shares, upon the surrender of such Certificate in accordance with
Section 5.3, the Merger Consideration and the Redemption Consideration.
(b) At the Effective Time, each Company Share issued and outstanding and owned
by Parent, Merger Sub or any direct or indirect wholly owned Subsidiary of
Parent, and each share of Company Stock owned by the Company or any of its
Subsidiaries, immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, be canceled and cease to exist without payment of any
consideration therefor.
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(c) At the Effective Time, each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Merger Sub or the holder thereof,
be converted into shares of common stock of the Surviving Company pursuant to
the Certificate of Merger.
(d) Each Option shall be canceled and extinguished solely in consideration for
the cash and Flexible Shares payable pursuant to amendments of the Options
entered into pursuant to Section 8.15. No Options shall be exercisable for the
purchase of Company Stock after the Effective Time. Any rights to acquire
options to purchase Company Stock and any stock appreciation rights
outstanding immediately prior to the Effective Time shall be canceled and
extinguished without compensation therefor.
(e) The Option Plans and any other Stock Plan (or the applicable portions
thereof) shall be terminated (or deleted, as applicable) as of the Effective
Time, and the Company shall ensure that following the Effective Time no holder
of an Option or any participant in any Stock Plan shall have any right
thereunder to acquire any capital stock of the Company, Parent or the
Surviving Company. The Company will ensure that neither the Company nor any of
its Subsidiaries is or will be bound by any Options, other options, warrants,
rights or agreements which would entitle any Person, other than Parent or its
affiliates, to own any capital stock of the Surviving Company or any of its
Subsidiaries or to receive any payment in respect thereof. After the date of
this Agreement, no additional Options or stock appreciation rights shall be
granted under any Stock Plan, and no cash payments will be made to holders of
any such options or stock appreciation rights in respect thereof, except as
expressly contemplated in Section 5.2(d).
5.3 Payment for Company Shares. The manner of making payment for Company
Shares in the Merger shall be as follows:
(a) Concurrently with or prior to the Effective Time, a bank or trust
company located in the United States shall be designated by Parent and the
Company, subject to their mutual agreement, to act as paying/exchange agent
for the Merger Consideration and the Redemption Consideration (the "Paying
Agent") for purposes of making the cash payments and the distribution of
Flexible Shares contemplated hereby. At the Effective Time, Parent shall
make available to the Paying Agent the aggregate Merger Consideration, and
the Company shall make available to the Paying Agent, the aggregate
Redemption Consideration, payable pursuant to Section 5.1, which, in
aggregate, shall constitute the Merger Payment Fund. The cash portion of
the Merger Payment Fund shall be invested by the Paying Agent, as directed
by Parent, so long as such directions do not materially impair the rights
of holders of Company Shares, in direct obligations of the United States of
America, obligations for which the full faith and credit of the United
States of America is pledged to provide for the payment of principal and
interest, commercial paper rated the highest quality by Moody's Investors'
Services or Standard & Poor's Corporation, or certificates of deposit
issued by a commercial bank having at least $500,000,000 of assets; and any
net earnings with respect thereto shall be paid to Parent as and when
requested by Parent. The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in Section 5.3 out of the
Merger Payment Fund. At any time after the Effective Time, upon notice from
the Surviving Company that a stockholder has properly dissented, demanded
payment of the fair value of his Company Shares and otherwise properly
perfected his appraisal rights under Section 262 of the DGCL, the Paying
Agent shall promptly (i) repay to the Surviving Company from the Merger
Payment Fund an amount equal to the product of (A) the number of Dissenting
Shares (as herein defined) held by such stockholder and (B) $11.00 and (ii)
return to the Surviving Company that number of Flexible Shares equal to the
number of Dissenting Shares held by such stockholder divided by two. The
Merger Payment Fund shall not be used for any purpose other than as
described herein.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each holder of record of Company Shares (i) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Company Shares shall pass, only upon proper delivery of the
Certificates representing such Company Shares to the Paying Agent) and (ii)
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender of Certificates to the Paying Agent,
together with such
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letter of transmittal duly executed and any other required documents, the
holder of such Certificates shall be entitled to receive for each of the
Company Shares represented by such Certificates the Merger Consideration
and Redemption Consideration. Until so surrendered, such Certificates shall
represent solely the right to receive the Merger Consideration and
Redemption Consideration with respect to each of the Company Shares
represented thereby. No interest shall be paid or accrue on the cash
portion of the Merger Payment Fund payable upon surrender of the
Certificates. If any payment of the Merger Consideration or the Redemption
Consideration is to be made to a Person other than the one in whose name
the Certificate surrendered in exchange therefor is registered, it shall be
a condition of such payment that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
Person requesting such payment shall pay to the Paying Agent any applicable
transfer or other similar Taxes, or shall establish to the satisfaction of
the Paying Agent that any such Tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of Company Shares for any Merger
Consideration or the Redemption Consideration delivered to a public
official pursuant to applicable escheat Law.
(c) Any portion of the Merger Payment Fund (including any interest
thereon or earnings or profits with respect thereto, or Flexible Shares, if
any) which remains unclaimed by the former stockholders of the Company for
six months after the Effective Time (including any interest thereon or
earnings or profits with respect thereto) shall be delivered to the
Surviving Company, upon demand of Parent. Any former stockholders of the
Company shall thereafter look only to the Surviving Company for payment of
their claim for the Merger Consideration and Redemption Consideration for
the Company Shares but shall have no greater rights against the Surviving
Corporation, or Parent than may be accorded to general creditors of the
Surviving Corporation or Parent under applicable Law.
5.4 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, those Company Shares which immediately prior to the Effective Time
are Dissenting Shares shall not be converted into the right to receive the
Merger Consideration and Redemption Consideration as provided in Section 5.1
hereof, but the holders of Dissenting Shares shall be entitled to receive such
consideration as shall be determined pursuant to Section 262 of the DGCL;
provided, however, that, if any such holder shall have failed to perfect or
shall withdraw (with the written approval of the Surviving Corporation, if
such withdrawal is not tendered within 60 days after the Effective Time) or
lose his right to appraisal and payment in accordance with the DGCL, such
holder's shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration and
Redemption Consideration, without any interest thereon, as provided in Section
5.1 and such shares shall no longer be Dissenting Shares. The Company (and
after the Effective Time, the Surviving Corporation) shall give Parent and
Merger Sub (A) prompt notice of any written demands for appraisal, withdrawals
of demands for appraisal and any other related instruments received by the
Company or the Surviving Corporation, as the case may be, and (B) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company (and, after the Effective Time, the Surviving
Corporation) will not voluntarily make any payment with respect to any demands
for appraisals and will not, without the prior written consent of Parent,
settle or offer to settle any such demand.
5.5 Transfer of Company Shares After the Effective Time. No transfers of
Company Shares shall be made on the stock transfer books of the Company after
the close of business on the business day preceding the date of the Effective
Time.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
6.1 Capitalization
(a) The entire authorized capital stock of the Company consists of 20,000,000
shares of common stock, having a per share par value of $.10 per share. As of
the date hereof, (i) 11,078,232 shares of Company Stock are issued and
outstanding, (ii) no such shares are held in treasury and (iii) 239,606 shares
of Company Stock are reserved for issuance pursuant to outstanding Options. No
other shares of the capital stock of the Company are issued and outstanding or
reserved for issuance. All issued and outstanding shares of Company Stock are
duly authorized, validly issued and are fully paid and non-assessable and are
not subject to, nor were they issued in violation of, any pre-emptive rights.
Except as set forth on Schedule 6.1 to the Company Disclosure Letter, there
are not as of the date hereof, and there will not be at the Effective Time,
any stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or to which it is bound
relating to the voting of any shares of the capital stock of the Company.
Except as set forth on Schedule 6.1 to the Company Disclosure Letter, there
are no outstanding or authorized options, warrants, agreements, subscriptions,
calls, demands or rights of any character relating to the Company's capital
stock, whether or not issued, which the Company is a party to, including
without limitation, securities convertible into, exchangeable for or
evidencing the right to purchase any capital stock or other securities of the
Company. The Company has no authorized or outstanding Voting Debt.
(b) All of the outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable, are not subject to, nor were they issued in violation of, any
preemptive rights, and are owned, of record and beneficially, by the Company,
free and clear of all Liens whatsoever. No shares of capital stock of any of
the Company's Subsidiaries are reserved for issuance and there are no
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, rights of redemption, convertible or
exchangeable securities, or other commitments, contingent or otherwise,
relating to the capital stock of any Subsidiary, pursuant to which such
Subsidiary is or may become obligated to issue any shares of capital stock of
such Subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such Subsidiary, except
for any agreements with respect to the Flexible Company and the Permitted
Transactions. Other than as set forth on Schedule 6.1 to the Company
Disclosure Letter or otherwise restricted by the DGCL, there are no
restrictions of any kind which prevent the payment of dividends by any of the
Company's Subsidiaries. Except for the Subsidiaries listed on Schedule 6.1 to
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is subject to any obligation or requirement to provide funds for or to make
any investment (in the form of a loan, capital contribution or otherwise) to
or in any Person. The Company's Subsidiaries have no Voting Debt.
6.2 Corporate Organization, Qualification and Power. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and is duly
qualified or licensed to conduct its business, and to the extent such concept
is applicable, is in good standing in every other jurisdiction in which its
business is conducted, except where failure to be so qualified or licensed or
in good standing, individually or in aggregate, could not reasonably be
expected to have a Material Adverse Effect. Each of the Company and its
Subsidiaries has the corporate power to own or lease its respective properties
and to carry on its business as now being conducted, wherever located. The
Company's Subsidiaries are listed on Schedule 6.2 to the Company Disclosure
Letter, and, except as disclosed on Schedule 6.2 to the Company Disclosure
Letter, the Company owns no interest in any corporation, partnership,
proprietorship or any other business entity. The Company has heretofore made
available to Parent complete and correct copies of its Certificate of
Incorporation, as amended and Bylaws, as amended and the Articles of
Incorporation and Bylaws, or other comparable charter or organizational
documents, of its Subsidiaries, in each case as amended to the date of this
Agreement.
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6.3 Authorization of Agreement and Merger. The Company has the requisite
corporate power and authority to approve, authorize, execute and deliver this
Agreement and to consummate the Transactions, including the distribution of
the Flexible Shares (subject to the requisite approval of the Merger by
stockholders of the Company holding a majority of the outstanding voting stock
of the Company, pursuant to Section 251(c) of the DGCL). This Agreement, and
the consummation by the Company of the Transactions, including the
distribution of the Flexible Shares, have been duly and validly authorized by
the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than the requisite approval of the Merger
by the stockholders of the Company).
6.4 Enforceable Agreement. This Agreement has been duly and validly executed
and delivered by the Company and, assuming it constitutes the valid and
binding agreement of Parent and Merger Sub, constitutes a valid and binding
obligation of the Company, enforceable against the Company according to its
terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar Laws affecting the enforceability of
contractual obligations and creditor's rights generally and by the application
of equitable principles by courts of competent jurisdiction, sitting at law or
in equity.
6.5 No Conflicts, Violations, Breaches or Defaults. Except as set forth on
Schedule 6.5 to the Company Disclosure Letter, the execution and delivery of
this Agreement by the Company and its performance of its obligations
hereunder, including its execution, delivery and performance of any Additional
Agreements to which it is a party and the consummation of the Transactions,
(a) do not conflict with or result in any breach of any provision of the
Certificate of Incorporation, as amended or the Bylaws, as amended, of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries; (b) do not require any consent, approval, authorization or
permit of, or filing with, or notification to, any Governmental Authority,
except (i) in connection with the applicable requirements, if any, of HSR;
(ii) in connection with the applicable requirements, if any, of the Australian
Foreign Acquisitions and Takeovers Act or the Australian Trade Practices Act
of 1974, as amended; (iii) pursuant to the applicable requirements of the
Securities Act and the Exchange Act, and the rules and regulations promulgated
thereunder; (iv) the filing of the Certificate of Merger pursuant to the DGCL
and appropriate documents with the relevant authorities of other states in
which the Company is authorized to do business; (v) such filing or consent as
may be required by applicable state securities, or "blue sky" Laws; or (vi)
where the failure to obtain such consent, approval, authorization or permit,
or to make such filing or notification, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect or
materially adversely affect the ability of the Company to consummate the
Transactions; (c) except as individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or materially
adversely affect the ability of the Company to consummate the Transactions,
conflict with or contravene any provisions or result in a breach or violation
of, or constitute a default under, or result in (or create in any party the
right to cause) the acceleration of any performance or any increase in any
payment required by or the termination, suspension, modification or impairment
of, or result in the loss, revocation, impairment, suspension or forfeiture or
any rights of the Company or its Subsidiaries under, any mortgage, bond,
indenture, agreement, contract, license or other instrument or obligations to
which the Company and/or any of its Subsidiaries are subject or bound; (d) do
not conflict with, violate or contravene any Judgment or Law by which the
Company or any of its Subsidiaries is subject or bound; or (e) do not result
in the creation of any Lien on any of the assets of the Company or any of its
Subsidiaries, other than the Flexible Assets.
6.6 Company SEC Reports. Since January 1, 1993, the Company has filed all
forms, reports and documents with the SEC required to be filed by it pursuant
to the federal securities Laws, all of which complied as of their respective
dates in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder. The Company has, prior to the date of this Agreement, made
available to Parent true and complete copies of all Company SEC Reports. None
of the Company SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed, or the Company's
earnings release dated February 9, 1998, contained any untrue statement of a
material fact or omitted to state a 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.
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6.7 Financial Statements; Accounting Matters. The statements of financial
position and the related statements of revenues and expenses, stockholders'
equity and cash flows (including the related notes thereto) of the Company
included in the Company SEC Reports complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with prior periods (except as otherwise noted therein), and present fairly the
financial position of the Company as of their respective dates, and the
consolidated results of its operations and its cash flows for the periods
presented therein (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and except that the unaudited
interim financial statements do not contain all of the footnote disclosure
required by generally accepted accounting principles). The total amount of
indebtedness of the Company and its Subsidiaries for borrowed money, as of
February 27, 1998 was $86,550,000.
6.8 Absence of Certain Changes. Except as disclosed in the Company SEC
Reports, as contemplated in this Agreement, or as set forth on Schedule 6.8 to
the Company Disclosure Letter, since September 30, 1997 (a) there has not been
any material adverse change in the business, assets, liabilities, operations,
condition (financial or otherwise), results of operations or prospects of the
Company and its Subsidiaries, taken as a whole; (b) the businesses of the
Company and each of its Subsidiaries have been conducted only in the ordinary
course; (c) neither the Company nor any of its Subsidiaries (other than the
Flexible Company) has incurred any material liabilities (direct, contingent or
otherwise) or engaged in any material transaction or entered into any material
agreement, other than in the ordinary course of business; (d) the Company and
its Subsidiaries (other than the Flexible Company) have not increased the
compensation of any officer or granted any general salary or benefits increase
to their employees other than in the ordinary course of business; (e) neither
the Company nor any of its Subsidiaries (other than solely with respect to the
Flexible Business) has taken any action referred to in Section 8.1 hereof,
except as permitted thereby; (f) there has been no declaration, setting aside
or payment of any dividend or other distribution with respect to the Company
Stock; and (g) there has been no change by the Company in accounting
principles, practices or methods, except as may have been required by GAAP or
applicable rule or regulation.
6.9 Proxy Statement; S-4 Registration Statement. None of the information
included or incorporated by reference, or to be included or incorporated by
reference, in the Proxy Statement or the S-4 Registration Statement required
to be filed in connection with the Transactions (or any amendment or
supplement thereto) will (a) in the case of the Proxy Statement, at the time
of the mailing of the Proxy Statement and at the time of the Company
Stockholders Meeting, and (b) in the case of the S-4 Registration Statement,
at the time it becomes effective and at the Effective Time, 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 are made, not misleading. If at any time
prior to the Effective Time any event occurs with respect to the Company which
is required to be described in an amendment of, or a supplement to, the S-4
Registration Statement, the Company shall promptly notify Parent, file such
with the SEC and disseminate it to the Company's stockholders as required by
Law. If at any time prior to the Company Stockholders Meeting any event occurs
or the Company becomes aware of any event or fact which is required to be
described in an amendment of, or a supplement to, the Proxy Statement, the
Company shall promptly notify Parent, file such amendment or supplement with
the SEC and disseminate it to the Company's stockholders as required by Law.
Prior to its filing with the SEC, such amendment or supplement shall be
delivered to Parent and Merger Sub and their counsel and Parent and Merger Sub
shall have a reasonable opportunity to comment on such amendment or supplement
prior to such filing. The Proxy Statement and the S-4 Registration Statement
will comply as to form in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, respectively and the
rules and regulations thereunder. Notwithstanding the foregoing, no
representation or warranty is made with respect to any information with
respect to Parent, Merger Sub or their officers, directors or affiliates
provided in writing to the Company by Parent or Merger Sub expressly for
inclusion in the Proxy Statement or the S-4 Registration Statement.
6.10 Litigation. Except as disclosed in the Company SEC Reports or as set
forth on Schedule 6.10 to the Company Disclosure Letter, there is no action,
suit, claim, governmental investigation, arbitration or any
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administrative or other proceeding pending, or, to the Company's knowledge,
threatened, against the Company or any of its Subsidiaries which, if adversely
determined, individually or in the aggregate, might result in any Material
Adverse Effect or which challenge, or might prevent or materially delay, the
consummation of the Transactions. Except as disclosed in the Company SEC
Reports or as set forth on Schedule 6.10 to the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries is subject to any Judgment
entered in any lawsuit or proceeding which could be reasonably likely to have
a Material Adverse Effect or challenge, prevent or materially delay the
consummation of the Transactions.
6.11 Taxes. Except as set forth on Schedule 6.11 to the Company Disclosure
Letter:
(a) The Company and each of its Subsidiaries has (i) timely filed or
caused to be timely filed all Tax Returns in respect of all Taxes that are
required to be filed by or with respect to them through the date hereof and
shall prepare and file all such Tax Returns required to be filed after the
date hereof and on or before the Effective Time and (ii) paid, or caused to
be paid, all Taxes due and owing for the periods covered by such Tax
Returns and all Taxes, if any, required to be paid for which no return is
required, except in either case as accrued and adequately disclosed and
fully provided for on their respective books and records in accordance with
generally accepted accounting principals consistently applied by them
through all periods indicated. True copies of all federal, state, local and
foreign Tax Returns of the Company and/or each of its Subsidiaries relating
to each of the last three taxable years ended December 31, 1996 have been
delivered to Parent or made available for its review. The Company is not
being audited or examined by the Internal Revenue Service or any state,
local or foreign taxing jurisdiction, nor has the Company or any of its
Subsidiaries received any notices from any taxing authority relating to any
issue which could have a Material Adverse Effect on the Tax liability of
the Company or any of its Subsidiaries, and no agreements or consents
extending or waiving the period during which any Taxes may be assessed or
collected are now in force. As of the date hereof, no material adjustments
have been proposed by the Internal Revenue Service or by any other taxing
authority with respect to any open Tax years or Tax Returns.
(b) Neither the Company nor any of its Subsidiaries has been included in
any "consolidated," "unitary" or "combined" Tax Return provided for under
the Law of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes for any taxable period for which the statute
of limitations has not expired.
(c) All Taxes which the Company or any of its Subsidiaries is (or was)
required by Law to withhold or collect have been duly withheld or
collected, and have been timely paid, and in some cases over paid, to the
proper authorities to the extent due and payable.
(d) Neither the Company nor any of its Subsidiaries is a "United States
real property holding corporation" within the meaning of Section 897(c)(2)
of the Code.
(e) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between the Company, any of its Subsidiaries or any
predecessor or affiliate thereof and any other party under which Parent and
Merger Sub or the Company could be liable for any Taxes or other claims of
any party, other than as contemplated in the Tax Procedures Agreement,
attached hereto as Exhibit 2.4(a).
(f) Neither the Company nor any of its Subsidiaries has applied for, been
granted, or agreed to any accounting method change for which it will be
required after the Effective Time to take into account any adjustment under
Section 481 of the Code or any similar provision of the Code or the
corresponding tax Laws of any nation, state or locality.
(g) No election under Section 341(f) of the Code has been made or shall
be made prior to the Closing Date to treat the Company or any of its
Subsidiaries as a "consenting corporation," as defined in Section 341 of
the Code.
6.12 Employee Matters. Except as set forth on Schedule 6.12 to the Company
Disclosure Letter, with respect to the Company's business, excluding the
Flexible Business, (a) there are no collective bargaining
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agreements between the Company or any of its Subsidiaries and any bargaining
representative of the employees; and (b) there is not any existing, or to the
best knowledge of the Company, any threatened labor dispute regarding the
Company, any of its Subsidiaries (other than the Flexible Company), or their
respective businesses. The Company has furnished to Parent true and complete
copies of any and all of the employee benefit, fringe benefit and incentive
compensation plans, policies, funds, trusts, schemes, agreements or
arrangements of the Company and its Subsidiaries (other than the Flexible
Company) or to which the Company or any such Subsidiary contribute or have any
liability, all of which are set forth on Schedule 6.12 to the Company
Disclosure Letter (each an "employee plan" for purposes of this Section 6.12);
and except as set forth on Schedule 6.12 to the Company Disclosure Letter,
with respect to any assets allocated to any such employee plan, (i) there are
no benefit commitments exceeding any assets allocated thereto, (ii) to the
best knowledge of the Company, there have been no prohibited transactions
under Section 406 of ERISA or Section 4975 of the Code, (iii) to the best
knowledge of the Company, there have been no actions, suits, grievances or
other manner of litigation or claim with respect to any such employee plan
which are pending, threatened or commenced; (iv) any such employee plan and/or
related trust which is intended to be qualified or exempt under Section 401(a)
or 501(a) of the Code has received a favorable determination letter from the
Internal Revenue Service and, to the Company's knowledge, nothing has occurred
that could reasonably be expected to adversely affect any such determination,
(v) neither the Company nor any of its Subsidiaries (other than the Flexible
Company) would be subject to any withdrawal liability under Part 1 of Subtitle
E of Title IV of ERISA if, as of the close of the most recent fiscal year of
any such employee plan which is a "multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA) ended prior to the date hereof, the Company or
any such Subsidiary were to engage in a withdrawal from any such employee
plan, and (vi) to the best knowledge of the Company, no event has occurred and
no conditions exist that could reasonably be expected to materially increase
the level of contributions required to be paid by the Company or any such
Subsidiary to any such employee plan which is subject to Title IV of ERISA
from the level of contributions made for the Company or such Subsidiary's most
recently ended fiscal year. Except as set forth on Schedule 6.12 to the
Company Disclosure Letter or pursuant to the Option Plans or other Options,
there is no contract, arrangement or employee plan covering any employee of
the Company which (either alone or upon the occurrence of any additional or
subsequent event) could give rise to the payment of any amount which would
constitute an "excess parachute payment" as defined in Section 280G of the
Code. Except as set forth in Schedule 6.12, or pursuant to the Option Plans or
the Options, the execution of this Agreement and the consummation of the
Transactions will not (A) be a trigger event under any employee plan that will
result in any payment (whether severance pay or otherwise) becoming due to any
employee, officer, director, shareholder, or contractor of the Company, or (B)
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any employee, former employee, officer,
director, shareholder or contractor of the Company or any of its Subsidiaries
under any employee plan, or any policy, arrangement, statement, commitment or
agreement. Each of the Company and its Subsidiaries has, in all material
respects, complied with all applicable Laws (including notice and filing
requirements thereunder) relating to the employment of labor and the employee
plans, including those relating to wages, collective bargaining, equal
employment opportunity, ERISA, the Code, Occupational Safety and Health Act of
1970, as amended, Worker Adjustment and Retraining Notification Act, the
Immigration Reform and Control Act of 1986, the Americans with Disabilities
Act and the National Labor Relations Act. As of the Effective Time, each of
the Company and its Subsidiaries will have paid all amounts due and owing to
its employees, including wages, salary, bonuses or any other accrued
compensation and under each employee plan and any agreement or Law applicable
to any such employee plan. Except as set forth on Schedule 6.12 to the Company
Disclosure Letter, there are no written agreements or oral arrangements which
may constitute employment contracts between the Company or any of its
Subsidiaries and independent contractors, employees and agents who are
employed or engaged in the management or operation of the Company and any of
its Subsidiaries.
6.13 Environmental Laws and Regulations. Except as set forth on Schedule
6.13 to the Company Disclosure Letter, the Company and each of its
Subsidiaries, (a) are in material compliance with environmental Laws and (b)
have not received written notice of, nor, to the knowledge of the Company, is
any of them the subject of an Environmental Claim, and (c) there are no facts,
circumstances or conditions concerning the business or operations of the
Company or any of its Subsidiaries or any real property at any time owned or
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operated by the Company or any of its Subsidiaries that could reasonably be
expected to give rise to an Environmental Claim against the Company or any of
its Subsidiaries or any such currently owned real property.
6.14 Compliance with Applicable Laws. The Company, including its
Subsidiaries, (a) holds all Company Permits except where the failure to so
hold, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect; (b) is in compliance with the terms of the
Company Permits, except where the failure so to comply would not, individually
or in the aggregate, have a Material Adverse Effect or could reasonably be
expected to materially adversely affect the ability of the Company to
consummate the Transactions; and (c) except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, the businesses of the
Company and its Subsidiaries are being conducted in compliance with all
applicable Laws, except for possible non-compliance which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect or which could not reasonably be expected to materially adversely
affect the ability of the Company to consummate the Transactions.
6.15 Title to Properties.
(a) With respect to each parcel of real property owned in fee, leased or
subleased by the Company, which is not an Excluded Asset, Schedule 6.15 to the
Company Disclosure Letter sets forth a complete and accurate list setting
forth its address and, in the case of owned real property, its legal
description. Except as disclosed in the Company SEC Reports or as set forth on
Schedule 6.15 to the Company Disclosure Letter, each of the Company and each
of its Subsidiaries currently has and, as of the Closing, with the exception
of any Excluded Assets sold pursuant to Permitted Transactions or other assets
sold or disposed of pursuant to Sections 8.1 or 8.3, prior thereto, will have,
good and marketable title to, or valid leasehold interests in, all their
respective properties and assets, except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, in the
aggregate, do not materially interfere with its ability to conduct its
business as currently conducted or materially impair the value of the
properties. All such assets and properties, other than assets and properties
in which the Company or any of its Subsidiaries has leasehold interests, are
free and clear of all Liens other than those set forth on Schedule 6.15 to the
Company Disclosure Letter, and except for Liens that, in the aggregate, do not
and will not materially interfere with the ability of the Company and its
Subsidiaries to conduct their businesses as currently conducted or materially
impair the value of the properties.
(b) Except as disclosed in the Company SEC Reports or as set forth on Schedule
6.15 to the Company Disclosure Letter or as to leases with respect to Excluded
Assets, each of the Company and its Subsidiaries has complied in all material
respects with the terms of all leases to which it is a party, and all such
leases are in full force and effect; all rents and additional rents due to
date in respect to all such leases have been paid; neither the Company nor any
Subsidiary has received notice that it is in default under any lease; and, to
the knowledge of the Company, there exists no event, occurrence, condition, or
act (including consummation of this transaction) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default by the Company or any Subsidiary under any such leases.
The Company has made available to Parent true and complete copies of all the
such material leases. Each of the Company and its Subsidiaries enjoys peaceful
and undisturbed possession under all such material leases.
6.16 Intellectual Property. Schedule 6.16 to the Company Disclosure Letter
lists each foreign and domestic patent, trademark and service mark, whether
patented, registered or unregistered and all applications for the same and
each registered or material unregistered copyright owned by or licensed to the
Company or any of its Subsidiaries, except those which constitute Excluded
Assets. Each registered or patented item listed on Schedule 6.16 to the
Company Disclosure Letter as owned by Company or any of its Subsidiaries
either has been duly patented, registered with, filed in, or issued by the
appropriate domestic or foreign Governmental Authority agency and each such
patent, registration, filing and issuance remains in full force and effect. No
Intellectual Property Rights other than the Company Intellectual Property
Rights are required by each of the Company and each of its Subsidiaries to
conduct, and to continue to conduct, their respective businesses (other than
the Flexible Business) as currently conducted in all material respects. Except
as disclosed on Schedule 6.16 to the Company Disclosure Letter, each of the
Company and each of its Subsidiaries owns free from any Liens and has good
marketable title to the Company Intellectual Property Rights and the
consummation of the Transactions will not alter or impair the Company's or its
Subsidiaries rights in the Company's Intellectual
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Property Rights in any respect. Except as set forth on Schedule 6.16 to the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries has
received any written notice from any other Person pertaining to or challenging
the right of the Company or any of its Subsidiaries to use any of the Company
Intellectual Property Rights or alleging that the Company or its Subsidiaries
are infringing, will infringe or have infringed in the past the Intellectual
Property Rights of another Person nor, to the knowledge of the Company, do
grounds for such a claim exist. No claims are pending by any Person with
respect to the ownership, validity, enforceability or use of any of the
Company Intellectual Property Rights or challenging or questioning the
validity or effectiveness of any of the foregoing. Except as set forth on
Schedule 6.16 to the Company Disclosure Letter, to the knowledge of the
Company, neither the Company nor any or its Subsidiaries has made any claim
nor do grounds exist to support a claim of a violation or infringement by
others of its rights to or in connection with the Company Intellectual
Property Rights.
6.17 Insurance. The Company and its Subsidiaries have obtained and
maintained in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and
covering such risks, including fire and other risks insured against by
extended coverage, as is reasonably prudent, and each has maintained in full
force and effect public liability insurance, insurance against claims for
personal injury or death or property damage occurring in connection with the
activities of the Company or its Subsidiaries or any properties owned,
occupied or controlled by the Company or its Subsidiaries, as is reasonably
prudent.
6.18 DGCL Section 203. On or before the date hereof, the Board of Directors
of the Company has approved the Merger, this Agreement, the Transactions and
the Irrevocable Proxies, and such approval is sufficient to render
inapplicable to the Merger and this Agreement, the other Transactions, and the
Irrevocable Proxies the provisions of Section 203 of the DGCL.
6.19 Material Contracts. Except as set forth on Schedule 6.19 to the Company
Disclosure Letter or identified in SEC Reports, neither the Company nor any of
its Subsidiaries (other than the Flexible Company) has or is bound by:
(a) any agreement, contract or commitment that involves the performance
of services by it of an amount or value (as measured by the revenue derived
therefrom during 1997) in excess of $500,000 annually, unless terminable by
the Company on not more than 90 days notice;
(b) any agreement, contract or commitment to be performed relating to
capital expenditures in excess of $200,000 in any calendar year, or in the
aggregate require expenditures in excess of $500,000;
(c) any other material agreement, contract or commitment, not entered
into in the ordinary course of business;
(d) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of its capital stock;
(e) any agreement, indenture or instrument relating to indebtedness for
borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business, intercompany indebtedness and
leases for telephones, copy machines, facsimile machines and other office
equipment);
(f) any loan or advance to (other than advances to employees in the
ordinary course of business in amounts of $10,000 or less to any individual
and $50,000 in the aggregate), or investment in (other than investments in
Subsidiaries), any Person, or any agreement, contract or commitment
relating to the making of any such loan, advance or investment or any
agreement, contract or commitment involving a sharing of profits (except
for bonus arrangements with employees entered into in the ordinary course
of business consistent with past practice);
(g) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than in the ordinary course
of business and other than with respect to any indebtedness or obligation
of the Company or any of its Subsidiaries);
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(h) any management service, consulting or any other similar type of
contract (other than contingent fee agreements with collection attorneys),
involving payments of more than $50,000 annually, unless terminable by the
Company on not more than 90 days notice;
(i) any agreement, contract or commitment limiting the ability of the
Company or any of its Subsidiaries (other than the Flexible Company) to
engage in any line of business or to compete with any Person (other than
with respect to the Flexible Business);
(j) any warranty, guaranty or other similar undertaking with respect to a
contractual performance extended by the Company or any of its Subsidiaries,
other than in the ordinary course of business; or
(k) any material amendment, modification or supplement in respect of any
of the foregoing.
Except as otherwise identified on Schedule 6.19 to the Company Disclosure
Letter, each contract or agreement set forth on Schedule 6.19 to the Company
Disclosure Letter is in full force and effect and there exists no default or
event of default or event, occurrence, condition or act on the part of the
Company or any Subsidiary or, to the knowledge of the Company, on the part of
any other Person which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default or event of
default thereunder, except for such default or event of default which could
not reasonably be likely to result in a Material Adverse Effect.
6.20 Authorization of Flexible Shares. Prior to the Effective Time, if the
Company has not entered into a Permitted Transaction, the Company and the
Flexible Company will have taken all necessary action to permit the issuance
of the Flexible Shares required to be issued pursuant to Article V. Flexible
Shares issued pursuant to Article V will, when issued, be validly issued,
fully paid and nonassessable and no Person will have any preemptive right of
subscription or purchase in respect thereof. The Flexible Shares will, when
issued, be registered under the Securities Act and the Exchange Act and
registered or exempt from registration under any applicable state securities
Laws.
6.21 Broker's Fees. Except for the fees and expenses payable to Goldman,
Sachs & Co. and George K. Baum & Co., the Company's financial advisors, which
are reflected in their agreements with the Company, true and correct copies of
which have been furnished to Parent, the Company has not employed any
investment bank, broker, finder, consultant or other intermediary, which would
be entitled to any fee or commission from the Company in connection with the
Transactions.
6.22 Opinions of Financial Advisors. The Board of Directors of the Company
has received the opinion of Goldman, Sachs & Co., the Company's financial
advisor, to the effect that the Merger Consideration to be received by the
holders, other than Parent, Merger Sub, the Company or any of their respective
Subsidiaries, of Company Shares pursuant to the Merger is fair to such holders
from a financial point of view.
6.23 Liabilities. Except as set forth on Schedule 8.1(h), neither the
Company nor any of its Subsidiaries has any material claims, liabilities or
indebtedness, contingent or otherwise, outstanding except (i) as set forth in
the consolidated balance sheet of the Company as of September 30, 1997, or
referred to in the footnotes thereto, or (ii) for liabilities incurred
subsequent to September 30, 1997 in the ordinary course of business not
involving borrowings by the Company or any of its Subsidiaries, or (iii) as
otherwise disclosed in the Company SEC Reports.
6.24 Sufficiency of Assets. As of the Effective Time, the assets of the
Company and its Subsidiaries (other than the Flexible Company) will constitute
all of the assets necessary for conducting the business of the Company and its
Subsidiaries (other than the Flexible Business) as presently conducted and
will not include any of the Excluded Assets or Excluded Liabilities.
6.25 Solvency of the Flexible Company. As of the Effective Time, in the
event that the Flexible Shares are being distributed to the Company's
stockholders, the Flexible Company will not be insolvent and will not be
rendered insolvent by the distribution of the Flexible Shares, will not be
left with unreasonably small capital
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with which to engage in its business and will not have incurred debts beyond
its ability to pay such debts as they mature and become due.
6.26 Flexible Company. Attached as Schedule 6.26 to the Company Disclosure
Letter is a pro forma balance sheet (the "Flexible Balance Sheet") of the
Flexible Company as of December 31, 1997 assuming that all of the Excluded
Assets and the Excluded Liabilities as of such date had been transferred to
the Flexible Company. The Flexible Balance Sheet was prepared from the books
and records of the Company and is subject to further allocations, adjustments
and reclassifications, which will not have a Material Adverse Effect on the
financial position of the Company (absent the Excluded Assets and Excluded
Liabilities or the Flexible Company). At the Effective Time, the Flexible
Company will only consist of the Excluded Assets and the Excluded Liabilities
determined on a basis consistent with the Flexible Balance Sheet, after audit
and prepared in accordance with generally accepted accounting principles.
6.27 Venture Packaging. Venture Packaging, Inc. does not engage in any
business or conduct any operations. Its only assets are Excluded Assets.
6.28 Permitted Asset Sale. The Company currently expects to consummate the
sale of all right, title and interest in the real property located at 6443 E.
Slauson Avenue, Los Angeles, California to Poly Food Packaging Co., Inc., for
the amount of $4,850,000 (before taxes and expenses of sale).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows:
7.1 Corporate Organization, Qualification and Power. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the Laws of its respective jurisdiction of incorporation and is
qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by
it require such qualification, except where the failure to so qualify or be in
such good standing, individually or in the aggregate, could not reasonably be
expected to materially adversely affect the ability of Parent or Merger Sub to
consummate the Transactions.
7.2 Authorization of Agreement and Merger. Each of Parent and Merger Sub has
the requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the Transactions. This Agreement, and
the consummation by Parent and Merger Sub of the Merger and the other
Transactions have been duly and validly authorized by the respective Boards of
Directors of Parent and Merger Sub and the sole stockholder of Merger Sub and
no other corporate proceedings on the part of Parent and Merger Sub are
necessary to authorize this Agreement or to consummate the Transactions.
7.3 Enforceable Agreement. This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and, assuming it constitutes the valid
and binding agreement of the Company, constitutes a valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of them
according to its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws affecting the
enforceability of contractual obligations and creditor's rights generally and
by the application of equitable principles by courts of competent
jurisdiction, sitting at law or in equity.
7.4 No Conflicts, Violations, Breaches or Defaults. Execution and delivery
of this Agreement by Parent and its performance of the obligations hereunder,
including its execution, delivery and performance of any Additional Agreements
to which it is a party and the consummation of the Transactions, (a) do not
conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws (or comparable chart or organizational documents) of
Parent and Merger Sub; (b) do not require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Authority,
except (i) in connection with the
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applicable requirements, if any, of the HSR; (ii) in connection with the
applicable requirements, if any, of the Australian Foreign Acquisitions and
Takeovers Act or the Australian Trade Practices Act of 1974, as amended; (iii)
pursuant to the applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder; (iv) the filing of
the Certificate of Merger pursuant to the DGCL; (v) such filing or consent as
may be required by applicable state securities, or "blue sky" Laws; or (vi)
such filings, consents, approvals, orders, registrations, declarations and
filings as may be required under the Laws of any foreign county in which
Parent or Merger Sub conducts any business or owns any assets, where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, individually or in the aggregate could not
reasonably be expected to materially adversely affect the ability of Parent or
Merger Sub to consummate the Transactions; (c) except as, individually or in
the aggregate, could not reasonably be expected to materially adversely affect
the ability of Parent or Merger Sub to consummate the Transactions, conflict
with or contravene any provisions or result in a breach or violation of, or
constitute a default under, or result in (or create in any party the right to
cause) the acceleration of any performance or any increase in any payment
required by or the termination, suspension, modification or impairment of, or
result in the loss, revocation, impairment, suspension or forfeiture or any
rights of Parent or Merger Sub under any mortgage, bond, indenture, agreement,
contract, license or other instrument or obligations to which Parent or its
Subsidiaries is subject or bound; or (d) do not conflict with, violate or
contravene any Judgment or Law by which Parent or Merger Sub is subject or
bound.
7.5 Proxy Statement; S-4 Registration Statement. None of the information
supplied by Parent or Merger Sub in writing expressly for inclusion or
incorporation by reference in the Proxy Statement or the S-4 Registration
Statement required to be filed in connection with the Transactions (or any
amendment or supplement thereto) will (a) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
Company Stockholders Meeting, and (b) in the case of the S-4 Registration
Statement, at the time it becomes effective and at the Effective Time, 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 are made, not
misleading. If at any time prior to the Effective Time, Parent or Merger Sub
obtains actual knowledge of any event which is required to be described in an
amendment of, or a supplement to the S-4 Registration Statement, Parent shall
promptly notify the Company. If at any time prior to the Company Stockholders
Meeting Parent or Merger Sub obtains actual knowledge of any event which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement, Parent shall promptly notify the Company.
7.6 Financing. As of Closing Date, Parent and/or Merger Sub will have funds
in place, which, in the aggregate will be sufficient to enable Merger Sub to
consummate the Transactions.
7.7 Broker's Fees. Except for the fees and expenses payable to Salomon Smith
Barney, Parent's financial advisor, which are reflected in its agreement with
Parent, Parent has not employed any investment bank, broker, finder,
consultant or other intermediary, which would be entitled to any fee or
commission from Parent in connection with the Transactions.
7.8 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the Transactions and has not engaged in any business
activities or conducted any operations other than in connection with the
Transactions.
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ARTICLE VIII
CONDUCT PENDING THE CLOSING AND COVENANTS
8.1 Conduct of Business by Company. Except as contemplated by Section 8.16,
the Company covenants and agrees that prior to the Effective Time, unless
Parent agrees in writing or as otherwise contemplated by this Agreement, it
will conduct its business and day to day operations (including those of any
Subsidiaries) in the ordinary and usual course of business, consistent with
its past custom and practice, and will use its reasonable best efforts to
preserve intact its business organization and goodwill, keep in full force and
effect all material rights, licenses, permits and franchises relating to such
business, keep available the services of its officers and key employees and
maintain satisfactory relationships with suppliers, customers and others
having business relationships with it, except with respect to dispositions of
any of the foregoing pursuant to the Company's limited right to engage in sale
transactions, as set forth in Section 8.3. The Company specifically agrees
that, prior to the Effective Time, unless the Parent otherwise agrees in
writing or as otherwise contemplated by this Agreement, including the
Permitted Restructuring and/or any Permitted Transactions, neither the
Company, nor any of the Company's Subsidiaries, will:
(a) except pursuant to the Option Plans or the other obligations set
forth on Schedule 6.1 to the Company Disclosure Letter, issue, deliver,
sell or dispose of, pledge or otherwise encumber (i) any additional shares
of capital stock of any class, or any securities or rights convertible
into, exchangeable for or creating the right to subscribe for any share of
capital stock, or any rights, warrants, options, calls, or any other
agreement of any kind to purchase or acquire any share of capital stock or
such securities, (ii) any securities convertible into exchangeable for, in
respect of, or in substitution for Company Stock currently outstanding, or
(iii) any Voting Debt;
(b) except pursuant to existing employee benefit plans or the other
obligations set forth on Schedule 6.1 to the Company Disclosure Letter,
redeem, purchase or otherwise acquire any of its outstanding capital stock;
(c) split, combine, subdivide or reclassify any share of its capital
stock, or declare, set aside or pay any dividend, or make any distribution,
on its capital stock (except for dividends by a wholly owned Subsidiary);
(d) amend its Certificate of Incorporation or Bylaws;
(e) adopt a plan of liquidation, dissolution, merger (other than the
Merger), consolidation, restructuring, or other reorganization of the
Company, or any Subsidiary, or alter in any manner the corporate structure
or ownership of any Subsidiary, except pursuant to the Permitted
Restructuring, as set forth on Schedule 8.1(e);
(f) make any acquisition of any corporation, partnership or business,
through merger, consolidation, acquisition of stock or assets or otherwise;
(g) (i) except in the ordinary course of business, consistent with past
practice, incur or modify or amend any debt for borrowed money or guarantee
any such debt or encumber any asset in connection with any such debt, issue
any debt securities, or (ii) make any loans, advances or capital
contributions to, or investments in, any other Person, other than a wholly
owned Subsidiary;
(h) except as set forth on Schedule 8.1(h), (i) enter into any contract
or commitment with respect to capital expenditures in excess of $200,000,
individually, or $500,000, in the aggregate; or (ii) except in the ordinary
course of business, enter into, amend, modify, supplement or cancel any
other material contract;
(i) take any action which would render, or which reasonably may be
expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at the Effective Time;
(j) acquire a material amount of assets or securities or release or
relinquish any material contract rights;
(k) except as set forth on Schedule 8.1(h), transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of, encumber or subject to any
lien, any assets, that are material to the Company and its Subsidiaries,
taken as a whole;
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(l) agree to the settlement of any claim or litigation, that is material
to the Company and its Subsidiaries, taken as a whole;
(m) make any Tax election or settle or compromise any Tax liability, that
is material to the Company and its Subsidiaries, taken as a whole; or
(n) authorize, propose or announce an intention to do any of the
foregoing, or enter into any contract or agreement to do any of the
foregoing.
8.2 Conduct of the Company as to Employee Matters. The Company specifically
agrees that with respect to any employee, officer or director, who is not as
of the date hereof, or will not be as of the Effective Time, employed
exclusively by the Flexible Company, unless Parent otherwise agrees in writing
or as otherwise contemplated by this Agreement, prior to the Effective Time
the Company shall not (a) grant any increase in salary or other compensation,
including bonuses, to any such director, officer or key employee, or grant a
general wage increase, except in the ordinary course of business, in
accordance with the Company's past practices; (b) grant or increase any
severance or termination pay or pension rights to any such employee, officer
or director of the Company not required by an existing plan or agreement to
which the Company is a party; (c) become obligated under any new pension plan,
welfare plan, employee benefit plan, severance plan, benefit arrangement or
similar plan or arrangement, which is not in existence as of the date hereof,
or amend any such existing plan or arrangement in a manner which would have
the effect of materially increasing any benefits thereunder; or (d) enter into
or negotiate any renewal, extension or any other matter with respect to any
collective bargaining agreement or employment agreement.
8.3 Sale of Certain Assets. On or prior to the Closing Date, the Company may
enter into and consummate agreements with respect to the sale or other
disposition of the assets listed on Schedule 8.3, but only in conformity with
the conditions in such Schedule, or with respect to a Permitted Transaction,
provided that all Excluded Assets must be sold and all Excluded Liabilities
must be assumed in the event of a Permitted Transaction. Any agreement or
agreements with respect to Permitted Transactions (and the assumption of any
such Excluded Liabilities) shall be reasonably satisfactory to Parent in all
respects and shall not be entered into without Parent's prior written consent
after the date the Proxy Statement is mailed to the Company's stockholders.
Without limiting the generality of the foregoing:
(a) to the extent any negotiations in connection with any Permitted
Transaction involve the disclosure of any confidential information
regarding the Company's business or its assets or liabilities (other than
those exclusively related to the Flexible Business), the Company shall
obtain confidentiality agreements with respect to such information, in form
and substance similar to the Confidentiality Agreement;
(b) except with respect to (i) any representations, warranties or
covenants with respect to Taxes or liabilities therefore incurred prior to
the closing of a Permitted Transaction, (ii) covenants to take supplemental
or confirmatory actions subsequent to the closing of a Permitted
Transaction that may be required in order to fully consummate or evidence
the Permitted Transaction, (iii) covenants to indemnify the Flexible
Company or the Flexible Buyer against liabilities of the Company that are
not Excluded Liabilities, and (iv) the indemnities referred to in clause
(c) below, all representations, warranties and covenants of the Company,
and/or its Subsidiaries contained in any agreement for the sale of Excluded
Assets shall expire at the closing of each Permitted Transaction, and the
recourse for a breach prior to the closing of a Permitted Transaction of
any such representation, warranty or covenant shall be limited to the
Flexible Buyer's election to terminate the agreement; and
(c) any agreement for any Permitted Transaction shall provide for the
assumption of all Excluded Liabilities directly related to the Excluded
Assets sold thereunder and shall provide for such indemnities in favor of
Parent, Merger Sub and the Surviving Company in respect of such Excluded
Liabilities as Parent shall reasonably request.
8.4 Conduct of Business of Merger Sub. During the period of time from the
date of this Agreement to the Effective Time, Merger Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
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8.5 Acquisition Proposals.
(a) The Company and its affiliates and each of their respective
Representatives shall immediately cease any discussions or negotiations with
any other parties that may be ongoing with respect to any Acquisition
Proposal. Neither the Company nor any of its affiliates, shall, directly or
indirectly, take (and the Company shall not authorize or permit its or its
Representatives or affiliates, to so take) any action to (i) encourage,
solicit or initiate the making of any Acquisition Proposal, (ii) enter into
any agreement with respect to any Acquisition Proposal or (iii) participate in
any way in discussions or negotiations with, or, furnish or disclose any
information to, any Person (other than Parent or Merger Sub) in connection
with, or take any other action to facilitate any inquiries or the making of
any proposal (including without limitation taking any action that would make
Section 203 of the DGCL inapplicable to an Acquisition Proposal, unless such
Acquisition Proposal has been determined to be a Superior Proposal and this
Agreement has been terminated in compliance with its terms) that constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal, provided,
however, that the Company, in response to an unsolicited Acquisition Proposal
and in compliance with its obligations under Section 8.5(b) hereof, may
participate in discussions or negotiations with or furnish information to any
third party which proposes a transaction which the Board of Directors of the
Company reasonably determines is likely to result in a Superior Proposal if
the Board of Directors believes (based upon the advice of independent outside
counsel) that failing to take such action would constitute a breach of its
fiduciary duties under applicable Law. In addition, neither the Board of
Directors of the Company nor any committee thereof shall (A) withdraw or
modify, or propose to with or modify, in a manner adverse to Parent or Merger
Sub the approval and recommendation of the Merger and this Agreement in
connection with an Acquisition Proposal or (B) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, provided that the
Company may recommend to its stockholders an Acquisition Proposal, and in
connection therewith withdraw or modify its approval or recommendation of the
Merger and this Agreement, if (I) the Board of Directors of the Company has
determined that the Acquisition Proposal is a Superior Proposal, (II) all the
conditions to the Company's right to terminate this Agreement in accordance
with Section 10.1(b)(iii) have been satisfied (including the expiration of the
five day period and the payment of the amounts required pursuant to Section
11.1(b)), and (III) simultaneously with such withdrawal, modification or
recommendation, this Agreement is terminated in accordance with Section
10.1(b)(iii). Any actions permitted under, and taken in compliance with, this
Section 8.5 shall not be deemed a breach of any other covenant or agreement of
such party contained in this Agreement.
(b) In addition to the obligations of the Company set forth in Section 8.5(a),
on the date of receipt thereof, the Company shall advise Parent of any request
for information or of any Acquisition Proposal, or any inquiry or proposal
with respect to any Acquisition Proposal, the material terms and conditions of
such request or takeover proposal, and the identity of the Person making any
such takeover proposal or inquiry. The Company will keep Parent fully informed
of the status and details (including amendments or proposed amendments) of any
such request, takeover proposal or inquiry and keep Parent fully informed as
to the details of any information requested of or provided by, the Company and
as to the details of all discussions or negotiations with respect to any such
request, takeover proposal or inquiry.
(c) Immediately following the date hereof, the Company will cause its
financial adviser to request each Person which has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
the Company or any portion thereof (other than any Person who has advised the
Company that it remains interested in pursuing only a Permitted Transaction)
to return all confidential information heretofore furnished to such Person by
or on behalf of the Company.
8.6 Stockholders' Approval; Proxy Statement.
(a) The Company, acting through its Board of Directors, shall, in accordance
with applicable Law, duly call, convene and hold the Company Stockholders
Meeting for the purpose of voting upon this Agreement and the Merger and the
Company agrees that this Agreement and the Merger shall be submitted at the
Company Stockholders Meeting. Subject to Section 8.5 of this Agreement, the
Company agrees that it shall use its reasonable best efforts to solicit from
its stockholders proxies, and shall take all other action necessary and
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advisable, to secure the vote of its stockholders required by applicable Law
to obtain the approval of this Agreement and the Merger and will include in
the Proxy Statement the recommendation of its Board of Directors that holders
of Common Stock approve and adopt this Agreement and approve the Merger.
Parent will cause all shares of Common Stock owned by Parent and its
Subsidiaries to be voted in favor of the Merger. The Company will not, without
Parent's prior written consent, include a fairness opinion from any Person
other than Goldman, Sachs & Co. in the Proxy Statement unless it is an opinion
of a nationally recognized investment bank of a similar ranking.
(b) As promptly as practicable, the Company will prepare and file a
preliminary Proxy Statement/S-4 Registration Statement with the SEC and will
use its best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement/S-4 Registration Statement (including, without limitation,
financial statements and supporting schedules and certificates and reports of
independent public accountants). The Company will cause the definitive Proxy
Statement/S-4 Registration Statement to be mailed to the stockholders of the
Company and, if necessary, after the definitive Proxy Statement/S-4
Registration Statement shall have been so mailed, promptly circulate amended,
supplemental or supplemented proxy material and, if required in connection
therewith, resolicit proxies. The Company will use all reasonable efforts to
have or cause the S-4 Registration Statement declared effective as promptly as
practicable including, without limitation, causing its accountants to deliver
necessary or required instruments such as reports, opinions, "comfort
letters," and certificates, and will take any other action reasonably required
or necessary to be taken under federal or state securities Laws or otherwise
in connection with the registration process.
(c) The Company shall use reasonable efforts to obtain, prior to the effective
date of the S-4 Registration Statement, all necessary state securities Laws or
"blue sky" permits and approvals required to carry out the Transactions.
8.7 Reasonable Best Efforts. Subject to the terms and conditions herein,
each of the parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things and
make all filings necessary, proper or advisable under applicable Laws to
consummate and make effective the Transactions, including using its reasonable
best efforts to obtain all necessary or appropriate waivers, consents and
approvals, to effect all necessary registrations, filings and submissions,
including, but not limited to, (i) filings under the HSR and any other
submissions requested by any Governmental Authority (ii) filings under the
Australian Foreign Acquisitions and Takeovers Act or the Australian Trade
Practices Act of 1974, as amended and (iii) required approvals under the
applicable state Laws, to obtain the requisite approvals of the stockholders
of the Company, and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible),
and to fulfill the other conditions to the Transactions; provided, however,
that no loan agreement or contract for borrowed money shall be repaid (except
as currently required by its terms or from the proceeds of any Permitted
Transaction), in whole or in part, and no contract shall be amended to
increase the amount payable thereunder or otherwise to be more burdensome to
the Company or any of its Subsidiaries in order to obtain any such consent,
approval or authorization without first obtaining the written approval of
Parent.
8.8 Notification of Certain Matters. The Company shall give prompt notice to
Parent of: (a) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by the Company or any of its Subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any material contract to
which the Company or any of its Subsidiaries is a party or is subject; and (b)
any Material Adverse Effect or the occurrence of any event which is reasonably
likely to result in any such Material Adverse Effect. Each of the Company and
Parent shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the Transactions.
8.9 HSR. The Company and Parent shall, as soon as practicable and in any
event, within fifteen business days from the date of this Agreement, file
Notification and Report Forms under HSR with the Federal Trade
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Commission and the Antitrust Division of the Department of Justice and shall
use their best efforts to respond as promptly as practicable to all inquiries
received from such Governmental Authorities for additional information or
documentation. The Company and Parent shall, as soon as practicable file all
information required under the Australian Foreign Acquisitions and Takeovers
Act or the Australian Trade Practices Act of 1974, as amended and shall use
their best efforts to respond as promptly as practicable to all inquiries
received from any Governmental Authorities with respect thereto for additional
information or documentation.
8.10 Representations and Warranties. Neither the Company, Parent nor Merger
Sub will take any action that would cause any of their respective
representations or warranties set forth herein not to be true and correct in
all material respects at and as of the Effective Time.
8.11 Access to/Confidentiality of Information. Upon reasonable notice, the
Company shall (and shall cause its Subsidiaries to) afford Parent's
Representatives reasonable access during normal business hours to its
properties, books and records and, during such period, and furnish promptly to
such Representatives all information concerning its business, properties and
personnel as may reasonably be requested. Parent agrees that it will not, and
will cause its Representatives not to, use any information obtained pursuant
to this Section 8.11 for any purpose unrelated to the consummation of the
Transactions and the operation of the business of the Company and its
Subsidiaries. The Confidentiality Agreement shall apply with respect to
information furnished by the Company or its Representatives hereunder.
8.12 Publicity. The parties will consult with each other and will mutually
agree upon any press releases or public announcement pertaining to the Merger
and the other Transactions and shall not issue any such press releases or make
any such public announcements prior to such consultation and agreement, except
as may be required by applicable Law or by obligations pursuant to any listing
agreement with The NASDAQ Stock Market and the rules of the Helsinki Stock
Exchange, in which case the party proposing to issue such press release or
make such public announcement shall use all reasonable efforts to consult in
good faith with the other party before any such issuance or announcement.
8.13 Indemnification of Directors and Officers. The Certificate of
Incorporation and Bylaws of the Surviving Company shall contain provisions
with respect to indemnification no less favorable to the indemnified Persons
than those set forth in the Certificate of Incorporation, as amended, and
Bylaws, as amended, of the Company on the date of this Agreement, and such
provisions shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would materially
adversely affect the rights thereunder of Persons who at any time prior to the
Effective Time were directors or officers of the Company in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the Transactions), unless such modification is required by Law;
provided, that in the event any claim or claims are asserted or made within
such six year period, all rights to indemnification in respect of any such
claim or claims shall continue until disposition of any and all such claims.
Such obligation shall be guaranteed by Parent or Parent shall cause the
Company to extend the D&O insurance policy currently maintained by the Company
through the purchase of coverage for runoff claims. This Section 8.13 is
intended to benefit the Persons with rights of indemnification referred to
above and shall be binding on all successors and assigns of Parent, Merger
Sub, the Company and the Surviving Company.
8.14 Employees.
(a) The Surviving Company hereby agrees to honor (without modification) the
employment agreements, executive termination agreements and individual benefit
arrangements listed on Schedule 8.14(a), all in effect on the date hereof.
(b) The Company shall, and shall use its best efforts to cause any Flexible
Buyer of the Flexible Business to, comply with the Worker Adjustment and
Retraining Notification Act.
8.15 Amendment of Options. The Company shall obtain the amendment of all
agreements with respect to Options, so as to provide for (a) the acceleration
of vesting at the Effective Time; (b) the payment, at the
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Effective Time, of an option settlement amount in cash and Flexible Shares
(subject to any applicable withholding Taxes) equal to the product of (i) the
number of shares for which the Option is exercisable multiplied by (ii) the
sum of the Merger Consideration plus the Redemption Consideration, minus the
per share exercise price of the Option and (c) the cancellation of all Options
as of the Effective Time. Assuming the Redemption Consideration consists of
Flexible Shares, for each payment of such settlement amount, 76% will be paid
in cash and 24% will be paid in Flexible Shares based upon an aggregate value
of $38,000,000 for the Flexible Company. The Surviving Company shall bear the
cash portion of such settlement amount and the Flexible Company shall bear the
balance of such settlement amount. Notwithstanding the foregoing, in the event
of a Permitted Transaction that portion of the option settlement amount
otherwise payable in Flexible Shares shall be paid in cash.
8.16 Conduct of Flexible Business. After the date hereof, the Flexible
Business and the business of the Surviving Company shall be treated for
accounting purposes as if they were separate stand alone businesses as of the
close of business on December 31, 1997. Any cash provided by the Company or
any of its other Subsidiaries to the Flexible Business shall be treated as an
advance from the Company or such Subsidiary to the Flexible Business which
will be repaid by the Flexible Company in cash, on or prior to the Effective
Time.
ARTICLE IX
CONDITIONS
9.1 Conditions to Each Party's Obligation to Close. The obligations of each
of the parties to consummate the Transactions are subject to satisfaction, or,
to the extent permitted by Law, mutual waiver, on or prior to the Effective
Time of each of the following conditions:
(a) Injunction. There shall not be in effect any Law or any Judgment
directing that the Transactions not be consummated; provided, however, that
prior to invoking this condition each party shall use its reasonable best
efforts to have any such Judgment vacated; and there shall have been no Law
enacted or promulgated which would make consummation of the Transactions
illegal.
(b) Stockholder Approval. This Agreement and the Merger shall have been
duly approved by the stockholders of the Company in accordance with
applicable Law and the Certificate of Incorporation, as amended, of the
Company at the Company Stockholders Meeting.
(c) HSR. Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR or the Australian Foreign
Acquisitions and Takeovers Act or the Australian Trade Practices Act of
1974, as amended shall have expired or shall have been earlier terminated.
(d) S-4 Registration Statement; "Blue Sky" Approvals. The S-4
Registration Statement shall have become effective and no stop order
suspending its effectiveness shall have been issued and no proceedings for
such purpose shall have been initiated and be continuing by the SEC. If
required, the Company shall have received all state securities Law or "blue
sky" permits and authorizations necessary to distribute the Flexible Shares
as part of the Merger Consideration.
(e) Amendment of Option Agreements. The Company shall, prior to the
Effective Time, have taken all actions, and obtained all consents and
approvals, necessary (including, without limitation, to appropriately amend
the Options pursuant to Section 8.15) to effect the cancellation,
extinguishment and/or conversion of all Options.
9.2 Additional Conditions to the Obligations of Parent and Merger Sub to
Close. The obligations of Parent and Merger Sub to consummate the Transactions
are subject to satisfaction, or, to the extent permitted by Law, waiver on or
prior to the Effective Time of each of the following conditions:
(a) Performance. The Company shall have complied with and satisfied, in
all material respects, all the covenants, agreements and obligations of the
Company contained herein, and performed in all material respects all acts
required of the Company by this Agreement.
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(b) Representations and Warranties. All the representations and
warranties made herein by the Company which are qualified as to materiality
shall have been and shall be true and correct in all respects and each such
representation and warranty which is not qualified shall have been, and
shall be, true and correct in all material respects when made and as of the
Effective Time (except for changes permitted by this Agreement, or except
to the extent they relate to a particular date).
(c) Deliveries. Parent shall have received at the Effective Time:
(i) a certificate dated the Effective Time and executed by the
President or a Vice President of the Company certifying to the
fulfillment of the conditions specified in Sections 9.2(a) and (b) and,
as to the Company, fulfillment of the conditions specified in Sections
9.1(b);
(ii) certified or verified copies of the Company's Certificate of
Incorporation, as amended, its Bylaws, as amended, and certificates of
good standing for the Company, as Parent may reasonably request; and
(iii) such other documents as Parent may reasonably request to
effectuate, or in connection with, the Transactions.
(d) Consents and Approvals. All consents, approvals and authorizations
legally required to be obtained to consummate the Merger shall have been
obtained from all Governmental Entities.
(e) Flexible Business. All of the Excluded Assets and Excluded
Liabilities related to the Flexible Business (i) shall be owned, directly
or indirectly, by the Flexible Company, or (ii) shall have been assigned to
and assumed by one or more Flexible Buyers pursuant to one or more
Permitted Transactions in compliance with Section 8.3 hereof. All amounts
payable owed by the Flexible Company to the Company or any Subsidiary of
the Company shall have been paid in cash. Any settlement of intercompany
accounts shall have been effected without any adverse Tax consequences to
the Company or any of its Subsidiaries (other than the Flexible Company).
(f) Ancillary Agreements. Provided the Flexible Shares are to be
distributed to the stockholders of the Company, the Surviving Company and
the Flexible Company shall have duly executed and delivered each of the
Ancillary Agreements.
(g) Non-U.S. Real Property Interest Statement. The Company shall furnish
to the Parent and Merger Sub on or before the Effective Time a copy of a
statement, dated not more than thirty days prior to the Effective Time,
issued by the Company pursuant to Section 1.897-2(h) of the Code,
certifying that the interest in the Company being acquired by the Parent
and Merger Sub is not a U.S. real property interest as defined in Section
897 of the Code.
(h) Material Adverse Changes. No change shall have occurred or been
threatened, and Parent shall not have become aware of any fact that is
reasonably likely to have either a Material Adverse Effect or a Flexible
Company Material Adverse Effect.
(i) No Litigation. No suit, action or proceeding by any Governmental
Authority, or by any other Person, domestic or foreign, shall be
threatened, instituted or pending before any court of competent
jurisdiction or Governmental Authority, (i) challenging or seeking to, or
which could reasonably be expected to make illegal, impede, delay or
otherwise directly or indirectly restrain, prohibit or make materially more
costly the Merger, or seeking to obtain material damages, (ii) seeking to
prohibit or materially limit the ownership or operation by Parent or Merger
Sub of all or any material portion of the business assets of the Company
and its Subsidiaries taken as a whole, or to compel Parent or Merger Sub to
dispose of or hold separately all or any material portion of the business
or assets of Parent and its Subsidiaries or the Company and its
Subsidiaries taken as a whole, or seeking to impose any limitation on the
ability of Parent or Merger Sub to conduct its business or own such assets,
(iii) seeking to impose limitations on the ability of Parent or Merger Sub
effectively to exercise full rights of ownership of the shares of Company
Stock, including, without limitation, the right to vote any shares of
Company Stock acquired or owned by Merger Sub or Parent on all matters
properly presented to the Company's stockholders, or (iv) seeking to
require divestiture by Parent or Merger Sub of any shares of Company Stock.
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9.3 Additional Conditions to the Company's Obligation to Close. The
obligation of the Company to consummate the Transactions is subject to
satisfaction, or, to the extent permitted by Law, waiver, on or prior to the
Effective Time of each of the following conditions:
(a) Performance. Parent and Merger Sub shall have materially complied
with, and satisfied, in all material respects, all the covenants,
agreements and obligations of Parent and Merger Sub contained herein, and
materially performed all acts required of Parent and Merger Sub by this
Agreement.
(b) Representations and Warranties. All the representations and
warranties made herein by Parent or Merger Sub which are qualified as to
materiality shall have been and shall be true and correct in all respects
and each such representation and warranty which is not so qualified shall
have been, and shall be, true and correct, in all material respects when
made and as of the Effective Time (except for changes permitted by this
Agreement, or except to the extent they relate to a particular date).
(c) Deliveries. The Company shall have received at the Effective Time:
(i) a certificate dated the Effective Time and executed by the
President or a Vice President of Parent certifying to the fulfillment
of the conditions specified in Sections 9.3(a) and (b);
(ii) certified or verified copies of Merger Sub's Certificates of
Incorporation, as currently amended, and certificates of good standing
for Merger Sub; and
(iii) such other documents as the Company may reasonably request to
effectuate, or in connection with, the Transactions.
(d) Ancillary Agreements. Provided the Flexible Shares are to be
distributed to the stockholders of the Company, Surviving Company and the
Flexible Company shall have duly executed and delivered each of the
Ancillary Agreements.
ARTICLE X
TERMINATION AND REMEDIES
10.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by stockholders of the Company,
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if:
(i) any court of competent jurisdiction in the United States, or some
other Governmental Authority, 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; provided,
however, that the party seeking to terminate this Agreement under this
Section 10.1(b)(i) shall have used its reasonable best efforts to
remove such injunction, order or decree; or
(ii) the Merger shall not have been consummated by September 30,
1998; provided, that the right to terminate this Agreement pursuant to
this Section 10.1(b)(ii) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement results
in the failure of the Merger to occur on or before such date;
(iii) by either Parent, on the one hand, or the Company, on the other
hand, if the Board of Directors of the Company determines that an
Acquisition Proposal constitutes a Superior Proposal and the Board
believes (based upon the advice of independent outside counsel) that a
failure to terminate this Agreement and enter into an agreement to
effect the Superior Proposal would constitute a breach of its fiduciary
duties; provided, however the Company may not terminate this Agreement
pursuant to this Section 10.1(b)(iii) unless and until (A) five days
have elapsed following delivery to Parent of a written notice of such
determination by the Board of Directors; (B) during such five day
period the Company has fully cooperated with the Parent, including,
without limitation, informing the Parent of
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the terms and conditions of such Superior Proposal, and the identity of
the Person making such Proposal, with the intent of enabling both
parties to agree to a modification of the terms and conditions of this
Agreement so that the Transactions may be effected; and (C) at the end
of such five day period the Board of Directors of the Company
determines that the Acquisition Proposal constitutes a Superior
Proposal and the Board continues to believe (again based upon the
advice of independent outside counsel) that a failure to terminate this
Agreement and enter into an agreement to effect the Superior Proposal
would constitute a breach of its fiduciary duties; provided further
that this Agreement shall not terminate pursuant to this Section
10.0(b)(iii) unless simultaneously with such termination (I) the
Company enters into a definitive acquisition, merger or similar
agreement to effect the Superior Proposal and (II) Parent has received
all amounts required to be paid to Parent pursuant to Section 11.1(b)
by wire transfer in same day funds; or
(iv) if the Stockholders of the Company do not approve this Agreement
and Merger at the Company Stockholders Meeting.
(c) by Parent, if:
(i) (A) any of the representations or warranties made by the Company
in this Agreement that are qualified as to materiality shall be untrue
or incorrect in any respect or any such representations and warranties
that are not so qualified shall be untrue or incorrect in any material
respect, in each case as of the date of this Agreement and Closing
Date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as
of such date, (B) the Company shall have failed to perform in any
material respect any material obligation or to comply in any material
respect with any material agreement or material covenant of the Company
to be performed or complied with by it under this Agreement, or (C) any
Person (other than Parent, Sub or one of their controlled affiliates)
shall have commenced a tender offer for 10% or more of any class of
equity securities of the Company; provided, that prior to termination
this Agreement pursuant to clause (A) or (B), Parent shall have given
the Company written notice of such breach or misrepresentation and the
Company shall not have cured such breach or misrepresentation within
thirty days of the date of such notice if curable within such thirty
day period; or
(ii) the Board of Directors of the Company withdraws or materially
modifies or changes its recommendation of this Agreement or the Merger
in a manner adverse to Parent or Merger Sub and there exists at such
time an Acquisition Proposal for the Company; or
(iii) holders of Dissenting Shares hold more than five percent (5%)
of the outstanding Company Shares.
(d) by the Company, if (i) any of the representations or warranties made
by the Parent and Merger Sub in this Agreement that are qualified as to
materiality shall be untrue or incorrect in any respect or any such
representations and warranties that are not so qualified shall be untrue or
incorrect in any material respect, in each case as of the date of this
Agreement and Closing Date, except that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date, or (ii) Parent or Merger Sub shall have
failed to perform in any material respect any material obligation or to
comply in any material respect with any material agreement or material
covenant of Parent or Merger Sub, as the case may be, to be performed or
complied with by each of them under this Agreement; provided that, prior to
terminating this Agreement pursuant to this clause 10.1(d), the Company
shall have given Parent and Merger Sub written notice of such breach or
misrepresentation and Parent and/or Merger Sub shall not have cured such
breach or misrepresentation within thirty days of the date of such notice
if curable within such thirty day period.
10.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1, this Agreement shall become void
and have no effect, without any liability on the part of any party hereto or
its affiliates, directors, officers or stockholders, provided that,
notwithstanding the foregoing, if this Agreement has been terminated the
provisions of Sections 6.21, 7.7, 10.2, 11.1 and 11.2; the last two
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sentences of Section 8.11; and Article XI, in its entirety, shall survive all
such termination and shall continue to be of binding effect. Nothing contained
in this Section 10.2 shall relieve any party from liability for any willful
and material breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 Expenses.
(a) All fees, costs and expenses, including attorney's fees and investment
banking fees, incurred in connection with this Agreement or the Transactions
shall be paid by the party incurring such, provided however it is agreed that
in the event of a distribution of the Flexible Shares upon Closing, the
Company Transaction Expenses shall be paid by the Flexible Company. All such
fees, costs and expenses shall be paid in full at Closing.
(b) In the event this Agreement is terminated in any of the following manners,
the Company shall pay to Parent an amount equal to $3.8 million plus $1.5
million, representing reimbursement for out-of-pocket fees and expenses
incurred by Parent or on its behalf in connection with the transactions
contemplated in connection with this Agreement, payable by wire transfer of
immediately available funds at the times as set forth below:
(i) by the Company, pursuant to Section 10.1(b)(iii) (amounts payable
simultaneously with execution of a definitive agreement to effect the
Superior Proposal);
(ii) by the Company, pursuant to Section 10.1(b)(ii) or (iv), but only in
the event that within 12 months from the date of such termination the
Company enters into an agreement with respect to the Third Party
Acquisition, or a Third Party Acquisition occurs (amounts payable upon the
occurrence of a Third Party Acquisition, or the earlier execution by the
Company of a definitive agreement to effect such Third Party Acquisition);
(iii) by Parent, pursuant to Section 10.1(b)(iii), but only in the event
that the Company executes a definitive agreement to effect the Superior
Proposal (amounts payable upon the execution of such definitive agreement);
(iv) by Parent, pursuant to Section 10.1(c)(i)(A) or (B), unless the
Company's failure to so perform or comply is beyond the control of the
Company (amounts payable within five (5) business days of such
termination); or
(v) by Parent, pursuant to Section 10.1(c)(ii) (amounts payable within
two (2) business days of such termination).
11.2 Nonsurvival. The representations and warranties made herein shall not
survive beyond the earlier of termination of this Agreement or the Effective
Time. This Section 11.2 shall not limit any covenant or agreement of the
parties hereto which by its terms contemplates performance after the Effective
Time. The Confidentiality Agreement shall survive any termination of this
Agreement.
11.3 Further Documents. Each party hereto agrees to execute and deliver to
the other party such other and further agreements, consents, documents, or
instruments of conveyance, assignment, assumption or transfer, and to do such
other things and to take such other actions, supplemental or confirmatory, as
may be required by the other party for the purpose of or in connection with
the consummation or evidencing of the Transactions.
11.4 Modification or Amendment. This Agreement may be amended by an
instrument in writing executed and delivered on behalf of each of the parties
hereto, at any time prior to the Effective Time, subject to the provisions of
the DGCL; provided, however, that after approval of this Agreement by the
stockholders of the Company, no amendment shall be made which by Law requires
further approval by such stockholders without such further approval.
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11.5 Waiver. The conditions to each of the parties' obligations to
consummate the Merger are for the sole benefit of such party and may be
waived, at any time prior to the Effective Time, by such party in whole or in
part to the extent permitted by Law. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in writing
signed on behalf of such party, and shall not be inferred by the failure of
any such party to assert any of its rights hereunder. Waiver of any provision
of this Agreement or of any breach hereof shall be a waiver of only said
specific provision or breach and shall not be deemed a waiver of any other
provision or any future breach hereof.
11.6 Notices. All notices, documents, or other communications to be given
hereunder shall be in writing and shall be deemed validly given if delivered
by messenger, facsimile transmission (with a confirming copy sent by overnight
courier), or express overnight delivery, as follows:
(a) If to the Company, to
G. Kenneth Baum
c/o George K. Baum & Company
Twelve Wyandotte Plaza
120 West 12th Street
Kansas City, MO 64105
(816) 474-1100 (telephone)
(816) 283-5325 (telecopier)
with a copy to:
Thomas W. Van Dyke, Esq.
Bryan Cave LLP
7500 College Boulevard
Suite 1100
Overland Park, KS 66210
(913) 338-7700 (telephone)
(913) 338-7777 (telecopier)
(b)If to Parent or Merger Sub, to
c/o Huhtamaki Oy
Lansituulentie 7
02100 ESP00
FINLAND
Attention: Eero Aho
(011) 358-9-6868-81 (telephone)
(011) 358-9-6868-8222 (telecopier)
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Timothy B. Goodell, Esq.
(212) 819-8200 (telephone)
(212) 354-8113 (telecopier)
or such other Persons or addresses as may be designated in writing by the
party to receive such notice. Any notice delivered by messenger shall be
deemed received when such delivery is tendered; notices sent by facsimile
transmission shall be deemed received upon faxed confirmation of receipt; and
notices delivered by other methods shall be deemed received when actually
received by the addressee or its authorized agent.
11.7 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the Laws of the State of Delaware, without giving
effect to the principals of the conflicts of Law thereof.
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11.8 Entire Agreement. This Agreement, including the Additional Agreements,
constitute the entire agreement and understanding of the parties with respect
to the Transactions and supersedes any and all prior agreements and
understandings relating to the subject matter hereof, provided, however, that
the provisions of the Confidentiality Agreement shall remain valid and in
effect.
11.9 Construction. The section and article headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement. The preamble hereof, the
recitals hereto, and all exhibits and schedules attached hereto and the
Company Disclosure Letter and the Schedules thereto are hereby incorporated
herein by reference and made a part hereof.
11.10 Binding Effect. This Agreement shall be binding upon and inure solely
to the benefit of the parties, and their respective successors and assigns, to
the extent allowed hereby. Nothing in this Agreement, express or implied,
other than the right to receive the Merger Consideration payable pursuant to
Article V hereof is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement; provided, however, that the provisions of Sections 8.13 and
8.14 shall inure to the benefit of and be enforceable by the indemnified
parties or the employees and directors of the Company, respectively.
11.11 Assignment. None of the parties hereto may assign any rights or
delegate any obligations provided for in this Agreement without the prior
written consent of all the other parties.
11.12 Counterparts. This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
11.13 Obligation of Parent. Whenever this Agreement requires Merger Sub to
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Merger Sub to take such action and a guarantee of
the performance thereof.
11.14 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
Sealright Co., Inc.
/s/ John T. Carper
By: _________________________________
Name: John T. Carper
Title: Senior Vice President
Huhtamaki Oy
/s/ Eero Aho
By: _________________________________
Name: Eero Aho
Title: Executive Vice President
/s/ Juha Salonen
By: _________________________________
Name: Juha Salonen
Title: Vice President
Administration
Seal Acquisition Corporation
/s/ Eero Aho
By: _________________________________
Name: Eero Aho
Title: President
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APPENDIX B
PERSONAL AND CONFIDENTIAL
March 2, 1998
Board of Directors
Sealright Co., Inc.
9201 Packaging Drive
DeSoto, Kansas 66018
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders (other than Huhtamaki Oy ("Parent"), Seal Acquisition
Corporation, an indirect wholly-owned subsidiary of Parent ("Merger Sub"),
Sealright Co., Inc. (the "Company"), or any direct or indirect subsidiary of
Parent or the Company) of the outstanding shares of Common Stock, par value
$0.10 per share (the "Shares"), of the Company of the $11.00 per Share in cash
to be received by such holders pursuant to the Agreement and Plan of Merger,
dated as of March 2, 1998, by and among Parent, Merger Sub and the Company (the
"Agreement"). Pursuant to the Agreement, Merger Sub will be merged with and
into the Company (the "Merger") and each outstanding Share will be converted
into the right to receive $11.00 in cash. We understand that prior to the
Merger, the Company will transfer (the "Permitted Restructuring") the Excluded
Assets and the Excluded Liabilities to the Flexible Company (each as defined in
the Agreement) and that simultaneously with the consummation of the Merger, the
shareholders of the Company will also be entitled to receive Flexible Shares
(as defined in the Agreement) on a pro rata basis (the "Distribution") or a pro
rata share of the sales proceeds (less certain transaction expenses) (the
"Flexible Proceeds") from the Permitted Transaction (as defined in the
Agreement).
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1996; a draft of the Annual
Report on Form 10-K of the Company for the year ended December 31, 1997;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
the Company; certain other communications from the Company to its stockholders;
certain internal financial analyses and forecasts prepared by the Company's
management for the Company as well as the business (the "Retained Business")
that will remain with the Company after the Permitted Restructuring; and
certain pro forma historical financial information with respect to
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<PAGE>
the Retained Business. We also have held discussions with members of the
senior management of the Company and the Retained Business regarding the past
and current business operations, financial condition and future prospects of
the Retained Business. In addition, we have reviewed the reported price and
trading activity for the Shares, compared certain financial and stock market
information for the Company and certain financial information for the Retained
Business with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the packaging industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of
the Company, the Flexible Company or the Retained Business or any of the
Company's subsidiaries and we have not been furnished with any such evaluation
or appraisal. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated
by the Agreement and such opinion does not constitute a recommendation as to
how any holder of Shares should vote with respect to such transaction. In
addition, we are not expressing any opinion herein as to the fairness of the
Permitted Restructuring, the Distribution or the Flexible Proceeds or as to
the prices at which the Flexible Shares may trade if and when they are issued.
You considered other alternatives to the Merger, including a sale of the
Company as an entirety without undertaking the Permitted Restructuring, but
you advised us that it was your conclusion that the Merger and the Permitted
Restructuring were in the best interests of the Company and its stockholders
and, accordingly, you asked us solely for our views on the sale of the
Retained Business pursuant to the Agreement.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $11.00
per Share in cash to be received by the holders for the Retained Business
(other than Parent, Merger Sub, the Company or any direct or indirect
subsidiary of Parent or the Company) of Shares pursuant to the Agreement is
fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
Goldman, Sachs & Co.
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW,
REGARDING APPRAISAL RIGHTS
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
the 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 subsections (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 his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his 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 his 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 or 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 of consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten 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; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. 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 who 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
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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 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 who 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 his 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 who 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 his 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 his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
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(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 who has demanded his 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 his 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
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20 Indemnification of Directors and Officers
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions), or (iv) for any
transaction from which a director derived an improper personal benefit. The
Registrant's Certificate of Incorporation limits the liability of directors to
the extent permitted by Section 102(b)(7) of the DGCL.
The Registrant has purchased insurance coverage on behalf of its directors
and officers against any liability asserted against any of them in their
capacity as a director or officer of the Registrant.
Item 21(a) Exhibits
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger dated March 2, 1998 by and among
Sealright Co., Inc., Seal Acquisition Corp. and Huhtamaki Oy
(included as Appendix A to this Proxy Statement/Prospectus)
2.1(a) Form of Tax Procedures Agreement
2.1(b) Form of Intellectual Property License Agreement
2.1(c) Form of Transitional Services Agreement
2.2 Reorganization Agreement, dated as of April 30, 1998, by and among
Sealright Co., Inc., JPS Packaging Company, Sealright Manufacturing-
West, Inc. and Sealright Packaging Company
3.1(a) Certificate of Incorporation of JPS Packaging Company dated March
24, 1998
3.1(b) Certificate of Merger of JPS Packaging Company dated April 3, 1998
II-1
<PAGE>
Exhibit
Number Description
------- -----------
3.1(c) Amendment to Certificate of Incorporation dated April 24, 1998
3.2 Amended and Restated Bylaws of JPS Packaging Company
4.1 Form of Stock Certificate
5.1 Opinion of Bryan Cave LLP including Consent
10.1 Commitment Letter Agreement between Harris Trust and Savings Bank
and JPS Packaging Company dated May 29, 1998
10.2 JPS Packaging Company 1998 Incentive Compensation Plan
10.3 Executive Retention Agreement between Sealright Co., Inc. and John
T. Carper dated October 21, 1997
10.4 Executive Retention Agreement between Sealright Co., Inc. and A.
Lawrence Walton dated October 21, 1997
10.5 Executive Retention Agreement between Sealright Co., Inc. and Steven
Saucier dated October 21, 1997
21.1 Subsidiaries of JPS Packaging Company
23.1 Consent of KPMG Peat Marwick Relating to Matters Concerning the
Registrant
23.2 Consent of Arthur Andersen LLP Relating to Matters Concerning
Sealright Co., Inc.
23.3 Consent of Bryan Cave LLP (included in Exhibit 5.1 above)
23.4 Consent of Goldman, Sachs & Co.
24.1 Powers of Attorney (included as part of signature page)
27.1 Financial Data Schedule
99.1 Proxy Card of Sealright Co., Inc.
II-2
<PAGE>
Item 21(b) Financial Statement Schedules
The schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
Item 22 Undertakings
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by its is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Act of 1934; and,
where interim financial information required to be presented by Article 3 of the
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of DeSoto, state of Kansas,
on June 8, 1998.
JPS PACKAGING COMPANY
By: /s/ John T. Carper
------------------
Name: John T. Carper
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individuals whose signatures
appear below constitute and appoint John T. Carper and David S. Boylan or any of
them, his true and lawful attorney in fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John T. Carper President and Director June 8, 1998
- -----------------------
John T. Carper
/s/ David S. Boylan Chief Financial Officer and June 8, 1998
- ----------------------- Chief Accounting Officer
David S. Boylan
/s/ G. Kenneth Baum Director June 8, 1998
- -----------------------
G. Kenneth Baum
II-4
<PAGE>
Signature Title Date
--------- ----- ----
/s/ D. Patrick Curran Director June 8, 1998
- -----------------------
D. Patrick Curran
/s/ Charles A. Sullivan Director June 8, 1998
- -----------------------
Charles A. Sullivan
/s/ William D. Thomas Director June 8, 1998
- -----------------------
William D. Thomas
II-5
<PAGE>
EXHIBIT 2.1(a)
TAX PROCEDURES AGREEMENT
THIS TAX PROCEDURES AGREEMENT is made and entered into as of
_________________, 1998, by and among, Sealright Co., Inc., a Delaware
corporation (the "Company"), Sealright Manufacturing East, Inc. (East"), a
______ corporation.
RECITALS
WHEREAS, the Company is the common parent of an affiliated group of
corporations, within the meaning of section 1504(a) of the Internal Revenue Code
of 1986 (the "Code"), which files a Federal consolidated income tax return (the
"Sealright Consolidated Group");
WHEREAS, the Company's affiliated group of corporations includes among
others East and Sealright Manufacturing West, Inc. ("West");
WHEREAS, Huhtamaki Oy ("Parent"), Seal Acquisition Corporation
("Merger Sub") and the Company have entered into an Agreement and Plan of Merger
made and entered into as of March 2, 1998 (the "Merger Agreement"), pursuant to
which Merger Sub will merge with and into the Company;
WHEREAS, the Company will contribute or cause to be contributed to
East all of the Excluded Assets (within the meaning of the Merger Agreement);
WHEREAS, contemporaneous with and as part of the merger contemplated
in the Merger Agreement, West will distribute all of the issued and outstanding
stock of East to the Company and the Company will distribute all of the issued
and outstanding stock of East to the Company's shareholders of record as of the
effective date of the merger of Merger Sub with and into the Company;
WHEREAS, pursuant to Treasury Regulation (S) 1.1502-6, the Company and
each member of the Sealright Consolidated Group, including East, is severally
liable for the consolidated Federal income tax liability of the Sealright
Consolidated Group;
WHEREAS, pursuant to Section 2.4 of the Merger Agreement, the Company
and East are to enter into this Tax Procedures Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE>
Article I
Definitions
1.1 Definitions. As used herein, the following terms shall have the
following meanings unless the context otherwise specifies:
"Affiliate" of any person means any person, corporation,
partnership or other entity directly or indirectly controlling, controlled
by or under common control with such person. Reference to an Affiliate of
the Company shall mean any Affiliate of the Company, excluding, after the
Distribution Date, East.
"Distribution Date" means the date on which the Company
distributes its East stock to the Company's shareholders of record as of
the effective date of the merger of Merger Sub with and into the Company.
"Flexible Business" means the business of manufacturing and
selling flexible packaging and labeling for the food, dairy and beverage
market, and machines for the application of sleeve labels to plastic
bottles, operated by the Company, directly or indirectly through certain of
its subsidiaries, including the ownership and sale of the Excluded Assets.
"Pre-Distribution Tax Liability" means (i) the Federal Tax
liability of the Company and each corporation included in the Sealright
Consolidated Group for any period as to which a consolidated Federal income
Tax Return was filed by the Company for such group, and (ii) the state Tax
liability of any consolidated, combined or unitary group which includes the
Company or any of its Affiliates, for all taxable periods beginning before
the Distribution Date, regardless of whether any such liability has been
previously assessed in whole or in part or is assessed in whole or part
after the date of this Agreement, or whether such liability is or was
imposed on the Sealright Consolidated Group or on any corporation included
within such group separately.
"Short Period" shall mean the period beginning on January 1, 1998
and ending on or immediately prior to the Distribution Date.
"Tax Affiliate" shall mean, with respect to a company, any member
of an affiliated group as defined in section 1504 of the Code, or member of
a combined or unitary group of which such company is or was a member.
1.2 Additional Terms. For purposes of this Agreement, unless
otherwise expressly provided:
(1) All references herein to Sections or other subdivisions,
unless
2
<PAGE>
otherwise specified, refer to the corresponding Sections and other
subdivisions of this Agreement;
(2) The terms "hereof", "herein", "hereby", "hereunder" and
"herewith" refer to this Agreement;
(3) The capitalized terms used herein which are defined in the
Merger Agreement shall have the respective meanings stated in such Merger
Agreement; and
(4) Words of the masculine gender shall be deemed to include the
feminine and neuter genders, and vice versa, where applicable. Words of the
singular number shall be deemed to include the plural number, and vice
versa, where applicable.
Article II
Tax Sharing Arrangements
2.1 Termination of Tax Sharing Arrangements. Except as provided in
this Agreement, all tax sharing agreements or similar arrangements with respect
to or involving East or any of its direct or indirect subsidiaries shall be
terminated at or immediately prior to the Distribution Date and, after the
Distribution Date, East shall not be bound thereby or have any liability
thereunder on amounts due in respect of taxable periods beginning prior to the
Distribution Date. After the Distribution Date, this Agreement shall constitute
the sole tax sharing agreement or arrangement among the Company and East and any
affiliate thereof (or any predecessor thereof).
2.2 Filing Returns. The Company shall prepare (or cause to be
prepared) and file (or cause to be filed) the consolidated Federal income tax
return of the Sealright Consolidated Group and all other consolidated, combined
or unitary Tax Returns of the Company and any of its Tax Affiliates, which Tax
Returns include East (and the business operations contained in East as of the
Distribution Date), and shall report the operations of East (and the business
operations contained in East as of the Distribution Date) in such Tax Returns
for all taxable periods of East ending on or prior to the Distribution Date.
East shall be responsible for preparing and filing all Tax Returns required to
be filed on or on behalf of East or any of its Tax Affiliates, for all taxable
periods ending after the Distribution Date. The Tax Returns to be filed by the
Company or any of its Tax Affiliates (other than East), which include any
taxable period beginning before and ending after the Distribution Date, shall be
filed on a basis which is consistent with the manner in which the Company or its
Tax Affiliates filed such Tax Returns in the past, unless a contrary treatment
is required by law.
2.3 Tax Sharing Arrangement for Short Period. Subsequent to the
Distribution Date, the Company shall determine (i) the amount of net Federal
taxable income recognized by the Sealright Consolidated Group for the Short
Period attributable to the operations of the
3
<PAGE>
Flexible Business ("Short Period Federal Income") and (ii) the amount of net
taxable income recognized by the Company for the Short Period attributable to
the operations of the Flexible Business ("Short Period State Income") required
to be included on each state and local income or franchise Tax Return that the
Company or any Tax Affiliate of the Company (other than East) is obligated to
file pursuant to Section 2.2 ("State Income Tax Return"). In computing such
Short Period Federal Income and Short Period State Income, the parties will, to
the extent permitted by applicable law, elect to close the taxable period on the
Distribution Date. The Company shall promptly, upon making such determinations
referred to in the second preceding sentence, provide in writing to East copies
of such determinations and East shall have the right to verify and approve such
determinations. East shall complete its verification and approval within 30 days
after having been provided copies of the determination. If the Company and East
are unable to agree on the amount of the Short Period Federal Income and Short
Period State Income and the amounts payable under this Section 2.3, they shall
employ the services of a mutually agreeable nationally recognized accounting
firm to make a determination of such Short Period Federal Income and Short
Period State Income and the amounts payable under this Section 2.3, which
determination shall be binding upon the Company and East. The Company and East
shall each pay one half of the fees and expenses of such nationally recognized
accounting firm. Upon completion of the Company's Federal and State income tax
returns for the taxable years or periods that include the Short Period, the
Company shall promptly pay to East an amount equal to the excess, if any, of the
Company's aggregate Federal and State income tax, computed without taking into
account the Short Period Federal Income and the Short Period State Income, over
the amount of the Company's aggregate Federal and State income tax, computed
taking into account the Short Period Federal Income and the Short Period State
Income. Upon completion of the Company's Federal and State income tax returns
for the taxable years or periods that include the Short Period, East shall
promptly pay to the Company an amount equal to the excess, if any, of the
Company's aggregate Federal and State income tax, computed taking into account
the Short Period Federal Income and the Short Period State Income, over the
aggregate Federal and State income tax, computed without taking into account the
Short Period Federal Income and the Short Period State Income. To the extent the
benefit of any negative Federal Short Period Income or negative State Short
Period Income is not realized in the year including the Short Period, the
Company shall pay promptly East the amount of any such benefit realized at the
time such benefit is realized. For purposes of the computation of Short Period
Federal Income and Short Period State Income, such amounts shall not include any
amounts of gain or loss taken into account in the computation of Redemption
Consideration and shall include as a deduction the portion of the settlement
amount paid with respect to the options described in Section 8.15 of the Merger
Agreement attributable to the Flexible Shares portion.
2.4 Company Liability and Indemnity. Except as provided in Section
2.3 above and Section 2.6 below, the Company shall be responsible for all
Federal, state and local income Taxes of the Company and any Tax Affiliate. If
the Tax of the Company or any Tax Affiliate is adjusted for any period prior to
or including the Distribution Date, the Company shall keep any Tax refund and
shall be responsible for the payment of any additional Tax. The Company and
4
<PAGE>
each member of the Sealright Consolidated Group (excluding East) shall jointly
and severally indemnify East and any of its Affiliates against and hold them
harmless from any Pre-Distribution Tax Liability and any liability for fees,
costs and expenses (including reasonable attorneys' fees) arising out of or
incident to any proceeding before any taxing authority or any judicial authority
with respect to an amount indemnified pursuant to this sentence.
2.5 East Liability and Indemnity. East shall indemnify the Company
and each member of the Sealright Consolidated Group against and hold them
harmless from any liability resulting from any Taxes of East or any of its
Affiliates with respect to any taxable period beginning on or after the
Distribution Date and any liability for fees, costs and expenses (including
reasonable attorneys' fees) arising out of or incident to any proceeding before
any taxing authority or any judicial authority with respect to an amount
indemnified pursuant to this sentence.
2.6 East Liability and Indemnity. Notwithstanding Section 2.4 hereof,
if (i) there is an adjustment to the Company's income Tax liability attributable
to the Flexible Business and (ii) such adjustment results in an increase in
income Tax liability computed on the basis as if the Flexible Business was
operated as a separate corporation, East shall indemnify the Company for the
amount of such increased Tax. For purposes of this computation, the Federal or
state taxable income attributable to the Flexible Business and Tax shall be
computed by separating the income or expenses which are directly allocable to
the Flexible Business and the indirect expense, including the sales and general
and administrative expenses, shall be allocated consistent with the allocation
set forth in the side letter dated March 2, 1998 between Parent and the Company.
Article III
Carrybacks of Net Operating Losses and Tax Credits
3.1 East Carryback of Net Operating Losses. If East, or an East Tax
Affiliate, incurs a net operating loss in a taxable period beginning on or after
the Distribution Date that may be carried back to a consolidated Federal income
tax return of the Sealright Consolidated Group, East shall make an election
pursuant to section 172(b)(3) of the Code to relinquish the entire carryback
period with respect to any such net operating loss.
3.2 East Carryback of Tax Attributes which Must be Carried Back. If
East, or an East Tax Affiliate, incurs a net capital loss, business credit or
other Tax attribute in a taxable period beginning on or after the Distribution
Date that must be carried back to a Company consolidated, combined or unitary
Tax Return, East may file a refund claim or application for adjustment only
after receiving the written consent of the Company. In the event the Company
receives a refund (or credit against Taxes) attributable to such claim or
application, the Company shall promptly pay East the amount of such refund or
credit (including any interest payable thereon by the governmental authority or
interest which would had been received from the governmental authority if the
Tax had not been credited).
5
<PAGE>
Article IV
Representations and Covenants
4.1 Cooperation. The Company and East shall cooperate (and shall
cause each of their Affiliates to cooperate) fully at such time and to the
extent reasonably requested by the other party in connection with the
preparation and filing of any Tax Return, claim for refund or other claim with
respect to Taxes or the conduct of any audit, dispute, proceeding, suit or
action concerning any Tax Return, amounts indemnifiable hereunder or any matter
contemplated hereunder. Such cooperation shall include, without limitation, (i)
the retention and provision for inspection on reasonable request of books,
records, documentation or other information relating to any Tax Return until the
expiration of seven years after the closing of the merger contemplated in the
Merger Agreement; (ii) the provision of additional information and explanation
of material provided under clause (i) of this Section 4.1; (iii) the execution
of any document that may be necessary or helpful in connection with the filing
of any Tax Return of the Company or any Affiliate of the Company, or by East or
any Affiliate of East, or any audit, proceeding, suit or action addressed in the
preceding sentence; and (iv) the use of the parties' best efforts to obtain any
documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing. On and after the seventh
anniversary of the closing of the merger contemplated in the Merger Agreement,
neither the Company nor East shall destroy or dispose or allow the destruction
or disposition of such books, records, documentation or other information
relating to any Tax Return without first having offered in writing to deliver
such books, records, documentation or other information to the other party at
such other party's expense. If such other party fails to request copies of such
books, records, documentation or other information within 90 days after the
receipt of the notice described in the preceding sentence, the notifying party
may dispose of such books, records, documentation or other information.
4.2 Elections. The Company shall not modify or make any election
(except as required by law) with respect to Taxes affecting or binding East or
any Affiliate of East for any taxable period ending after the Distribution Date
without the prior written consent of East, which consent shall not be
unreasonably withheld.
4.3 Section 338(h)(10) Election. If the stock of East is sold in a
Permitted Transaction, the Company agrees that it will make an election under
section 338(h)(10) of the Code (or applicable state election) with respect to
such sale and will take any other actions reasonably required to effectuate such
election, if requested in writing by East and such section 338(h)(10) election
would not result in greater aggregate Federal and state income tax to the
Company and its Affiliates than would result if such election or elections were
not made.
6
<PAGE>
Article V
Tax Reporting with respect to East Distribution
5.1 Tax Reporting. The parties agree to report that, for Tax
purposes, the value of the East stock distributed by the Company is equal to the
fair market value of East. The parties agree that East's fair market value is
equal to $38 million.
Article VI
Miscellaneous
6.1 Notices. All notice, demand, claim or other communication under
this Agreement shall be in writing and shall be deemed to have been given upon
the delivery or mailing thereof, as the case may be, if delivered personally or
sent by certified mail, return receipt requested, postage prepaid, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the other):
If to the Company:
Huhtamaki Oy
Lansituulentie 7
02100 ESP00
Finland
(011) 358-9-6868-81 (telephone)
(011) 358-9-6868-8222 (telecopier)
If to East:
G. Kenneth Baum
c/o George K. Baum & Company
Twelve Wyandotte Plaza
120 West 12th Street
Kansas City, MO 64105
(816) 474-1100 (telephone)
(816) 283-5325 (telecopier)
6.2 Section Headings. The section heading contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
6.3 Amendments; No Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and East, or in the
case of a waiver, by the party
7
<PAGE>
against whom the waiver is effective. 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 right, power or privilege.
6.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Missouri.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instruments.
6.6 Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, provided
that no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties
hereto.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
SEALRIGHT CO., INC.
By________________________________
Name:
Title:
SEALRIGHT MANUFACTURING EAST, INC.
By________________________________
Name:
Title:
9
<PAGE>
EXHIBIT 2.1(b)
INTELLECTUAL PROPERTY LICENSE AGREEMENT
---------------------------------------
This Intellectual Property License Agreement ("License Agreement")
dated ________ __, 1998 (the "Effective Time") is between Sealright Co., Inc., a
Delaware corporation ("Licensor") and [Flexible Co.], a Delaware corporation
("Licensee"). All capitalized terms used in this License Agreement and not
otherwise defined below in Section I shall have the respective meanings given
such terms in the Merger Agreement (defined below).
WHEREAS, Huhtamaki Oy, a corporation organized under the laws of
Finland, and its wholly owned subsidiary, Seal Acquisition Corporation, a
Delaware corporation ("Seal") have entered into the Merger Agreement dated March
2, 1998, (the "Merger Agreement") providing for the merger of Licensor with
Seal;
WHEREAS, the Merger Agreement provides that all the capital stock of
[Flexible Co.], a wholly owned subsidiary of Licensor, will be distributed to
the stockholders of Licensor as of the Effective Time;
WHEREAS, Licensor is the owner of and has the right to license the
trademarks, service marks and trade names and those registrations and
applications for registration related to any of the foregoing, listed on
Schedule A attached hereto and the goodwill associated therewith (individually,
a "Mark" and collectively, the "Marks") that prior to the Effective Time, have
been used by Licensor in connection with the Flexible Business;
WHEREAS, Licensee wishes to use the Marks only in the Flexible
Packaging Industry (defined below);
WHEREAS, Licensor has agreed to allow such usage on a limited basis on
the terms and conditions hereafter set forth in this License Agreement; and
WHEREAS, this License Agreement is a condition to the consummation of
the Transactions contemplated by the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this License Agreement as well as in the Merger Agreement, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agrees as follows:
I. Definitions.
a. "Affiliate" means, with respect to any corporation, partnership,
organization or any other entity ("Person"), any other Person controlling,
controlled by or under common control with such Person, where "control" means
the possession, directly or indirectly, of the power to direct the management
and policies of a Person whether through the ownership of voting securities,
contract or otherwise.
b. "Competitor" means a Person that competes with the business of
Licensor (other than the Flexible Business) in effect as of the Effective Time
and that derived more than twenty-
<PAGE>
five percent (25%) of its net revenues for the fiscal year immediately preceding
the attempted assignment of this License Agreement by Licensee to such Person
pursuant to Section VII from such competitive business.
c. "Flexible Packaging Industry" means the business of manufacturing and
selling (a) flexible packaging and labels for the food, dairy and beverage
market and (b) machines for the application of sleeve labels to plastic bottles.
II. License Grant.
-------------
a. Scope. Subject to the terms and conditions set forth herein, Licensor
hereby grants to Licensee and its Affiliates a royalty-free worldwide,
indivisible right and license to use the Marks solely in the Flexible Packaging
Industry.
b. Term and Duration. This License Agreement shall come into effect on
the Effective Time and shall continue thereafter for a period of six (6) months
(the "License Period").
III. Termination.
a. Termination. In the event that one party determines that the other
has committed a material breach of a provision of this License Agreement, such
party may provide written notice to the breaching party ("Breach Notice")
specifying the material breach complained of in reasonable detail and requiring
the other party to rectify such breach. The breaching party shall then have
thirty (30) days from receipt of the Breach Notice to cure such breach (the
"Initial Cure Period") or, if such material breach is such that it cannot be
cured within the Initial Cure Period but is capable of being cured within a
reasonable time not to exceed thirty (30) days afterwards, to begin to cure such
breach within the Initial Cure Period and thereafter to proceed diligently to
complete the cure of the breach within a reasonable time period. If such
material breach is not cured pursuant to this Section III(a), this License
Agreement shall automatically terminate.
b. Termination Upon Bankruptcy. Notwithstanding the above, this License
Agreement shall terminate automatically with respect to Licensee and its
Affiliates without the Initial Cure Period if Licensee seeks protection from
creditors or enters into receivership or bankruptcy or in the event of any
affirmative act of insolvency by Licensee.
c. Effect of Termination. On or before the expiration or termination by
Licensee of this License Agreement, or within a commercially reasonable time
after termination of this License Agreement for breach by Licensee pursuant to
Section III(a): (i) Licensee and its Affiliates shall completely cease all use
of the Marks (or any of their formatives or derivatives or any modified Marks,
subject to Section IV(a)(iii) below), including but not limited to use of the
Marks in the Flexible Packaging Industry, and all use of any trademark,
servicemark, tradename or trade dress that is confusingly similar to the Marks
or the modified Marks; and (ii) Licensee and its Affiliates shall change any
internet site or local, state and national telephone or trade directories in the
next printing of such directories and to amend any registration or certificate
with any governmental authority and their corporate names so as to delete the
Marks or take any other commercially reasonable action so as to not lead anyone
to believe or confuse anyone into believing there is any services or goods or
source affiliation between Licensor and Licensee.
2
<PAGE>
IV. Ownership Of The Marks; Quality Assurances.
a. Licensor's Ownership.
(i) Licensee acknowledges Licensor's right, title and interest in
and to the Marks and the goodwill associated with the Marks. Licensee shall
not represent in any manner that it has ownership in the Marks. Licensee
acknowledges that use of the Marks shall not create any ownership, rights,
goodwill, title or interest in Licensee, but that all such use by Licensee
shall inure to the sole benefit of Licensor. Licensee shall use the Marks
in such a manner as to preserve and protect the rights and interest of
Licensor therein. Licensee acknowledges that it will not during the term of
this License Agreement or anytime thereafter register or apply for
registration of the Marks anywhere in the world, or take any action
whatsoever to contest the validity of the Marks, Licensor's ownership of
the Marks or which in any way diminishes Licensor's ownership, validity or
use of the Marks.
(ii) Licensee agrees that upon the expiration or termination of this
License Agreement, Licensor shall hold all rights and goodwill to the
Marks, formatives, derivatives or modification (subject to Section
IV(a)(iii) below) for all services and goods. Licensee agrees to execute
such documents and consents to enter into agreements or assist in any
reasonable manner, at Licensor's expense, after the termination or
expiration of this License Agreement to insure the validity or ownership of
the Marks to Licensor.
(iii) Notwithstanding anything in this License Agreement to the
contrary, Licensee or its Affiliates' use of any of the Marks in
combination with a name, mark or logo that do not contain the word
"SEALRIGHT" to which the Licensee or its Affiliates otherwise have rights
shall not be deemed a grant to Licensor of any rights in or to such name,
mark or logo and Licensee and its Affiliates may continue to use such name,
mark or logo after the termination or expiration of this License Agreement.
Notwithstanding the above, Licensee shall not use the Marks in combination
with any name, mark or logo such that the total combination is likely to
cause confusion that Licensee does business outside of the Flexible
Packaging Industry.
b. Quality Standards. Licensee and its Affiliates shall use and display
the Marks (including in connection with the promotion and advertising of
products and services) only in accordance with the laws and regulations that are
applicable within the United States, Canada and such other places where the
Marks are or may hereafter be in use by Licensee and its Affiliates and further
agrees to never use the Marks in any manner which would reasonably be expected
to dilute or genericize or impair the validity of the Marks. Licensee shall use
the Marks in connection with goods and services of a quality, which at a
minimum, is equal to those previously manufactured, supplied or provided by
Licensor or its Subsidiaries in the Flexible Business.
c. Further Action. The parties shall execute such documents and consents
and take such other action as may be necessary to complete the registrations of
Marks pending with the respective registration authorities as of the Effective
Time.
3
<PAGE>
V. Warranties.
Licensor warrants that: (i) it has the full right, power and authority to
enter into this License Agreement; and (ii) it has not previously assigned,
transferred, conveyed or otherwise encumbered the rights granted in this License
Agreement.
VI. Infringement.
a. Notification. Each party shall notify the other pursuant to the
notification provision in Section IX in the event that such party learns of any
reasonably significant infringement of the Marks in the Flexible Packaging
Industry within ten business (10) days of such party's knowledge of such
infringement.
b. Infringement Within the Flexible Packaging Industry. Licensor may at
its sole option elect to bring an action against any apparent infringement of
the Marks within the Flexible Packaging Industry. In such event, and at
Licensor's expense, Licensee shall cooperate fully with Licensor and execute
such documents and consents and take all steps reasonably necessary to assist in
such action. Licensee, its Affiliates, officers, agents and employees shall be
fully indemnified and be held harmless by Licensor from any liability, loss,
damage or expense, including reasonable attorney's fees of any type arising from
Licensor brining such action. In the event that Licensor elects not to bring
such an action, it must promptly notify Licensee and Licensee shall have the
right to bring an action at its option and expense. Licensor, its Affiliates,
officers, agents and employees shall be fully indemnified and be held harmless
by Licensee from any liability, loss, damage or expense, including reasonable
attorney's fees of any type arising from Licensee bringing such action. In the
event that Licensee brings such action, at Licensee's expense, Licensor shall
cooperate fully with Licensee and execute such documents and consents and take
all steps reasonably necessary to assist in such action. Any proceeds which
either party receives by virtue of a successful action against or settlement
with an apparent infringer within the Flexible Packaging Industry shall first be
used to reimburse the costs (including legal fees) of the party that brought the
action, then to reimburse the costs (including legal fees) that the other party
bore, if any, in connection with the action, and any remaining proceeds shall be
for the benefit of the party that brought such action.
VII. Assignment/Sublicense.
Licensee shall not, without the prior written consent of Licensor (which
consent may be granted or withheld at Licensor's sole discretion) assign,
transfer, or sublicense this License Agreement or any of its rights or
obligations hereunder, except that Licensee, without Licensor's consent, may:
(i) grant sublicenses or assign any of its rights or obligations hereunder to
any of its controlled Affiliates for use in the Flexible Packaging Industry; and
(ii) assign or license the rights and obligations under this License Agreement
for collateral security purposes to any lender providing financing to Licensee
or its Affiliates, provided that such lender is bound by the termination
provisions contained in this License Agreement. In addition, Licensee may assign
its rights and obligations under this License Agreement to any purchaser of
Licensee's business to which this License Agreement relates ("Assignee"), other
than a "Prohibited Assignee" (as set forth below), upon thirty (30) days written
notice to Licensor informing it of the identity of such Purchaser. A "Prohibited
Assignee" shall be (x) a Competitor or (y) any Person that the Board of
Directors of Licensor determines in good faith after reasonable inquiry is
likely, as a result of such
4
<PAGE>
assignment, to significantly and adversely affect the reputation or goodwill of
Licensor or its Marks, provided, however, that such Person shall not be deemed
to be a Prohibited Assignee unless within thirty (30) days after receiving
notice from the Licensee of the identity of the Assignee, the Licensor's Board
of Directors shall (i) make the determination specified above and (ii) provide
Licensee with a list of all of its reasons for such determination. Licensor may
assign this License Agreement and its rights or obligations hereunder without
Licensee's prior consent, provided such assignment is in conjunction with
Licensor's assignment of the Marks as a whole and provided further that such
assignee agrees in writing to be bound by the terms and conditions of this
License Agreement.
VIII. Modification/Waiver.
a. Modification. This License Agreement may be modified only in writing
signed by both Licensor and Licensee. Neither Licensor's nor Licensee's failure
to enforce any of the provisions of this License Agreement shall constitute a
waiver of its rights to later enforce such terms or conditions.
b. Waiver. Any waiver under this License Agreement must be in writing
and signed by the party to be charged therewith.
IX. Notices.
Any notice, communications or payment given or required in connection with
this License Agreement shall be considered sufficient and effective as set forth
in Section 11.6 (Notices) of the Merger Agreement.
X. Governing Law.
This License Agreement shall be construed under the laws of the State of
Delaware without regard to its conflict of laws.
XI. Entire Agreement.
This License Agreement and the Merger Agreement, and any exhibits and
schedules attached hereto or thereto, constitute the entire agreement of the
parties with respect to the subject hereof, and supersede all prior
understandings, agreements and oral representations and warranties of the
parties with respect to the subject matter of this License Agreement. Any
reference in this License Agreement shall be deemed to include any exhibits and
schedules. If there is any conflict or inconsistency between the terms of this
License Agreement and the Merger Agreement, then the terms of this License
Agreement shall control.
XII. Severability Of Provisions.
In the event that any provision or paragraph of this License Agreement
shall be found to be unlawful or a violation of public policy or for any other
reason unenforceable in law, such finding shall in no way invalidate any other
provisions or sections of this License Agreement.
5
<PAGE>
XIII. Confidentiality.
Each party agrees that it will not use for its own purposes or disclose
to any third party (other than for purposes of enforcing this Agreement subject
to an appropriate confidentiality order) any confidential information (including
without limitation advertising or promotional materials, or other marketing or
business information) disclosed to it (the "Receiving Party") by the other party
pursuant to this Agreement unless and to the extent that the aforementioned
matters become generally known to and available for use by the public other than
as a result of the Receiving Party's acts or omissions to act or to the extent
otherwise required by law.
XIV. Headings.
All headings used in this License Agreement are for reference purposes only
and shall not be deemed to have any substantive effect.
XV. Counterparts.
This License Agreement may be executed in one or more counterparts each of
which shall be deemed to be an original and all of which shall be deemed to have
been executed simultaneously.
IN WITNESS WHEREOF, the parties have signed this License Agreement through
their duly authorized representatives, as of the date first hereinabove written.
SEALRIGHT CO., INC. [Flexible Co.]
By: By:
______________________ ______________________
Name: Name:
______________________ ______________________
Title: Title:
______________________ ______________________
6
<PAGE>
SCHEDULE A
Issued and Active Trademark Registrations
-----------------------------------------
<TABLE>
<CAPTION>
Case ID # Registration # Issue Date Trademark Class Country Ownership
- --------- -------------- ---------- --------- ----- ------- ---------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEACO 0,133,812 08/03/20 Sealright U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO 0,227,019 04/26/27 Liftright U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO 0,381,524 09/24/40 SSS & DES. U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO224 0,869,867 05/27/69 Sealright U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO386 1,007,407 03/25/75 SR DES. 21 U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO363 1,009,241 04/22/75 SR DES. U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO172 1,225,003 01/25/83 SR & DES. U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO311 1,887,480 04/04/95 Sealright 37 U.S.A. Sealright Co., Inc.
- ----------------------------------------------------------------------------------------------------------------------------
SEACO312 1,890,194 04/18/95 SR Sealright & 37 U.S.A. Sealright Co., Inc.
Design
============================================================================================================================
</TABLE>
Pending U.S. Trademark Applications
-----------------------------------
<TABLE>
<CAPTION>
Application
Case ID # Serial # File Trademark Class Country Ownership
- --------- ----------- ---- --------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
SEACO415 033,023 12/15/95 Sealright & Design 16, 20, 21 U.S.A. Sealright Co., Inc.
- -------------------------------------------------------------------------------------------------------
SEACO416 038,697 12/29/95 Sealright & Design 7 U.S.A. Sealright Co., Inc.
- -------------------------------------------------------------------------------------------------------
SEACO417 038,696 12/29/95 Sealright & Design 7 U.S.A. Sealright Co., Inc.
- -------------------------------------------------------------------------------------------------------
SEACO419 038,698 12/29/95 Sealright & Design 37 U.S.A. Sealright Co., Inc.
- -------------------------------------------------------------------------------------------------------
SEACO424 064,446 02/27/96 S Logo 20, 21 U.S.A. Sealright Co., Inc.
=======================================================================================================
</TABLE>
Issued and Active Foreign Trademark Registrations
-------------------------------------------------
<TABLE>
<CAPTION>
Case ID # Registration # Issue Date Trademark Class Country Ownership
- --------- -------------- ---------- --------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
SEACO920 64299 05/08/79 Sealright 4+ Austria
- ---------------------------------------------------------------------------------------
SEACO945 82779 12/17/71 Sealright 6+ Benelux
- ---------------------------------------------------------------------------------------
SEACO913 152/34240 09/21/23 Sealright Canada
- ---------------------------------------------------------------------------------------
SEACO997 39112/11961 05/23/84 Sealright 16 Costa Rica
- ---------------------------------------------------------------------------------------
SEACO996 39146/11962 06/11/84 Sealright 7 Costa Rica
- ---------------------------------------------------------------------------------------
SEACO944 3087/1969 11/07/69 Sealright 6+ Denmark
- ---------------------------------------------------------------------------------------
SEACO998 57837 01/05/81 Sealright 6+ Finland
- ---------------------------------------------------------------------------------------
SEACO801 1053011 06/09/78 Sealright 7+ France
- ---------------------------------------------------------------------------------------
SEACO 1470409 06/09/88 Sealright 7+ France
- ---------------------------------------------------------------------------------------
SEACO939 885971 02/05/79 Sealright 16+ Germany
- ---------------------------------------------------------------------------------------
SEACO925 52870 07/29/68 Sealright 7+ Italy
- ---------------------------------------------------------------------------------------
SEACO 546551 07/29/68 Sealright 7+ Italy
- ---------------------------------------------------------------------------------------
SEACO810 1906816 10/28/86 Sealright J18 Japan
w/Katakana
=======================================================================================
</TABLE>
<PAGE>
<TABLE>
===========================================================================================================
Case ID # Registration # Issue Date Trademark Class Country Ownership
- --------- -------------- ---------- --------- ----- ------- ---------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEACO 39985 03/17/81 Cis-4 Lebanon
- -----------------------------------------------------------------------------------------------------------
SEACO811 77028 07/31/79 Sealright 6+ Norway
- -----------------------------------------------------------------------------------------------------------
SEACO984 580479 03/28/71 Sealright 20 Spain
- -----------------------------------------------------------------------------------------------------------
SEACO985 580480 03/31/71 Sealright 21 Spain
- -----------------------------------------------------------------------------------------------------------
SEACO983 580478 05/10/71 Sealright 17 Spain
- -----------------------------------------------------------------------------------------------------------
SEACO973 580477 05/10/72 Sealright 16 Spain
- -----------------------------------------------------------------------------------------------------------
SEACO915 580476 06/25/73 Sealright 7 Spain
- -----------------------------------------------------------------------------------------------------------
SEACO162 136072 08/06/81 Sealright 6+ Sweden
===========================================================================================================
</TABLE>
2
<PAGE>
Exhibit 2.1(C)
June 30, 1998
Sealright Co., Inc.
9201 Packaging Drive
DeSoto, KS 66018
--and--
Huhtamaki Oy
Lansituulentie 7
02100 ESP00
FINLAND
Dear Sirs:
In connection with the Agreement and Plan of Merger by and among
Huhtamaki Oy, Seal Acquisition Corporation ("Seal") and Sealright Co., Inc.
("Sealright"), dated as of March 2, 1998 (the "Merger Agreement") and other
documents related thereto, we would like to set forth our understanding and
agreement regarding the provision of certain services and products between
Sealright and JPS Packaging Company ("JPS"). In connection therewith, it is our
understanding that to the extent reasonably requested by JPS, Sealright will
provide the following services:
1. Information Systems/Computer, including:
. Payroll
. Bank Reconciliation
. Human Resources
. Accounts Payable
. General Ledger
. Invoicing and Accounts Receivable
. Fixed Assets
. Office Support Systems
. Other related services the parties may agree upon
*Additional required software licensing costs will be
paid by JPS.
2. Human Resources
3. Accounting
4. Treasury and Credit/Collection
In addition, the parties will provide to each other certain products.
To the extent reasonably requested by JPS, Sealright will manufacture Styrotech
machines, and to the extent reasonably requested by Sealright, JPS will
manufacture and supply certain aseptic lidding products, subject to customary
terms and conditions of sale.
The term of this letter agreement ("Agreement") and the provision of
services and products hereunder shall be for a period of ninety (90) days
commencing as of the closing date of the Merger contemplated by the Merger
Agreement. At the request of JPS, this Agreement may be renewed for an
additional ninety day (90) period (the "Renewal Period"). Costs and charges for
any services provided
1
<PAGE>
hereunder, excluding the Lease, will be based upon the service or product
provider's actual direct costs and will not include indirect or overhead costs,
except that during the Renewal Period, if applicable, Sealright may charge JPS
twice the cost for any such services performed during such period. Charges for
any services performed or products provided hereunder will be billed to the
appropriate party at the end of the initial ninety (90) day term (and, if
applicable, at the end of the Renewal Period) and such bills shall include a
reasonable breakdown of actual direct costs incurred.
Sealright and JPS shall perform all services and manufacture all
products hereunder as independent contractors, and nothing in this Agreement or
in its performance shall create any employment, joint venture or agency
relationship between them. All notices, requests for services or other matters
related to this Agreement shall be made to John T. Carper at JPS and to
_______________________ at Sealright, respectively. Huhtamaki agrees to
cooperate with the terms of this Agreement and, to the extent Sealright fails
to perform hereunder, to cause Sealright to so perform. This Agreement shall be
governed by and construed in accordance with the laws of the State of Kansas.
If you are in agreement with the foregoing, please sign a copy of this
Agreement and return it to me, whereupon this Agreement shall constitute a valid
and binding agreement.
JPS PACKAGING COMPANY
By:_______________________________
John T. Carper, President
AGREED AND ACCEPTED this ___
day of ______, 1998 by:
SEALRIGHT CO., INC.
By:__________________________
Name:
Title:
HUHTAMAKI OY
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
2
<PAGE>
Exhibit 2.2
REORGANIZATION AGREEMENT
This Reorganization Agreement (the "Agreement"), dated as of April 30,
1998, by and among Sealright Co., Inc., a Delaware corporation ("Sealright"),
JPS Packaging Company, a Delaware corporation ("Flexible"), Sealright
Manufacturing - West, Inc., a Missouri corporation ("West") and Sealright
Packaging Company, a Kansas corporation ("Packaging").
RECITALS
A. Sealright holds all the issued and outstanding capital stock of West and
Packaging.
B. West holds all the issued and outstanding capital stock of Flexible and
Venture Packaging, Inc., a North Carolina corporation ("Venture").
C. Sealright, Huhtamaki Oy, a corporation organized under the laws of
Finland ("Huhtamaki") and Seal Acquisition Corporation, a Delaware corporation
("Acquisition Sub"). are parties to that certain Agreement and Plan of Merger
dated as of March 2, 1998 (as may be amended from time to time, the "Merger
Agreement"), pursuant to which Acquisition Sub will merge with and into
Sealright with Sealright being the surviving corporation and wholly-owned
indirectly by Huhtamaki (the "Merger").
D. Sealright, Flexible, West and Packaging each desire to agree to and
effectuate the transactions and actions herein described to create within
Sealright and its subsidiaries an organizational structure whereby certain
flexible packaging and other assets and certain related liabilities owned or
incurred, respectively, directly or indirectly by Sealright will be assigned to
and assumed by Flexible as permitted by Section 8.1(e) of the Merger Agreement
(the "Reorganization").
E. The Reorganization is permitted under the Merger Agreement as a
"Permitted Restructuring" as defined in the Merger Agreement, and Huhtamaki and
Acquisition Sub have indicated their consent and acknowledgment thereof.
F. The Reorganization is intended to qualify for non-recognition treatment
under Section 351 of the Code (hereinafter defined).
G. The parties hereto have determined that it is necessary and desirable to
set forth the principal corporate transactions required to effect the
Reorganization and the other transactions contemplated hereby and to set forth
other agreements that will govern certain other matters relating to the
Reorganization.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound thereby, the
parties agree as follows:
1
<PAGE>
DEFINITIONS
1.1 General. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
Acquisition Sub: as defined in the recitals to this Agreement.
Action: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any arbitration or other tribunal.
Affiliate: with respect to any specified Person, an "affiliate" as
defined in Rule 405 promulgated pursuant to the Securities Act (as hereinafter
defined); provided, however, that for purposes of this Agreement (i) Affiliates
of the Flexible Group shall not be deemed to include the Sealright Rigid Group,
and (ii) Affiliates of the Sealright Rigid Group shall not be deemed to include
the Flexible Group.
Agreement: as defined in the preamble to this Agreement.
Ancillary Agreements: all the agreements, instruments, understandings,
assignments and other arrangements (excluding the Merger Agreement) entered into
in connection with the transactions contemplated hereby, including, without
limitation, the Letter Agreement.
Closing: as defined in the Merger Agreement.
Closing Date: as defined in the Merger Agreement.
Code: the Internal Revenue Code of 1986, as amended, or any successor
statute or law.
Collective Bargaining Agreement: any collective bargaining or other
labor agreement to which any member of either Group is a party.
Contract: any written or oral contract, agreement, lease, indenture or
evidence of indebtedness.
Delayed Asset: as defined in Section 3.3 of this Agreement.
Delayed Liability: as defined in Section 3.3 of this Agreement.
2
<PAGE>
DeSoto Facility: Sealright's facility (including manufacturing,
warehouse and office space) located at 9201 Packaging Drive, DeSoto, Kansas.
Effective Time: The date and time at which the Certificate of Merger
has been duly filed with the Secretary of State of the State of Delaware or such
other time as is agreed upon by the parties to the Merger Agreement and
specified in the Certificate of Merger, as such terms are defined in the Merger
Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
Exchange Act: the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
Flexible: as defined in the preamble to this Agreement.
Flexible Assets: The stock of Flexible and those assets of Sealright
and its subsidiaries used exclusively in the Flexible Business, and described on
Schedule 1.1 of the Merger Agreement.
Flexible Business: The business of manufacturing and selling flexible
packaging and labeling for the food, dairy and beverage market (excluding
Sealright's Australian operations), and machines for the application of sleeve
labels to plastic bottles, operated by Sealright, directly and through certain
of its subsidiaries.
Flexible Collective Bargaining Agreements: The following collective
bargaining agreements related to the Akron, Ohio facility and the San Leandro,
California facility:
A. Agreement between Flexible and International Chemical Workers Union
and its Local No. 1033 dated November 18, 1993 (Akron); and
B. Agreement between Sealright and Warehouse, Mail Order and Retail
Employees, Local Union 853, IBT dated February 1, 1998 (San Leandro).
Flexible Employee: any individual who on the Reorganization Date is an
officer or employee of Flexible or Venture.
Flexible Group: Flexible and Venture, after giving effect to the
Reorganization.
Flexible Liabilities: those liabilities directly and exclusively
related to the Flexible Assets and the Flexible Business described on Schedule
1.2 of the Merger Agreement.
Group: the Flexible Group or the Sealright Rigid Group, as the context
requires.
Huhtamaki: as defined in the recitals to this Agreement.
3
<PAGE>
Information: as defined in Section 6.2 of this Agreement.
IRS: the Internal Revenue Service.
Letter Agreement: the letter agreement dated March 2, 1998 by and
between Huhtamaki and Sealright regarding unallocated expenses, unallocated
personnel and transfer pricing.
Merger Agreement: as defined in the recitals to this Agreement.
Other Flexible Assets: As held by Sealright or any of its Subsidiaries
(excluding Flexible or Venture), the following:
A. all interests in, and rights and benefits accruing under customer,
supplier, employee and other contracts and agreements relating directly and
exclusively to the Flexible Business, as listed on Appendix C to Schedule
1.1 of the Merger Agreement;
B. all personal property, including prints and drawings used directly
and exclusively in the Flexible Business;
C. all machinery and equipment used directly and exclusively in the
Flexible Business;
D. all accounts receivable relating directly and exclusively to the
Flexible Business outstanding;
E. all inventory (including finished goods and spare parts) relating
directly and exclusively to the Flexible Business;
F. all intellectual property relating directly and exclusively to the
Flexible Business, as listed on Appendix D to Schedule 1.1 of the Merger
Agreement;
G. all goodwill and other intangible assets relating directly and
exclusively to the Flexible Business;
H. all tax assets related directly and exclusively to the Flexible
Business, including but not limited to tax refunds or credits, to the
extent permitted under the United States Treasury Regulations and to the
extent not otherwise paid or allocated to the Flexible Business pursuant to
Section 2.3 of the Tax Procedures Agreement;
I. all idle manufacturing equipment previously used in the Flexible
Business and not currently used in the operations of Sealright's business
and previously identified for sale located at the DeSoto Facility, and any
after-tax proceeds received therefrom since December 31, 1997, with the
major items of such equipment being described on Appendix E to Schedule 1.1
of the Merger Agreement.
4
<PAGE>
J. all other assets, properties and rights relating directly and
exclusively to the Flexible Business, including but not limited to those
listed on Appendix F to Schedule 1.1 of the Merger Agreement.
Packaging: as defined in the preamble to this Agreement.
Packaging Flexible Contracts: The following contracts to which Packaging is a
party:
A. Transpeed Express & Distribution Co. Letter Agreement dated
February 16, 1997;
B. KBIB Pouch Purchase Order Contract with Hunt Wesson, Inc. dated
September 20, 1994;
C. Sales Representative Agreement with Gamma Ingenieria S.A. dated
July 1, 1997;
D. Sales Representative Agreement with Policentro San Luis S.A. dated
July 1, 1997; and
E. Distributorship Agreement with General Labels & Labeling (M)
SDN.BHD dated April 1, 1997.
Person: an individual, a partnership, a joint venture, a corporation,
a limited liability company, a trust or other entity, an unincorporated
organization or a government or any department or agency thereof.
Plan: any plan, policy, arrangement, contract or agreement providing
benefits (including salary, bonuses, deferred compensation, incentive
compensation, savings, stock purchases, pensions, profit sharing, welfare
benefits or retirement or other retiree benefits, including retiree medical
benefits) for any group of employees or former employees or individual employee
or former employee, or the beneficiary or beneficiaries of any such employee or
former employee, whether formal or informal or written or unwritten and whether
or not legally binding, and including any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
employee or former employee or the beneficiary or beneficiaries of any such
employee or former employee.
Qualified Plan: a Plan which is an employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) and which constitutes or is
intended in good faith to constitute a qualified plan under Section 401(a) of
the Code.
Raleigh Office: the office facility located at 831 Purser Drive,
Raleigh, North Carolina and leased indirectly by West pursuant to the Raleigh
Office Lease.
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Raleigh Office Lease: the office lease dated July 1, 1997, between
Alton Glenn Holland, Jr. and Styrotech Machines, a division of Sealright
International, a division of West.
Reorganization: as defined in the recitals to this Agreement.
Reorganization Date: April 30, 1998 or such later date as may be
agreed in writing by the parties hereto, as of which the Reorganization shall be
effected.
Reorganization Time: the close of business on the Reorganization Date.
San Leandro Accounts: all accounts receivable or accounts payable
relating directly and exclusively to the operations conducted at the San Leandro
Facility outstanding as of the Reorganization Time.
San Leandro Assets: the San Leandro Facility, the San Leandro
Warehouse, the San Leandro Warehouse Lease, the San Leandro Property, the San
Leandro Inventory and the San Leandro Accounts.
San Leandro Facility: the manufacturing facility located at 2450
Alvarado Road, San Leandro, California, owned in fee simple by West.
San Leandro Inventory: all inventory (including finished goods, spare
parts and work in progress) related directly and exclusively to the operations
at the San Leandro Facility located at the San Leandro Facility, the San Leandro
Warehouse or elsewhere, as of the Reorganization Time.
San Leandro Property: all equipment, machinery and personal property
located at the San Leandro Facility and the San Leandro Warehouse, as listed on
Appendix A to Schedule 1.1 of the Merger Agreement.
San Leandro Warehouse: the warehouse facility located at 761 Montague
Avenue, San Leandro, California leased by West pursuant to the San Leandro
Warehouse Lease.
San Leandro Warehouse Lease: the warehouse lease dated March 10, 1987,
as amended, between Rudolph Reich and Mary A. Barry and Indopak d/b/a Packaging
Industries, Inc. (now known as Sealright Manufacturing-West, Inc.).
Sealright: as defined in the preamble to this Agreement.
Sealright Flexible Contracts: The contracts to which Sealright is a
party relating directly and exclusively to the Flexible Business, including but
not limited to those listed on Appendix C to Schedule 1.1 of the Merger
Agreement, and also the following:
A. Asceptic Lidding Requirements Contract with Kraft Foods dated
April 8, 1997;
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B. Sole Source Contract with Baxter Foods dated March, 1997;
C. Sole Source Contract with Purity Dairies dated October, 1997; and
D. Sole Source Contract with Southern Foods Group dated March, 1997.
Sealright-Held Flexible Intellectual Property: the intellectual
property described in Appendix D to Schedule 1.1 of the Merger Agreement as
being owned by Sealright.
Sealright Rigid Group: Sealright and all other direct and indirect
subsidiaries of Sealright (other than Flexible and Venture), after giving effect
to the Reorganization.
Sealright Rigid Group Collective Bargaining Agreements: Any Collective
Bargaining Agreement except for the Flexible Collective Bargaining Agreements.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended, together with
the rules and regulations promulgated thereunder.
Styrotech Accounts: all accounts receivable or accounts payable
relating directly and exclusively to the Styrotech Operations conducted at the
DeSoto Facility.
Styrotech Assets: the Styrotech Operations, the Raleigh Office Lease,
the Styrotech Property, the Styrotech Accounts and the Styrotech Inventory.
Styrotech Inventory: all inventory (including finished goods, spare
parts and work in progress) related directly and exclusively to the Styrotech
Operations located at the DeSoto Facility, or elsewhere.
Styrotech Operations: the business conducted by Sealright and its
Subsidiaries of manufacturing and selling machines for the application of sleeve
labels to plastic bottles.
Styrotech Property: all equipment, machinery and personal property
located at the Raleigh Office or elsewhere, used directly and exclusively in the
Company's Flexible Business, as listed on Appendix B to Schedule 1.1 of the
Merger Agreement.
Subsidiary: with respect to any specified Person, any corporation or
other legal entity of which such Person or any of its Subsidiaries controls or
owns, directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote on the election of members to the board of directors
or similar governing body of such corporation or other legal entity.
Venture: as defined in the recitals to this Agreement.
Venture Stock: all the outstanding capital stock of Venture.
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West: as defined in the preamble to this Agreement.
West Flexible Contracts: Those contracts or agreements to which West
is a party, related directly and exclusively to the Flexible Business, including
but not limited to those contracts listed on Appendix C to Schedule 1.1 of the
Merger Agreement, and including the following:
A. Warehouse Storage and Services Agreement dated December 23, 1991
with Chicagoland - Quad Cities Express, Inc.
West-Held Flexible Intellectual Property: the intellectual property
described in Appendix D to Schedule 1.1 of the Merger Agreement as being owned
by West.
1.2 References to Time. All references to times of the day in this
Agreement shall refer to Kansas City, Missouri time.
ARTICLE II
REINCORPORATION OF EAST AS A DELAWARE CORPORATION
Prior to the date hereof and as permitted by Section 8.1(e) of the
Merger Agreement, Sealright has caused the merger of Sealright Manufacturing-
East, Inc., an Ohio corporation, into a new shell Delaware corporation
("Newco"), with Newco being the surviving corporation and taking the name "JPS
Packaging Company" and being referred to herein as "Flexible".
ARTICLE III
CONTRIBUTION AND ASSUMPTION OF ASSETS AND LIABILITIES
3.1 Contribution of the Flexible Assets. Upon the terms and subject
to the conditions of this Agreement:
(a) Packaging shall assign, transfer, convey and dividend to
Sealright, effective immediately prior to the Reorganization Time, all of
Packaging's right, title and interest in, to and under the Packaging
Flexible Contracts;
(b) Sealright shall assign, transfer, convey and contribute to
West, effective immediately prior to the Reorganization Time, all of
Sealright's right, title and interest in, to and under the Sealright-Held
Flexible Intellectual Property;
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(c) Sealright shall assign, transfer, convey and contribute to
West, effective immediately prior to the Reorganization Time, all of
Sealright's right, title and interest in, to and under the Sealright
Flexible Contracts;
(d) Sealright shall assign, transfer, convey and contribute to
West, effective immediately prior to the Reorganization Time, all of
Sealright's right, title and interest in and to the Other Flexible Assets
owned by Sealright;
(e) Sealright shall assign, transfer, convey and contribute to
West, effective immediately prior to the Reorganization Time, all of
Sealright's right, title and interest in, to and under the Packaging
Flexible Contracts which it receives pursuant to clause (a) above;
(f) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under (i) the Sealright-Held
Flexible Intellectual Property which it receives pursuant to clause (b)
above and (ii) the West-Held Flexible Intellectual Property;
(g) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under (i) the Sealright
Flexible Contracts which it receives pursuant to clause (c) above and (ii)
the West Flexible Contracts;
(h) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under (i) the Other Flexible
Assets which it receives pursuant to clause (d) above and (ii) the Other
Flexible Assets owned by West;
(i) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under the San Leandro Assets;
(j) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under the Styrotech Assets;
(k) West shall assign, transfer, convey and contribute to
Flexible, effective immediately prior to the Reorganization Time, all of
West's right, title and interest in, to and under the Venture Stock; and
(l) West shall assign, transfer, convey and contribute to
Flexible, immediately prior to the Reorganization Time, all of West's
right, title and interest in each and every environmental permit, license
and identification number at any time issued to West by any federal, state
or local authority or agency, in respect of the Flexible Business to
Flexible.
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3.2 Assumption of the Flexible Liabilities. Upon the terms and
subject to the conditions of this Agreement, effective immediately prior to the
Reorganization Time, Flexible shall assume and agree to pay, perform and
discharge when due, the Flexible Liabilities, including the obligations to pay
stock option settlement amounts as set forth in Section 8.15 of the Merger
Agreement.
3.3 Delayed Assets and Liabilities.
(a) To the extent that any required consent or waiver with
respect to a Contract or other instrument included in the Flexible Assets
has not been obtained on or prior to the Reorganization Date, such Contract
or instrument (a "Delayed Asset") shall not be transferred hereunder, and
any related liability that constitutes a Flexible Liability (a "Delayed
Liability"), shall not be assumed hereunder by Flexible unless and until
such required consent or waiver has been obtained. Notwithstanding the
foregoing, if such a required consent or waiver is not obtained, the party
required to transfer such Delayed Asset will reasonably cooperate with the
party entitled to receive such Delayed Asset to attempt to provide such
party with the benefits under or of any such Delayed Asset as long as the
party entitled to receive such Delayed Asset shall assume, pay and perform
any corresponding Delayed Liabilities. Sealright, West, Packaging and
Flexible each agrees that, in any such event, they shall work in good faith
to cause such arrangement to reflect as nearly as possible the respective
benefits and obligations that would have been in effect had such consent or
waiver been obtained.
(b) At such time and on each occasion after the Reorganization
Date that a required consent or waiver shall be obtained with respect to a
Delayed Asset, such Delayed Asset shall forthwith be transferred and
assigned to the party entitled to receive it hereunder, and all related
Delayed Liabilities shall be simultaneously assumed by such party
hereunder, whereupon (i) such Delayed Asset shall constitute for all
purposes a Flexible Asset acquired hereunder and (ii) such Delayed
Liabilities shall constitute for all purposes a Flexible Liability assumed
hereunder.
3.4 Indemnification
(a) Flexible hereby indemnifies and holds the Sealright Rigid
Group harmless from and against any loss, liability, claim, action, cost
and expense (but specifically excluding incidental, indirect and
consequential damages and lost profits) that it may incur or suffer arising
out of any third party claim or demand (a "Loss") for payment or
satisfaction of any of the Flexible Liabilities.
(b) Sealright hereby indemnifies and holds the Flexible Group
harmless from and against any Loss for payment or satisfaction of any
liabilities of the Sealright Rigid Group (exclusive of any Flexible
Liabilities).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the parties to this Agreement represents and warrants to the
other parties as follows:
(a) Organization and Standing. Such party is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation.
(b) Authority; Execution; Enforceability. Such party has all
requisite power and authority to execute this Agreement and the Ancillary
Agreements to which it is or will be party (collectively, the Agreement and
such Ancillary Agreements are referred to herein as the "Reorganization
Documents") and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Reorganization
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Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of
such party and, to the extent required, by its stockholders. This Agreement
has been duly executed and delivered by such party and constitutes, and
each of the other Reorganization Documents will be duly executed and
delivered by such party on or prior to the Reorganization Date, and when so
executed and delivered will constitute, a legal, valid and binding
obligation of such party, enforceable against it in accordance with its
terms.
(c) No Conflict. The execution, delivery and performance by such
party of the Reorganization Documents will not contravene, violate, result
in a breach of or constitute a default under (x) any provision of
applicable law or of the organizational documents of such party (or its
Subsidiaries) or (y) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to such party (or its Subsidiaries) or any of
its properties or assets.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
All intercompany services provided prior to the Reorganization Date by
the Sealright Rigid Group to Flexible and/or Venture, and by the Flexible Group
to any member of the Sealright Rigid Group, respectively, shall terminate
(without cost) as of the Effective Time unless otherwise provided in any
Ancillary Agreement.
ARTICLE VI
ACCESS TO INFORMATION
6.1 Provision of Corporate Records. Prior to or as promptly as
practicable after the Reorganization Date, the Sealright Rigid Group shall
deliver to Flexible all corporate books and records of the Flexible Group in its
possession or control as well as copies or originals of all books, records and
data relating exclusively to the Flexible Business, the Flexible Assets or the
Flexible Liabilities, including, but not limited to, all books, records and data
relating to the purchase of materials, supplies and services, financial results,
sale of products, records of the Flexible Employees, commercial data, research
done by or for the Flexible Group or the Flexible Business, catalogues,
brochures, training and other manuals, sales literature, advertising and other
sales and promotional materials, maintenance records and drawings, all active
agreements, active litigation files and government filings. All such documents
located at the San Leandro Facility, the San Leandro Warehouse or the Raleigh
Office shall be deemed delivered to Flexible as of the Reorganization Date. To
the extent that originals of such books, records and data are provided to
Flexible, Flexible shall provide Sealright copies thereof as reasonably
requested for a valid and legitimate business interest, in writing, by
Sealright. From and after the Reorganization Date, all books, records and copies
so delivered shall be the property of Flexible. Notwithstanding the above,
Sealright shall not be required to make copies, other than pursuant to Section
6.2 of this
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Agreement, of any portion of any books, records or data to the extent such
portion relates exclusively to the assets, business or liabilities not related
or derivative to the Flexible Assets, the Flexible Business or the Flexible
Liabilities.
6.2 Access to Information. From and after the Reorganization Date,
the Sealright Rigid Group and the Flexible Group shall each afford to the other
and to the other's agents, employees, accountants, counsel and other designated
representatives, reasonable access and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information ("Information") within such party's possession relating to
such other party's businesses, assets or liabilities, insofar as such access is
reasonably required by such other party. Without limiting the foregoing, such
Information may be requested under this Section for audit, accounting, claims,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations.
6.3 Retention of Records. Except as otherwise required by law or
agreed in writing, or as otherwise provided in the Tax Procedures Agreement,
each of the Sealright Rigid Group and the Flexible Group shall retain, for a
period of at least seven years following the Reorganization Date, all
significant Information in such party's possession or under its control relating
to the business, assets or liabilities of the other party and, after the
expiration of such seven-year period, prior to destroying or disposing of any of
such Information, (a) the party proposing to dispose of or destroy any such
Information shall provide no less than 60 days prior written notice to the other
party, specifying the Information proposed to be destroyed or disposed of, and
(b) if, prior to the scheduled date for such destruction or disposal, the other
party requests in writing that any of the Information proposed to be destroyed
or disposed of be delivered to such other party, the party proposing to dispose
of or destroy such Information promptly shall arrange for the delivery of the
requested Information to a location specified by, and at the expense of, the
requesting party.
6.4 Confidentiality. From and after the Reorganization Date, the
Sealright Rigid Group, on one hand, and the Flexible Group, on the other hand,
shall hold, in strict confidence, all Information obtained from the other Group
prior to the Reorganization Date or furnished to it pursuant to this Agreement
or any other agreement referred to herein which solely relates to or concerns
solely the business conducted by such other Group, and such Information relating
solely to, or solely concerning said Group, shall not be used by it to the
detriment of the other Group, or disclosed by it or its agents, officers,
employees or directors without the prior written consent of such other Group
unless and to the extent that (a) disclosure is compelled by judicial or
administrative process or, in the opinion of such Group's counsel, by other
requirements of law, or (b) such Group can show that such Information was (i)
available to such Group on a nonconfidential basis prior to its disclosure by
the other Group, (ii) in the public domain through no fault of such Group, (iii)
lawfully acquired by such Group from other sources after the time that it was
furnished to such Group pursuant to this Agreement or any other agreement
referred to herein, or (iv) independently developed by such Group.
Notwithstanding the foregoing, each Group shall be deemed to have satisfied its
obligations of confidentiality under this Section with respect to any
Information concerning or supplied by the other Group if it exercises
substantially the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
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6.5 Reimbursement. Each member of either the Sealright Rigid Group or
the Flexible Group, respectively, providing Information pursuant to Sections 6.2
or 6.3 to any member of the other Group shall be entitled to receive from the
recipient, after the Merger and upon presentation of an invoice therefor,
payment of all out-of-pocket costs and expenses as may reasonably be incurred in
providing such Information.
ARTICLE VII
EMPLOYEE BENEFITS; LABOR MATTERS
7.1 Allocation of Employee Benefit Plan Responsibilities.
(a) Benefit Accruals Generally. Except to the extent provided to
the contrary elsewhere in this Article VII, as of the Closing Date, all
participation and continued accrual or provision of any benefits to any
Flexible Employee or any covered dependent or beneficiaries of any Flexible
Employee in any Plan sponsored by the Sealright Rigid Group shall cease.
Except to the extent provided to the contrary elsewhere in this Article
VII, in respect of Flexible Employees who terminate employment on or prior
to the Closing Date, the Sealright Rigid Group shall be solely responsible
for any and all benefits of all former Flexible Employees and/or any
covered dependents and/or beneficiaries of any Flexible Employees under any
Plan for which Sealright Rigid Group is the Plan sponsor on or after the
Closing Date.
(b) Change of Plan Sponsor and Named Fiduciary; Transfer and
Assumption of Liabilities. Except to the extent provided to the contrary
elsewhere in this Article VII, as of the Closing Date, Flexible and Venture
shall transfer to the Sealright Rigid Group and the Sealright Rigid Group
shall assume all of the liabilities and obligations (except for any breach
of any duty or obligation occurring prior to the Closing Date) of Flexible
and Venture in respect of the Retirement Income Plan of Sealright Co.,
Inc., the Sealright Co., Inc. Long Term Savings Plan, the Sealright Co.
Inc. Deferred Compensation Plan, the Stock Purchase Plan and all retiree
medical plans including, but not limited to, all liabilities and
obligations thereunder with respect to Flexible Employees and their
beneficiaries and former Flexible Employees and their beneficiaries whether
vested or unvested. As of the Closing Date, Flexible and Venture shall be
relieved of all liabilities and obligations arising out of or relating to
the Plans except for any breach of duty or obligation occurring prior to
the Closing Date.
(c) Necessary Acts. Each Plan sponsor shall take or cause to be
taken such actions in respect of each Plan as are reasonably necessary to
accomplish the requirements of this Article VII.
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7.2 Retirement Benefit Plans.
(a) Retirement Income Plan of Sealright Co., Inc. ("RIP"). As of
the Closing Date, each Flexible Employee shall be fully vested in his
accrued benefit in the RIP and, in addition to all other distribution
options available under the RIP, shall be permitted either to receive a
lump sum distribution or to direct a rollover distribution of his accrued
benefit.
(b) Sealright Co., Inc. Long Term Savings Plan ("401(k) Plan").
Effective as of the Closing Date, with respect to each 401(k) Plan
participant who is or becomes a Flexible Employee on the next business day
following the Closing Date, the Sealright Rigid Group shall transfer each
such participant's 401(k) Plan account balances including both vested and
unvested balances, increased by any contributions due for periods prior to
the Closing Date but not made as of the Closing Date and reduced by any
benefits paid after the Closing Date and prior to the transfer date, to the
new Qualified Plan established and designated by Flexible in which each
such participant participates provided that Flexible has submitted to
Sealright Rigid Group satisfactory evidence that such new Qualified Plan is
qualified under Code (S) 401(a) and will not violate Code (S) 411(d)(6).
Such Qualified Plan shall provide service credit to each such participant
equal to each such participant's service credit under the 401(k) Plan and
shall utilize the same vesting schedule as the 401(k) Plan with respect to
transferred account balances.
Effective as of the Closing Date, the Sealright Rigid Group shall
amend the 401(k) Plan to provide that any participant whose employment is
terminated as a result of the Merger or the distribution of the Flexible
Business and is not hired by the Sealright Rigid Group, Flexible or Venture
shall be fully vested in his 401(k) Plan account balances.
(c) Sealright Co., Inc. Deferred Compensation Plan ("Deferred
Compensation Plan"). As of the Reorganization Date, the Sealright Rigid
Group shall cause each Flexible Employee who participates in the Deferred
Compensation Plan to be fully vested in his accrued benefit and shall
freeze the Deferred Compensation Plan with respect to any further accrual
of benefits with respect to, and deferrals of compensation by, each
Flexible Employee who participates in the Deferred Compensation Plan.
(d) Jaite Union Pension Plan ("Jaite Plan"). As of the Closing
Date, the Sealright Rigid Group shall transfer to Flexible and Flexible
shall assume (i) the sponsorship of the Jaite Plan, (ii) the status of the
"named fiduciary" with respect to the Jaite Plan, and (iii) all of the
liabilities and obligations (except for any breach of any duty or
obligation occurring prior to the Closing Date) of the Sealright Rigid
Group in respect of the Jaite Plan including, but not limited to, all
liabilities and obligations thereunder with respect to Flexible Employees
and their beneficiaries and former Flexible Employees and their
beneficiaries whether vested or unvested. As of the Closing Date, the
Sealright Rigid Group shall be relieved of all liabilities and obligations
arising out of or relating to the Jaite Plan except for any breach of duty
or obligation occurring prior to the Closing Date.
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(e) The Western Conference of Teamsters Pension Trust Fund
("Teamsters Pension Fund") and The Western Conference of Teamsters
Supplemental Income Trust Fund ("Teamsters 401(k) Plan"). As of the
Closing Date, the Sealright Rigid Group shall transfer to Flexible and
Flexible shall assume all of the liabilities and obligations (except for
any breach of any duty or obligation occurring prior to the Closing Date)
of the Sealright Rigid Group in respect of the Teamsters Pension Fund and
the Teamsters 401(k) Plan including, but not limited to, all liabilities
and obligations thereunder with respect to Flexible Employees and their
beneficiaries and former Flexible Employees and their beneficiaries. As of
the Closing Date, the Sealright Rigid Group shall be relieved of all
liabilities and obligations arising out of or relating to the Teamsters
Pension Fund and Teamsters 401(k) Plan except for any breach of duty or
obligation occurring prior to the Closing Date.
7.3 Welfare Benefit Plans and Trusts.
(a) Medical, Dental and Vision Insurance; Medical Spending
Accounts; Employee Assistance Program. The Sealright Rigid Group shall be
responsible for (i) all claims incurred, both reported and unreported, with
respect to all medical, dental and vision plans, all health care spending
accounts, and employee assistance programs on or prior to the Closing Date,
(ii) all obligations with respect to continuation coverage which arise on
or prior to the Closing Date, and (iii) any Health Insurance Portability
and Accountability Act of 1996 notice and reporting obligations.
As of the Closing Date, the Sealright Rigid Group shall transfer
to Flexible and Flexible shall assume all of the liabilities and
obligations (except for any breach of any duty or obligation occurring
prior to the Closing Date) of the Sealright Rigid Group in respect of the
Teamsters Managed Health Care Fund including, but not limited to, all
liabilities and obligations thereunder with respect to Flexible Employees
and their beneficiaries and former Flexible Employees and their
beneficiaries. As of the Closing Date, the Sealright Rigid Group shall be
relieved of all liabilities and obligation arising out of or relating to
the Teamsters Managed Care Trust Fund except for any breach of duty or
obligation occurring prior to the Closing Date.
(b) Life Insurance; Accidental Death and Dismemberment; Business
Travel Accident. The Sealright Rigid Group shall be responsible for all
claims incurred, both reported and unreported, with respect to all life
insurance, accidental death and dismemberment and business travel accident
plans on or prior to the Closing Date. The Sealright Rigid Group shall
inform each Flexible Employee who terminates employment of any individual
right available under any applicable life insurance, accidental death and
dismemberment and business travel accident plans to convert to an
individual policy.
(c) Disability.
(1) Short-term disability: Sealright Rigid Group shall be
responsible for its employees (and unallocated employees who become
Sealright Rigid
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Group employees) who are disabled and/or on a short-term disability leave
of absence. Flexible shall be responsible for its employees (and
unallocated employees who become Flexible employees) who are disabled
and/or on a short-term disability leave of absence. In the event that any
of certain unallocated personnel is disabled and/or on a short-term
disability leave of absence and does not become an employee of either
Sealright Rigid Group or Flexible, Sealright Rigid Group and Flexible shall
respectively assume and bear the short-term disability costs associated
with such unallocated personnel pursuant to the terms of the Letter
Agreement.
(2) Long-term disability: Sealright Rigid Group shall be
responsible for (i) employees who are disabled and/or on a long-term
disability leave of absence on or before the Closing Date, and (ii)
employees who are disabled and/or on a short-term disability leave of
absence on or before the Closing Date and go on a long-term disability
leave of absence after the Closing Date without first returning to full-
time, active work.
(d) Refunds and Rebates. In the event that the Sealright Rigid
Group receives any refund, rebate or similar premium or fee adjustment from
any insurer or third party administrator, Sealright Rigid Group shall pay
Flexible a portion of such refund, rebate or similar premium or fee
adjustment which is in the same proportion to the total refund, rebate or
similar premium or fee adjustment as the Flexible Employee participants and
their dependents and beneficiaries bear to the total number of
participants, dependents and beneficiaries in such insured plan, minimum
premium arrangement or other similar arrangement during the period of time
for which such refund, rebate or similar premium or fee adjustment is made.
In the event that Flexible or Venture receives any refund, rebate
or similar premium or fee adjustment from any insurer or third party
administrator, Flexible or Venture respectively shall pay Sealright Rigid
Group a portion of such refund, rebate or similar premium or fee adjustment
which is in the same proportion to the total refund, rebate or similar
premium or fee adjustment as the Sealright Rigid Group Employee
participants and their dependents and beneficiaries bear to the total
number of participants, dependents and beneficiaries in such insured plan,
minimum premium arrangement or other similar arrangement during the period
of time for which such refund, rebate or similar premium or fee adjustment
is made.
7.4 Vacation Pay. Each party shall assume all liability for all
unpaid vacation pay accrued by its employees. Sealright and Flexible shall
respectively assume and bear vacation pay costs associated with certain
unallocated personnel pursuant to the terms of the Letter Agreement.
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7.5 Severance Pay.
(a) Except as provided in 7.5(b) below, each party shall assume and
be solely responsible for all severance pay liabilities and obligations
whatsoever in connection with claims made by or on behalf of its employees.
(b) Sealright and Flexible shall respectively assume and bear
severance costs associated with certain unallocated personnel pursuant to the
terms of the Letter Agreement.
7.6 Collective Bargaining Agreements. As of the Reorganization Date,
(i) the Flexible Group shall have all (and the Sealright Rigid Group shall cease
to have any) liability or obligation whatsoever with respect to any employee or
former employee under the Flexible Collective Bargaining Agreements and (ii) the
Flexible Group shall cease to have any liability or obligation whatsoever with
respect to any employee or former employees under any of the Sealright Rigid
Group Collective Bargaining Agreements.
7.7 Other Balance Sheet Adjustments. To the extent not otherwise
provided in this Agreement, Sealright and Flexible shall take such action as is
necessary to effect an adjustment to the books of Sealright and Flexible so
that, as of January 1, 1998, the prepaid expense balances and accrued employee
liabilities with respect to any employee liability or obligation assumed or
retained as of such date by the Sealright Rigid Group or the Flexible Group are
appropriately reflected on the consolidated balance sheets of Sealright and
Flexible as of January 1, 1998, respectively.
7.8 Refunds and Rebates of Expensed Items. In the event that
subsequent to January 1, 1998, Sealright Rigid Group receives any refund, rebate
or similar premium or fee adjustment for or relating to any prepaid expense
items (including but not limited to insurance, and for which adjustments
pursuant to Section 7.7 hereof have not been appropriately made) relating to
employee benefits or arrangements not described in Section 7.3(d) hereof,
Sealright Rigid Group shall pay Flexible a portion of such refund, rebate or
similar premium or fee adjustment which is in the same proportion to the total
refund, rebate or similar premium or fee adjustment as the Flexible Employee
participants and their dependents and beneficiaries bear to the total number of
participants, dependents and beneficiaries in such employee benefits or
arrangements.
In the event that subsequent to January 1, 1998, Flexible receives any
refund, rebate or similar premium or fee adjustment for or relating to any
prepaid expense items (including but not limited to insurance, and for which
adjustments pursuant to Section 7.7 hereof have not been appropriately made)
relating to employee benefits or arrangements not described in Section 7.3(d)
hereof, Flexible shall pay Sealright Rigid Group a portion of such refund,
rebate or similar premium or fee adjustment which is in the same proportion to
the total refund, rebate or similar premium or fee adjustment as the Sealright
Rigid Group Employee participants and their dependents and beneficiaries bear to
the total number of participants, dependents and beneficiaries in such employee
benefits or arrangements.
17
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances. Each party hereto shall cooperate reasonably
with the other parties, and execute and deliver, or use its reasonable best
efforts to cause to be executed and delivered, all instruments, including
instruments of conveyance, assignment and transfer, and to make all filings
with, and to obtain all consents, approvals or authorizations of, any
governmental or regulatory authority or any other Person under any permit,
license, agreement, indenture or other instrument, and take all such other
actions as such party may reasonably be requested to take by any other party
hereto from time to time, consistent with the terms of this Agreement, in order
to effectuate the provisions and purposes of this Agreement and the transfers of
Flexible Assets and Flexible Liabilities and the other transactions contemplated
hereby or in any of the Ancillary Agreements.
8.2 Survival of Agreements. All covenants and agreements of the
parties hereto contained in this Agreement shall survive the Reorganization
Date.
8.3 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto (if any), and the Ancillary Agreements shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof,
superseding all previous negotiations, commitments and writings with respect to
such subject matter.
8.4 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Kansas, without
regard to its conflicts of law principles, as to all matters, including matters
of validity, construction, effect, performance and remedies.
8.5 Notices. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt) by delivery
in person, by cable, telegram, telex, facsimile or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
18
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If to a member of the Sealright Rigid Group:
c/o Huhtamaki Oy Sealright Co., Inc.
Lansituulentie 7 9201 Packaging Drive
02100 ESP00 DeSoto, KS 66018
FINLAND Attention: John Carper
Attention: Eero Aho (913) 583-3025 (telephone)
(011) 358-9-6868-81 (telephone) (913) 583-8284 (telecopier)
(011) 358-9-6868-8222 (telecopier)
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Timothy B. Goodell, Esq.
(212) 819-8200 (telephone)
(212) 354-8113 (telecopier)
If to a member of the Flexible Group:
G. Kenneth Baum
c/o George K. Baum & Company
Twelve Wyandotte Plaza
120 West 12th Street
Kansas City, MO 64105
(816) 474-1100 (telephone)
(816) 283-5325 (telecopier)
with a copy to:
Bryan Cave LLP
7500 College Boulevard
Suite 1100
Overland Park, KS 66210
Attention: Thomas W. Van Dyke, Esq.
(913) 338-7700 (telephone)
(913) 338-7777 (telecopier)
or to such other address as either Group may have furnished to the other Group
by a notice in writing in accordance with this Section.
8.6 Amendment and Modification; No Waiver. This Agreement may be
amended, modified or supplemented, and rights hereunder may be waived, only by a
written agreement signed by the parties hereto. No waiver of any term, provision
or condition of or
19
<PAGE>
failure to exercise or delay in exercising any rights or remedies under this
Agreement, in one or more instances, shall be deemed to be, or construed as, a
further or continuing waiver of such term, provision, condition, right or remedy
or as a waiver of any other term, provision or condition of, or right or remedy
under, this Agreement.
8.7 Successors and Assigns; No Third-Party Beneficiaries. This
Agreement and all the provisions hereof shall be binding upon and inure to the
benefit of each party hereto and each of their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
and obligations hereunder shall be assigned by any party with the consent of the
other parties.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 Interpretation.
(a) 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.
(b) The parties hereto intend that, for federal income tax
purposes, the contributions, transfers, assumptions, and the Reorganization
contemplated hereby shall each qualify for non-recognition treatment under
the applicable provisions of Section 351 of the Code.
8.10 Legal Enforceability. Any provision of this Agreement or any of
the Ancillary Agreements which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Each party acknowledges that money damages would be an inadequate
remedy for any breach of the provisions of this Agreement or any of the
Ancillary Agreements and agrees that the obligations of the parties hereunder
and thereunder shall be specifically enforceable.
8.11 References; Construction. References to any "Article,"
"Exhibit," "Schedule" or "Section," without more, are to Articles, Exhibits,
Schedules and Sections to or of this Agreement, as applicable. Unless otherwise
expressly stated, clauses beginning with the term "including" set forth examples
only and in no way limit the generality of the matters thus exemplified.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
SEALRIGHT CO., INC.
By: /s/ Charles F. Marcy
----------------------------------
Name: Charles F. Marcy
Title: President
JPS PACKAGING COMPANY
By: /s/ John T. Carper
----------------------------------
Name: John T. Carper
Title: President
SEALRIGHT MANUFACTURING-WEST, INC.
By: /s/ Charles F. Marcy
----------------------------------
Name: Charles F. Marcy
Title: President
SEALRIGHT PACKAGING COMPANY
By: /s/ Charles F. Marcy
----------------------------------
Name: Charles F. Marcy
Title: President
21
<PAGE>
EXHIBIT 3.1(a)
CERTIFICATE OF INCORPORATION
OF
SEALRIGHT MANUFACTURING-EAST, INC.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
FIRST: The name of the corporation is Sealright Manufacturing-East,
Inc.
SECOND: The registered office of the Corporation is to be located at
1013 Centre Road, Wilmington, County of New Castle, Delaware 19805. The name of
its registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is fifteen million (15,000,000) shares of common
stock, of the par value of One Cent ($.01) per share, and one million
(1,000,000) shares of preferred stock, of the par value of One Cent ($.01) per
share.
(a) The privileges, powers, rights, qualifications, limitations and
restrictions of the common stock are as follows:
(1) The holders of common stock shall receive, to the extent
permitted by law and to the extent the Board of Directors shall determine,
such dividends as may be declared from time to time by the Board of
Directors.
(2) In the event of the voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of common stock
shall be entitled to receive the remaining assets of the Corporation
available for distribution, following payment of all liabilities of the
Corporation, the expenses of liquidation, and the preferential
distributions due to the holders of preferred stock, if any.
(3) Except as may be otherwise required by law or by the
Certificate of Incorporation, each holder of common stock shall have one
vote in respect of each share of stock held by him on all matters voted
upon by the stockholders.
(4) The holders of the common stock shall have no preemptive
rights to subscribe for any shares of any class of stock of the Corporation
whether now or hereafter authorized.
(b) The Board of Directors is hereby expressly authorized, subject to
any limitations prescribed by law, to provide for the issuance of shares of
preferred stock in series, and
<PAGE>
by filing a certificate pursuant to the applicable law of the State of Delaware
(such certificate being hereinafter referred to as a "Certificate Designation"),
to establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each series and any qualifications, limitations or restrictions thereof.
FIFTH: The name and address of the incorporator are as follows:
Name Address
---- -------
Lorna Wright Haberkern 3500 One Kansas City Place
1100 Main
Kansas City, MO 64105
SIXTH: Except as otherwise specifically provided by applicable
statute, all powers of management, direction and control of the Corporation
shall be vested in its Board of Directors.
The number of directors of the Corporation shall be such as from time
to time shall be fixed by, or in the manner provided in, the Bylaws.
SEVENTH: In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized:
To make, adopt, alter, amend or repeal the Bylaws of the Corporation;
To, in its sole discretion, call special meetings of the stockholders
of the Corporation;
To set apart out of any of the money or funds of the Corporation
available for dividends a reserve or reserves for any proper purpose or to
abolish any such reserve in the manner in which it was created;
When and as authorized by the stockholders' vote, to sell, lease or
exchange all or substantially all of the property or assets of the Corporation,
including its goodwill and its corporate franchises, upon such terms and
conditions and for such consideration, which may be in whole or in part shares
of stock in, or other securities of (or both), any other corporation or
corporations as the Board of Directors may deem expedient and for the best
interests of the Corporation; and
To sell, issue or otherwise dispose of common stock or any other
securities of the Corporation, including preferred stock, debentures, bonds,
mortgages, notes, certificates, and any and all other securities whatsoever, for
such consideration as the Board of Directors in its discretion shall determine;
provided, however, that no shares of stock shall be sold for any consideration
not in accordance with the laws of the State of Delaware.
2
<PAGE>
The Corporation may in its bylaws confer powers additional to the
foregoing upon the directors, in addition to the powers, authorities and duties
expressly conferred upon them by law.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or Stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, except to the extent such exemption from liability or
limitation thereof is not permitted by Delaware General Corporation Law as it
now exists or may hereafter be amended. Notwithstanding the foregoing, a
director shall be liable to the extent provided by the existing Delaware General
Corporation Law (a) for breaches of the directors' duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (c)
under the provisions of section 174 of Title 8 of the Delaware Code (relating to
unlawful stock purchase or redemption) and any amendments thereto, or (d) for
any transaction from which the director derived an improper personal benefit.
Any repeal or modification of these provisions shall not adversely affect any
right of any director of the Corporation existing at the time of such repeal or
modification.
TENTH: The Corporation shall have the power to indemnify officers,
directors, employees and agents as follows:
(a) Any person who, by reason of the fact he is or was a
director or officer of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, is or
was a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, shall be indemnified by the Corporation,
provided he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, had no
3
<PAGE>
reasonable cause to believe his conduct was unlawful. Such indemnification
shall be provided against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually reasonably incurred by him in
connection with such action, suit or proceeding; provided, however, that
with respect to an action or suit by or in the right of the Corporation,
such indemnification shall be only against expenses, including attorneys'
fees, and in such cases no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to
the Corporation, unless, and only to the extent that, the court in which
the action or suit was brought determines, upon application, that despite
the adjudication of liability and in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any such action, suit, or proceeding or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the action, suit, or proceeding. Any
other indemnification hereunder, unless ordered by a court, shall be made
by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth herein. The determination shall be made by
the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding, or if
such a quorum is not obtainable, or even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or by the stockholders. The termination of any action,
suit, or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action of proceeding, that he
had reasonable cause to believe that his conduct was unlawful.
(b) Expenses, including attorneys' fees, incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of the action, suit, or proceeding as
authorized by the Board of Directors in the specific case, upon receipt of
an undertaking by or on behalf of the director, officer, employee or agent
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized herein.
(c) The indemnification provided hereunder shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any applicable statute as amended from time to time, any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacity while holding such
office and shall continue as to a person who has caused to be a director,
officer, employee or agent and shall inure to the benefit of their heirs,
executors and administrators of such person.
4
<PAGE>
(d) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions herein.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the 24th day
of March, 1998.
/s/ Lorna Wright Haberkern
--------------------------
Lorna Wright Haberkern, Incorporator
5
<PAGE>
EXHIBIT 3.1(b)
CERTIFICATE OF MERGER
MERGING
SEALRIGHT MANUFACTURING-EAST, INC., an Ohio Corporation
INTO
SEALRIGHT MANUFACTURING-EAST, INC., a Delaware Corporation
-----------------------------------------------------------
Pursuant to Section 252 of the General
Corporation Law of the State of Delaware
Pursuant to the provisions of The General Corporation Law of Delaware,
the undersigned corporations certify the following:
FIRST: That Sealright Manufacturing-East, Inc., an Ohio corporation
("Sealright East-Ohio), was incorporated on the 1st day of November, 1990,
pursuant to the Ohio General Corporation Law.
SECOND: That Sealright Manufacturing-East, Inc., a Delaware
corporation ("Sealright East-Delaware"), was incorporated on the 24th day of
March, 1998, pursuant to the Delaware General Corporation Law.
THIRD: That an Agreement and Plan of Merger has been adopted,
approved, certified, executed and acknowledged by each of the above-referenced
corporations in accordance with Section 252(c) of the Delaware General
Corporation Law.
FOURTH: That Sealright East-Delaware shall be the surviving
corporation. The name of the surviving corporation shall continue to be
Sealright Manufacturing-East, Inc.
FIFTH: That the Certificate of Incorporation of Sealright East-
Delaware, as in effect immediately prior to the effective time of the merger,
shall be the Certificate of Incorporation of the surviving corporation.
SIXTH: That the executed Agreement and Plan of Merger is on file at
the principal place of business of the surviving corporation, 192 Akron-
Peninsula Road, Akron, Ohio 44313.
SEVENTH: That a copy of the Agreement and Plan of Merger will be
furnished by the surviving corporation, on request and without cost, to any
stockholder of either Sealright East-Ohio or Sealright East-Delaware.
<PAGE>
EIGHTH: That the authorized capital stock of Sealright East-Ohio is
Seven Hundred Fifty (750) shares of common stock, par value $0.10 per share.
IN WITNESS WHEREOF, this certificate has been signed in duplicate by
Sealright East-Ohio and Sealright East-Delaware this 31st day of March, 1998.
SEALRIGHT MANUFACTURING-EAST, INC.,
an Ohio Corporation
By:/s/ Charles F. Marcy
--------------------
Charles F. Marcy, President
ATTEST:
/s/ John T. Carper
- ------------------
John T. Carper, Secretary
SEALRIGHT MANUFACTURING-EAST, INC.,
a Delaware corporation
By:/s/ John T. Carper
------------------
John T. Carper, President
ATTEST:
/s/ Thomas W. Van Dyke
- ----------------------
Thomas W. Van Dyke, Secretary
2
<PAGE>
EXHIBIT 3.1(c)
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
SEALRIGHT MANUFACTURING-EAST, INC.
SEALRIGHT MANUFACTURING-EAST, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Company"), does hereby certify:
FIRST: That the Board of Directors of the Company by the unanimous
written consent of its members, filed with the minutes of the Board a resolution
setting forth proposed amendments of the Certificate of Incorporation of the
Company, declaring said amendments to be advisable and submitting the same to a
vote of the sole stockholder of the Company for consideration thereof. The
resolutions setting forth the proposed amendments are as follows:
RESOLVED, that the present Article First of the Certificate of
Incorporation of the Company be deleted in its entirety and replaced by:
"FIRST: The name of the corporation is JPS Packaging Company."
RESOLVED, that the present Article Fourth of the Certificate of
Incorporation of the Company be deleted in its entirety and replaced by:
"FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is fifteen million (15,000,000) shares of
common stock, of the par value of One Cent ($.01) per share. The
privileges, powers, rights, qualifications, limitations and restrictions of
the common stock are as follows:
(a) The holders of common stock shall receive, to the extent
permitted by law and to the extent the Board of Directors shall determine,
such dividends as may be declared from time to time by the Board of
Directors.
(b) Except as may be otherwise required by law or by the
Certificate of Incorporation, each holder of common stock shall have one
vote in respect of each share of stock held by him on all matters voted
upon by the stockholders.
(c) The holders of the common stock shall have no preemptive
rights to subscribe for any shares of any class of stock of the Corporation
whether now or hereafter authorized."
<PAGE>
SECOND: That in lieu of a meeting and vote of the sole stockholder of
the Company, the sole stockholder of the Company consented in writing to the
above actions in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Company shall not be reduced under or
by reason of said amendments.
IN WITNESS WHEREOF, said Sealright Manufacturing-East, Inc., has
caused this certificate to be signed by its Secretary, Thomas W. Van Dyke, this
23rd day of April, A.D. 1998.
By:/s/ Thomas W. Van Dyke
----------------------
Thomas W. Van Dyke, Secretary
2
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
JPS PACKAGING COMPANY
APRIL 28, 1998
<PAGE>
BYLAWS
OF
JPS PACKAGING COMPANY
ARTICLE I
STOCKHOLDERS
Section 1.1. Annual Meetings. An annual meeting of stockholders shall
be held on the third Tuesday in May of each year, if not a legal holiday, and if
a legal holiday, then on the next secular day following, for the election of
directors at such time and at such place either within or without the State of
Delaware as may be designated by the Board of Directors from time to time. Any
other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of the stockholders
may be called at any time by the Chairman of the Board, President, Secretary or
by resolution of the Board of Directors to be held at such date, time and place
either within or without the State of Delaware as may be stated in the notice of
the meeting. Special meetings of the stockholders may be held for any purpose or
purposes.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than (10) nor more than sixty (60) days before the date
of the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the Certificate of Incorporation or these Bylaws,
the holders of a majority of the shares issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum. For purposes of the foregoing, two or more classes or series of stock
shall be considered a single class if the holders thereof are entitled to
1
<PAGE>
vote together as a single class at the meeting. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from time to
time in the manner provided by Section 1.4 of these Bylaws until a quorum shall
attend. Shares of its own capital stock belonging on the record date for the
meeting to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
person designated by the Board of Directors, or in the absence of such
designation by a chairman to be chosen by the stockholders owning a majority of
the shares of stock of the Corporation issued and outstanding and entitled to
vote at the meeting and who are present in person or represented by proxy. The
Secretary shall act as secretary of the meeting, but in his absence the
Assistant Secretary, or if he is not present, such person chosen by the Board of
Directors, or if none of such persons is present, the stockholders owning a
majority of the shares of stock of the Corporation issued and outstanding
entitled to vote at the meeting and who are present in person or represented by
proxy shall choose any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine. At all meetings of stockholders for the election of
directors, a plurality of the votes cast shall be sufficient to elect. All other
elections and questions shall, unless otherwise provided by law or by the
Certificate of Incorporation or these Bylaws, be decided by the vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at the meeting, provided that
(except as otherwise required by law or by the Certificate of Incorporation) the
Board of Directors may require a larger vote upon any election or question.
Section 1.8. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any
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meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action; provided, however, any record date for determining
stockholders entitled to consent to corporate actions in writing without a
meeting may not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted; provided further, any record date
established by the Board of Directors may not precede the date upon which the
resolution fixing the record date is adopted. If no record date is fixed: (a)
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if noticed is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (b) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
setting forth the action taken is delivered to the Corporation; and (c) the
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1. Powers; Number; Qualifications. The business and affairs
of the Corporation shall be managed by the Board of Directors, except as may be
otherwise provided by law or in the Certificate of Incorporation. The Board
shall have and is vested with all and unlimited powers and authorities, except
as may be expressly limited by law, the Certificate of Incorporation or by these
Bylaws, to do or cause to be done any and all lawful things for and in behalf of
the Corporation, to exercise or cause to be exercised any or all of its powers,
privileges and franchises, and to seek the effectuation of its objects and
purposes. The number of directors which shall constitute the whole Board shall
range from three (3) to eleven (11). The exact number shall be determined by
resolution of the Board of Directors, or by the stockholders. The directors
shall be elected at the annual meetings of stockholders, except as provided in
Sections 2.2 and 2.11 of these Bylaws. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal.
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(a) Except as otherwise provided by law or the Certificate of
Incorporation or these Bylaws, any director, directors or the entire Board of
Directors may be removed with or without cause by the holders of a majority of
the shares then entitled to vote at an election of directors. Each director
shall hold office until the annual meeting of stockholders next succeeding his
election and until his successor is elected and qualified or until his earlier
resignation or removal. Any director may resign at any time upon written notice
to the Board of Directors or to the Chairman of the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, or if not specified therein, upon delivery thereof to the
Board of Directors or the designated officer, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective.
(b) Unless otherwise provided in the Certificate of
Incorporation or these Bylaws or by law, when one or more directors shall resign
from the Board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places within or without
the State of Delaware as shall from time to time be fixed by resolution adopted
by the Board of Directors. Any business may be transacted at a regular meeting.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the President
or the Secretary. The place may be within or without the State of Delaware as
designated in the notice.
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Written or printed notice of each special meeting of the Board of
Directors, stating the place, day and hour of the meeting and the purpose or
purposes thereof, shall be mailed to each director at least three days before
the day on which the meeting is to be held, or shall be sent to him by telecopy,
or be delivered, at least two days before the day on which the meeting is to be
held. If mailed, such notice shall be deemed to be delivered when deposited in
the United States Mail with postage thereon addressed to the director at his
residence or usual place of business. If notice be given by telecopy, such
notice shall be deemed to be delivered when the same is sent. The notice may be
given by any officer having authority to call the meeting or by any director.
"Notice" and "call" with respect to such meeting shall be deemed to be
synonymous.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board, may participate in
a meeting of the Board or of such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Bylaw shall constitute presence in person at such
meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the entire Board shall constitute a quorum for
the transaction of business. The vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board unless the
Certificate of Incorporation or these Bylaws shall require a vote of a greater
number. In case at any meeting of the Board a quorum shall not be present, the
members of the Board present may adjourn the meeting from time to time until a
quorum is present and no notice of adjournment shall be required other than
announcement at the meeting.
Section 2.7. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.8. Informal Action by Directors. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.9. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. Any director may waive compensation
for any meeting. Any director receiving compensation under
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these provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 2.10. Action in Lieu of a Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws or by law, any action
required to be taken at a meeting of the Board of Directors or any other action
which may be taken at a meeting and without notice of the Board of Directors or
of any committee thereof, may be taken without a meeting and without notice, if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the consent in writing is filed with the minutes of the proceedings
of the Board of Directors.
Section 2.11. Vacancies. Unless otherwise provided by the Certificate
of Incorporation, these Bylaws or by law, vacancies and newly-created
directorships resulting from any increase in the number of authorized directors
may be filled by the vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. Each director so
chosen shall hold office until the next annual meeting of stockholders and until
his successor is duly elected and shall qualify. If there are no directors in
office, any officer, stockholder, or an executor, administrator, trustee,
guardian or similarly situated fiduciary of the stockholder may call a special
meeting of stockholders in accordance with the provisions of the Certificate of
Incorporation or these Bylaws, at which meeting such vacancies shall be filled.
If, at the time of filling any vacancies or any newly-created directorship, the
directors then in office shall constitute less than a majority of the whole
Board, as constituted immediately prior to any such increase, the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent (10%) of the total number of shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly-created directorship, or to replace the
directors chosen by the directors then in office, which election shall be
governed by the applicable provisions of the several corporation laws of
Delaware.
ARTICLE III
COMMITTEES
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have power or authority
in reference to amending the Certificate of Incorporation adopting an agreement
of merger or consolidation, recommending to the stockholders the sale,
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lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of dissolution, removing or indemnifying directors or amending these
Bylaws; and, unless the resolution expressly so provided, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, a majority
of the entire authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the members
present at a meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee shall conduct
its business in the same manner as the Board conducts its business pursuant
Article II of these Bylaws.
Section 3.3. Vacancies, Changes, Discharge. The Board of Directors
shall have the power at any time to fill vacancies in, to change the membership
of, and to discharge any committee.
Section 3.4. Compensation. Members of any committee shall be entitled
to such compensation for their services as members of such committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
receiving compensation under these provisions shall not be barred from serving
the Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 3.5. Action by Consent in Lieu of Meeting. Any action required
or permitted to be taken at any meeting of any committee of the Board of
Directors may be taken without a meeting if a written consent to such action is
signed by all members of the committee and such written consent is filed with
the minutes of its proceedings.
Section 3.6. Telephonic Meetings Permitted. The members of any
committee designated by the Board of Directors may participate in a meeting of
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other and participation in such meeting shall constitute presence in person
at such meeting.
ARTICLE IV
OFFICERS
Section 4.1. Officers; Election; Qualification; Term of Office;
Resignation; Removal; Vacancies. As soon as practicable after the annual meeting
of stockholders in each year, the Board of Directors shall elect a President and
a Secretary, and it may, if it so determines, elect from among its members a
Chairman of the Board and a Vice Chairman of the Board. The Board may also elect
one or more Vice Presidents, one or
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more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer
and one or more Assistant Treasurers. The Board from time to time may also
appoint such other officers and agents for the Corporation as it shall deem
necessary or advisable. All officers of the Corporation shall hold their offices
at the pleasure of the Board or for such terms as the Board may specify, for the
term for which he was elected and until his successor is elected and shall
qualify, or until he resigns or is removed by the Board, whichever first occurs.
An officer shall be deemed qualified when he enters upon the duties of the
office to which he has been elected or appointed and furnishes any bond required
by the Board; but the Board may also require of such person his written
acceptance and promise faithfully to discharge the duties of such office. Any
officer may resign at any time upon written notice to the Board or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. The
Board may remove any officer or agent elected or appointed by the Board with or
without cause at any time by an affirmative vote of a majority of directors then
in office. Any such removal shall be without prejudice to the contractual rights
of such officer, if any, with the Corporation, but the election or appointment
of an officer shall not of itself create contractual rights. Any number of
offices may be held by the same person. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board at any regular or special
meeting.
Section 4.2. Powers and Duties of Executive Officers. The officers of
the Corporation shall have such powers and duties in the management of the
Corporation as may be prescribed by the Board of Directors, or by an elected
officer empowered by the Board to make such determination, and, to the extent
not so provided, as generally pertain to their respective offices, subject to
the control of the Board.
Section 4.3. Compensation. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. No
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
ARTICLE V
STOCK
Section 5.1. Certificates.
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(a) The certificates representing shares of stock of the
Corporation shall be numbered, shall be in such form as may be prescribed by the
Board of Directors in conformity with law, and shall be entered in the stock
records of the Corporation as they are issued, and such entries shall show the
name and address of the person, firm, partnership, corporation or association to
whom each certificate is issued. Each certificate shall have printed, typed or
written thereon the name of the person, firm, partnership, corporation or
association to whom it is issued, and number of shares represented thereby and
shall be signed by the Chairman of the Board, Vice Chairman of the Board,
President or a Vice President, and the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation and sealed with the
seal of the Corporation, which seal may be facsimile, engraved or printed. If
the Corporation
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has a registrar, a transfer agent, or a transfer clerk who actually signs such
certificates, the signature of any of the other officers above mentioned may be
facsimile, engraved or printed. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
(b) All stock certificates representing shares of stock which
are subject to restrictions on transfer or to other restrictions may have
imprinted thereon such notation to such effect as may be determined by the Board
of Directors.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed upon making of an affidavit of the fact by the person
claiming the certificate to be lost, stolen or destroyed, and the Corporation
may require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 5.3. Transfers of Shares, Transfer Agent, Registrar.
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(a) Transfers of shares of stock shall be made on the stock
record or transfer books of the Corporation only by the person named in the
stock certificate, or by his attorney lawfully constituted in writing, and upon
surrender of the certificate therefor. The stock record book and other transfer
records shall be in the possession of the Secretary or of a transfer agent or
clerk for the Corporation. The Corporation, by resolution of the Board, may from
time to time appoint a transfer agent, and, if desired, a registrar, under such
arrangements and upon such terms and conditions as the Board deems advisable;
but until and unless the Board appoints some other person, firm or corporation
as its transfer agent (and upon the revocation of any such appointment,
thereafter until a new appointment is similarly made), the Secretary of the
Corporation shall be the transfer agent or clerk of the Corporation, without the
necessity of any formal action of the Board, and the Secretary shall perform all
of the duties thereof.
(b) Upon surrender to the Corporation or any transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation or its transfer agent to issue a new certificate to
the person entitled thereto, to cancel the old certificate and to record the
transaction upon its books.
(c) Except as otherwise provided by law, the Corporation shall
be entitled to recognize the exclusive right of a person who is registered on
its books as the owner of shares of its stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments a person who is registered on its books as the owner of shares of
its stock. The Corporation shall not be bound to recognize any equitable or
legal claim to or interest in such shares on the part of any other person.
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(d) If a stockholder desires that notice and/or dividends shall
be sent to a name or address other than the name or address appearing on the
stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any) in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification of Directors, Officers and Employees.
Unless otherwise provided in the Certificate of Incorporation, the Corporation
shall have the power to indemnify to the full extent authorized by law any
person made or threatened to be made a party to any action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served any
other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor of the Corporation.
Section 6.2. Expenses. As to all expenses, including attorneys' fees,
costs, settlements, fines and judgments incurred by or levied upon a director in
connection with any action, suit or proceeding, referred to in the Certificate
of Incorporation or these Bylaws, to which the director is entitled to
indemnification thereunder, the Corporation shall pay the director, or such
person or entity as the director may designate, on a continuing and current
basis, and in any event not later than 10 business days following receipt by the
Corporation of the director's request for reimbursement.
Section 6.3. Notification and Defense of Claim. Promptly after
receipt by a director, officer, employee or agent of notice of the commencement
of any action, suit or proceeding, the director, officer employee or agent will,
if a claim in respect thereof is to be made against the Corporation, notify the
Corporation of the commencement thereof. The failure to promptly notify the
Corporation will not relieve the Corporation from any liability that it may have
to the director, officer, employee or agent under the Certificate of
Incorporation or these Bylaws, except to the extent the Corporation is
prejudiced in its defense of such claim as a result of such failure. Unless
otherwise requested by the Board of Directors, written notification shall not be
necessary if the director, officer, employee or agent informs a majority of the
Board of Directors of the commencement of any such action, or, independent of
such notification by the director, officer, employee or agent, a majority of the
Board of Directors has reason to believe such action has been initiated or
threatened. With respect to any such action, suit or proceeding as to which the
director, officer, employee or agent notified, or is deemed to have notified,
the Corporation of the commencement thereof; the following shall apply:
(a) The Corporation will be entitled to participate therein at
its own expense;
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(b) Except as otherwise provided below, to the extent that it
may wish, the Corporation, jointly with any other indemnifying party similarly
notified, is entitled to assume the defense thereof with counsel reasonably
satisfactory to the director, officer, employee or agent. After notice from the
Corporation to the director, officer, employee or agent of its election so to
assume the defense thereof, the Corporation will not be liable to the director,
officer, employee or agent for any legal or other expenses subsequently incurred
by the director, officer, employee or agent in connection with the defense
thereof other than reasonable costs of investigation or unless: (i) the
employment of separate counsel by the director, officer, employee or agent has
been authorized by the Corporation; (ii) the director, officer, employee or
agent reasonably concludes that there may be a conflict of interest between the
Corporation and the director, officer, employee or agent in the conduct of the
defense of such action and that such conflict may lead to exposure for the
director, officer, employee or agent not otherwise indemnifiable and the
director, officer, employee or agent notifies the Corporation of such conclusion
and decision to employ separate counsel; or (iii) the Corporation fails to
employ counsel to assume the defense of such action. The Corporation shall not
be entitled to assume the defense of any action, suit or proceeding brought by
or on behalf of the Corporation or as to which the director, officer, employee
or agent reasonably makes the conclusion provided for in (ii) above; and
(c) The Corporation shall not be liable to indemnify the
director, officer, employee or agent for any amount paid in settlement of any
action or claim effected without its written consent. The Corporation shall not
settle any action or claim in any manner which would impose any penalty or
limitation on the director, officer, employee or agent without the written
consent of the director, officer, employee or agent. Neither the Corporation nor
the director, officer, employee or agent will unreasonably withhold their
consent to any proposed settlement.
Section 6.4. Further Indemnity. The Corporation shall have the power
to give any further indemnity, in addition to the indemnity authorized or
contemplated under these Bylaws or the Certificate of Incorporation, to any
person who is or was a director, officer, employee or agent or to any person who
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise; provided, no such indemnity shall indemnify any person from or
on account of such person's conduct which has finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct, or if it is
determined by a final judgment or other final adjudication by a court of
competent jurisdiction considering the question of indemnification that such
payment of indemnification is or would be in violation of applicable law. The
Corporation may enter into indemnification agreements with each director and
officer of the Corporation whom the Board of Directors authorizes by vote of a
majority of a quorum of disinterested directors.
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ARTICLE VII
MISCELLANEOUS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the of Directors.
Section 7.2. Seal. The Corporation shall have a corporate seal which
shall have inscribed thereon the name of the Corporation, the year of
incorporation and the words: Corporate Seal Delaware. The corporate seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation
or these Bylaws.
Section 7.4. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorized the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (a) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (b) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board or of a committee which authorizes the contract
or transaction.
Section 7.5. Dividends. Ordinary dividends upon the shares of the
Corporation, subject to the provisions of the Certificate of Incorporation, and
of any applicable law or statute, may be declared by the Board of Directors at
any regular or special meeting. Dividends may be
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paid in cash, in property, or in shares of its stock, and to the extent and in
the manner provided by law, out of any available earned surplus or earnings of
the Corporation.
If the dividend is to be paid in shares of the Corporation's theretofore
unissued capital stock, the Board of Directors shall, by resolution, direct that
there be transferred from surplus to the capital account in respect of such
shares, an amount which is not less than the par value of the shares being
declared as a dividend. No transfer from surplus to capital shall be necessary
if shares are being distributed by the Corporation pursuant to a split-up or
division of its stock, rather than as payment of a dividend declared payable in
stock of the Corporation.
Liquidating dividends or dividends representing a distribution of paid-in
surplus or a return of capital shall be made only when and in the manner
permitted by law.
Section 7.6. Reserves. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole discretion,
may fix a sum which may be set aside or reserved over and above the paid-in
capital of the Corporation for working capital or as a reserve for any proper
purpose, and may from time to time increase, diminish or vary such fund or
funds.
Section 7.7. Checks. All checks or instruments for the payment of money
and all notes of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to time
designate. If no such designation is made, and unless and until the Board
otherwise provides, the Chairman of the Board or President and Secretary, or the
Chairman of the Board or President and Treasurer, shall have power to sign all
such instruments for, in behalf of and in the name of the Corporation, which are
executed or made in the ordinary course of the Corporation's business.
Section 7.8. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of account
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
Section 7.9. Amendment of Bylaws. These Bylaws may be altered or repealed,
and new Bylaws may be adopted in either of the following ways:
(a) By the vote of the holders of a majority of the shares issued and
outstanding entitled to vote at any annual or special meeting thereof; or
(b) By resolution adopted by a majority of the members of the Board
of Directors then in office; provided, however, that the power of the directors
to suspend, repeal, amend or otherwise alter the Bylaws or any portion thereof
may be denied as to any Bylaws or
13
<PAGE>
portion thereof enacted by the stockholders if at the time of such enactment the
stockholders shall so expressly provide.
14
<PAGE>
EXHIBIT 4.1
================================================================================
COMMON STOCK COMMON STOCK
JPS
NUMBER PACKAGING SHARES
JPS PACKAGING COMPANY
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 46623H 10 2
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK
OF THE PAR VALUE OF ONE CENT ($.01) OF
JPS PACKAGING COMPANY
transferable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned and registered by the
transfer agent and registrar.
Witness the facsimile seal of the Corporation and the signatures of
its duly authorized officers.
Dated:
/s/ Thomas W. Van Dyke /s/ John T. Carper
SECRETARY PRESIDENT
JPS PACKAGING COMPANY
DELAWARE
CORPORATE SEAL 1990
CERTIFICATE OF STOCK
COUNTERSIGNED AND REGISTERED
UMB BANK, n.a.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
================================================================================
<PAGE>
JPS PACKAGING COMPANY
The Corporation will furnish to any stockholder upon request and without
charge a full statement of the designations, preferences, limitations and
relative rights of the shares of each class authorized to be issued and the
variations in the relative rights and preferences between the shares of each
series of a class of shares so far as the same have been fixed and determined
and the authority of the Board of Directors to fix and determine the relative
rights and preferences of the subsequent series.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT --
TEN ENT - as tenants by the entireties _______ as Custodian for _______
JT TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts to Minors
tenants in common Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
POSTAL ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------
X
---------------------------------------
(SIGNATURE)
NOTICE:
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY ----
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE
WHATEVER.
X
---------------------------------------
(SIGNATURE)
-----------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION AS
DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
-----------------------------------------
SIGNATURE(S) GUARANTEED BY:
-----------------------------------------
<PAGE>
EXHIBIT 5.1
BRYAN CAVE LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2100
(816) 374-3200
Facsimile (816) 374-3300
June 8, 1998
JPS Packaging Company
9201 Packaging Drive
DeSoto, Kansas 66018
Sealright Co., Inc.
9201 Packaging Drive
DeSoto, Kansas 66018
Ladies and Gentlemen:
We have acted as counsel to JPS Packaging Company, a Delaware
corporation (the "Corporation"), in connection with the registration under the
Securities Act of 1933, as amended, on Form S-4 (the "Registration Statement")
of up to a maximum of 5,599,889 shares (the "Exchange Shares") of the
Corporation's common stock, par value $.01 per share, (the "JPS Common Stock").
The Exchange Shares consist of (i) 5,541,282 shares of JPS Common Stock (the
"Direct Exchange Shares") held by Sealright Manufacturing-West, Inc. ("West"), a
Missouri Corporation and wholly owned subsidiary of Sealright Co., Inc., a
Delaware corporation ("Sealright") and to be delivered to Sealright stockholders
in partial redemption and exchange (the "Exchange") of Sealright's common stock,
par value $.10 per share (the "Sealright Common Stock") at the ratio of one-half
share of JPS Common Stock for each share of Sealright Common Stock outstanding
and entitled to the Exchange on June 1, 1998 (the "Record Date"), and (ii)
either, or a combination of, (A) up to 51,635 shares of the JPS Common Stock
issuable by the Corporation to West in the event of the exercise of vested
Sealright Stock Options (as defined in the Registration Statement) between the
Record Date and the Effective Date (as defined in the Registration Statement)
(to the extent actually issued, the "Option Exercise Shares") and/or (B) up to
11,471 shares of the JPS Common Stock issuable by the Corporation in connection
with the Reorganization Agreement, dated April 30, 1998, by and among Sealright,
the Corporation, West and Sealright Packaging Company, a Kansas corporation (the
"Reorganization Agreement") and certain settlement agreements (the "Settlement
Agreements") relating to the Sealright Stock Options (to the extent actually
issued, the "Settlement Shares"). As such counsel, we have examined and relied
upon originals or copies, certified or otherwise identified to our satisfaction,
of such corporate records, agreements, documents, instruments and certificates
of officers and representatives of the Corporation, and have made such
investigations of law, as we deem necessary or appropriate in order to enable us
to render the opinion expressed below.
Based upon the foregoing, and in reliance thereon, we are of the
opinion that (i) the Direct Exchange Shares have been duly authorized and
validly issued and are fully paid and nonassessable, and (ii) the Option
Exercise Shares have been duly and validly authorized for issuance and will be,
when issued in accordance with the terms of the authorizing resolution, validly
issued, fully paid and nonassessable and (iii) the Settlement Shares have been
duly and validly authorized for issuance and will be, when issued in accordance
with the terms of the Reorganization Agreement and the Settlement Agreement,
validly issued, fully paid and nonassessable.
<PAGE>
JPS Packaging Company
Sealright Co., Inc.
June 8, 1998
Page 2
The legal opinion stated herein is as of the date hereof, and we
assume no obligation to update or supplement this legal opinion to reflect any
facts or circumstances that may hereafter come to our attention or any changes
in law that may hereafter occur. This legal opinion is limited to the matters
stated herein and no opinion is implied or may be inferred beyond the matters
expressly stated.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Bryan Cave LLP
BRYAN CAVE LLP
<PAGE>
Harris Trust and 111 West Monroe Street Telephone (312) 461-2121
Savings Bank P.O. Box 755
Chicago, Illinois 60690-0755
- --------------------------------------------------------------------------------
[LOGO OF HARRIS BANK]
May 29, 1998
Mr. John T. Carper
Senior Vice President
Sealright Co., Inc.
9201 Packaging Drive
Desoto, Kansas 66018
Re: Credit Facilities
Dear John:
We are pleased to advise you that we have approved the credit facilities
described below on and subject to the terms and conditions set forth below. You
are hereinafter referred to in this letter as the "Borrower" and we will
hereinafter refer to ourselves as the "Bank."
Section 1. Borrower: JPS Packaging Co., ("JPS"), the successor to the so-
called flexible packaging business (including the Styrotech flexible packaging
business) of Sealright Co., Inc., including the related facilities in San
Leandro, California, Charlotte and Raleigh, North Carolina and Akron, Ohio.
Section 2. Credit Facility. $10,000,000 secured committed revolving credit
facility as more fully set forth below.
Section 3. Revolving Credit. The Bank will make available to the Borrower a
Revolving Credit under which the Bank may from time to time make advances to the
Borrower in an aggregate principal amount outstanding at any one time not to
exceed the lessor of (i) $10,000,000 or (ii) the amount of the Borrowing Base
(as hereinafter described) as then determined and computed. The Revolving Credit
shall be made available in the form of advances ("Loans") and letters of credit
("L/C's"); provided, however, that the aggregate amount of L/C's (including as
such the undrawn amount available under L/C's and unreimbursed drawings on
L/C's) shall not exceed $1,500,000. All advances under the Revolving Credit
shall be repayable three (3) years from the date of closing. Each L/C under the
Revolving Credit must be cancellable at the Bank's option no later than the
Termination Date or if earlier, one year after its issuance. Amounts repaid
under the Revolving Credit may, subject to the terms and conditions of such
Credit Agreement, be reborrowed.
Section 4. Interest. Interest will accrue on the outstanding principal
balance of the Loans at the rate per annum equal at all times to the Prime Rate
as from time to time in effect (herein defined as the greater of (x) the Bank's
prime commercial rate as announced from time to time or (y) the fed funds rate
plus 1/2 of 1%) or, at the option of the relevant Borrower with 3 bank business
days prior notice to the Bank and provided no default exists under the Credit
Agreement referred to below, at one or more rates of interest determined
<PAGE>
based on reserve-adjusted LIBOR plus 2-3/4% (with such rate to be subject to
incentive pricing which effects a reduction therein by 1/4% one year after
closing if the Borrower reaches a level of profitability to be determined by the
bank and no default then exists with respect to the Revolving Credit), provided
that the total amount of Loans outstanding and bearing interest at a reserve-
adjusted LIBOR rate shall be limited to an amount to be determined by the Bank.
Generally speaking, after default, the interest rates applicable to loans will
be increased by 2%. Each Loan under the Revolving Credit bearing interest with
reference to LIBOR shall be in an amount of $500,000 or such greater amount
which is an integral multiple of $100,000. The Borrower shall have the option to
convert portions of the Revolving Credit from the Prime Rate to one or more
reserve-adjusted LIBOR rates for interest periods of one, two or three months.
At the end of any interest period for any portion of the Revolving Credit
bearing interest at a reserve-adjusted LIBOR rate, the interest rate on the
relevant Loans shall revert to the Prime Rate or, subject to the conditions set
forth above, be set at a newly applicable reserve-adjusted LIBOR rate for the
selected interest period. Interest shall be computed on the basis of a year of
360 days for the actual number of days elapsed, and, in the case of loans
bearing interest at the Prime Rate, shall be payable monthly in arrears and, in
the case of loans bearing interest at a reserve-adjusted LIBOR rate, shall be
payable on the last day of each interest period selected therefor. The Credit
Agreement referred to below will include the Bank's standard clauses for LIBOR-
based pricing protection such as availability of eurodollars, change in
circumstances, increased costs and funding indemnity provisions. To cover the
cost of providing immediate credit under the Credit Agreement for collection of
the Borrower's accounts, the Credit Agreement hereinafter identified shall
provide for payments and collections to be deemed applied one (1) bank business
day after receipt for purposes of determining interest payable by the Borrowers
on the Loans (it being understood that if any item presented for collection is
not honored, the Bank may reserve any provisional credit which has been given
for the item and make appropriate adjustments to the amount of interest and
principal otherwise due).
Section 5. Credit Agreement. The Bank and the Borrower shall enter into the
Bank's standard form of Credit Agreement to provide for the Revolving Credit and
set forth the terms and conditions to be applicable to the Revolving Credit and
which will contain representations, warranties, covenants, agreements, events of
default and other pertinent provisions customarily required by the Bank or which
the Bank believes appropriate to evidence, secure and assure repayment and
performance of all the Borrower's present and future obligations to the Bank
(collectively the "Obligations"), including the Loans, and otherwise protect the
Bank's interests in the Obligations. The Credit Agreement is sometimes referred
to herein as the "Credit Agreement." The Credit Agreement shall, of course, be
in a form and contain terms and conditions which are consistent with, but not
limited by, the terms of this commitment and are otherwise satisfactory to the
Bank and its counsel in form and substance. The Credit Agreement shall be for a
contract period of three (3) years, at the end of which period, all the
Obligations, if not already due, shall be due and payable. Among the more
important general covenants to be included in the Credit Agreement will be
covenants requiring the submittal of detailed financial information on a
periodic basis (including monthly internally prepared financial statements and
annual audit reports), compliance with the Borrowing Base more fully described
herein (which includes
-2-
<PAGE>
submittal of officer certificates reflecting computation of the Borrowing Base
on a weekly basis, or if and so long as availability under the Revolving Credit
exceeds $2,500,000, on a monthly basis), prohibition on the creation of liens
and encumbrances other than to the Bank, compliance with all governmental,
regulatory and other applicable rules and regulations, limitations on handling
of hazardous substances, restrictions on capital expenditures, prohibitions on
the incurrence of additional indebtedness, restrictions on investments, loans,
advances and guarantees, prohibitions of mergers, consolidations and the like,
prohibitions of dividends and stock redemptions, restrictions on changes in
management, restrictions on payment of management and similar fees more fully
described herein and ratios and other financial tests solely acceptable to us.
Based on the Bank's current analysis of the financial information heretofore
provided by or on behalf of the Borrower to the Bank, the Bank's present intent
is that the financial covenants in the Credit Agreement include those set out on
the attached Exhibit to this letter. The Credit Agreement will also contain
defaults and events of default of the type customarily required by the Bank and
other prudent Banks, including defaults related to the untruthfulness of
representations and warranties, the failure to observe or perform covenants and
agreements, the commencement of bankruptcy, insolvency, reorganization or
similar proceedings by the Borrower and payment of any indebtedness which is
prohibited by the terms of any subordination agreement in effect between the
holder of such indebtedness and the Bank. Any default under the Credit Agreement
shall be deemed a default in respect of the Loans and L/C's, entitling the Bank
to accelerate the maturity of the Loans and to require cash collaterialization
of the L/C's.
Section 6. Borrowing Base. The aggregate principal amount of Loans and
L/C's shall at no time and for no reason exceed the lesser of (i) $10,000,000 or
(ii) the Borrowing Base as then determined and computed. The "Borrowing Base"
and the computation thereof shall be equal to the amount (if any) by which (a)
the sum of (i) eighty-five percent (85%) of the unpaid amount of the Borrower's
Eligible Receivables (to be defined in the Credit Agreement to be accounts
acceptable to the Bank, but in no event to include (x) accounts which remain
unpaid more than ninety (90) days from their invoice date, (y) accounts which
are more than sixty (60) days past due and (z) accounts (whether or not past
due) which are outstanding more than one hundred fifty (150) days from their
invoice date, provided that the so-called Jelsert accounts on up to a 120-day
dating may still be eligible if and so long as they are neither more than thirty
(30) days past due nor outstanding more than one hundred fifty (150) days from
their invoice date); (ii) up to sixty percent (60%) of the loan value (to be at
the lower of FIFO cost or market) of the Borrower's Eligible Inventory (to be
defined in the Credit Agreement consisting of raw materials acceptable to the
Bank); and (iii) up to fifty percent (50%) of the loan value (to be at the lower
of FIFO cost or market) of the Borrower's Eligible Inventory (to be defined in
the Credit Agreement) consisting of finished goods acceptable to the Bank
exceeds (b) $500,000. Notwithstanding the foregoing, the portion of the
Borrowing Base attributable to Eligible Inventory (both raw materials and
finished goods) shall be limited to $5,000,000 at all times. If at any time the
aggregate principal amount of Loans and L/C's shall exceed the amount of the
Borrowing Base as so computed (subject to the more specific provisions related
thereto in the Credit Agreement), the Borrower shall immediately prepay the
principal of such advances by the amount of such excess. Generally, the
inventory to be
-3-
<PAGE>
included in computation of such Borrowing Base will in no event include spare
parts, subassemblies, adhesives, inks or packaging and crating materials.
Without limiting the Bank's discretion with respect to eligibility of the
collateral, the Bank intends to review regularly the standards for advances
against accounts and inventory. Each request for an advance under the Revolving
Credit must be in writing, and prior to each such advance the Borrower shall be
required to provide such certificates and other information as the Bank may
require to support the advance. The Borrowing Base shall only be computed
against so much of the accounts and inventory as to which such information has
been provided.
Section 7. Fees and Costs. (a) Closing Fee. 1/2 of 1% of the entire
facility, which fee shall be deemed fully earned and non-refundable upon
acceptance of this commitment.
(b) Facility Fee. 1/4 of 1% on the average daily unused portion of the
Revolving Credit, whether or not available under the Borrowing Base (computed on
the basis of a year of 360 days for the actual number of days elapsed), such
facility fee to be payable quarterly in arrears.
(c) Letter of Credit Fee. 1/4 of 1% per annum non-refundable fee on the
fact amount of each issued Letter of Credit, payable at issuance and each
anniversary thereof, plus usual and customary administrative fees.
(d) Prepayment Fee. In the event of the Loans and L/C's are paid in full
and the Credit Agreement hereinafter identified is terminated prior to the
Termination Date, the Borrowers shall pay to the Bank a prepayment premium equal
to $100,000 for any prepayment during the first year following closing and
$50,000 at any time thereafter.
(e) Costs. The Loans, L/C's and all the other transactions contemplated by
this letter shall be made without cost to the Bank and, without limiting the
generality of the foregoing, the Borrower shall pay to the Bank all fees,
commissions, costs and expenses (including without limitation audit charges,
travel costs, title charges, escrow fees, recording fees, taxes and attorney's
fees and charges) incurred by the Bank in connection with the transactions
contemplated hereby (whether or not the Loans are actually funded), including
expenses incurred in enforcing the Loans and obligations in respect of the
L/C's. The closing and facility fees shall be in addition to and not in
substitution for the amounts for which the Borrower must reimburse the Bank in
accordance with the immediately preceding sentence.
Section 8. Security. The Loans and all other Obligations shall be secured
by first and prior perfected liens on all of the Borrower's assets and
properties. Without limiting the foregoing, the Loans shall be supported by the
following pursuant to documentation acceptable to the Bank and its counsel:
(a) A first and prior perfected security interest in all of the Borrower's
present and future accounts, inventory, machinery, equipment, fixtures, general
intangibles (including without limitation all tradenames, trade styles, patents
and the right to use the same) and all proceeds thereof and of any insurance
related thereto.
-4-
<PAGE>
The Borrower shall cause all proceeds of its accounts to be deposited in a
lockbox maintained by the Borrower at the Bank's principal office in
Chicago, Illinois, and all the proceeds of such lockbox shall in turn be
remitted into an account of the Borrower at such office (the "Operations
Account").
(b) A first and prior perfected mortgage lien on all of the
Borrower's real property and all improvements thereon and all proceeds
thereof and of any insurance related thereto relating to the Borrower's
real estate located in California and Ohio.
Section 9. Conditions Precedent to Loan Disbursement. A. Disbursements
Generally. Prior to the disbursement of the Loans, the Borrower shall satisfy
such requirements and shall deliver to the Bank such documents, certificates and
legal opinions (collectively the "Loan Documents") as the Bank, in its
discretion, deems necessary or desirable to satisfy the terms of this commitment
and evidence that all parties' participation in the transactions contemplated
hereby has been duly authorized, all to be acceptable to the Bank and its
counsel as to form and substance.
B. Conditions Precedent to Disbursement of the Loans. Without limiting
the generality of paragraph lettered "A" above, the following documents shall be
delivered and conditions shall be complied with to the satisfaction of the Bank
and its counsel prior to the initial advance under the Revolving Credit, and all
documentation required below shall be satisfactory in form and substance to the
Bank and its counsel:
(1) The Bank shall have received the Credit Agreement, a master
demand promissory note to evidence Loans made from time to time under the
Revolving Credit and such mortgages, security agreements, financing
statements and other instruments and documents as the Bank may require to
provide for the collateral security contemplated by this letter to be
delivered in connection with the Loans, and all liens thereon in favor of
the Bank shall have been duly perfected as first and prior liens.
(2) The Bank shall have received original policies of hazard
insurance on the collateral and such other insurance as the Bank may
require in such amounts and with such coverages of the Bank may require
with all such policies containing a mortgagee's loss payable and notice of
cancellation clause acceptable to the Bank.
(3) The Bank shall have received title insurance policies (or binding
commitments therefor) on each parcel of real property subject to the liens
described above together with such endorsements thereto as the Bank
requests.
(4) The Bank shall have received fixed-asset appraisals on the
equipment of the Borrower performed by valuation consultants acceptable to
the Bank.
(5) The Bank shall have reasonably satisfied itself concerning the
environmental hazards and matters with respect to each parcel of real
property subject to the liens described above.
-5-
<PAGE>
(6) The Bank shall have received an ALTA Survey prepared by a
licensed surveyor on each parcel of real property subject to the liens
described above which surveys shall also state whether or not any portion
of the real property is in a federally designated flood hazard area.
(7) The Bank shall have received financial projections for the
Borrower reflecting its financial condition through the expiration of the
Revolving Credit, such projections to include monthly income statements and
balance sheets for such period, and the Bank shall receive such assurances
as it may require of the Borrower's likelihood of such performance.
(8) The Bank shall have receives such assurances as it may require to
satisfy itself that the Borrower shall have at lease $4,500,000 of credit
available under the Borrowing Base after giving effect to the initial
extensions of credit under the Revolving Credit.
(9) No change occurs in the business or prospects of the Borrower
which the Bank regards as materially adverse.
(10) Payment of the closing fee.
C. Conditions Precedent to Subsequent Advances Under the Revolving
Credit. Subject to the terms of the Credit Agreement, Loans and L/C's will
continue to be available to the Borrower under the Revolving Credit, so long as
no default has occurred under the Credit Agreement or any of the other Loan
Documents or would occur with the lapse of time, the giving of notice or both,
and there has been no adverse change in the condition (financial or otherwise)
of the Borrower or the collateral.
D. Legal Matters Generally. Before any Loans are made or L/C's issued,
all legal matters incident to the transactions contemplated hereby, all the Loan
Documents and the other instruments and documents required hereby or affecting
the security for this credit, the state of title to the collateral, the validity
and priority of the Bank's liens thereon, the power and authority of the parties
to the transaction contemplated hereby to consummate the same and to execute and
deliver the Loan Documents and any other instruments and documents required in
connection therewith and such other instruments, documents, opinions and
assurances as the Bank may request, and all procedures in connection therewith,
must all be acceptable to the Bank and its counsel.
Section 10. Entire Understanding. This letter constitutes the entire
understanding of the parties with respect to the subject matter hereof and any
prior agreement, statement or representation, whether written or oral, whether
made to the Borrower or any other person, firm or corporation and with respect
thereto or are superseded hereby.
Section 11. Termination. This commitment shall terminate and the Bank shall
have no obligation to make any extension of credit hereunder if (i) the Bank has
not received an accepted copy of this commitment within five (5) business days
of the date hereof (this
-6-
<PAGE>
commitment shall not be deemed to have been accepted in the event that the
Borrower purports to accept the same subject to any change in the terms and
conditions hereof); (ii) the $50,000 payment of the Bank's origination fee is
not received at the time required by paragraph numbered 7(a) hereof; (iii) the
disbursement of the initial Loan has not, for any reason, occurred on or before
July 31, 1998; (iv) any material adverse change occurs with respect to the
condition (financial or otherwise) or prospects of the Borrower, the collateral
or any statements., information, materials, representations or warranties
furnished to the Bank by any party in connection with this commitment proves
untrue in any respect.
We are delighted to be able to make this financing available to you for
this acquisition. If the foregoing is satisfactory, kindly indicate your
acceptance by signing the enclosed copy of this letter and returning one fully
executed counterpart thereof to the Bank, along with the $50,000 balance of the
commitment fee.
Very truly yours,
HARRIS TRUST AND SAVINGS BANK
By: /s/ Terrence E. O'Grady
-------------------------
Vice President
Accepted and agreed to as of this 1 day of June , 1998. Our check in the
amount of $50,000 is enclosed.
JPS PACKAGING CO.
By: /s/ John T. Carper
-------------------------
Title: President
------------------
-7-
<PAGE>
EXHIBIT 10.2
JPS PACKAGING COMPANY
1998 LONG-TERM COMPENSATION PLAN
1. Purposes. The purposes of this 1998 Long-Term Compensation Plan are to
provide incentives and rewards to those employees largely responsible for the
success and growth of JPS Packaging Company, and its subsidiary corporations and
to assist all such corporations in attracting and retaining executives and other
key employees with experience and ability.
2. Definitions.
(a) Award means one or more of the following: Stock Options, Incentive
Stock Options, Restricted Shares, Performance Shares, Performance Units and any
other rights which may be granted to a Recipient under the Plan.
(b) Common Stock means the Common Stock, without par value, of the
Company.
(c) Company means JPS Packaging Company, a Delaware corporation, and,
unless the context otherwise requires, includes its subsidiary corporations and
their respective divisions, departments and subsidiaries and the respective
divisions, departments and subsidiaries of such subsidiaries.
(d) Incentive Stock Option means a Stock Option which meets all of the
requirements of an "incentive stock option" as defined in Section 422(b) of the
Internal Revenue Code of 1986, as now in effect or hereafter amended (the
"Internal Revenue Code").
(e) Performance Period means that period of time specified by the
Committee during which a Recipient must satisfy any designated performance goals
in order to receive an Award.
(f) Performance Share means the right to receive, upon satisfying
designated performance goals within a Performance Period, shares of Common
Stock, cash, or a combination of cash and shares of Common Stock, based on the
market value of shares of Common Stock covered by such Performance Shares at the
close of the Performance Period.
(g) Performance Unit means the right to receive, upon satisfying
designated performance goals within a Performance Period, shares of Common
Stock, cash, or a combination of cash and shares of Common Stock.
(h) Plan means this JPS Packaging Company 1998 Long-Term Compensation
Plan, as the same may be amended from time to time.
(i) Recipient means an employee or director of the Company who has been
granted an Award under the Plan.
(j) Restricted Share means a share of Common Stock issued to a Recipient
hereunder
<PAGE>
subject to such terms and conditions, including, without limitation, forfeiture
or resale to the Company, and to such restrictions against sale, transfer or
other disposition, as the Committee may determine at the time of issuance.
(k) Stock Option means the right to purchase, upon exercise of a Stock
Option granted under this Plan, shares of the Company's Common Stock.
3. Administration of the Plan. The Plan shall be administered by a
Compensation Committee (the "Committee") consisting of two or more directors of
the Company each of whom qualifies as an "Outside Director" under Treasury
Regulation Section 1.162-27(e)(3) and as a "Non-Employee Director" under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended, to be
appointed by and to serve at the pleasure of the Board of Directors of the
Company. A majority of the Committee members shall constitute a quorum and the
acts of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the Committee, shall be
valid acts of the Committee, however designated, or the Board of Directors of
the Company if the Board has not appointed a Committee.
The Committee shall have full power and authority to construe, interpret
and administer the Plan, subject to the powers herein specifically reserved to
the Board of Directors and to the other provisions of this Plan, and to make
determinations which shall be final, conclusive and binding upon all persons
including, without limitation, the Company, the shareholders of the Company, the
Board of Directors, the Recipients and any persons having any interest in any
Awards which may be granted under the Plan. The Committee shall impose such
additional conditions upon the grant and exercise of Awards under this Plan as
may from time to time be deemed necessary or advisable, in the opinion of
counsel to the Company, to comply with applicable laws and regulations. The
Committee from time to time may adopt rules and regulations for carrying out the
Plan and written policies for implementation of the Plan. Such policies may
include, but need not be limited to, the type, size and terms of Awards to be
made to Recipients and the conditions for payment of such Awards.
Notwithstanding the foregoing, the Company's Board of Directors shall have
authority to determine which non-employee directors shall receive Awards and the
terms and conditions of such Awards.
4. Absolute Discretion. The Committee may, in its sole and absolute
discretion (subject to the Committee's power to delegate certain authority in
accordance with the second paragraph of this Section 4), at any time and from
time to time during the continuance of the Plan, (i) determine which employees
and directors of the Company shall be granted Awards under the Plan, (ii) grant
to any employee or director so selected such an Award, (iii) determine the type,
size and terms of Awards to be granted (subject to Sections 6, 10 and 11 hereof,
as hereafter amended), (iv) establish objectives and conditions for receipt of
Awards, (v) place conditions or restrictions on the payment or exercise of
Awards, and (vi) do all other things necessary and proper to carry out the
intentions of this Plan; provided, however, that, in each and every case, those
Awards which are Incentive Stock Options shall contain and be subject to those
requirements specified in Section 422 of the Internal Revenue Code and shall be
granted only to those employees eligible thereunder to receive the same.
2
<PAGE>
5. Eligibility. Awards may be granted to any employee or director of the
Company. An employee may be granted multiple forms of Awards under the Plan.
Incentive Stock Options may be granted under the Plan to a Recipient during any
calendar year only if the aggregate fair market value (determined as of the date
the Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by such Recipient
during any calendar year under the Plan and any other "incentive stock option
plans" (as defined in the Internal Revenue Code) maintained by the Company does
not exceed the sum of $100,000. No non-employee director shall be eligible for
grants of Awards by the Committee, although such director may be eligible for
grants of Awards granted by the Board of Directors.
6. Stock Subject to the Plan. The total number of shares of Common Stock
issuable under this Plan may not at any time exceed 550,000 shares, subject to
adjustment as provided herein. All of such shares may be issued or issuable in
connection with the exercise of Incentive Stock Options. Not more than 55,000
shares may be issued or issuable as Restricted Shares or Common Stock issued in
connection with Performance Shares or Performance Units. Shares of Common Stock
not actually issued pursuant to an Award shall be available for future Awards.
Shares of Common Stock to be delivered or purchased under the Plan may be either
authorized but unissued Common Stock or treasury shares.
7. Awards.
(a) Awards under the Plan may include, but need not be limited to, shares
of Stock Options, Incentive Stock Options, Restricted Shares, Performance Shares
and Performance Units. The amount of each Award may be based upon the market
value of a share of Common Stock. The Committee may make any other type of Award
which it shall determine is consistent with the objectives and limitations of
the Plan.
(b) The Committee may establish performance goals to be achieved within
such Performance Periods as may be selected by it using such measures of the
performance of the Company as it may select as a condition to the receipt of any
Award.
8. Vesting Requirements and Other Contingencies. The Committee may
determine that all or a portion of an Award or a payment to a Recipient pursuant
to an Award, in any form whatsoever, shall be vested at such times and upon such
terms as may be selected by it, except that an award of Restricted Shares shall
not vest prior to the expiration of three (3) years from the date of grant.
However, the Committee may accelerate the vesting of any Award upon a "Change of
Control of the Company" as such term may be defined in the Award agreement.
9. Deferred Payments and Dividend and Interest Equivalents. The Committee
may determine that the receipt of all or a portion of an Award or a payment to a
Recipient pursuant to an Award, in any form whatsoever, (i) shall be deferred,
or (ii) at the election of such Recipient, may be deferred. Deferrals shall be
for such periods and upon such terms as the Committee may determine.
3
<PAGE>
10. Stock Option Price. The purchase price per share of Common Stock under
each Stock Option shall be determined by the Committee, but shall not be less
than, market value (as determined by the Committee) of one share of Common Stock
on the date the Stock Option or Incentive Stock Option is granted. Payment for
exercise of any Stock Option granted hereunder shall be made (a) in cash, or (b)
by delivery of Common Stock having a market value equal to the aggregate option
price, or (c) by a combination of payment of cash and delivery of Common Stock
in amounts such that the amount of cash plus the market value of the Common
Stock equals the aggregate option price.
11. Continuation of Employment. The Committee shall require that a
Recipient be an employee or director of the Company at the time an Award is paid
or exercised. The Committee may provide for the termination of an outstanding
Award if a Recipient ceases to be an employee or director of the Company and may
establish such other provisions with respect to the termination or disposition
of an Award on the death or retirement of a Recipient as it, in its sole
discretion, deems advisable. The Committee shall have the sole power to
determine the date of any circumstances which shall constitute a cessation of
employment or membership on the Company's Board of Directors and to determine
whether such cessation is the result of retirement, death or any other reason.
12. Registration of Stock. Each Award shall be subject to the requirement
that, if at any time the Committee shall determine that qualification or
registration under any state or federal law of the shares of Common Stock,
Restricted Shares, Stock Options, Incentive Stock Options, or other securities
thereby covered or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of or in connection with the granting
of such Award or the purchase of shares thereunder, the Award may not be paid or
exercised in whole or in part unless and until such qualification, registration,
consent or approval shall have been effected or obtained free of any conditions
the Committee, in its discretion, deems unacceptable.
13. Employment Status. No Award shall be construed as imposing upon the
Company the obligation to continue the employment of a Recipient. No employee or
other person shall have any claim or right to be granted an Award under the
Plan.
14. Assignability. No Award granted pursuant to the Plan shall be
transferable or assignable by the Recipient other than by will or the laws of
descent and distribution and during the lifetime of the Recipient shall be
exercisable or payable only by or to him or her.
15. Dilution or Other Adjustments. In the event of any changes in the
capital structure of the Company, including but not limited to a change
resulting from a stock dividend or split-up, or combination or reclassification
of shares, the Board of Directors shall make such equitable adjustments with
respect to Awards or any provisions of this Plan as it deems necessary and
appropriate, including if necessary, any adjustment in the maximum number of
shares of Common Stock subject to the Plan, the maximum number of shares that
may be subject to one or more Awards granted to any one Recipient during a
calendar year, or the number of shares of
4
<PAGE>
Common Stock subject to an outstanding Award.
16. Merger, Consolidation, Reorganization, Liquidation, Etc. If the
Company shall become a party to any corporate merger, consolidation, major
acquisition of property for stock, reorganization, or liquidation, the Board of
Directors shall make such arrangements it deems advisable with respect to
outstanding Awards, which shall be binding upon the Recipients of outstanding
Awards, including, but not limited to, the substitution of new Awards for any
Awards then outstanding, the assumption of any such Awards and the termination
of or payment for such Awards.
17. Withholding Taxes. The Company shall have the right to deduct from all
Awards hereunder paid in cash any federal, state, local or foreign taxes
required by law to be withheld with respect to such Awards and, with respect to
Awards paid in other than cash, to require the payment (through withholding from
the Recipient's salary or otherwise) of any such taxes. Subject to such
conditions as the Committee may establish, Awards under the Plan payable in
shares of Common Stock may provide that the Recipients thereof may elect, in
accordance with any applicable regulations, to have the Company withhold shares,
of Common Stock to satisfy all or part of any such tax withholding obligations,
with the value of such withheld shares of Common Stock based upon their fair
market value on the date the tax withholding is required to be made.
18. Costs and Expenses. The cost and expenses of administering the Plan
shall be borne by the Company and not charged to any Award nor to any Recipient.
19. Funding of Plan. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Award under the Plan.
20. Award Contracts. The Committee shall have the power to specify the
form of Award contracts to be granted from time to time pursuant to and in
accordance with the provisions of the Plan and such contracts shall be final,
conclusive and binding upon the Company, the shareholders of the Company and the
Recipients. No Recipient shall have or acquire any rights under the Plan except
such as are evidenced by a duly executed contract in the form thus specified. No
Recipient shall have any rights as a holder of Common Stock with respect to
Awards hereunder unless and until certificates for shares of Common Stock or
Restricted Shares are issued to the Recipient.
21. Guidelines. The Board of Directors of the Company shall have the power
to provide guidelines for administration of the Plan by the Committee and to
make any changes in such guidelines as from time to time the Board deems
necessary.
5
<PAGE>
22. Amendment and Discontinuance. The Board of Directors of the Company
shall have the right at any time during the continuance of the Plan to amend,
modify, supplement, suspend or terminate the Plan, provided that in the absence
of the approval of the holders of a majority of the shares of Common Stock of
the Company present in person or by proxy at a duly constituted meeting of
shareholders of the Company, no such amendment, modification or supplement shall
(i) increase the aggregate number of shares which may be issued under the Plan,
unless such increase is by reason of any change in capital structure referred to
in Section 16 hereof, (ii) change the termination date of the Plan provided in
Section 24, or (iii) delete or amend the market value restrictions contained in
Sections 10 and 11 hereof, and provided further, that no amendment, modification
or termination of the Plan shall in any manner affect any Award of any kind
theretofore granted under the Plan without the consent of the Recipient of the
Award, unless such amendment, modification or termination is by reason of any
change in capital structure referred to in Section 16 hereof or unless the same
is by reason of the matters referred to in Section 17 hereof.
23. Termination. The Committee may grant Awards at any time prior to May
4, 2008, on which date this Plan will terminate except as to Awards then
outstanding hereunder, which Awards shall remain in effect until they have
expired according to their terms or until May 4, 2018, whichever first occurs.
No Incentive Stock Option shall be exercisable later than 10 years following the
date it is granted.
24. Effectiveness and Approval. This Plan has been adopted and approved by
the Board of Directors and the sole shareholder of the Company as of May 4,
1998, and shall be effective as of May 4, 1998. The Committee may grant Awards
at any time on or after May 4, 1998.
6
<PAGE>
EXHIBIT 10.3
SEALRIGHT CO., INC.
9201 Packaging Drive
DeSoto, Kansas 66018
John Carper
Dear John:
The Board of Directors of Sealright has approved supplementary
benefits for key executives. The Benefits include a Retention Payment and
Severance Enhancements, but do not otherwise modify your existing agreements or
benefits.
Retention Payment
- -----------------
If you remain in the continuous employment of Sealright and perform
your present duties through May 29, 1998, you will receive a one time payment of
$60,000. However, if you are asked to leave before this date without cause, you
will receive this payment.
Severance Enhancements
- ----------------------
If your employment with Sealright or its successor is terminated
without cause you will receive the benefits under the Severance Pay Plan or your
individual agreement plus the following:
1. Payment of COBRA costs for as long as you desire such insurance
coverage up to 12 months.
2. Payment for outplacement services for as long as the services are
needed up to 12 months.
3. Payment of your base salary for 12 months following the effective
date of the termination in place of your existing arrangement.
In the event no transaction involving Sealright has been consummated by December
31, 1998, the Board will review the Severance Enhancements as well as all other
benefits in the normal course.
If you have any questions about the foregoing, please contact Carl
Walker or me.
Sincerely,
/s/ Charles F. Marcy
<PAGE>
EXHIBIT 10.4
SEALRIGHT CO., INC.
9201 Packaging Drive
DeSoto, Kansas 66018
Larry Walton
Dear Larry:
The Board of Directors of Sealright has approved supplementary
benefits for key executives. The Benefits include a Retention Payment and
Severance Enhancements, but do not otherwise modify your existing agreements or
benefits.
Retention Payment
- -----------------
If you remain in the continuous employment of Sealright and perform
your present duties through May 29, 1998, you will receive a one time payment of
$60,000. However, if you are asked to leave before this date without cause, you
will receive this payment.
Severance Enhancements
- ----------------------
If your employment with Sealright or its successor is terminated
without cause you will receive the benefits under the Severance Pay Plan or your
individual agreement plus the following:
1. Payment of COBRA costs for as long as you desire such insurance
coverage up to 12 months.
2. Payment for outplacement services for as long as the services are
needed up to 12 months.
3. Payment of your base salary for 12 months following the effective
date of the termination in place of your existing arrangement.
In the event no transaction involving Sealright has been consummated by December
31, 1998, the Board will review the Severance Enhancements as well as all other
benefits in the normal course.
If you have any questions about the foregoing, please contact Carl
Walker or me.
Sincerely,
/s/ Charles F. Marcy
<PAGE>
EXHIBIT 10.5
SEALRIGHT CO., INC.
9201 Packaging Drive
DeSoto, Kansas 66018
Steve Saucier
Dear Steve:
The Board of Directors of Sealright has approved supplementary benefits for
key executives. The Benefits include a Retention Payment and Severance
Enhancements, but do not otherwise modify your existing agreements or benefits.
Retention Payment
If you remain in the continuous employment of Sealright and perform your
present duties through May 29, 1998, you will receive a one time payment of
$60,000. However, if you are asked to leave before this date without cause, you
will receive this payment.
Severance Enhancements
If your employment with Sealright or its successor is terminated without
cause you will receive the benefits under the Severance Pay Plan or your
individual agreement plus the following:
1. Payment of COBRA costs for as long as you desire such insurance
coverage up to 12 months.
2. Payment for outplacement services for as long as the services are
needed up to 12 months.
3. Payment of your base salary for 12 months following the effective date
of the termination in place of your existing arrangement.
In the event no transaction involving Sealright has been consummated by December
31, 1998, the Board will review the Severance Enhancements as well as all other
benefits in the normal course.
If you have any questions about the foregoing, please contact Carl Walker
or me.
Sincerely,
/s/ Charles F. Marcy
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF JPS PACKAGING COMPANY
Venture Packaging, Inc.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
The Board of Directors
Sealright Co., Inc.
The Board of Directors
JPS Packaging Company
We consent to the use of our report dated February 9, 1998, except for note 11
which was as of March 2, 1998, incorporated by reference herein and our report
dated April 21, 1998 included herein and to the reference to our firm under the
heading "Experts" in the proxy statement/prospectus.
KPMG Peat Marwick LLP
Kansas City, Missouri
June 8, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent accountants, we hereby consent to the use of our report
included in or made part of this registration statement.
/s/ Arthur Andersen LLP
Kansas City, Missouri
June 3, 1998
<PAGE>
Ex 23.4
PERSONAL AND CONFIDENTIAL
- -------------------------
June 8, 1998
Board of Directors
Sealright Co., Inc.
9201 Packaging Drive
DeSoto, Kansas 66018
Re: Registration Statement of JPS Packaging Company relating to the Common
Stock, par value, $.01 per share being registered in connection with the
below-described transaction.
Gentlemen:
Reference is made to our opinion letter dated March 2, 1998 with respect to the
fairness from a financial point of view to the holders (other than Huhtamaki Oy
("Parent"), Seal Acquisition Corporation, an indirect wholly-owned subsidiary of
Parent ("Merger Sub"), Sealright Co., Inc. (the "Company"), or any direct or
indirect subsidiary of Parent or the Company) of the outstanding shares of
Common Stock, par value $0.10 per share (the "Shares"), of the Company of the
$11.00 per Share in cash to be received by such holders pursuant to the
Agreement and Plan of Merger, dated as of March 2, 1998, by and among Parent,
Merger Sub and the Company (the "Agreement"). Pursuant to the Agreement, Merger
Sub will be merged with and into the Company (the "Merger") and each outstanding
Share will be converted into the right to receive $11.00 in cash. We understand
that prior to the Merger, the Company will transfer the Excluded Assets and the
Excluded Liabilities to the Flexible Company (each as defined in the Agreement)
and that simultaneously with the consummation of the Merger, the shareholders of
the Company will also be entitled to receive Flexible Shares (as defined in the
Agreement) on a pro rata basis or a pro rata share of the sales proceeds (less
certain transaction expenses) from the Permitted Transaction (as defined in the
Agreement).
The foregoing opinion letter is provided solely for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the transaction contemplated therein and is not to be used,
circulated, quoted or otherwise referred to for any other purpose, nor is it to
be filed with, included in or referred to in whole or in part in any
registration statement, proxy statement or any other document, except in
accordance with our prior written consent. We understand that the Company has
determined to include our opinion in the above-referenced Registration
Statement.
<PAGE>
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "SUMMARY - The Merger and Exchange" "THE PROPOSED
TRANSACTIONS - Background," "THE PROPOSED TRANSACTIONS - Reasons for the
Transactions; Recommendation of the Sealright Board" and "THE PROPOSED
TRANSACTIONS - Opinion of Financial Advisor" and to the inclusion of the
foregoing opinion in the Proxy Statement/Prospectus included in the above-
mentioned Registration Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 of the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted from
JPS PACKAGING COMPANY and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000712964
<NAME> SEALRIGHT CO., INC.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 289
<SECURITIES> 0
<RECEIVABLES> 11,575
<ALLOWANCES> 333
<INVENTORY> 12,987
<CURRENT-ASSETS> 25,745
<PP&E> 67,343
<DEPRECIATION> 36,376
<TOTAL-ASSETS> 59,920
<CURRENT-LIABILITIES> 8,506
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 47,973
<TOTAL-LIABILITY-AND-EQUITY> 59,920
<SALES> 20,416
<TOTAL-REVENUES> 20,416
<CGS> 18,837
<TOTAL-COSTS> 18,837
<OTHER-EXPENSES> 3,334
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,755)
<INCOME-TAX> (603)
<INCOME-CONTINUING> (1,152)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,152)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
<PAGE>
SEALRIGHT CO., INC.
SPECIAL MEETING MONDAY, JUNE 29, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder(s) of Sealright Co., Inc., a Delaware
corporation (the "Company"), appoint CHARLES F. MARCY and JOHN T. CARPER and,
or either of them, with full power to act alone, the true and lawful
attorneys-in-fact of the undersigned, with full power of substitution and
revocation, to vote all shares of stock of said Corporation which the
undersigned is entitled to vote at the special meeting of its stockholders to
be held at the offices of Bryan Cave LLP, Suite 3700, One Kansas City Place,
1200 Main Street, Kansas City, Missouri 64105, on June 29, 1998 at 10 a.m.
Central Daylight Time, and at any adjournment thereof, with all powers the
undersigned would possess if personally present, as follows:
YOU ARE REQUESTED TO COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY
(Continued and to be SIGNED on the reverse side)
- -------------------------------------------------------------------------------
* CUT OR TEAR ALONG PERFORATED EDGE *
<PAGE>
SEALRIGHT CO., INC.
1.Approval and adoption of the Agreement and Plan of Merger, dated as of March
2, 1998 by and among the Company, Huhtamaki Oy ("Huhtamaki") and Seal
Acquisition Corporation ("Acquisition Sub") and the transactions contemplated
therein, including the partial redemption of common stock of the Company and
the merger of Acquisition Sub, a wholly-owned subsidiary of Huhtamaki into the
Company with the Company surviving the merger as a wholly-owned subsidiary of
Huhtamaki, pursuant to which transactions, each outstanding share of the
Company's common stock, par value $.10 per share will be converted into the
right to receive $11.00 in cash without interest and one-half share of common
stock, par value $.01 per share of the Company's subsidiary, JPS Packaging
Company ("JPS Packaging"), with any partial shares of common stock of JPS
Packaging issued to a stockholder being redeemed by JPS Packaging for $6.86 in
cash per share.
For [_] Against [_] Abstain [_]
2. On any other matter that may be submitted to a vote of stockholders.
For [_] Against [_] Abstain [_]
This proxy will be voted "FOR" above the proposal if no instruction to the
contrary is indicated. If any other business is presented at the meeting, this
proxy will be voted in accordance with the recommendation of the Company's
Board of Directors.
- -------------------------------------------------------------------------------
Dated
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE SIGN NAME OR NAMES AS APPEARING ON THIS PROXY. IF SIGNING AS A REPRE-
SENTATIVE, PLEASE INCLUDE CAPACITY.
- -------------------------------------------------------------------------------
* CUT OR TEAR ALONG PERFORATED EDGE *
