-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VV2qhdB0mc2lN3daorMjA5LwjfVEgusQXm5CgWQUae4K4aRAheay+L3qKR92m6XZ Wbqa2f5CkZueoy5ap7ID+A== 0000950130-02-007007.txt : 20021010 0000950130-02-007007.hdr.sgml : 20021010 20021010154714 ACCESSION NUMBER: 0000950130-02-007007 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20021010 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BWAY CORP CENTRAL INDEX KEY: 0000943897 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 363624491 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-48540 FILM NUMBER: 02786433 BUSINESS ADDRESS: STREET 1: 8607 ROBERTS DR STREET 2: STE 250 CITY: ATLANTA STATE: GA ZIP: 30350 BUSINESS PHONE: 4045870888 MAIL ADDRESS: STREET 1: 8607 ROBERTS DRIVE SUITE 250 CITY: ATLANTA STATE: GA ZIP: 30350 FORMER COMPANY: FORMER CONFORMED NAME: BROCKWAY STANDARD HOLDINGS CORP DATE OF NAME CHANGE: 19950413 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BCO HOLDING CO CENTRAL INDEX KEY: 0001197471 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O KELSO & CO STREET 2: 320 PARK AVE 24TH FL. CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127513939 MAIL ADDRESS: STREET 1: C/O KELSO & CO STREET 2: 320 PARK AVE 24TH FL CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 13D
 
 
Under the Securities Exchange Act of 1934
 
BWAY Corporation
(Name of Issuer)
 
Common Stock, par value $.01 per share
(Title of Class of Securities)
 
056039100
(CUSIP Number)
 
James J. Connors, II
BCO Holding Company
320 Park Avenue
New York, NY 10022
(212) 751-3939
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
 
Copy To:
Margaret A. Davenport, Esq.
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
(212) 909-6000
 
September 30, 2002
(Date of Event which Requires Filing of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ¨.
 
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule13d-7 for other parties to whom copies are to be sent.
 
*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent

Page 2 of 12
 
amendment containing information which would alter disclosures provided in a prior cover page.
 
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 
CUSIP NO. 056039100
  
SCHEDULE 13D
  
Page 3 of 12
 
(1)
   
Names of Reporting Persons.
I.R.S. Identification
Nos. of Above Persons (Entities
Only).
   
BCO Holding Company
(2)
   
Check the Appropriate Box
if a Member of a Group
   
(a)  ¨
(b)  x
(3)
   
SEC Use Only
     
(4)
   
Source of Funds
   
00/Not Applicable
(5)
   
Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
   
¨
(6)
   
Citizenship or Place of
Organization
   
Delaware
    
Number of Shares
Beneficially Owned
by Each Reporting                                
Person With
   
(7)  Sole Voting Power
   
None
 
     
       
(8)  Shared Voting Power
   
2,513,168
*
     
       
(9)  Sole Dispositive Power
   
None
 
     
       
(10)  Shared Dispositive Power
   
None
 
     
                
(11)
      
2,513,168*
(12)
      
¨
(13)
      
27.4%**
(14)
   
Type of Reporting Person
   
CO

Page 4 of 12
 
  *    Reflects the number of shares of Common Stock of BWAY Corporation beneficially owned in the aggregate, as of September 30, 2002, by (i) Jean-Pierre Ergas, as represented and warranted in the Voting Agreement, dated September 30, 2002, between BCO Holding Company and Mr. Ergas, filed as Exhibit 1 hereto, including 291,683 shares of Common Stock subject to options held by Mr. Ergas that are exercisable within 60 days of September 30, 2002, (ii) Warren J. Hayford, as represented and warranted in the Voting Agreement, dated September 30, 2002, between BCO Holding Company and Mr. Hayford, filed as Exhibit 2 hereto, including 169,376 shares of Common Stock subject to options held by Mr. Hayford that are exercisable within 60 days of September 30, 2002, and (iii) Mary Lou Hayford, as represented and warranted in the Voting Agreement, dated September 30, 2002, between BCO Holding Company and Mrs. Hayford, filed as Exhibit 3 hereto.
 
**    Based upon 8,708,626 shares of Common Stock of BWAY Corporation outstanding as of September 30, 2002, as represented in the Agreement and Plan of Merger, dated September 30, 2002, by and among BCO Holding Company, BCO Acquisition, Inc. and BWAY Corporation, filed as Exhibit 4 hereto.

 
Page 5 of 13
 
ITEM 1.    SECURITY AND ISSUER.
 
The class of equity securities to which this statement on Schedule 13D (the “Statement”) relates is the Common Stock, par value $.01 per share (the “Common Stock”), of BWAY Corporation, a Delaware corporation (the “Issuer”). The principal executive offices of the Issuer are located at 8607 Roberts Drive, Suite 250, Atlanta, Georgia 30350.
 
ITEM 2.    IDENTITY AND BACKGROUND.
 
(a)-(c), (f)  The name of the person filing this Statement is BCO Holding Company, a Delaware corporation (“BCO Holding” or the “Reporting Person”). The principal business of the Reporting Person will be the acquisition of the outstanding shares of capital stock of the Issuer (as described in Item 4 below) and the operation of the Issuer after such acquisition. All of the outstanding capital stock of BCO Holding is beneficially owned by Kelso Investment Associates VI, L.P., a Delaware limited partnership (“KIA VI”), and KEP VI, LLC, a Delaware limited liability company (“KEP VI”), which are two private investment funds formed by Kelso & Company, L.P., a Delaware limited partnership (“Kelso”).
 
Kelso is a private investment firm specializing in acquisition transactions. The general partner of KIA VI is Kelso GP VI, LLC, a Delaware limited liability company (“Kelso GP VI”), the principal business of which is serving as the general partner of KIA VI. The principal business address of BCO Holding, KIA VI, KEP VI and Kelso GP VI is c/o Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York 10022. The name, citizenship, principal occupation and address of each managing member of Kelso GP VI and KEP VI are set forth on Schedule I, which is incorporated by reference herein.
 
(d)-(e)  During the last five years, none of the persons or entities referred to in this Item 2 (including those persons listed on Schedule I) has been (i) convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) a party to a civil proceeding or a judicial or administrative body of competent jurisdiction and as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
 
All of the persons or entities referred to in this Item 2 (including those persons listed on Schedule I) hereby expressly disclaim beneficial ownership of any shares of Common Stock, and the filing of this Statement shall not be construed as an admission that such persons or entities are, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the beneficial owners of any such shares of Common Stock.

Page 6 of 12
 
ITEM 3.     SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
 
BCO Holding may be deemed to have acquired beneficial ownership of 2,513,168 shares of Common Stock pursuant to (i) the Voting Agreement, dated as of September 30, 2002, between Jean-Pierre Ergas and BCO Holding, (ii) the Voting Agreement, dated as of September 30, 2002, between Warren J. Hayford and BCO Holding and (iii) the Voting Agreement, dated as of September 30, 2002, between Mary Lou Hayford and BCO Holding (collectively, the “Voting Agreements”). However, BCO Holding expressly disclaims any beneficial ownership of the shares of Common Stock that are covered by the Voting Agreements.
 
Subject to the terms of each of their respective Voting Agreements, Mr. Ergas, Mr. Hayford and Mrs. Hayford (collectively, the “Voting Agreement Individuals”) have each agreed to (a) vote all of the Common Stock that each of them owns (i) in favor of the Merger Agreement (as defined in Item 4 below), the transactions contemplated thereby (including, without limitation, the Merger (as defined in Item 4 below)), and any actions required in furtherance thereof, (ii) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation of the Issuer under such Voting Agreement, the Merger Agreement or any other agreement contemplated thereby, (iii) against any Acquisition Proposal (as defined in Section 5.4(b) of the Merger Agreement) and against any other proposal for action or agreement that is intended, or could reasonably be expected, to materially impede, interfere with, delay, postpone or adversely affect the consummation of the transactions contemplated by the Merger Agreement, (iv) against any change in the composition of the Board of Directors of the Issuer, other than as contemplated by the Merger Agreement, and (v) against any amendment to the Certificate of Incorporation or by-laws of the Issuer, other than as contemplated by the Merger Agreement, and (b) grant an irrevocable proxy to BCO Holding, intended to be used only in the event of a failure by any such Voting Agreement Individual to comply with the obligations described in clause (a) above, to vote all of the shares of Common Stock held by such Voting Agreement Individual pursuant to the items in clause (a) above. The Voting Agreements were entered into in consideration of the execution and delivery of the Merger Agreement and BCO Holding did not pay additional consideration in connection with the execution and delivery of the Voting Agreements.
 
Additionally, pursuant to the Voting Agreements and, as long as the Merger and the transactions contemplated thereby have not yet been consummated, upon 60 days prior to the vesting of certain options to purchase shares of Common Stock held by Mr. Ergas and Mr. Hayford, BCO Holding may be deemed to acquire beneficial ownership of (i) 6,667 shares of Common Stock as of October 15, 2002, (ii) 281,058 shares of Common Stock as of November 29, 2002 and (iii) 63,333 shares of Common Stock as of August 13, 2003. BCO Holding expressly disclaims any beneficial ownership of such shares.

Page 7 of 12
 
The foregoing descriptions of the Voting Agreements are qualified in their entirety by reference to the Voting Agreements, copies of which are attached hereto as Exhibit 1, 2 and 3 and are incorporated herein by reference.
 
ITEM 4.    PURPOSE OF TRANSACTION.
 
(a), (b) and (e) On September 30, 2002, the Issuer, BCO Holding and BCO Acquisition, Inc., a Delaware corporation and a direct wholly owned subsidiary of BCO Holding (“BCO Acquisition”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Issuer will become a subsidiary of BCO Holding. The Merger Agreement contemplates that BCO Acquisition will merge with and into the Issuer (the “Merger”) whereby the Issuer shall continue as the surviving corporation and become a direct wholly owned subsidiary of BCO Holding and each share of the Issuer’s Common Stock, except for treasury shares, dissenting shares and shares held by BCO Holding, will be converted into the right to receive $20 in cash (the “Merger Consideration”) following the satisfaction or waiver of the conditions set forth in the Merger Agreement, including obtaining Issuer shareholder approval for the transactions contemplated thereby (the “Merger Conditions”).
 
Additionally, as part of the transactions contemplated by the Merger Agreement, BCO Holding has entered into separate Exchange Agreements (collectively, the “Exchange Agreements”), dated as of September 30, 2002, with each of Jean-Pierre Ergas, Warren J. Hayford, Mary Lou Hayford, Thomas N. Eagleson, Kevin C. Kern, Jeffrey M. O’Connell and Kenneth M. Roessler (collectively the “Exchange Agreement Individuals”) pursuant to which, subject to the Merger Conditions and other conditions, immediately prior to the consummation of the Merger, (i) Mary Lou Hayford will exchange 596,596 shares of Common Stock for 1,193,192 shares of common stock, par value $.01 per share, of BCO Holding (“BCO Holding Common Stock”), and (ii) the Exchange Agreement Individuals will exchange, in the aggregate, options to acquire 812,910 shares of Common Stock for new options to acquire, in the aggregate 1,625,820 shares of BCO Holding Common Stock. Upon the consummation of the Merger, the remaining shares of Common Stock owned by the Exchange Agreement Individuals will be converted into the right to receive the Merger Consideration and each remaining option to acquire shares of Common Stock owned by the Exchange Agreement Individuals will be canceled in exchange for a single lump sum payment (less any applicable income or employment tax withholding) equal to the excess, if any, of $20 over the exercise price per share of such option (the “Exchange Cash Consideration”).
 
Pursuant to the Senior Credit Facility Commitment Letter, dated as of September 30, 2002, by and between Deutsche Bank Trust Company Americas and BCO Acquisition (the “Senior Credit Facility Commitment Letter”), Deutsche Bank Trust Company Americas has agreed to provide a senior credit facility of not less than $90 million, of which up to $40 million may be drawn on the closing date of the Merger.

 
Page 8 of 12
 
Pursuant to the Bridge Facility Commitment Letter, dated as of September 30, 2002, by and between Deutsche Bank Trust Corporation, BCO Holding and BCO Acquisition (the “Bridge Facility Commitment Letter”), Deutsche Bank Trust Corporation has agreed to provide BCO Acquisition with a bridge loan facility in the amount of up to $190 million on the closing date of the Merger. The senior credit facility and the bridge loan facility will contain customary terms and conditions, including, without limitation, with respect to fees, indemnification and events of default. A portion of the proceeds from the senior credit facility and the bridge loan facility may be used to pay the aggregate Exchange Cash Consideration and the aggregate Merger Consideration.
 
The purpose of entering into the Voting Agreements was to aid in facilitating the consummation of the transactions contemplated by the Merger Agreement.
 
(c)  Not Applicable.
 
(d)  Pursuant to the Merger Agreement, the Issuer will use its reasonable best efforts to obtain the resignation of each current director of the Issuer, other than Warren J. Hayford and Jean-Pierre Ergas, effective immediately prior to the consummation of the Merger. The Board of Directors of the Issuer following the transactions contemplated by the Merger Agreement shall consist of five directors.
 
(f)  Not Applicable.
 
(g)  The Certificate of Incorporation and by-laws of the Issuer as in effect immediately prior to the Merger, will be the certificate of incorporation and by-laws of the surviving corporation after the Merger.
 
(h)–(i) If the transactions contemplated by the Merger Agreement are consummated, the Common Stock of the Issuer will be delisted from the New York Stock Exchange and will be deregistered under Section 12(g)(4) of the Exchange Act.
 
(j)  Not Applicable.
 
The foregoing descriptions of the Voting Agreements, the Merger Agreement, the Exchange Agreements, the Senior Credit Facility Commitment Letter, the Bridge Facility Commitment Letter and the transactions related thereto, are qualified in their entirety by reference to the Voting Agreements, the Merger Agreement, the Exchange Agreements, the Senior Credit Facility Commitment Letter and the Bridge Facility Commitment Letter, copies of which are attached hereto as Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13, respectively, and are incorporated herein by reference.

Page 9 of 12
 
ITEM 5.    INTEREST IN SECURITIES OF THE ISSUER.
 
(a)–(b)  The responses of BCO Holding with respect to Rows 11, 12 and 13 of the cover pages to this Statement that relate to the aggregate number and percentage of Common Stock are incorporated herein by reference. The responses of BCO Holding with respect to Rows 7, 8, 9, and 10 of the cover pages of this Statement that relate to the number of shares as to which BCO Holding has sole power to vote or to direct the vote, shared power to vote or to direct the vote and sole or shared power to dispose or to direct the disposition are incorporated herein by reference. BCO Holding may be deemed to have shared power to vote such shares of Common Stock with respect to the limited matters described in Item 3 above. However, BCO Holding expressly disclaims any beneficial ownership of the shares of Common Stock that are covered by the Voting Agreements or the Exchange Agreements.
 
Except as set forth in this Statement, to the knowledge of BCO Holding, no person named in Item 2 beneficially owns any shares of Common Stock.
 
(c)  Except as described in this Statement, during the past 60 days there have been no other transactions in the securities of the Issuer effected by BCO Holding or, to the knowledge of BCO Holding, the other persons named in Item 2.
 
(d)  Not applicable.
 
(e)  Not applicable.
 
ITEM 6.    CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
 
Except as described in this Statement or the Exhibits hereto, the Reporting Person presently has no contracts, arrangements, understandings or relationships with any other person with respect to any securities of the Issuer, including but not limited to the transfer or voting of any shares of Common Stock, finder’s fees, joint ventures, loans or option arrangements, puts or calls, guarantees of profits, division of profits or loss or the giving or withholding of proxies.
 
ITEM 7.    MATERIAL TO BE FILED AS EXHIBITS.
 
1.    Voting Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Jean-Pierre Ergas (incorporated herein by reference to Exhibit 99.1 of the Form 8-K filed with the Securities and Exchange Commission by BWAY Corporation on October 3, 2002, File No. 001-12415).

 
Page 10 of 12
 
2.    Voting Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Warren J. Hayford (incorporated herein by reference to Exhibit 99.2 of the Form 8-K filed with the Securities and Exchange Commission by BWAY Corporation on October 3, 2002, File No. 001-12415).
 
3.    Voting Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Mary Lou Hayford (incorporated herein by reference to Exhibit 99.3 of the Form 8-K filed with the Securities and Exchange Commission by BWAY Corporation on October 3, 2002, File No. 001-12415).
 
4.    Agreement and Plan of Merger dated as of September 30, 2002, by and among BCO Holding Company, BCO Acquisition, Inc. and BWAY Corporation (incorporated herein by reference to Exhibit 2.1 of the Form 8-K filed with the Securities and Exchange Commission by BWAY Corporation on October 3, 2002, File No. 001-12415).
 
5.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Jean-Pierre Ergas.
 
6.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Warren J. Hayford.
 
7.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Mary Lou Hayford.
 
8.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Thomas N. Eagleson.
 
9.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Kevin C. Kern.
 
10.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Jeffrey M. O’Connell.
 
11.    Exchange Agreement, dated as of September 30, 2002, by and between BCO Holding Company and Kenneth M. Roessler.
 
12.    Senior Credit Facility Commitment Letter, dated as of September 30, 2002, by and between Deutsche Bank Trust Company Americas and BCO Acquisition, Inc.
 
13.    Bridge Facility Commitment Letter, dated as of September 30, 2002, by and between Deutsche Bank Trust Corporation, BCO Holding Company and BCO Acquisition Inc.

Page 11 of 12
 
Schedule I
 
The following table sets forth the name and present principal occupation of each managing member of Kelso GP VI and KEP VI. The business address of each such person is c/o Kelso & Company, L.P. (“Kelso”), 320 Park Avenue, 24th Floor, New York, New York 10022 and each such person is a citizen of the United States.
 
Managing Member
  
Present Principal Employment
Frank T. Nickell
  
President and Chief Executive Officer of Kelso
Thomas R. Wall, IV
  
Managing Director of Kelso
George E. Matelich
  
Managing Director of Kelso
Michael B. Goldberg
  
Managing Director of Kelso
David I. Wahrhaftig
  
Managing Director of Kelso
Frank K. Bynum
  
Managing Director of Kelso
Philip E. Berney
  
Managing Director of Kelso

Page 12 of 12
 
SIGNATURES
 
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct.
 
Dated: October 10, 2002
 
BCO Holding Company
 
 
/s/    James J. Connors II
Name:    James J. Connors II
Title:     Vice President

EX-5 3 dex5.txt EXCHANGE AGREEMENT, 9/30/02, JEAN-PIERRE ERGAS EXHIBIT 5 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Jean-Pierre Ergas (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 476,700 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 728,610 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ---------------------------------- Name: James J. Connors II Title: Vice President /s/ Jean-Pierre Ergas --------------------------------------- Jean-Pierre Ergas Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 12/14/99 20,000 $ 6.00 40,000 $3.000 12/14/99 40,000 $ 6.00 80,000 $3.000 10/12/00 67,605 $ 4.44 135,210 $2.220 01/28/02 236,700 $11.05 473,400 $5.525
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-6 4 dex6.txt EXCHANGE AGREEMENT, 9/30/02, WARREN J. HAYFORD EXHIBIT 6 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Warren J. Hayford (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 335,417 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 670,834 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ------------------------------ Name: James J. Connors II Title: Vice President /s/ Warren J. Hayford ----------------------------------- Warren J. Hayford Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 10/12/00 10,000 $ 4.44 20,000 $2.220 01/28/02 325,417 $11.05 650,834 $5.525
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-7 5 dex7.txt EXCHANGE AGREEMENT, 9/30/02, MARY LOU HAYFORD EXHIBIT 7 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Mary Lou Hayford (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the beneficial owner of, and has the sole right to vote and dispose of 1,821,273 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the conditions set forth herein, immediately prior to the Effective Time, (i) the Stockholder desires to exchange 596,596 shares of Company Common Stock (the "Shares"), and (ii) Holding desires to issue to the Stockholder, in exchange (the "Share Exchange") for the Shares, 1,193,192 shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Share Exchange. (a) Immediately prior to the Effective Time, the Stockholder shall assign, transfer, convey and deliver the Shares to Holding and, in exchange for each such Share, Holding shall issue and deliver to the Stockholder 1,193,192 shares of Holding Common Stock. If any Shares are held in "street name" by the Stockholder, such Stockholder agrees to arrange for appropriate transfer to Holding hereunder. (b) In the event that the Share Exchange is consummated but the Merger Agreement is terminated in accordance with its terms, then promptly following such termination, the Stockholder shall assign, transfer, convey and deliver to Holding the number of shares of Holding Common Stock received by the Stockholder pursuant to clause (a) above and, in exchange therefor, Holding shall assign, transfer, convey and deliver to the Stockholder the Shares exchanged by the Stockholder for such shares of Holding Common Stock pursuant to clause (a) above. 2. Closing. (a) The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. (b) At the Closing, Stockholder will deliver to Holding stock certificates duly endorsed for transfer to Holding, or accompanied by stock powers duly endorsed in blank, and representing the number of Shares subject to the Share Exchange. 3. Covenants. Attached hereto as Schedule A are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule B are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule B, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 2 (b) Ownership of Shares. The Stockholder is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which meaning will apply for all purposes of this Agreement) of, and has the sole power to vote and dispose of the number of Shares set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Shares), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Shares. (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Shares, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Shares, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Shares, or the shares of Holding Common Stock. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the shares of Holding Common Stock have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for the shares of Holding Common Stock, (iii) the shares of Holding Common Stock must be held 3 indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any shares of Holding Common Stock and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if the shares of Holding Common Stock may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of Holding Common Stock without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the certificate representing the shares of Holding Common Stock and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of Holding Common Stock are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the shares of Holding Common Stock. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the shares of Holding Common Stock for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the shares of Holding Common Stock, and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the shares of Holding Common Stock. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Share Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the shares of Holding Common Stock solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The 4 Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the shares of Holding Common Stock (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the shares of Holding Common Stock. The shares of Holding Common Stock, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or 5 authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between 6 the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the 7 parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ----------------------------- Name: James J. Connors II Title: Vice President /s/ Mary Lou Hayford ---------------------------------- Mary Lou Hayford Schedule A Summary of Materials Terms of Stockholders and Registration Rights Agreements Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and Drag-Along Rights The non-Kelso stockholders will have pro rata tag- along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder No charter amendments that would disproportionately Protections affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule B Summary of Material Terms of Equity Incentive Plan ------------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option Grant It is anticipated that all options will be non-qualified stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,/1/ Termination of Employment all options held by the employee, whether or not then exercisable, will terminate and be canceled - -------------------- /1/ To be mutually agreed upon by the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Fully-Diluted Assuming the Company's total equity account is Shares Available for $101.5 million (i.e., the sum of (a) Kelso's funded Different Types of Options equity, (b) the aggregate - - value of the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Roessler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control./2/ Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ----------------------- /2/ This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives - ---------------------------------------------------------------- Fiscal Year EBITDA Objective - ---------------------------------------------------------------- 2003 $64.0 million - ---------------------------------------------------------------- 2004 $68.0 million - ---------------------------------------------------------------- 2005 $72.0 million - ---------------------------------------------------------------- 2006 $76.0 million - ---------------------------------------------------------------- 2007 $80.0 million - ---------------------------------------------------------------- Cummulative Total $360.0 million - ---------------------------------------------------------------- 6 EX-8 6 dex8.txt EXCHANGE AGREEMENT, 9/30/02, THOMAS N. EAGLESON EXHIBIT 8 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Thomas N. Eagleson (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 120,000 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 63,340 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ------------------------------ Name: James J. Connors II Title: Vice President /s/ Thomas N. Eagleson ----------------------------------- Thomas N. Eagleson Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 09/05/01 6,057 $6.65 12,114 $3.325 09/05/01 25,613 $6.65 51,226 $3.325
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-9 7 dex9.txt EXCHANGE AGREEMENT, 9/30/02, KEVIN C. KERN EXHIBIT 9 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Kevin C. Kern (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 41,033 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 50,292 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ------------------------------- Name: James J. Connors II Title: Vice President /s/ Kevin C. Kern ------------------------------------ Kevin C. Kern Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 12/14/99 4,113 $ 6.00 8,226 $3.000 01/28/02 7,856 $11.05 15,712 $5.525 01/28/02 13,177 $11.05 26,354 $5.525
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-10 8 dex10.txt EXCHANGE AGREEMENT, 9/30/02, JEFFREY M. O'CONNELL EXHIBIT 10 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Jeffrey M. O'Connell (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 29,700 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 37,320 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ------------------------------ Name: James J. Connors II Title: Vice President /s/ Jeffrey M. O'Connell ----------------------------------- Jeffrey M. O'Connell Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 12/14/99 627 $ 6.00 1,254 $3.000 01/28/02 8,356 $11.05 16,712 $5.525 01/28/02 9,677 $11.05 19,354 $5.525
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-11 9 dex11.txt EXCHANGE AGREEMENT, 9/30/02, KENNETH M. ROESSLER EXHIBIT 11 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of September 30, 2002, between BCO Holding Company, a Delaware corporation ("Holding"), and Kenneth M. Roessler (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date herewith (the "Merger Agreement"), which provides, among other things, for the merger of Acquisition Sub with and into the Company, with the Company continuing as the surviving corporation (the "Merger"); WHEREAS, as of the date hereof, the Stockholder is the owner of options (the "Options") to acquire 95,000 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock"); and WHEREAS, subject to the terms and conditions set forth herein, immediately prior to the Effective Time, the Stockholder desires to have the Options identified in Schedule A (the "Exchange Options") cancelled in exchange (the "Option Exchange") for substitute options (each, a "New Option") to acquire shares of common stock, par value $0.01 per share, of Holding (the "Holding Common Stock"). Capitalized terms used herein and not otherwise defined shall have the respective meanings attributed to them in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, Holding and the Stockholder hereby agree as follows: 1. Option Exchange. Stockholder agrees that each Exchange Option held by the Stockholder shall be cancelled and, in exchange therefor, converted into New Options to purchase 75,424 shares of Holding Common Stock with exercise prices as set forth on Schedule A. Holding shall, at the Effective Time, assume the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New Option shall be subject to the same terms and conditions as in effect immediately before the Option Exchange, it being understood and agreed that all New Options shall be fully vested as of the Closing under the Merger Agreement. Holding and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. 2. Closing. The closing of the transactions contemplated by this Agreement shall take place at the offices of Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, immediately prior to the Closing under the Merger Agreement. 3. Covenants. Attached hereto as Schedule B are the terms of the Stockholders Agreement and the Registration Rights Agreement to be entered into among Holding, Kelso Investment Associates VI, L.P., KEP VI, LLC and the parties to the Exchange Agreements immediately prior to the closing of the Merger. The parties hereto agree to negotiate in good faith definitive forms of such agreements as promptly as practicable after the date hereof. Attached hereto as Schedule C are the terms of the Option Plan and a form of Option Agreement to be adopted by Holding in the case of the Option Plan and to be entered into by Holding and each of the managers identified on Schedule C, in each case, immediately prior to the closing of the Merger. Holding and each such manager agree to negotiate in good faith definitive forms of such Option Plan and Option Agreement as promptly as practicable after the date hereof. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: (a) Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) Ownership of Options. The Stockholder is owner of the number of Exchange Options set forth in the recitals hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Exchange Options), except as may exist by reason of this Agreement, the Voting Agreement between the Stockholder and Holding or pursuant to applicable law, or pursuant to the restrictions on transferability and on exercise provided for in the Company's 1995 Long-Term Incentive Plan and any related option agreement. Except as provided for in this Agreement, the Voting Agreement between the Stockholder and Holding, the Merger Agreement and the other agreements contemplated hereby and thereby, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Exchange Options. 2 (c) No Agreements. Except for this Agreement, the Voting Agreement, the Stockholders Agreement and the Registration Rights Agreement referred to above and any other agreements contemplated hereby and thereby, the Stockholder has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the Options, including, but not limited to, arrangements or agreements with respect to the acquisition or disposition thereof or any interest therein or the voting of any such shares. (d) No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding to which the Stockholder is a party, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Exchange Options, or (b) require any material consent, authorization or approval of any person, entity or government entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Exchange Options, or New Options to be received by Stockholder. (e) Securities Laws Matters. The Stockholder acknowledges receipt of advice from Holding that (i) the New Options and any shares of Holding Common Stock acquired in exercise of the New Options ("Exercise Shares") have not been registered under the Securities Act of 1933 (the "Act") or qualified under any state securities or "blue sky" or non U.S. securities laws, (ii) it is not anticipated that there will be any public market for any Exercise Shares, (iii) any Exercise Shares must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Holding Common Stock unless such shares of Holding Common Stock are subsequently registered under the Act and such state or non U.S. securities laws or an exemption from such registration is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not presently available with respect to sales of any Exercise Shares and Holding has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if any Exercise Shares may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of any Exercise Shares without registration will require the availability of an exemption under the Act, (vii) restrictive legends in the form set forth in the Stockholders Agreement shall be placed on the 3 certificate representing the shares of any Exercise Shares and (viii) a notation shall be made in the appropriate records of the Holding indicating that the shares of any Exercise Shares are subject to restrictions on transfer and, if Holding should in the future engage the services of a stock transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to any Exercise Shares. (f) Accredited Investor. The Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (g) Stockholder's Experience. (A) The Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the Exercise Shares for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the New Options and any Exercise Shares and (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the New Options and any Exercise Shares. (h) Access to Information. The Stockholder represents and warrants that the Stockholder has been granted the opportunity to ask questions of, and receive answers from, representatives of Holding concerning the terms and conditions of the Option Exchange and to obtain any additional information that the Stockholder deems necessary to verify the accuracy of the information so provided. (i) Investment Intent. The Stockholder is acquiring the New Options, and such Stockholder will acquire any Exercise Shares solely for the Stockholder's own account for investment and not with a view to or for sale in connection with any distribution thereof. The Stockholder agrees that the Stockholder will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the New Options or any Exercise Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any shares of Holding Common Stock), except in compliance with (i) the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, (ii) applicable state and non-U.S. securities or "blue sky" laws and (iii) the provisions of this Agreement and the Stockholders Agreement. 5. Representations and Warranties of Holding. Holding represents and warrants as follows: 4 (a) Corporate Form. Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has (and, immediately following the Effective Time, will have) all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority, etc. Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Holding has (and, immediately prior to the Effective Time, will have) all requisite corporate power and authority to issue the New Options. The Exercise Shares, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. Holding has taken all corporate actions necessary to authorize it to enter into this Agreement and, prior to the Effective Time, will have taken all corporate actions necessary to authorize it to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holding and, assuming due authorization, execution and delivery of this Agreement by the Stockholder constitutes a legal, valid and binding obligation of Holding enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). (d) Required Filings and Approvals. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by Holding, and the consummation of the transactions contemplated hereby by Holding, do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Holding, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which Holding will comply with prior to the date of the Closing, or (iii) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have an Acquiror Entity Material Adverse Effect. (e) No Conflicts. Other than as provided for in the Merger Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions 5 contemplated hereby, by Holding will conflict with the certificate of incorporation or the by-laws of Holding or result in any breach of, or constitute a default under any contract, agreement or instrument to which Holding is a party or by which it or any of its respective assets is bound. (f) Post-Closing Capitalization. Assuming the consummation of the transactions contemplated hereby, by the Merger Agreement and by each other similar Exchange Agreement entered or to be entered into between Holding and any other stockholder, director, officer or employee of the Company (the "Other Exchange Agreements") and assuming, further, Holding's total equity account is $101.5 million (i.e., the sum of (A) Kelso's funded equity, (B) the aggregate value of the Exchange Shares and (C) the aggregate spread value of the Exchange Options (as defined in the Other Exchange Agreements)), immediately following the consummation of the transactions contemplated hereby, by the Merger Agreement and by the Other Exchange Agreements, (1) the authorized capital stock of Holding will consist solely of 13,115,576 shares of Holding Common Stock, 9,303,827 of which will have been issued at a per share price of $10.00 and will be outstanding and (2) no options, rights, instruments or securities exercisable for (or exchangeable or convertible into) any shares of Holding Common Stock will be outstanding (other than options to acquire up to an aggregate of 1,625,820 shares of Holding Common Stock held by directors, officers and employees of the Company). All outstanding shares of Holding Common Stock shall have been issued for the same per share purchase price. (g) Holding Fees. Other than as permitted by the Stockholders Agreement, the aggregate fees (but not including any expense reimbursements) payable to Kelso and its affiliates (1) in connection with the consummation of the transactions contemplated by this Agreement, the Merger Agreement and the other agreements contemplated hereby and thereby and (2) in connection with any agreements (including financial advisory agreements) to be entered into between the Company and Kelso and its affiliates in connection with the Closing will not exceed the amounts set forth in Section 5.16 of the Merger Agreement. 6. Conditions Precedent. (a) The obligations of the Stockholder to consummate the transactions contemplated hereby are subject to (1) the conditions set forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied or waived by the Company and (2) Holding having entered into the Stockholders Agreement and Registration Rights Agreement and having adopted the Option Plan and entered into the Option Agreement, in each case as referred to in Section 3. 6 (b) The obligations of Holding to consummate the transactions contemplated hereby are subject to (i) the conditions set forth in Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or waived by Holding and (ii) the Stockholder having entered into the Stockholders Agreement and the Registration Rights Agreement referred to in Section 3. 7. Miscellaneous. (a) Binding Effect; Benefits. This Agreement shall be binding upon the successors, heirs, executors and administrators of the parties hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, except as provided in Section 7(j) below. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and Holding. (c) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Stockholder without the prior written consent of Holding; it being understood that Holding may assign its rights hereunder to any affiliate of Holding, provided that the post-closing capitalization of such assignee shall be the same as the proposed post-closing capitalization of Holding. (d) Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties hereto agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 7 (f) Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. (h) Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. (i) Termination. This Agreement shall terminate on the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms and (ii) an agreement of Holding and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. (j) Third Party Beneficiary. The Company is a third party beneficiary of this Agreement with the right to enforce the provisions hereof. 8 IN WITNESS WHEREOF, Holding and the Stockholder have executed this Agreement as of the date first above written. BCO Holding Company By: /s/ James J. Connors II ------------------------------ Name: James J. Connors II Title: Vice President /s/ Kenneth M. Roessler ----------------------------------- Kenneth M. Roessler Schedule A Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price Exchange Option Options Exchange Options Options of New Options 02/21/00 15,000 $6.88 30,000 $3.440 09/05/01 22,712 $6.65 45,424 $3.325
Schedule B Summary of Materials Terms of Stockholders and Registration Rights Agreements ----------------------------------------------- Parties Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, "Kelso") and WH, MH, J-PE and other managers who exchange options pursuant to an Exchange Agreement with the Company. Tag-Along and The non-Kelso stockholders will have pro rata Drag-Along Rights tag-along rights on sales of shares of Kelso to a third party which, together with all other shares previously sold by Kelso, represent more than 15% of the shares held by Kelso on the closing date. If Kelso proposes to sell shares to a third party for cash, and such shares, together with all other shares previously sold by Kelso, represent more than 85% of the shares held by Kelso on the closing date, Kelso will have the right to drag along, on a pro rata basis, each of the non-Kelso stockholders. Kelso would have the right to receive non-cash consideration so long as the per share consideration received by Kelso is no greater than the per share cash consideration received by the non-Kelso stockholders. The tag-along and drag-along rights would expire on a Company IPO. Registration Rights Kelso would have unlimited demand rights. After the first year anniversary of an IPO, WH/MH would jointly have two demand rights. Both Kelso's and WH/MH's demand rights would be subject to customary suspension provisions. If Kelso exercises its demand rights, the non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for Kelso) and the additional cutback for the management stockholders described below. If WH/MH exercise their demand rights, Kelso and the other non-Kelso stockholders will have piggyback rights, subject to a pro rata cutback (and no priority for WH/MH) and the additional cutback for management stockholders described below. If WH/MH are cut back by more than 65% in any given offering, then that offering would not constitute one of their demand rights. If the Company files a registration statement for an IPO, Kelso and the non-Kelso stockholders will have pro rata rights to sell their shares in the IPO, subject only to right of the Company to sell shares first. Stockholders who are also management employees may be subject to an additional cutback if the IPO's underwriter determines in good faith that the participation of such management stockholders would adversely affect the marketability or offering price of the other securities to be sold. All parties to the Registration Rights Agreement will agree to a lockup following the IPO of up to 180 days, depending on the managing underwriter's requirements. Pre-emptive Rights WH/MH and the other non-Kelso stockholders (but only if such non-Kelso stockholder is an employee of the Company at that time) would have pre-emptive rights on issuances of securities by the Company, subject to customary agreed upon exemptions. Transfer Restrictions All non-Kelso stockholders except WH/MH would be restricted from transferring their shares until an IPO or Kelso's exit, subject to customary estate planning exceptions. WH/MH would be permitted to sell to a third party who agrees to be bound by the Stockholders Agreement, subject to Kelso's consent, such consent not to be unreasonably withheld. The Company will have the right to purchase the shares of any non-Kelso stockholder whose shares become subject to foreclosure, bankruptcy, etc. prior to a Company IPO, at the lesser of: (a) fair market value and (b) the amount of the liability giving rise to such involuntary transfer plus any excess of the carrying value of the transferred shares over such liability. 2 Puts and Calls The options (and the underlying shares) acquired pursuant to an Exchange Agreement would be subject to puts and calls upon termination of employment, the specifics of which will be discussed by the parties. Board Seats WH would have one board seat unless the board has 11 or more directors in which case WH would have an additional board seat. WH/MH would have the right to designate a member of their family to serve on the board in WH's place. The family may designate non-family member(s) to represent them on the board, the identity of whom would be subject to Kelso's consent, such consent not to be unreasonably withheld. Any such non-family board member would receive the same director's fee being paid to other outside directors. The board seat would not be transferable outside of the WH/MH family, subject to the right of designation described above. J-PE would have one board seat, so long as he is CEO. Kelso would have the right to designate the remaining directors which would constitute a majority of the board of directors. Veto Right WH would have a veto on affiliate transactions, except for (1) Kelso fees as described below and (2) payments pursuant to the financial advisory agreement described below. This veto right would only be exercisable by WH, or in the event that WH is no longer a director, a family member, if any, who is serving on the board. If there are no family members on the board, then affiliate transactions would be reviewed by the disinterested board. Kelso Fees Kelso will receive an up front fee of $4,950,000 and annual fee of $495,000 pursuant to a financial advisory agreement between Kelso and the Company. Kelso will also receive a customary exit fee, consistent with their past practices that will be negotiated with the Company at that time. WH would participate pro rata in the exit fee based on stock ownership at the time of exit, but capped at 15% for WH. WH's Rights WH to receive an annual director's fee of $100,000. The fee would be payable to WH or a designated family member serving on the board. WH to continue benefits under SERP ($157,500 per year with acceleration as a 3 result of the transaction so that payments would commence beginning the month in which the closing occurs). Employment Agreements Existing employment agreements, except as otherwise mutually agreed upon. Minority Shareholder Protections No charter amendments that would disproportionately affect roll-over shareholders. Others, if any, to be discussed. Management Offering Proposed $2 mm equity offering to managers pursuant to Rule 701 post-closing. 4 Schedule C Summary of Material Terms of Equity Incentive Plan ----------------------------- Participants Officers and key employees of the Can Holding Company, and its subsidiaries (the "Company"), as selected by Jean-Pierre Ergas, subject to the reasonable approval of the Compensation Committee of the Board of Directors. It is expected that the Committee shall be comprised of two Kelso directors and Jean-Pierre Ergas. Shares The common stock of the Company, par value $.01 per share (i.e., voting common stock). Type of Option It is anticipated that all options will be Grant non-qualifed stock options. Option Price; Payment The Committee shall have the ability to determine the per share exercise price of the options, provided that such price cannot be less than the fair market value of the common stock on the grant date. Options granted in connection with the closing of the merger will be granted with an exercise price equal to the equivalent of the per share merger consideration. The Plan provides for payment by cash (or equivalents) or, following an IPO by "stock swap" (i.e., paying the exercise price with shares - - already owned for 6 months or more). Exercise; Expiration The Committee shall have the ability to set the exercise terms at the time of granting the options, provided that no options will be exercisable after the 10th anniversary of the grant date. The Plan requires, as a condition to exercise, that optionholders execute the Management Stockholders Agreement and the Registration Rights Agreement. Treatment of Options Upon In the event employment is terminated for cause,1 all Termination of Employment options held by the employee, whether or not then exercisable, will terminate and be canceled - ---------------------------------------- 1 To be mutually agreed upon the parties following the closing of the merger. immediately. In all other cases, the employee may exercise any options that are or become exercisable at the time of the termination of his or her employment within a period of time following such termination (one year in case of termination by reason of death, disability or retirement; 60 days in all other cases), but in any case prior to the normal expiration date of the options, and all unvested options will be cancelled. Service Options Options Service Options become exercisable in up to three equal annual installments, commencing on the first anniversary of the grant date. Performance Options Performance Options become exercisable in five equal annual installments only if the Company achieves the EBITDA objectives established by the Committee (in consultation with the Company) for such fiscal year or the cumulative EBITDA objective for the period ending with the end of the subsequent fiscal year. Notwithstanding the foregoing, Annex A lists the EBITDA objectives for the Company's 2003-07 fiscal years. The Plan provides for a "catch up" opportunity in the event the EBITDA objectives for a year are not achieved. Exit Options Exit Options are exercisable only if (i) Kelso Investment - Associates VI, L.P. and KEP VI, LLC (together, the "Kelso Entities") sell all or substantially all of their Company common stock or the Company sells all or substantially all of its assets to a non-affiliated third party (an "Exit Event"), (ii) at least a minimum aggregate share value with respect to the shares of Company common stock held by the Kelso Entities (the "Kelso Stock") of two times the equivalent of the per share merger consideration (the "Floor Value") is achieved by the Kelso Entities in the Exit Event taking into account all options (the "Exit Value") and (iii) the Kelso Entities shall have achieved at least a 15% internal rate of return, compounded annually, on their investment in the Kelso Stock. Where the Exit Value is greater than the Floor Value, but less than four times the equivalent of the per share merger consideration, Exit Options become exercisable ratably. All Exit Options are exercisable if the Exit Value is at least four times the equivalent of the per 2 share merger consideration. Exit Options that have not vested upon the first occurrence of an event described in clause (i) of this paragraph will be cancelled. Percentage of Assuming the Company's total equity account is $101.5 Fully-Diluted Shares million Different Types of Options (i.e., the sum of Available for Different (a) Kelso's funded equity, (b) the aggregate value of Types of Options the Exchange Shares and (c) the aggregate spread value of Exchange Options (as each such term is defined in the Exchange Agreements to which this term sheet is attached)) as of the closing of the merger, 2,185,929 shares of common stock of the Company will be available for option grants under the Plan, representing approximately 20% of the outstanding shares of common stock of the Company at closing, including, for this purpose, the aggregate number of shares reserved for issuance in connection with the New Options (as defined in the Exchange Agreements to which this term sheet is attached) (the "Option Pool"). 40% of the Option Pool will be Service Options, 10% of the Option Pool will be Performance Options and 50% of the Option Pool will be Exit Options. In connection with the closing of the merger, 40% of the Option Pool shall be granted to Jean-Pierre Ergas, 20% of the Option Pool shall be granted to Kenneth M. Rossler, and the remaining 40% of the Option Pool shall be granted in accordance with the terms of the Plan to employees selected by Jean-Pierre Ergas, subject to the reasonable approval of the Committee. Any shares subject to an option that expires, or is canceled, terminated or forfeited without the issuance of shares shall again be available for grant. Transferability Options are not transferable other than by will or by the laws of descent and distribution, or, if allowed by the Committee, in connection with certain pledges and estate-planning transfers. Change in Control In the event of a sale of more than 50% of the Company's common stock or assets to any person or group that is unaffiliated with Kelso (a "Change in Control"), unless the Committee determines that the Options will be honored, assumed or substituted, each 3 Service Option, whether or not then exercisable, and each Performance Option and Exit Option that vests in accordance with its terms on or before the date of such Change in Control will be canceled for a payment by the Company to the Option holder of the price per share paid for the Company's common stock in the Change of Control transaction less the exercise price for the Option. If in connection with the Change of Control all of the Exit Options have vested in accordance with their terms (after giving to effect all options vesting in connection with the transaction), all of the Performance Options that would otherwise have covered the period following the Change of Control shall vest. Requirements of Law The purchase of shares and the grant (and terms) of options shall be subject to all applicable securities laws (including U.S. and non-U.S. laws and state "blue-sky" laws). Adjustments in The plan provides for the Committee to make Capitalization proportionate adjustments to the number of shares subject to the plan, and outstanding options for any stock dividend, stock split, recapitalization, reorganization, merger or consolidation or other similar event. Cap on Benefits The plan provides that, notwithstanding anything herein to the contrary, to the extent that any of the payments and benefits provided for under the Plan or under any other agreement or arrangement between the Company and a Participant (collectively, the "Payments") would constitute a "parachute payment" within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code. If Payments that would otherwise be limited as a result of the foregoing would not be limited if the shareholder approval requirements of Section 280G(b)(5) of the Code are capable of being satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such 4 approval prior to a Change in Control.2 Administration The Plan (including the determination of terms and conditions of options) will generally be administered by the Committee. - ------------------------------- 2 This provision is intended to address the IRS's view on how it's recently proposed regulations under Section 280G will operate. Kelso's intent is to take such steps (i.e., shareholder approval prior to a Change of Control) to avoid the imposition of the cap. 5 Annex A EBITDA Objectives Fiscal Year EBITDA Objective ------------------------------------------------------------------ 2003 $64.0 million ------------------------------------------------------------------ 2004 $68.0 million ------------------------------------------------------------------ 2005 $72.0 million ------------------------------------------------------------------ 2006 $76.0 million ------------------------------------------------------------------ 2007 $80.0 million ------------------------------------------------------------------ Cumulative Total $360.0 million 6 EX-12 10 dex12.txt SENIOR CREDIT FACILITY COMMITMENT LETTER EXHIBIT 12 CONFIDENTIAL September 30, 2002 BCO ACQUISITION, INC. c/o Kelso & Company 320 Park Avenue New York, New York 10022 Attention: Thomas R. Wall, IV David Wahrhaftig Stanley de J. Osborne Ladies and Gentlemen: BCO Acquisition, Inc. ("MergerCo") has advised Deutsche Bank Trust Company Americas ("DBTCo") that it intends (a) to acquire (the "Acquisition") a previously identified target corporation ("Jupiter") by effecting the merger (the "Merger") of MergerCo with and into Jupiter, and (b) concurrently with the Acquisition, to effect the repurchase of a majority of Jupiter's outstanding subordinated notes (the "Existing Note Repurchase"). MergerCo has further advised DBTCo that the aggregate cash proceeds paid in connection with the Acquisition and the Existing Note Repurchase will be approximately $331,000,000, and that the total financing requirements for the Acquisition and Existing Note Repurchase (including, without limitation, related transaction fees and expenses and the ongoing working capital requirements of Jupiter and its wholly-owned subsidiaries after the Acquisition) will be provided through: (i) a common equity investment of not less than $101,000,000 (including a rollover investment of existing common equity) in BCO Holding Company, of which MergerCo is a wholly-owned subsidiary (the cash proceeds of which will be contributed to MergerCo), provided, that, the cash portion of this $101,000,000 may be reduced (by an amount up to $10,000,000) by the amount of any reduction in (x) actual transaction expenses as opposed to projected transaction expenses and/or (y) actual total bank debt to be repaid at closing as opposed to the projected amount of such bank debt (the "Equity Investment"), (ii) $190,000,000, of newly issued unsecured senior or subordinated notes or other obligations or other junior securities or obligations (the "Notes"), and (iii) Jupiter's existing $90,000,000 senior secured revolving credit facility (the "Existing Revolving Credit Facility"), amended and restated to accommodate the Acquisition, Existing Note Repurchase, Equity Investment and issuance of the Notes (collectively, the "Related Transactions"), or, if requested by MergerCo, a new $90,000,000 senior secured revolving credit facility (the "New Revolving Credit Facility" and, together with the Existing Revolving Credit Facility, hereinafter referred to as the "Revolving Credit Facility") (with a total commitment under the Revolving Credit Facility of not less than $90,000,000, and no more than $40,000,000 to be funded thereunder at closing, after giving effect to the Related Transactions). DBTCo is pleased to commit, subject to the terms and conditions described herein, to provide the Revolving Credit Facility by causing the amendment and restatement of the Existing Revolving Credit Facility to accommodate the Related Transactions, or, in the alternative, at your election, by extending the New Revolving Credit Facility to Jupiter, in each case after giving effect to the Related Transactions. Proceeds of the Revolving Credit Facility shall be used: (a) if the New Revolving Credit Facility is extended, to repay the outstanding debt of Jupiter under the Existing Revolving Credit Facility; (b) to pay a portion of the purchase price for the Acquisition and Existing Note Repurchase, and (c) to provide financing for the ongoing working capital and general corporate purposes of Jupiter and its wholly-owned subsidiaries. DBTCo's commitment hereunder to provide the Revolving Credit Facility is delivered substantially on the basis set forth herein and in the Summary Term Sheet attached hereto as Exhibit A (the "Term Sheet"). DBTCo's commitment hereunder shall terminate automatically upon the earlier to occur of (a) the close of business on February 28, 2003, unless on or prior thereto, the Credit Agreement and all other Credit Documents (in each case as defined below) have been executed and delivered to all parties, or (b) receipt by DBTCo of a written notice from MergerCo requesting such termination (which notice shall be irrevocable). Our commitment is specifically subject to the negotiation of a definitive amended and restated credit agreement or credit agreement, as the case may be (the "Credit Agreement") and other definitive legal documentation with respect to the Revolving Credit Facility (collectively, including the Credit Agreement, herein referred to as the "Credit Documents") reflecting the applicable terms and conditions set forth herein and otherwise in form and substance reasonably satisfactory to DBTCo and its counsel. In consideration of DBTCo's commitment with respect to the Revolving Credit Facility, MergerCo agrees as follows: (a) (i) if our commitment hereunder is terminated by MergerCo, or otherwise terminates pursuant to the terms hereof, in each case for any reason, to reimburse DBTCo promptly upon demand following the date of such termination for all reasonable costs and expenses incurred by DBTCo, any of its affiliates or any of their respective successors and assigns, including, without limitation, Deutsche Bank AG and Deutsche Bank Securities Inc. (collectively, its "Affiliates"), in connection with any collateral audits and asset appraisals obtained by DBTCo in connection herewith, provided, that, notwithstanding the foregoing, to the extent (and only to the extent) that MergerCo has received a "bust-up" fee and/or expense reimbursement from Jupiter, MergerCo shall reimburse DBTCo promptly upon demand following the date of such termination for all reasonable costs, fees and expenses described in clause (a)(ii) herein below); and (ii) in the event the Closing Date occurs, to reimburse DBTCo promptly upon the Closing Date, for all reasonable costs and expenses incurred by DBTCo or any of its Affiliates in connection with the negotiation, preparation, review, execution, delivery, collection and enforcement of this commitment letter, the Credit Documents and any other documentation contemplated hereby or thereby, which shall include, without limitation, (x) the reasonable fees and expenses of attorneys and paralegals, (y) out-of-pocket expenses of personnel of DBTCo and its Affiliates, including the costs and expenses described in the foregoing clause (a)(i), and (z) all reasonable fees from outside sources, taxes (other than income taxes), assessments and duties; (the costs and expenses referred to in the foregoing paragraphs (i) and (ii) being herein referred to as the "Expenses"); (b) whether or not the Credit Documents are executed or the transactions contemplated herein and therein are consummated, to defend, indemnify and hold harmless DBTCo and its Affiliates, directors, officers, employees, persons controlling or controlled by or under common control with any of them and any attorneys and agents of any of the foregoing (collectively, the "Indemnified Persons") from and against any and all losses, claims, damages, costs and expenses (including, without limitation, reasonable out-of-pocket attorneys' and other legal fees, costs and expenses) ("Losses") to which any of the Indemnified Persons becomes subject, whether direct or indirect, that result or arise from or relate to any claim, litigation, or any other proceeding, whether threatened or initiated, arising from or in connection with or related to this commitment letter, the Revolving Credit Facility, any of the Credit Documents, the Related Transactions or any other matter contemplated hereby or thereby (including, without limitation, all reasonable costs involved in connection with any subpoena or other governmentally-sanctioned request for the production of documents or witnesses in any case or proceeding, whether involving an Indemnified Person as a party or otherwise); provided, however, that no Indemnified Person shall be indemnified for any losses, claims, damages, costs or expenses of any kind which a court in a final judgment no longer subject to appeal shall determine have arisen from the willful misconduct or gross negligence of any Indemnified Person; (c) to cooperate (and to use reasonable efforts to cause Jupiter to cooperate) in all reasonable respects with the Agent in its completion of the syndication of the Revolving Credit Facility, promptly providing such information and other assistance as shall be reasonably requested from time to time by the Agent in connection therewith; and (d) whether or not the Credit Documents are executed or the transactions contemplated herein and therein are consummated, that, prior to termination of DBTCo's commitment hereunder, MergerCo shall furnish DBTCo with such information about MergerCo and, to the extent available to MergerCo, Jupiter, as DBTCo reasonably requests from time to time, and that all of such and any other information, materials or analysis furnished to DBTCo, or developed by DBTCo, prior to or after the date hereof in connection with the Revolving Credit Facility and the Related Transactions, including information bearing on the creditworthiness of Jupiter and its affiliates (collectively, "Information"), may be shared by DBTCo with its Affiliates in connection with the Revolving Credit Facility, provided that none of such Information shall be used or disclosed by DBTCo or any of its Affiliates in any manner which would violate any confidentiality agreement referred to herein below in this paragraph or applicable law, including, without limitation, applicable securities laws. It is understood and agreed that this paragraph shall serve as a nondisclosure agreement within the meaning of Regulation FD, as adopted by the United States Securities and Exchange Commission. You also confirm that, subject to the foregoing, and to the compliance by DBTCo and its Affiliates with any confidentiality agreement entered into between MergerCo, on the one hand, and DBTCo or any of its Affiliates, on the other hand, and any confidentiality agreement between Jupiter, on the one hand, and Kelso & Company, on the other hand, in connection with the transactions contemplated hereby, you have no objection to discussions between DBTCo's personnel and the Affiliates' personnel concerning you, Jupiter, the Information, the Revolving Credit Facility, the Related Transactions or any other potential transaction between you and any of the Affiliates or Jupiter and any of the Affiliates, as the case may be. Subject to the fourth to last paragraph of this Commitment Letter, the obligations of MergerCo contained in the foregoing subparagraphs (a) and (b), respectively, shall remain in full force and effect whether or not definitive Credit Documents are executed and delivered and notwithstanding the termination of this commitment letter. The foregoing agreement shall be in addition to any rights that DBTCo or any other Indemnified Person may have at common law or otherwise, including, but not limited to, any right to contribution. If for any reason the foregoing indemnification is unavailable to any Indemnified Person or is insufficient to hold such Indemnified Person harmless as to the extent contemplated in the preceding paragraphs, then MergerCo shall contribute to the amount paid or payable to the Indemnified Person as a result of such Losses as is appropriate to reflect the relative benefits received by MergerCo on the one hand and the applicable Indemnified Person on the other, as well as any other relevant equitable considerations Notwithstanding the foregoing, MergerCo shall not be liable under any circumstance to contribute any amounts to any Indemnified Person under this commitment letter or otherwise, except to the extent and under such circumstances as MergerCo would have been obligated to indemnify such Indemnified Person pursuant to paragraph (b) above if such indemnification provisions were enforceable under applicable law. MergerCo hereby represents and warrants to DBTCo that, to its knowledge, (i) the Information (other than the Financial Statements and Projections (as each such term is defined herein below)) which has been or is hereafter furnished by or on behalf of MergerCo to DBTCo in connection with the transactions contemplated hereby, taken as a whole, will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact known to you necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are made; (ii) all financial statements of any person or entity (the "Financial Statements") that have been or will be made available to DBTCo by MergerCo fairly present the consolidated financial position, the consolidated results of operations, the changes in stockholder equity, the cash flow and the other information included therein, as the case may be, for such person or entity for the periods or as of the dates therein set forth, in each case in accordance with the generally acceptable accounting principles ("GAAP") consistently applied during the periods involved, except as otherwise noted therein and except that the unaudited financial statements are subject to normal year end adjustments and lack footnotes and other presentation items required for full disclosure under GAAP; and (iii) all financial projections concerning Jupiter that have been or are hereafter made available to DBTCo by MergerCo in connection with the transactions contemplated hereby (the "Projections") have been, or in the case of Projections made available after the date hereof, will be prepared in good faith based upon assumptions believed by you at the time of preparation to be reasonable; it being understood that the Projections are subject to significant uncertainties and contingencies (many of which are beyond MergerCo's control) and that no assurances can be given that such Projections will be realized. In addition, MergerCo agrees that, for so long as DBTCo shall have a commitment hereunder to provide the Revolving Credit Facility, MergerCo will advise DBTCo promptly of all developments materially affecting MergerCo or Jupiter of which MergerCo becomes aware. MergerCo further agrees that neither DBTCo, the Affiliates nor any of their respective directors, officers, employees, agents, attorneys or affiliates shall be liable in respect of the transactions contemplated by this commitment letter or the Credit Documents on any theory of liability for indirect or consequential damages. This commitment letter constitutes the entire agreement between DBTCo and MergerCo, and supersedes all other agreements between DBTCo and MergerCo, in each case with respect to the subject matter hereof. This commitment letter shall not be assignable by MergerCo without the prior written consent of DBTCo and may not be amended or any provision hereof waived or modified except by an instrument in writing signed by MergerCo and DBTCo. MergerCo's representations, warranties, covenants and obligations under this commitment letter, other than the provisions hereof relating to MergerCo's ongoing assistance in connection with the syndication of the Revolving Credit Facility and the provisions set forth in the immediately preceding paragraph, shall automatically terminate and be superseded by the provisions of the Credit Documents upon the initial funding thereunder, whereupon MergerCo shall automatically be released from all liabilities and obligations hereunder. DBTCo's commitment to provide the Revolving Credit Facility on the terms and conditions set forth in this commitment letter and the Term Sheet is specifically contingent upon the execution and delivery (by facsimile) back to DBTCo of this commitment letter and the accompanying letter agreements (collectively, the "fee letter"), in each case by 5:00 p.m. Chicago time on October 4, 2002. This commitment letter may be executed in counterparts which, when taken together, shall constitute an original. Any such counterpart which may be delivered by facsimile transmission shall be deemed the equivalent of an originally signed counterpart and shall be fully admissible in any enforcement proceedings regarding this commitment letter. Pursuant to New York General Obligations Law Section 5-1401, this commitment letter shall be governed by and construed in accordance with the internal laws and decisions of the State of New York. Please indicate your acceptance of and agreement to the foregoing by signing and returning the enclosed copy of this letter (together with the accompanying fee letter pertaining hereto) to Deutsche Bank Trust Company Americas, 233 South Wacker Drive, 84/th/ Floor, Chicago, Illinois 60606, Attention: Frank Fazio. Sincerely, DEUTSCHE BANK TRUST COMPANY AMERICAS By: /s/ Albert Fischetti ------------------------------ Name: Albert Fischetti Title: Director READ AND AGREED TO this 30th day of September, 2002 BCO ACQUISITION, INC. By: /s/ James J. Connors II ------------------------------ Name: James J. Connors II Title: Vice President EX-13 11 dex13.txt BRIDGE FACILITY COMMITMENT LETTER EXHIBIT 13 DEUTSCHE BANK TRUST CORPORATION 31 WEST 52/ND/ STREET NEW YORK, NEW YORK 10019 September 30, 2002 BCO Holding Company BCO Acquisition Inc. c/o Kelso & Company 320 Park Avenue New York, NY 10022 Attention: Thomas R. Wall, IV David Wahrhaftig Stanley De J. Osborne Re: Jupiter Acquisition Financing Commitment Letter Ladies and Gentlemen: We understand that BCO Holding Company ("Holdco") and certain other equity investors reasonably satisfactory to us (collectively, the "Equity Investors") intend to acquire the outstanding capital stock (the "Acquisition") of a company known to both of us as Jupiter (the "Acquired Business") through the merger of a wholly owned subsidiary of Holdco ("Newco") with the Acquired Business. As used herein, "Newco" means BCO Acquisition, Inc. prior to the merger referred to in preceding sentence and thereafter the corporation surviving such merger. We further understand that the funding requirements for the Acquisition (including the refinancing of existing senior subordinated notes of the Acquired Business (the "Refinancing") and related fees and expenses) will be approximately $331 million and such amount, together with ongoing working capital needs, will be provided solely from (i) an existing asset based facility of the Acquired Business (the "Existing Bank Facility") of up to $90 million of which up to $40 million will be drawn on the closing date of the Acquisition (the "Closing Date"), (ii) not less than a $101 million equity investment in Holdco (including rollover equity), the cash proceeds of which shall be contributed as common equity to Newco (the "Equity Financing"); provided that the cash portion of this $101 million may be reduced (by an amount up to $10 million) by the amount of any reduction in (A) actual transaction expenses as opposed to projected transaction expenses and/or (B) actual bank debt to be repaid on the Closing Date as opposed to the pro- -2- jected amount of such bank debt, and (iii) the issuance and sale of Debt Securities (as defined below). The Acquisition, the Refinancing, the borrowing under the Existing Bank Facility or, in lieu thereof, borrowings under a new credit facility as set forth in Section 2(c) (in either case, the "Bank Financing"), the Equity Financing, the bridge loan contemplated by this letter and the issuance and sale of the Debt Securities are herein collectively referred to as the "Transaction". In connection with the Transaction, you have engaged Deutsche Bank Securities Inc. ("DBSI") to sell or place senior debt securities of Newco (the "Debt Securities"). You have requested that Deutsche Bank Trust Corporation (the "Lender") commit to provide to Newco funds in the amount of up to $190 million in the form of a senior bridge loan to be made available as described in Section 1 hereof (the "Bridge Loan"). Accordingly, subject to the terms and conditions set forth or incorporated in this letter, the Lender agrees with you as follows: Section 1. Bridge Loan. The Lender hereby commits, subject to the terms and conditions hereof and in the Summary Term Sheet attached hereto as Exhibit A (the "Term Sheet"), to provide to Newco a senior bridge loan on the Closing Date in the aggregate principal amount of up to $190 million. The proceeds of the Bridge Loan shall be used solely to finance the Acquisition and to pay fees and expenses incurred in connection therewith. The principal terms of the Bridge Loan are summarized in the Term Sheet. Unless the Lender's commitment hereunder shall have been terminated pursuant to Section 7, the Lender shall have the exclusive right to provide the Bridge Loan or other bridge or interim financing required in connection with the Transaction. You hereby represent and covenant that to your knowledge, (a) all information other than Projections and Financial Statements (as defined below) taken as a whole which has been or is hereafter made available to the Lender by you or your representatives in connection with the transactions contemplated hereby (the "Information") will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact known to you and necessary to make the statements contained therein, in the light of the circumstances -3- under which such statements were or are made, not misleading and (b) all financial statements of the Acquired Business (the "Financial Statements") that have been or will be made available to DBSI by Newco fairly present the consolidated financial position, the consolidated results of operations, the changes in stockholder equity, the cash flow and the other information included therein, as the case may be, for the periods or as of the dates therein set forth, in each case in accordance with the generally acceptable accounting principles ("GAAP") consistently applied during the periods involved, except as otherwise noted therein and except that the unaudited financial statements are subject to normal year end adjustments and lack footnotes and other presentation items required for full disclosure under GAAP and (c) all financial projections concerning the Acquired Business that have been or are hereafter made available to the Lender by you or your representatives in connection with the transactions contemplated hereby (the "Projections") have been or, in the case of Projections made available after the date hereof, will be prepared in good faith based upon reasonable assumptions (it being understood that the Projections are subject to significant uncertainties and contingencies, many of which are beyond your control and that no assurance can be given that such Projections will be realized). You agree to supplement the Information and the Projections from time to time, to the extent there is material new information of which you become aware, until the termination of the Lender's commitment hereunder so that the representation and warranty made in the preceding sentence is correct as of such date. In arranging and syndicating the Bridge Loan, the Lender will be using and relying on the Information and the Projections. The Lender shall have the right to designate all or a portion of the Bridge Loan to be a senior subordinated obligation. The representations and covenants contained in this paragraph shall remain effective until a definitive financing agreement is executed or this letter otherwise terminates and thereafter the representations and covenants contained herein shall be terminated and of no further force and effect. Section 2. Financing Documentation. The making of the Bridge Loan will be governed by definitive loan and related agreements and documentation (collectively, the "Financing Documentation") in form and substance reasonably satisfactory to the Lender and to you. The Financing Documentation shall be prepared by Cahill Gordon & Reindel, special counsel to the Lender. The Financing Documentation shall contain such covenants, terms and conditions as are consistent with this letter and the Term Sheet and such other covenants, terms, conditions, representations, warranties, events of default and remedies -4- provisions as shall be reasonably satisfactory to the Lender and you. Section 3. Conditions. The obligation of the Lender under Section 1 of this letter to provide the Bridge Loan is subject to fulfillment of the following conditions: (a) Acquisition Agreement. Newco and the Acquired Business shall have entered into an agreement relating to the Acquisition (the "Acquisition Agreement") on terms and in form and substance reasonably satisfactory to the Lender. The Acquisition Agreement shall not have been amended in any material respect without the Lender's consent, which consent shall not be unreasonably withheld. All conditions precedent to the Acquisition contained in the Acquisition Agreement shall have been performed or complied with in all material respects substantially on the terms set forth therein and not waived without the Lender's consent, which consent shall not be unreasonably withheld and simultaneously with the making of any Bridge Loan, the Acquisition shall have been consummated. (b) Financing Documentation. Newco and the Lender shall have entered into the Financing Documentation relating to the Bridge Loan and the transactions contemplated thereby consistent with this letter and the Term Sheet and otherwise in form and substance reasonably satisfactory to the Lender and Newco. (c) Bank Financing. The Lender shall be reasonably satisfied with the terms and conditions of the Existing Bank Facility, as amended to permit the Transactions. In lieu of satisfying this condition as to the Existing Bank Facility, Newco shall have the option to enter into a new credit facility (the "New Credit Facility") with a commercial lender or lenders or a syndicate of commercial lenders providing for borrowings of up to $90 million on terms and conditions reasonably satisfactory to the Lender (in either case, collectively with all documents and instruments related thereto or delivered in connection therewith, the "Bank Documents"). The Bank Documents shall be in full force and effect and the parties thereto shall be in compliance in all material respects with all material agreements thereunder. The Lender acknowledges the terms of the New Credit Facility set forth in the Commitment Letter dated the date hereof from Deutsche Bank Trust Company Americas are acceptable to the Lender. -5- (d) Existing Senior Subordinated Notes. A majority of the outstanding senior subordinated notes (the "Existing Notes") of the Acquired Business shall have been repurchased, retired, redeemed or otherwise acquired by the Acquired Business or Newco and canceled pursuant to the terms of the governing indenture and such governing indenture shall have been amended to permit the Transaction on terms reasonably satisfactory to the Lender. On the Closing Date, Newco shall have called for redemption the Existing Notes then outstanding. (e) Equity Financing. On or prior to the Closing Date, Holdco shall have received an equity investment of not less than $101 million, which shall be provided by the Equity Investors (including rollover equity) and the cash proceeds thereof shall have been contributed as common equity to Newco; provided that the cash portion of this $101 million may be reduced (by an amount up to $10 million) by the amount of any reduction in (i) actual transaction expenses as opposed to projected transaction expenses and/or (ii) actual bank debt to be repaid at closing as opposed to the projected amount of such bank debt. The terms and conditions of the Equity Financing shall be reasonably satisfactory to the Lender. (f) No Adverse Change or Development, Etc. (i) Nothing shall have occurred since September 30, 2001 (and the Lender shall have become aware of no facts or conditions not previously known to the Lender) which has had or would reasonably be expected to have a material adverse effect on the rights or remedies of the Lender, or on the ability of Newco to perform its obligations to the Lender or which has had or would reasonably be expected to have a materially adverse effect on the business, property, assets, liabilities, financial condition or results of operations or prospects of Newco after giving effect to the Transaction; (ii) a banking moratorium shall not have been declared by New York or United States authorities; and (iii) after the date of this letter, there shall not have been any material change in the financial markets of the United States which in the reasonable judgment of the Lender would materially and adversely affect the ability to sell or place the Debt Securities. (g) Capital Structure. The pro forma consolidated capital structure of Newco, after giving effect to the Transaction, shall be consistent with the capital structure contemplated herein, and other than the Bridge Loan, -6- the Bank Financing and other indebtedness reasonably satisfactory to the Lender, Newco and its subsidiaries, after giving effect to, and upon consummation of, the Transaction, shall have no outstanding indebtedness for money borrowed. (h) Opinions. As of the Closing Date, the Lender shall have received a legal and other opinions (including with respect to solvency) from persons, and covering matters, reasonably acceptable to the Lender. (i) Due Diligence. DBSI shall have completed and be reasonably satisfied with its continuing environmental due diligence; it being understood and agreed that DBSI has substantially completed all of its environmental due diligence investigation of Jupiter, that DBSI is satisfied with the results of all of its environmental due diligence to date and that DBSI believes it can complete its remaining environmental due diligence, including site assessments by its environmental consultants, in approximately two to three weeks; provided that, if DBSI does not notify you within three weeks from the date of this letter that this condition has not been satisfied, it will be deemed satisfied. (j) Pro Forma Financial Tests. On a pro forma basis after giving effect to the Transaction, (a) Newco and its subsidiaries shall have a ratio of (i) pro forma total indebtedness outstanding on the Closing Date to (ii) pro forma EBITDA (in each case, as defined in a manner reasonably satisfactory to the Lender and you) for the twelve-month period of the Acquired Business ending on the most recent fiscal quarter prior to the Closing Date for which financial statements are available (the "Applicable Period") not to exceed 4.25 to 1 and (b) pro forma EBITDA for the Applicable Period of not less than $54.0 million. All pro forma adjustments shall be reasonably satisfactory to the Lender and you. (k) Minimum Ratings Condition. The Bridge Loan or other unsecured senior long-term debt obligations of Newco (that do not have any credit support by any party other than Newco and its subsidiaries) have received a rating of better than CCC+ by Standard & Poor's and a rating of better than Caa1 by Moody's. (l) Take-Out Bank. You shall have engaged DBSI (the "Take-Out Bank") to publicly offer or privately place the -7- Debt Securities, the proceeds of which will be used either to fund the Acquisition or to prepay in whole or in part the Bridge Loan. Newco shall have prepared an offering memorandum relating to the issuance of the Debt Securities (which offering memorandum shall contain audited, unaudited and pro forma financial statements meeting the requirements of Regulation S-X under the Securities Act of 1933, as amended, of the Acquired Business for the periods required of a registrant on Form S-1) on or before December 31, 2002 and the Take-Out Bank shall have been afforded the opportunity to market (regardless of the status of the market) such Debt Securities pursuant to such offering memorandum for at least a 45-day period; provided, however, that such marketing period shall expire on February 27, 2003 if Newco has delivered such offering memorandum on or before December 31, 2002 and Newco shall otherwise have complied with the provisions of this clause (l). Newco shall have used reasonable commercial efforts to assist the Take-Out Bank in marketing the Debt Securities, including, without limitation, using reasonable commercial efforts to prepare the offering memorandum relating thereto, using reasonable commercial efforts to make senior management of the Acquired Business and other representatives of you and the Acquired Business available (at mutually agreeable times) to participate in meetings with prospective investors and using reasonable commercial efforts to provide such information and assistance as the Take-Out Bank shall have reasonably requested during the course of such marketing process. Section 4. Fee Letter. You agree to comply with the provisions set forth in the fee letter from the Lender to you dated the date hereof (the "Fee Letter"). Section 5. Indemnification and Contribution. You agree to indemnify the Lender and each of its affiliates and each person in control of the Lender and each of its affiliates and the respective officers, directors, employees, agents and representatives of the Lender and its affiliates and control persons, as and to the extent provided in the Indemnity Letter dated the date hereof (the "Indemnity Letter") and attached hereto. Section 6. Expenses. In addition to any fees that may be payable to the Lender hereunder if the Bridge Loan is funded or, if the Transactions are not consummated and we have not breached our obligations hereunder, to the extent Newco receives a "bust-up" fee and/or expense reimbursement sufficient -8- to pay all costs, expenses, fees and disbursements in connection with the transactions contemplated hereby, including any such costs, expenses, fees and disbursements payable pursuant hereto, from the Acquired Business or other third party source, you hereby agree to reimburse the Lender for all reasonable fees and disbursements of legal counsel, including but not limited to the reasonable fees and disbursements of Cahill Gordon & Reindel, the Lender's special counsel, and all of the Lender's reasonable travel and other reasonable out-of-pocket expenses incurred in connection with the Transaction or otherwise arising out of the Lender's commitment hereunder. Section 7. Termination. The Lender's commitment hereunder to provide the Bridge Loan shall terminate, unless expressly agreed to by the Lender in its sole discretion to be extended to another date, on the earlier of (A) February 28, 2003 if no portion of the Bridge Loan has been funded and (B) the termination of the Acquisition Agreement in accordance with the terms thereof. No such termination of such commitment shall affect your obligations under Sections 5 and 6 hereof or this Section 7, which shall survive any such termination. All other provisions of this letter shall terminate upon any such termination of such commitment. Newco's representations, warranties, covenants and obligations under this letter shall automatically terminate and be superseded by the provisions of the definitive Financing Documentation upon the earliest initial funding under such documentation, whereupon Newco shall automatically be released from all liabilities and obligations under this letter. Section 8. Assignment; Syndication. This letter shall not be assignable by any party hereto without the prior written consent of the other parties (other than, in the case of the Lender, to an affiliate of the Lender, it being understood that any such affiliate shall be subject to the restrictions set forth in this letter including without limitation this Section 8); provided, however, that the Lender shall have the right, in its sole discretion, to syndicate the Bridge Loan and its commitment with respect thereto among banks or other financial institutions pursuant to the Financing Documentation or otherwise and to sell, transfer or assign all or any portion of, or interests or participations in, the Bridge Loan and its commitment with respect thereto and any notes issued in connection therewith. You agree to use your reasonable commercial efforts, whether prior to or after the funding date of any Bridge Loan, to assist the Lender in syndicating the Bridge Loan or its commitment with respect thereto, including, without limitation, in connection with (x) the preparation of an infor- -9- mation package regarding the Transaction, including the Information and the Projections described in Section 1 hereof, and (y) meetings and other communications with prospective Lenders, including using reasonable efforts to make senior management of the Acquired Business and other representatives of you and the Acquired Business available (at mutually agreeable times) to participate in such meetings. Section 9. Miscellaneous. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES GOVERNING CONFLICTS OF LAWS, AND ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS COMMITMENT LETTER IS HEREBY WAIVED. EACH OF THE LENDER AND YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS COMMITMENT LETTER OR ANY MATTERS CONTEMPLATED HEREBY. This letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. The Lender reserves the right to employ the services of its affiliates (including DBSI) in providing services contemplated by this letter and to allocate, in whole or in part, to its affiliates certain fees payable to the Lender in such manner as the Lender and its affiliates may agree in their sole discretion. You acknowledge that, in connection with this engagement, the Lender may share with any of its affiliates (including DBSI) and such affiliates may share with the Lender (in each case, subject to any confidentiality agreements of DBSI, the Lender, Newco or any of their respective affiliates applicable thereto), any information related to you or your affiliates, the Acquired Business (including information relating to creditworthiness) or the Transaction. This letter and the Term Sheet (collectively, the "Commitment Letter") are furnished for your benefit, and may not be relied upon by any other person or entity. You agree that this Commitment Letter is for your confidential use only and that, except as required by law, neither its existence nor the terms hereof will be disclosed by you to any person other than your officers, directors, employees, accountants, attorneys and other advisors, and then only on a "need to know" basis in connection with the transactions contemplated hereby and on a confidential basis. Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter to us as -10- provided below, (i) you shall be permitted to furnish a copy hereof to the Acquired Business and its advisors in connection with the proposed Acquisition, (ii) you may make public disclosure of the existence and amount of the commitments hereunder and of the identity of the Lender, (iii) you may file a copy of this Commitment Letter in any public record in which it is required by law to be filed and (iv) you may make such other public disclosure of the terms and conditions hereof as, and to the extent, you are required by law, in the opinion of your counsel, to make. Except as otherwise required by law or unless the Lender has otherwise consented, you are not authorized prior to your acceptance of this letter as provided below to show or circulate this letter to any other person or entity (other than (x) your legal and financial advisors in connection with your evaluation hereof and (y) to the Acquired Business and its advisors in connection with the proposed Acquisition). -11- If you are in agreement with the foregoing, please sign and return to the Lender at 31 West 52/nd/ Street, New York, New York 10019 the enclosed copy of this letter no later than 6:00 p.m., New York time, on October 4, 2002, whereupon the undertakings of the parties shall become effective to the extent and in the manner provided hereby. This offer shall terminate if not so accepted by you on or prior to that time. Very truly yours, DEUTSCHE BANK TRUST CORPORATION By: /s/ Ryan Zanin ----------------------------------- Name: Ryan Zanin Title: Managing Director Accepted and Agreed to as of the date first above written: BCO HOLDING COMPANY By: /s/ James J. Connors II ---------------------------- Name: James J. Connors II Title: Vice President BCO ACQUISITION INC. By: /s/ James J. Connors II ---------------------------- Name: James J. Connors II Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----