SCHEDULE 14A INFORMATION
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Exchange Act of 1934
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BWAY Corporation
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BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of BWAY Corporation (the "Company"), which will be held on Wednesday, February
20, 2002, at 11:00 a.m., local time, at the Crowne Plaza Ravinia, 4355
Ashford-Dunwoody Road, Atlanta, Georgia 30346.
The Notice of Meeting, Proxy Statement, Proxy Form and Annual Report of
the Company are included with this letter. The matters listed in the Notice of
Meeting are more fully described in the Proxy Statement.
It is important that your shares are represented and voted at the
Annual Meeting, regardless of the size of your holdings. Accordingly, please
mark, sign and date the enclosed Proxy Form and return it promptly in the
enclosed envelope. If you attend the Annual Meeting, you may, of course,
withdraw your proxy should you wish to vote in person.
Sincerely,
/s/ Jeffrey M. O'Connell
Jeffrey M. O'Connell
Vice President, Treasurer and Secretary
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
The Annual Meeting of Stockholders of BWAY Corporation (the "Company") will
be held on Wednesday, February 20, 2002, at 11:00 a.m., local time, at the
Crowne Plaza Ravinia, 4355 Ashford-Dunwoody Road, Atlanta, Georgia 30346 to
consider and take action with respect to the following matters:
1. The election of two directors to hold office for a term of three
years;
2. The ratification of the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the fiscal year ending
September 29, 2002; and
3. The transaction of such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Holders of record of the Company's Common Stock at the close of business on
January 4, 2002 are entitled to receive notice of and to vote on all matters
presented at the Annual Meeting and at any adjournments or postponements
thereof. A list of such stockholders will be available for examination by any
stockholder for any purpose germane to the meeting during normal business hours
at the Company's principal executive offices, 8607 Roberts Drive, Suite 250,
Atlanta, Georgia 30350, and at the location of the meeting set forth above, in
each case for a period of 10 days prior to the meeting.
By Order of the Board of Directors
/s/ Jeffrey M. O'Connell
Jeffrey M. O'Connell
Vice President, Treasurer and Secretary
January 18, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND REGARDLESS OF
THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY FORM
AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE ANNUAL
MEETING. IN ADDITION, YOUR PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS VOTED BY
WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY OR BY DELIVERY OF A LATER-DATED
PROXY.
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
___________________
PROXY STATEMENT
___________________
Annual Meeting of Stockholders
to be held on
February 20, 2002
___________________
This proxy statement (this "Proxy Statement") is being furnished to the
holders of common stock, par value $0.01 per share (the "Common Stock"), of BWAY
Corporation (the "Company") in connection with the solicitation of proxies by
and on behalf of the Board of Directors of the Company (the "Board of Directors"
or the "Board") for use at the annual meeting of stockholders to be held on
February 20, 2002 at 11:00 a.m., local time, and at any adjournments or
postponements thereof (the "Annual Meeting"). The purpose of the Annual Meeting
is to elect two directors to the Board and to ratify the appointment of Deloitte
& Touche LLP as the Company's independent public accountants for the 2002 fiscal
year.
This Proxy Statement, the Notice of Meeting, the Proxy Form and the
Company's Annual Report to Stockholders, which includes portions of the
Company's Annual Report on Form 10-K for the Fiscal Year ended September 30,
2001, are being mailed on or about January 18, 2002 to holders of record of the
Common Stock at the close of business on January 4, 2002.
If the enclosed proxy form (the "Proxy Form") is properly signed, dated and
returned to the Company, the individuals identified as proxies thereon will vote
the shares represented by the Proxy Form in accordance with the directions noted
thereon. If no direction is indicated, the proxies will vote FOR the election of
the nominees named herein as directors and FOR the ratification of the
appointment of Deloitte & Touche LLP as the Company's independent public
accountants for the 2002 fiscal year. The Company's management does not know of
any matters other than those discussed in this Proxy Statement that will be
presented at the Annual Meeting. If other matters are presented, all proxies
will be voted in accordance with the recommendations of the Company's
management.
Returning your completed Proxy Form will not prevent you from voting in
person at the Annual Meeting if you are present and wish to vote. In addition,
you may revoke your proxy any time before it is voted by written notice to the
Secretary of the Company prior to the Annual Meeting at the Company's principal
executive offices at the address above or by submission of a later-dated proxy.
Each outstanding share of Common Stock entitles the holder thereof to one
vote on each matter to come before the Annual Meeting. As of January 4, 2002,
there were 8,701,806 shares of Common Stock outstanding. The presence in person
or by proxy of a majority of the shares of Common Stock outstanding will
constitute a quorum for the transaction of business. Pursuant to Delaware law,
abstentions are treated as present and entitled to vote, and therefore are
counted in determining the existence of a quorum and will have
the effect of a vote against any matter requiring the affirmative vote of a
majority of the shares present and entitled to vote at the Annual Meeting. Under
Delaware law, broker "non-votes" are considered present but not entitled to
vote, and thus will be counted in determining the existence of a quorum but will
not be counted in determining whether a matter requiring approval of a majority
of the shares present and entitled to vote has been approved or whether a
plurality of the vote of the shares present and entitled to vote has been cast.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's by-laws provide that the size of the Board shall be fixed
from time to time by resolution of the Board and that vacancies on the Board may
be filled by the remaining directors. The Board currently consists of nine
directorships. The Board is divided into three classes, which serve staggered
three-year terms. Class I consists of John E. Jones, James W. Milton and John W.
Puth, whose terms expire at the 2002 Annual Meeting. Class II consists of
Jean-Pierre M. Ergas, John T. Stirrup and one vacant directorship, whose terms
expire at the 2003 Annual Meeting. The Board has not yet identified and
nominated any person to fill the vacant Class II directorship. When the Board
identifies a person to fill the vacant Class II directorship, it will appoint
that person to serve on the Board until the 2003 Annual Meeting. Class III
consists of Thomas A. Donahoe, Alexander P. Dyer and Warren J. Hayford, whose
terms expire at the 2004 Annual Meeting. Each director is elected to serve for
the remaining term of any vacancy filled by the director or for a three-year
term (if elected at an annual meeting of stockholders) or until a successor is
duly elected.
Messrs. Jones and Puth have been nominated for re-election at the Annual
Meeting as Class I directors. See "Management-Nominees for Director" and
"Management-Continuing Directors" for information with respect to Messrs. Jones
and Puth and the continuing directors of the Company. Mr. Milton is retiring and
has determined to not stand for re-election as a Class I director. In connection
with Mr. Milton's retirement, the Board has reduced its size from nine to eight
directorships, effective as of the date of the Annual Meeting, and Class I will
thereafter consist of only two directorships. The Company believes that each
nominee is willing to be elected and to serve. In the event that any nominee is
unable to serve or is otherwise unavailable for election, which is not now
contemplated, the incumbent Board may or may not select a substitute nominee. If
a substituted nominee is selected, all proxies will be voted for the person
selected.
Directors will be elected at the Annual Meeting by a plurality of the votes
cast at the meeting by the holders of shares represented in person or by proxy.
There is no cumulative voting as to any matter, including the election of
directors.
The Board of Directors recommends a vote "FOR" the election of the nominees.
-2-
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of Deloitte & Touche LLP to serve as independent
auditors of the Company with respect to the 2002 fiscal year to examine the
financial statements of the Company for the fiscal year ending September 29,
2002 and to perform other appropriate accounting services.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting to respond to questions and to make a statement if they desire to
do so. If the stockholders do not ratify this appointment by the affirmative
vote of a majority of the shares represented in person or by proxy at the Annual
Meeting, other independent public accountants will be considered by the Board of
Directors upon recommendation by the Audit Committee.
The Audit Committee has considered and determined that the non-audit
services provided by Deloitte & Touche LLP in fiscal 2001 are compatible with
the auditor's independence. A summary of the fees paid to Deloitte & Touche LLP
for services and expenses in fiscal 2001 is as follows:
Financial Information
Systems Design and
Audit Fees Implementation Fees All Other Fees
---------- ------------------- --------------
$174,020 $0 $68,626
The Board of Directors recommends a vote "FOR" ratification of the appointment
of Deloitte & Touche LLP as the Company's independent public accountants for
fiscal year 2002.
-3-
MANAGEMENT
The following sets forth certain information as of January 1, 2002, with
respect to the Company's nominees for director, the Company's continuing
directors, and certain officers of the Company (including all executive officers
of the Company). Officers of the Company serve at the discretion of the Board of
Directors.
Nominees for Director
John E. Jones Age: 67
John E. Jones has served as a director of the Company since August 1996.
From 1989 until his retirement in 1996, Mr. Jones served as Chairman,
President and CEO of CBI Industries, Inc. Mr. Jones is a director of Amsted
Industries, Inc., NICOR Inc. and Valmont Industries, Inc. Mr. Jones also
serves as Trustee or Director on a number of not-for-profit entities,
including Rush-Presbyterian-St. Luke's Medical Center.
John W. Puth Age: 72
John W. Puth has served as a director of the Company since August 1995.
Since December 1987, Mr. Puth has served as President of J.W. Puth
Associates, an industrial consulting firm. From 1983 to 1987, Mr. Puth was
Chairman and President of Clevite Industries, Inc., a manufacturer of
industrial products. From 1975 to 1983, Mr. Puth was President and Chief
Executive Officer of Vapor Corporation. Mr. Puth is a director of A.M.
Castle & Co., L.B. Foster Company and US Freightways Corporation as well as
several privately-held corporations. Since October 1998, Mr. Puth has been
a general partner of BVCF III & IV Institutional Venture Capital Funds.
Continuing Directors
Thomas A. Donahoe Age: 66
Thomas A. Donahoe has served as a director of the Company since August
1996. Mr. Donahoe was a partner in the accounting firm Price Waterhouse LLP
(the "Firm") from 1970 until he retired in June 1996. As a partner in the
Firm, Mr. Donahoe held a variety of positions including: Managing
Partner-Operations of the Firm's Audit Business Advisory Practice, July
1995 to June 1996; Vice Chairman of the Firm, 1988 to June 1995; member of
the Price Waterhouse World Firm General Council, 1985 to June 1995;
Managing Partner of the Great Lakes Region, 1978 to June 1995; member of
the Firm's Management Committee, 1978 to June 1995; member of the Firm's
Policy Board, 1976 to June 1995; and Managing Partner of the Chicago
Office, 1976 to June 1994. Mr. Donahoe is a director of Andrew Corporation
and NICOR Inc. Mr. Donahoe also serves as a Director or Trustee of a number
of not-for-profit entities, including: Chicago Botanic Garden, Chicago
Central Area Committee, Executive Service Corp. of Chicago, Kohl's
Children's Museum and Rush-Presbyterian-St. Luke's Medical Center.
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Alexander P. Dyer Age: 69
Alexander P. Dyer has served as a director of the Company since August
1995. Mr. Dyer served as Chairman of Bunzl plc. from May 1993 to July 1996
and currently serves as its Deputy Chairman and as Chairman of its
Remuneration Committee. Mr. Dyer retired from The BOC Group plc. in January
1996, having served as its Chief Executive Officer and Deputy Chairman, in
which capacities he served from November 1993 to January 1996. Prior
thereto, Mr. Dyer served as Managing Director-Gases of The BOC Group plc.
from 1989 to 1993 and worked for Air Products and Chemicals Inc. for 26
years, serving most recently as Executive Vice President responsible for
worldwide gases and equipment businesses from 1987 to 1989.
Jean-Pierre M. Ergas Age: 62
Jean-Pierre M. Ergas became Chairman and Chief Executive Officer of the
Company in January 2000. Mr. Ergas has served as a director of the Company
since August 1995 and served as Vice-Chairman of the Board of the Company
from July 1999 to December 1999. Mr. Ergas served as Executive Vice
President, Europe of Alcan Aluminium Limited, President of Alcan Europe
Limited, Executive Chairman of British Alcan Aluminium plc. and Chief
Executive Officer of Alcan Deutschland GmbH from June 1996 to December
1999. Mr. Ergas served as Senior Advisor to the Chief Executive Officer of
Alcan Aluminium Limited from January 1995 to June 1996 and served as a
Trustee of DePaul University from February 1994 to December 1994. Prior
thereto, Mr. Ergas served as Senior Executive Vice President of Pechiney
S.A. and as a member of the Pechiney Group Executive Committee from 1987 to
January 1994 and also held several management positions with various
subsidiaries of Pechiney S.A., serving as: Chief Executive Officer of
American National Can Company from 1989 to January 1994 and Chairman of the
Board from 1991 to January 1994; Chief Executive Officer of Cegedur
Pechiney from 1982 to 1988 and Chairman of the Board from 1987 to 1988;
Chief Executive Officer of Cebal S.A. from 1974 to 1982 and Chairman of the
Board during 1982; and Marketing Manager for Pechiney Aluminum from 1967 to
1974. Mr. Ergas is a trustee of DePaul and AUP Universities and a director
of ABC-NACO, Dover Corporation and Compagnie Plastic Omnium.
Warren J. Hayford Age: 72
Warren J. Hayford became non-executive Vice-Chairman of the Board of the
Company in December 1999. From 1989 until December 1999, Mr. Hayford served
as Chairman of the Board and Chief Executive Officer of the Company. Mr.
Hayford has held a number of senior positions within the packaging industry
over the past thirty-five years including President and Chief Operating
Officer of Gaylord Container Corporation ("Gaylord"), a manufacturer of
paper packaging products, 1986 to 1988, and Vice Chairman of Gaylord, 1988
through 1992. Prior to Gaylord, Mr. Hayford served as President and a
director of Gencorp, Inc., President and a director of Navistar
International Corporation and Executive Vice President and a director of
the Continental Group, Inc. Mr. Hayford has also been a director of Gaylord
since 1986.
-5-
James W. Milton Age: 62
James W. Milton has served as a director of the Company since May 1996.
From May 1996 until his retirement in May 2001, Mr. Milton served as
Executive Vice President of the Company. Prior thereto, Mr. Milton held
several positions, including President, at Milton Can Company, Inc. from
1963 until it was acquired by the Company in May 1996. Mr. Milton also
served as Vice President of Van Dorn Company from 1983 to 1988 and as a
director of Van Dorn Company from 1984 to 1988. Mr. Milton is a trustee of
New Jersey Business and Industry Association and is a director of Norton &
Son, Inc. (Muralo Corporation), NJM Bank and NJM Insurance Group.
John T. Stirrup Age: 66
John T. Stirrup has served as a director of the Company since 1989. Mr.
Stirrup served as an independent consultant of the Company from June 2000
until December 2001. Mr. Stirrup served as President and Chief Operating
Officer of the Company from 1995 to June 2000 and from 1989 to 1995 Mr.
Stirrup served as President and Chief Operating Officer of Brockway
Standard, Inc., which at the time was the Company's principal operating
subsidiary. Mr. Stirrup joined Brockway, Inc. (later acquired by
Owens-Illinois Corporation) in 1980 and held a variety of positions
including: Group Vice President of Metal & Plastic Packaging, Corporate
Purchasing and Regional Airlines of Brockway, Inc., 1985 to 1988; Vice
President of Sales and Marketing Brockway Glass Containers of Brockway,
Inc., 1983 to 1985; Vice President of Operations Brockway Glass Containers
of Brockway, Inc., 1981 to 1983; and Vice President of Manufacturing
Brockway Glass Containers of Brockway, Inc., 1980 to 1981. Prior to joining
Brockway, Inc., Mr. Stirrup held several positions at Kerr Glass
Manufacturing Corp., including Vice President of Manufacturing.
Officers (Other Than Those who are Directors and Listed Above)
Thomas N. Eagleson Age: 60
Thomas N. Eagleson has served as Executive Vice President
Manufacturing/Engineering of the Company since July 2000. Prior thereto,
Mr. Eagleson held the positions of Senior Vice President of American
National Can from 1993 to 1998, Vice President Manufacturing Food/General
Line from 1990 to 1993, Vice President Manufacturing Beverage from 1988 to
1990, Vice President Metal Integration Metal Container from 1987 to 1988,
Vice President Manufacturing Food/General Line of National Can Corp from
1985 to 1987 and Manager of Manufacturing Food/General Line of National Can
Corp from 1983 to 1985. From 1970 to 1983, Mr. Eagleson held positions of
increasing responsibility within the manufacturing organization of National
Can Corp.
Kevin C. Kern Age: 42
Kevin C. Kern has been Vice President of Administration and Chief Financial
Officer of the Company since February 2001. From May 1995 until February
2001, Mr. Kern served as Corporate Controller of the Company. From 1991 to
May 1995, Mr. Kern was Controller of McKechnie Plastics Components, Inc.
From 1981 to 1991, Mr. Kern was employed by Ernst & Young, most recently as
a Senior Audit Manager from 1988 to 1991.
Jeffrey M. O'Connell Age: 48
Jeffrey M. O'Connell has been Vice President and Treasurer of the Company
since May 1997 and has served as Secretary of the Company since May 2001.
From June 1996 to May 1997, Mr.
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O'Connell served as Assistant Treasurer of the Company. From June 1995 to
June 1996, Mr. O'Connell served as Vice President of Finance of Macmillan
Bloedel Packaging Inc. From October 1994 to June 1995, Mr. O'Connell served
as Director of Financial Planning of the Company. Prior thereto, Mr.
O'Connell served as Vice President of Administration of Mead Coated Board
Division of The Mead Corporation.
Kenneth M. Roessler Age: 39
Kenneth M. Roessler has served as Executive Vice President of Sales and
Marketing of the Company since March 2000. From June 1993 to February 2000,
Mr. Roessler served in various senior management positions with Southcorp
Packaging USA, including Vice President of Sales and Marketing from 1998 to
February 2000, Vice President and General Manager from 1995 to 1998 and
Vice President and Chief Financial Officer from June 1993 through 1995.
Prior to June 1993, Mr. Roessler held senior management positions with
Berwind Corporation.
Information About the Board of Directors
The Board of Directors met six times during fiscal 2001. The Board of
Directors has an Audit Committee and a Management Resources, Nominating and
Compensation Committee. Each director attended 75% or more of the meetings of
the Board of Directors and any committees on which such director served during
fiscal 2001.
Audit Committee. The Audit Committee of the Board of Directors is composed
of four directors (currently Messrs. Puth, Donahoe, Dyer and Jones). The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the independence of such auditors,
approves the scope of the annual audit activities of the independent auditors
and reviews such audit results. The Audit Committee met five times during fiscal
2001.
Management Resources, Nominating and Compensation Committee. The Management
Resources, Nominating and Compensation Committee is composed of four directors
(currently Messrs. Puth, Donahoe, Dyer and Jones). The Management Resources,
Nominating and Compensation Committee makes recommendations to the Board
regarding the compensation of officers of the Company, awards under the
Company's compensation and benefit plans and compensation policies and
practices. The Management Resources, Nominating and Compensation Committee met
five times during fiscal 2001.
Compensation of Directors
Fees and Expenses. Directors who are employees of the Company or its
subsidiaries are not entitled to receive any fees for serving as directors. Each
non-employee director receives an annual retainer fee of $25,000 (except for Mr.
Hayford, who receives $50,000), a fee per meeting attended of $1,000 and a fee
per committee meeting attended of $500. In addition, each non-employee director
who serves as a committee chairman receives an annual fee of $3,500. All
directors are reimbursed for out-of-pocket expenses related to their service as
directors.
Incentive Plan. Under the Fourth Amended and Restated 1995 Long-Term
Incentive Plan (the "Incentive Plan"), the Management Resources, Nominating and
Compensation Committee may grant to directors (including non-employee directors)
of the Company and its subsidiaries nonqualified stock options,
-7-
stock appreciation rights in tandem with options, restricted stock awards,
performance awards or any combination thereof as the Management Resources,
Nominating and Compensation Committee shall determine. Options may be exercised
in whole or in part upon the payment of the exercise price of the shares to be
acquired and the Management Resources, Nominating and Compensation Committee
shall determine the term of the exercise period.
In fiscal 2001, the Company granted to each non-employee director (other
than Mr. Milton and Mr. Stirrup) 10,000 options to acquire shares of the
Company's Common Stock. Each such option has an exercise price equal to $4.44,
the then current market price of the Company's Common Stock, and such options
will vest at a rate of 3,334 options in October 2001, 3,333 options in October
2002 and 3,333 options in October 2003. The Company did not grant options to Mr.
Milton and Mr. Stirrup in fiscal 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
certain of the Company's officers, the Company's directors and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities to file reports of securities ownership and changes in such
ownership with the SEC. Certain officers, directors and greater than ten-percent
beneficial owners also are required by rules promulgated by the SEC to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely upon the Company's review of the copies of such forms it has
received, the Company believes that each of its officers, directors and greater
than ten-percent beneficial owners complied with all Section 16(a) filing
requirements applicable to them during fiscal 2001, except as described below.
Each of the Company's directors and Named Executive Officers (hereinafter
defined) inadvertently failed to file a Form 5 by November 14, 2001 to report,
(i) for each of Messrs. Donahoe, Dyer, Eagleson, Ergas, Hayford, Jones, Kern,
Puth and Roessler, the receipt of certain option grants, (ii) for each of
Messrs. Donahoe, Dyer, Ergas, Hayford, Jones, Kern, Milton, Puth and Stirrup,
the repurchase by the Company of certain outstanding options in connection with
the Company's July 2001 option repricing, (iii) for each of Messrs. Ergas, Kern
and Roessler, the acquisition of shares of the Company's Common Stock under the
Company's 401(k) plan and, (iv) for Mr. Stirrup, the disposition of shares of
the Company's Common Stock under the Company's 401(k) plan. Upon learning of
such errors, each of the Company's directors and Named Executive Officers filed
a Form 5 on January 7, 2002.
-8-
Audit Committee Report
In fulfilling its written charter adopted by the Board, the Audit Committee
assists the Board in fulfilling its responsibility for oversight of the quality
and integrity of the accounting, auditing and financial reporting practices of
the Company. During fiscal year 2001, the Audit Committee met five times, and
the Audit Committee chairman, as representative of the Audit Committee,
discussed the interim financial information contained in each quarterly earnings
announcement with the Chairman and Chief Executive Officer, Vice President of
Administration and Chief Financial Officer, Vice President-Treasurer and
Secretary and independent auditors prior to public release. A copy of the Audit
Committee Charter is attached hereto as Annex A.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with management, the internal auditor and the
independent auditors the quality and adequacy of the Company's internal
controls. The Audit Committee reviewed the independent auditors audit plans,
audit scope, and identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended September 30, 2001 with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements and the independent auditors
have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended September 30, 2001 for filing with the Securities
and Exchange Commission. The Audit Committee also recommended the reappointment,
subject to shareholder ratification, of the independent auditors and the Board
concurred in such recommendation.
-9-
This Audit Committee report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts, and such information shall be entitled to the benefits provided in Item
306(c) and (d) of Regulation S-K and Item 7(d)(3)(v) of Schedule 14A.
John W. Puth
Chairman
Thomas A. Donahoe
Alexander P. Dyer
John E. Jones
Members
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 2001 by
(i) each stockholder known by the Company to own beneficially 5 percent or more
of the outstanding shares of such Common Stock, (ii) each director and nominee
for director of the Company, (iii) each Named Executive Officer (hereinafter
defined) of the Company and (iv) all directors of the Company and executive
officers of the Company as a group. As of December 31, 2001, there were
8,701,806 shares of the Company's Common Stock outstanding. To the knowledge of
the Company, each stockholder has sole voting and investment power with respect
to the shares indicated as beneficially owned, unless otherwise indicated in a
footnote. Unless otherwise indicated in a footnote, the business address of each
person is the Company's corporate address.
Number of Shares of
Beneficial Owner Common Stock (1) Percent of Class (2)
------------------------------------------ ------------------- --------------------
Jean-Pierre M. Ergas (3) ....................... 360,115 4.0%
Warren J. Hayford (4) .......................... 2,080,234 23.5
Mary Lou Hayford (5) ........................... 1,821,273 20.9
James W. Milton (6) ............................ 610,719 7.0
Kevin C. Kern (7) .............................. 38,745 *
Thomas N. Eagleson (8) ......................... 33,334 *
Kenneth M. Roessler (9) ........................ 47,591 *
Thomas A. Donahoe (10) ......................... 50,417 *
Alexander P. Dyer (11) ......................... 154,087 1.8
John E. Jones (12) ............................. 70,417 *
John W. Puth (13) .............................. 116,787 1.3
John T. Stirrup (14) ........................... 330,810 3.8
Dimensional Fund Advisors, Inc. (15) ........... 697,350 8.0
J. & W. Seligman & Co. Incorporated (16) ....... 955,000 11.0
T. Rowe Price Associates, Inc. (17) ............ 899,500 10.3
Putnam Investments, LLC. (18) .................. 656,400 7.5
All Directors and Executive Officers as a
Group (11 persons) ............................. 3,893,256 41.2
_________________________
* Less than one percent.
-11-
(1) The number of shares includes shares of Common Stock subject to options
exercisable within 60 days of December 31, 2001.
(2) Shares subject to options exercisable within 60 days of December 31, 2001
are considered outstanding for the purpose of determining the percent of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others. Percentages less than one percent
are denoted by an asterisk.
(3) The shares of Common Stock beneficially owned by Mr. Ergas include 231,683
shares subject to options and 18,432 shares held under the Company's 401(k)
plan.
(4) The shares of Common Stock beneficially owned by Mr. Hayford include
1,821,273 shares owned directly by his wife, Mary Lou Hayford, and 92,918
shares owned directly by Mr. Hayford. In addition, the shares of Common
Stock beneficially owned by Mr. Hayford include 166,043 shares subject to
options. Mr. Hayford disclaims beneficial ownership of the shares owned
directly by his wife.
(5) The shares of Common Stock beneficially owned by Mrs. Hayford do not
include 92,918 shares owned directly by her husband, Warren J. Hayford, and
do not include 166,043 shares subject to options owned directly by her
husband.
(6) The shares of Common Stock beneficially owned by Mr. Milton include 72,119
shares owned directly by his wife and 57,029 owned by his wife as trustee
of a trust for the benefit of Sean A. Milton. In addition, the shares of
Common Stock beneficially owned by Mr. Milton include 27,533 shares subject
to options. Mr. Milton disclaims beneficial ownership of the shares owned
directly by his wife and the shares owned by his wife as trustee of this
trust.
(7) The shares of Common Stock beneficially owned by Mr. Kern include 18,850
shares subject to options and 14,401 shares held under the Company's 401(k)
plan.
(8) The shares of Common Stock beneficially owned by Mr. Eagleson include
33,334 shares subject to options.
(9) The shares of Common Stock beneficially owned by Mr. Roessler include
23,334 shares subject to options and 10,507 shares held under the Company's
401(k) plan.
(10) The shares of Common Stock beneficially owned by Mr. Donahoe include 42,917
shares subject to options.
(11) The shares of Common Stock beneficially owned by Mr. Dyer include 4,800
shares owned directly by his wife and 45,017 shares subject to options.
(12) The shares of Common Stock beneficially owned by Mr. Jones include 7,000
shares owned by his wife as trustee of a trust for the benefit of Mr.
Jones' wife and children. In addition, the shares of Common Stock
beneficially owned by Mr. Jones include 42,917 shares subject to options.
Mr. Jones disclaims beneficial ownership of the shares owned by his wife as
trustee of this trust.
-12-
(13) The shares of Common Stock beneficially owned by Mr. Puth include 45,017
shares subject to options.
(14) The shares of Common Stock beneficially owned by Mr. Stirrup include
67,708 shares subject to options.
(15) Based solely upon a Schedule13G, dated February 2, 2001, filed by
Dimensional Fund Advisors Inc. ("Dimensional"), Dimensional has sole
voting and sole dispositive power with respect to 697,350 shares of Common
Stock. Dimensional expressly disclaims that it is the beneficial owner of
such securities. Dimensional's address is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401.
(16) Based solely upon a Schedule 13G, dated February 1, 2001, filed jointly by
each of J. & W. Seligman & Co. Incorporated ("Seligman") and William C.
Morris ("Morris"), Seligman has shared voting power with respect to
883,924 shares of Common Stock and shared dispositive power with respect
to 955,000 shares of Common Stock. Morris, as owner of a majority of the
outstanding voting securities of Seligman, may be deemed to beneficially
own the shares of Common Stock reported by Seligman, which include those
shares separately reported by Morris. Seligman's address is 100 Park
Avenue, New York, NY 10017.
(17) Based solely upon a Schedule 13G, dated October 5, 2001, filed jointly by
each of T. Rowe Price Associates, Inc. ("Price Associates") and T. Rowe
Price Small Cap Value Fund, Inc. ("Small Cap"), the shares of Common Stock
shown as beneficially owned by Price Associates are owned by various
individual and institutional investors including Small Cap (which owns
776,600 shares), for which Price Associates serves as an investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates may be deemed to be a beneficial
owner of such securities; however, Price Associates expressly disclaims
that it is the beneficial owner of such securities. Price Associates'
address is 100 E. Pratt Street, Baltimore, MD 21202.
(18) Based solely upon a Schedule 13G, dated February 15, 2001, filed jointly
by each of Putnam Investments, LLC. ("Putnam Investments"), Putnam
Investment Management, LLC. ("Putnam Management") and Putnam Advisory
Company, LLC. ("Putnam Advisory"), the shares of Common Stock shown as
beneficially owned by Putnam Investments are owned by two wholly-owned
subsidiaries of Putnam Investments, Putnam Management (which owns 157,600
shares) and Putnam Advisory (which owns 498,800). For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Putnam
Investments may be deemed to be a beneficial owner of such securities;
however, Putnam Investments expressly disclaims that it is the beneficial
owner of such securities. Putnam Investments' address is One Post Office
Square, Boston, Massachusetts 02109.
-13-
EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by the
Compensation Committee of the Board of Directors of the Company. The following
table sets forth information regarding the compensation paid or accrued by the
Company to Mr. Ergas, who served as Chief Executive Officer during fiscal 2001,
and each of the Company's three other most highly compensated executive officers
(the "Named Executive Officers") for services rendered to the Company in all
capacities during fiscal years 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------------- ---------------------------------
Awards Payouts
------------------------ -------
All
Restricted Securities Other
Other Annual Stock Underlying LTIP Compen-
Name and Principal Fiscal Salary Bonus Compensation Awards Options/SARs Payouts sation
Position Year ($) ($)(1) ($) ($) (#) ($) ($)
------------------------------ ------- ------- ------- ----------- ---------- ------------ ------- ----------
Jean-Pierre M. Ergas ........... 2001 450,000 300,000 -- -- 180,000(2) -- 145,188(3)
Chairman and Chief 2000 337,500 337,500 -- -- 60,000(4) -- 133,390(5)
Executive Officer of 1999 -- -- -- -- 180,000(6) -- --
the Company
Kevin C. Kern .................. 2001 166,875 57,000 -- -- 15,000(7) -- 13,977(8)
Chief Financial Officer 2000 148,333 53,375 -- -- 5,000(9) -- 11,561(10)
of the Company 1999 138,003 35,700 -- -- 2,533(11) -- 9,397(12)
Thomas N. Eagleson ............. 2001 205,000 167,000 -- -- 80,000(13) -- --
Executive Vice President 2000 55,384 16,615 -- -- 40,000(14) -- 10,000(15)
of Manufacturing and 1999 -- -- -- -- -- -- --
Engineering
Kenneth M. Roessler ............ 2001 172,500 80,000 -- -- 80,000(16) -- 9,024(17)
Executive Vice President 2000 93,993 21,149 -- -- 15,000(18) -- 11,964(19)
of Sales and Marketing 1999 -- -- -- -- -- -- --
(1) Amounts shown for fiscal 1999, 2000 and 2001 were earned during fiscal
1999, 2000 and 2001, respectively, under the Company's Management Incentive
Plan and were paid during fiscal 2000, 2001 and 2002, respectively.
(2) Options become exercisable in three equal annual installments with the
first installment exercisable on October 12, 2001, and were granted
pursuant to the Incentive Plan.
(3) The amount shown includes an accrual of $130,571 for supplemental executive
retirement payments pursuant to his employment agreement, $1,117 for
country club dues and $13,500 of Company matching 401(k) contributions
under the Profit Sharing Plan.
(4) Options to acquire 40,000 shares became fully exercisable in January 2000.
Options to acquire the other 20,000 shares become exercisable in three
equal annual installments with the first installment exercisable on
December 14, 2000, and were granted pursuant to the Incentive Plan.
(5) The amount shown includes an accrual of $97,928 for supplemental executive
retirement payments pursuant to his employment agreement and $35,462 for
consulting services and reimbursements pursuant to his employment
agreement.
(6) Options become exercisable in three equal annual installments with the
first installment exercisable on January 1, 2001, and were granted pursuant
to the Incentive Plan.
-14-
(7) Options become exercisable in three equal annual installments with the
first installment exercisable on October 12, 2001, and were granted
pursuant to the Incentive Plan.
(8) The amount shown includes $5,400 for country club dues and $8,577 of
Company matching 401(k) contributions under the Profit Sharing Plan.
(9) Options become exercisable in three equal annual installments with the
first installment exercisable on December 14, 2000, and were granted
pursuant to the Incentive Plan.
(10) The amount shown includes $4,200 for country club dues and $7,361 of
Company matching 401(k) contributions under the Profit Sharing Plan.
(11) Options become exercisable in three equal annual installments with the
first installment exercisable on November 16, 1999, and were granted
pursuant to the Incentive Plan.
(12) The amount shown includes $4,200 for country club dues and $5,197 of
Company matching 401(k) contributions under the Profit Sharing Plan.
(13) Options to acquire 40,000 shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001.
Options to acquire the other 40,000 shares become exercisable in three
equal annual installments with the first installment exercisable on
September 5, 2002. These 80,000 options were granted pursuant to the
Incentive Plan.
(14) Options become exercisable in two equal annual installments with the first
installment exercisable on May 23, 2001, and were granted pursuant to the
Incentive Plan.
(15) The amount shown represents a $10,000 sign-on bonus.
(16) Options to acquire 40,000 shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001.
Options to acquire the other 40,000 shares become exercisable in three
equal annual installments with the first installment exercisable on
September 5, 2002. These 80,000 options were granted pursuant to the
Incentive Plan.
(17) The amount shown includes $4,449 for country club dues and $4,575 of
Company matching 401(k) contributions under the Profit Sharing Plan.
(18) Options become exercisable in three equal annual installments with the
first installment exercisable on February 21, 2001, and were granted
pursuant to the Incentive Plan.
(19) The amount shown includes a $10,000 sign-on bonus and $1,964 of country
club dues.
The Incentive Plan provides for the award of stock options, restricted
shares of Common Stock, stock appreciation rights, stock indemnification rights,
units valued on the basis of the long-term performance of the Company, or some
combination of the foregoing to participants. The Incentive Plan covers an
aggregate of 2,425,000 shares of Common Stock.
-15-
The following tables set forth, for the Named Executive Officers,
information regarding stock options granted or exercised during, or held at the
end of, fiscal 2001.
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
------------------------------------------------------- ----------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options/SARs Employees Exercise
Granted in Price Expiration
Name (#)(1) Fiscal Year ($/Sh) Date 5%($)(2) 10%($)(2)
-------------------- -------------- ------------- ------- ------------ ------------- -----------
Jean-Pierre M. Ergas ...... 180,000(3) 33.4% $4.44 10/12/10 502,613 1,273,719
Kevin C. Kern.............. 15,000(4) 2.8 $4.44 10/12/10 41,884 106,143
Thomas N. Eagleson......... 40,000(5) 7.4 $4.44 10/12/10 111,692 283,049
40,000(6) 7.4 $6.65 9/5/11 167,286 423,935
Kenneth M. Roessler........ 40,000(7) 7.4 $4.44 10/12/10 111,692 283,049
40,000(8) 7.4 $6.65 9/5/11 167,286 423,935
___________________________
(1) In the event of a change of control all options become fully vested and
exercisable. In order to prevent dilution or enlargement of rights under
the options, in the event of a reorganization, recapitalization, stock
split, stock dividend, combinations of shares, merger, consolidation,
distribution of assets or other change in the corporate structure of shares
of the Company, the type and number of shares available upon exercise and
the exercise price will be adjusted accordingly. The Management Resources,
Nominating and Compensation Committee may, subject to specified
limitations, advance the date on which an option shall become exercisable.
(2) Amounts reflect assumed rates of appreciation from the fair market value on
the date of grant as set forth in the Securities and Exchange Commission's
executive compensation disclosure rules. Actual gains, if any, on stock
option exercises depend on future performance of the Common Stock and
overall stock market conditions. No assurance can be made that the amounts
reflected in these columns will be achieved.
(3) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001,
and were granted pursuant to the Incentive Plan.
(4) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001,
and were granted pursuant to the Incentive Plan.
(5) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001,
and were granted pursuant to the Incentive Plan.
(6) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on September 5, 2002,
and were granted pursuant to the Incentive Plan.
-16-
(7) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on October 12, 2001,
and were granted pursuant to the Incentive Plan.
(8) Options to acquire these shares become exercisable in three equal annual
installments with the first installment exercisable on September 5, 2002,
and were granted pursuant to the Incentive Plan.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Options/SARs at Money
Fiscal Year End Options/SARs at
Shares (#)(1) Fiscal Year End ($)
Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (2) ($)(2) Unexercisable Unexercisable
------------------- --------------- ----------------- ----------------- ---------------
Jean-Pierre M. Ergas........ -- -- 106,667/ --
133,333
Kevin C. Kern............... -- -- 6,667/ --
13,333
Thomas N. Eagleson.......... -- -- 33,334/ --
86,666
Kenneth M. Roessler......... -- -- 18,334/ --
76,666
__________________________
(1) These amounts do not include 236,700 and 21,033 options surrendered by
Messrs. Ergas and Kern, respectively, in July 2001 and which the Company is
obligated to reissue to Messrs. Ergas and Kern in January 2002 or shortly
thereafter.
(2) As of the end of the fiscal year, none of the options held by the Named
Executive Officers had been exercised.
The following table sets forth, for the executive officers, information
regarding stock options repriced during fiscal 2001.
Option/SAR Repricing in Last Fiscal Year
Number of Exercise
Securities Market Price Price at Length of Original
Underlying of Stock at Time of Option Term Remaining
Options/SARs Time of Repricing or at Date of Repricing
Repriced Repricing or Amendment New Exercise or
Name Date or Amended (#) Amendment ($) ($/Sh) Price ($) Amendment
------------------- --------- ---------------- ------------- ------------- ------------ ---------------------
Jean-Pierre M. Ergas 7/27/01 15,000 $5.94 $10.67 (1) 49 months
Chairman and 7/27/01 19,200 $5.94 $12.17 (1) 61 months
Chief Executive 7/27/01 7,500 $5.94 $11.67 (1) 62 months
Officer of the 7/27/01 15,000 $5.94 $16.50 (1) 88 months
Company 7/27/01 180,000 $5.94 $12.75 (1) 96 months
-17-
Kevin C. Kern......... 7/27/01 1,659 $5.94 $12.67 (1) 58 months
Chief Financial 7/27/01 11,841 $5.94 $12.67 (1) 58 months
Officer of the 7/27/01 3,333 $5.94 $19.38 (1) 76 months
Company 7/27/01 1,667 $5.94 $19.38 (1) 76 months
7/27/01 844 $5.94 $16.50 (1) 88 months
7/27/01 1,689 $5.94 $16.50 (1) 88 months
Thomas N. Eagleson..... -- -- -- -- -- --
Executive Vice
President of
Manufacturing and
Engineering
Kenneth M. Roessler.... -- -- -- -- -- --
Executive Vice
President of Sales
and Marketing
______________________
(1) The new exercise price will equal the fair market value of the Company's
closing stock price on the date on which the Company will become obligated
to reissue replacement options for the options such executive surrendered
to the Company for exchange. Such issue date will be on or about January
28, 2002.
Long-Term Incentive Plan - Awards in Last Fiscal Year
The Company granted no long-term incentive plan awards in fiscal 2000.
Management Employment Agreements
Jean-Pierre M. Ergas is party to an employment agreement with the Company
dated as of January 1, 2000 and amended as of January 1, 2002. Under the
agreement, as amended, Mr. Ergas will receive an annual base salary of $500,000
(or such higher amount determined by the Board of Directors), and will be
eligible to receive an annual bonus of 60% of his base salary, based on the
achievement of goals and objectives determined by the Board of Directors, and
will be eligible to participate in all of the Company's employee benefits plans
for which senior executive employees of the Company are generally eligible.
Under the agreement, Mr. Ergas shall be recommended to the Board to receive
options to purchase 36,667 shares of Common Stock for each year during the
employment period, beginning in fiscal year 2001. The employment period shall
end on December 31, 2004, unless terminated earlier by the resignation, death,
or permanent disability or incapacity of Mr. Ergas or by the Company with or
without cause. In the event Mr. Ergas' employment is terminated by the Company
without cause prior to December 31, 2004, the Company shall (i) pay his base
salary until the later of December 31, 2004 or the second anniversary of the
date of such termination, (ii) pay his target bonus of 60% of his base salary in
respect of fiscal year 2002 and the fiscal year in which his employment is
terminated (or if his target bonuses have not yet been set for either such
fiscal year, an amount equal to 60% of his base salary at the date of
termination in lieu of the target bonus for either such fiscal year), (iii)
reimburse his COBRA premium under the Company's group health plan and dental
plan (if any) on a monthly basis for the lesser of the period in which he is
eligible to receive such continuation coverage or 18 months (the "COBRA Period")
and, (iv) upon expiration of the COBRA Period, procure individual medical and
dental insurance policies for him on substantially similar terms as the coverage
provided by the Company on the date of termination. In any event, the aggregate
payments to Mr. Ergas on termination (or deemed termination) of the employment
period by the Company without cause shall
-18-
not be less than the sum of his annual base salary at the rate in effect at the
date of termination, his target bonus for the fiscal year in question at the
date of termination and one year's coverage under a medical and dental insurance
policy. The amounts payable to Mr. Ergas described in (i)-(iv) above shall be
reduced by the amount of any compensation Mr. Ergas receives with respect to any
other employment during the period in which the Company is making such payments
or, in the event the employment period is terminated as a result of Mr. Ergas'
permanent disability or incapacity, by the amount Mr. Ergas receives with
respect to any Company disability policy. In the event Mr. Ergas' employment is
terminated (a) by the Company for cause, (b) as a result of Mr. Ergas' death,
(c) if the employment period expires or the Company decides not to renew this
agreement at the end of any one year period following December 31, 2004 or (d)
Mr. Ergas resigns and such resignation is not as a result of any material breach
of this agreement by the Company which is not cured by the Company within 30
days after Mr. Ergas delivers written notice of such breach to the Board, then
Mr. Ergas shall be entitled to receive his base salary through the termination
date. If Mr. Ergas' employment terminates after the first anniversary of
employment for any reason other than for cause, Mr. Ergas will be entitled to a
monthly supplemental retirement benefit until his death (and, following his
death, until the death of his surviving spouse). The monthly benefit will be
equal to one-twelfth of Mr. Ergas' base salary of $500,000 in effect on January
1, 2002, multiplied by a percentage multiplier based on the age of Mr. Ergas on
the retirement date (10% if Mr. Ergas is 62 years of age on the retirement date
and increasing by 5% each year for five years). If the employment period is
terminated by the Company without cause, because of Mr. Ergas' permanent
disability or incapacity or because of Mr. Ergas' resignation after a change of
control, Mr. Ergas shall be entitled to the maximum monthly retirement benefit
(as if he were 67 years of age or older on such retirement date). In the event
Mr. Ergas' spouse survives Mr. Ergas, she will be entitled to 50% of the monthly
benefit. Mr. Ergas has agreed not to compete with the Company during the term of
his employment and so long as he is receiving salary and bonus under the
agreement as a result of his termination by the Company without cause (but in no
event for less than eighteen months after the termination of his employment).
Thomas Eagleson is party to an employment agreement with the Company dated
as of July 1, 2000. Under the agreement, Mr. Eagleson will receive an annual
base salary of $200,000 (or such higher amount determined by the Board of
Directors), and will be eligible to receive an annual bonus of between 33% and
50% of his base salary, based on the achievement of goals and objectives
determined by the Board of Directors, and will be eligible to participate in all
of the Company's employee benefits plans for which senior executive employees of
the Company are generally eligible. Under the agreement, Mr. Eagleson shall be
recommended to the Board to be granted 40,000 options to purchase Common Stock,
the options to vest in equal portions over a two year period beginning on the
first anniversary of the date of grant. The Company shall provide Mr. Eagleson
with a reasonably priced furnished apartment in Cincinnati, Ohio mutually agreed
upon by both parties. The term of the employment agreement is two years, unless
terminated earlier by the resignation, death or permanent disability or
incapacity of Mr. Eagleson or by the Company with or without cause. In the event
that Mr. Eagleson's employment is terminated by the Company without cause prior
to the second anniversary of the agreement, Mr. Eagleson will be entitled to
receive his base salary and health, disability and life insurance benefits until
the later of the second anniversary of the agreement or the first anniversary of
the termination date. The amounts payable to Mr. Eagleson if he is terminated
(i) by the Company without cause will be reduced by the amount of any
compensation he receives with respect to any other employment or (ii) as a
result of his permanent disability or incapacity will be reduced by the amount
he receives with respect to any disability policy. Upon the Company's request
from time to time, Mr. Eagleson shall furnish any such compensation or payments
due to or received by him, and Mr. Eagleson shall have no obligation to seek
employment during the period that he is receiving compensation from the
-19-
Company. In the event that Mr. Eagleson's employment is terminated by the
Company for cause or by the resignation, death or permanent disability or
incapacity of Mr. Eagleson, Mr. Eagleson shall be entitled to receive his base
salary through the termination date. Mr. Eagleson has agreed not to compete with
the Company during the term of his employment and so long as he is receiving
salary and bonus under the agreement as a result of his termination by the
Company without cause (but in no event for less than twelve months after the
termination of his employment).
Consulting Arrangement
John T. Stirrup is party to an employment agreement with the Company dated
as of June 1, 1995, as amended. Pursuant to this agreement, on June 1, 2000, Mr.
Stirrup's employment with the Company terminated and the Company engaged Mr.
Stirrup as a non-employee consultant from June 2, 2000 until December 1, 2001.
Mr. Stirrup was entitled to compensation at the rate of $350,000 per annum. This
agreement was subject to earlier termination upon (i) Mr. Stirrup's resignation,
death or incapacity or by the Company with cause (in which case the consulting
payment would have immediately ceased) or (ii) Mr. Stirrup's permanent
disability or incapacity (in which case Mr. Stirrup would have continued to
receive the consulting payment reduced by any amount he received under any
disability policy). In addition, pursuant to this agreement, Mr. Stirrup is
entitled to deferred payments with respect to his prior services as an employee
of the Company of $75,000 per year for a period of 10 years beginning on Mr.
Stirrup's 70th birthday. In the event of Mr. Stirrup's death, Mr. Stirrup's
surviving spouse is entitled to receive 50% of such deferred payments during
such period. Mr. Stirrup agreed not to compete with the Company during the term
of the consulting period and thereafter until the later of (i) the first
anniversary of the expiration of the consulting period or termination of the
consulting period by any party for any reason or (ii) the date on which Mr.
Stirrup receives the final consulting payment after his permanent disability or
incapacity.
Change in Control Agreements
In August 2001, the Company entered into change in control agreements with
each of Messrs. Ergas, Kern, Eagleson and Roessler. The agreements are a result
of a determination by the Board of Directors that it is important and in the
best interests of the Company and its shareholders to ensure that, in the event
of a possible Change In Control of the Company, the stability and continuity of
management would continue unimpaired, free of the distractions incident to any
such Change In Control. The agreements expire on the earlier of (i) the date
such officer's employment with the Company terminates or (ii) the date that is
24 months following a Change In Control.
For purposes of the agreements, the "Business" means the manufacturing of
tinplate and steel packaging for consumer and industrial goods, including, but
not limited to, aerosol cans, cold rolled and black plate steel pails, tinplate
cans, steel ammunition boxes and material center services.
For purposes of the agreements, a "Change In Control" means (i) the sale,
transfer or other disposition of 80% or more of the Company's assets or (ii) a
sale of 50% or more of the then outstanding voting stock of the Company in a
single transaction or a series of related transactions.
For purposes of the agreements, the "Separation Date" means the date on
which the officer terminates his employment with the Company for good reason or
the date on which the Company or successor entity terminates the officer's
employment for any reason other than for cause.
-20-
The change in control agreements are not employment agreements and do not
create a contract for benefits, except as set forth therein. Each officer's
employment with the Company is at-will and, at either the officer's or the
Company's option, the officer's employment may be terminated at any time, with
or without cause or notice.
Jean-Pierre Ergas is party to a change in control agreement with the
Company dated as of August 30, 2001 and amended as of January 1, 2002. Benefits
are payable under the agreement upon a Change In Control in exchange for Mr.
Ergas' continued employment with the company. The principal benefits to be
provided to Mr. Ergas under the agreement are: (i) accelerated vesting of all
stock options and stock grants held by Mr. Ergas as of the date of the Change In
Control, provided Mr. Ergas is employed by the Company at any time during the 30
day period prior to the Change In Control, (ii) a lump sum payment equal to the
sum of three times Mr. Ergas' annual base salary and one times his target
incentive bonus in effect as of the date of the Change In Control (the
"Separation Payment"), provided Mr. Ergas has been continuously employed within
30 days prior to or 24 months following a Change In Control and either Mr. Ergas
terminates his employment for good reason or the Company or its successor entity
terminates his employment for any reason other than for cause, (iii) continued
payments of any executive perquisites until the later of six months from the
Separation Date or the end of the calendar year in which the Separation Date
occurs, (iv) reimbursement of COBRA premiums for the lesser of the period Mr.
Ergas is eligible to receive such continuation coverage or for 1.5 years, (v)
procurement of individual medical and dental insurance policies provided by the
Company as of the Separation Date for a period of 18 months following the
expiration of the COBRA period, (vi) procurement and payment of individual life
insurance premiums for a period of three years following the Separation Date,
(vii) fully vested retirement benefits and (viii) an increase, if necessary, of
Mr. Ergas' monthly supplemental retirement benefit to the maximum amount
possible under such terms and provisions. If, during his employment with the
Company or within one year after his employment with the Company ends (the
"Restricted Period"), Mr. Ergas engages in the Business in North America, (a)
this change in control agreement shall be rescinded, (b) Mr. Ergas shall return
the entire amount of the Separation Payment, (c) the exercise, payment, delivery
or sale pursuant to any stock options and/or stock grants shall be rescinded and
Mr. Ergas shall return to the Company any amounts he received in connection
therewith, (d) the Company's obligation to provide the benefits described in
(iii)-(viii) above shall cease and (e) Mr. Ergas shall reimburse the Company for
the full cost of any payments and benefits provided to him pursuant to
(iii)-(viii) above during the Restricted Period in which Mr. Ergas engaged in
the Business in North America.
Kevin C. Kern is party to a change in control agreement with the Company
dated as of August 9, 2001. Benefits are payable under the agreement upon a
Change In Control in exchange for Mr. Kern's continued employment with the
company. The principal benefits to be provided to Mr. Kern under the agreement
are: (i) accelerated vesting of all stock options and stock grants held by Mr.
Kern as of the date of the Change In Control, provided Mr. Kern is employed by
the Company at any time during the 30 day period prior to the Change In Control,
(ii) a lump sum payment equal to the sum of 1.5 times Mr. Kern's annual base
salary and one times his target incentive bonus in effect as of the date of the
Change In Control (the "Separation Payment"), provided Mr. Kern has been
continuously employed within 30 days prior to or 24 months following a Change In
Control and either Mr. Kern terminates his employment for good reason or the
Company or its successor entity terminates his employment for any reason other
than for cause, (iii) continued payments of any executive perquisites until the
later of six months from the Separation Date or the end of the calendar year in
which the Separation Date occurs, (iv) reimbursement of COBRA premiums
-21-
for the lesser of the period Mr. Kern is eligible to receive such continuation
coverage or for 1.5 years following the Separation Date, (v) procurement and
payment of individual life insurance premiums for a period of 1.5 years
following the Separation Date, (vi) fully vested retirement benefits and (vii)
outplacement services for a period of 12 months. If, during his employment with
the Company or within one year after his employment with the Company ends (the
"Restricted Period"), Mr. Kern engages in the Business in North America, (a)
this change in control agreement shall be rescinded, (b) Mr. Kern shall return
to the Company the entire amount of the Separation Payment, (c) the exercise,
payment, delivery or sale pursuant to any stock options and/or stock grants
shall be rescinded and Mr. Kern shall return to the Company any amounts he
received in connection therewith, (d) the Company's obligation to provide the
benefits described in (iii)-(vii) above shall cease and (e) Mr. Kern shall
reimburse the Company for the full cost of any payments and benefits provided to
him pursuant to (iii)-(vii) above during the Restricted Period in which Mr. Kern
engaged in the Business in North America.
Thomas N. Eagleson is party to a change in control agreement with the
Company dated as of August 9, 2001. Benefits are payable under the agreement
upon a Change In Control in exchange for Mr. Eagleson's continued employment
with the company. The principal benefits to be provided to Mr. Eagleson under
the agreement are: (i) accelerated vesting of all stock options and stock grants
held by Mr. Eagleson as of the date of the Change In Control, provided Mr.
Eagleson is employed by the Company at any time during the 30 day period prior
to the Change In Control, (ii) a lump sum payment equal to the sum of two times
Mr. Eagleson's annual base salary and one times his target incentive bonus in
effect as of the date of the Change In Control (the "Separation Payment"),
provided Mr. Eagleson has been continuously employed within 30 days prior to or
24 months following a Change In Control and either Mr. Eagleson terminates his
employment for good reason or the Company or its successor entity terminates his
employment for any reason other than for cause, (iii) continued payments of any
executive perquisites until the later of six months from the Separation Date or
the end of the calendar year in which the Separation Date occurs, (iv)
reimbursement of COBRA premiums for the period Mr. Eagleson is eligible to
receive such continuation coverage, (v) procurement of individual medical and
dental insurance policies provided by the Company as of the Separation Date for
a period of six months following the expiration of the COBRA period, (vi)
procurement and payment of individual life insurance premiums for a period of
two years following the Separation Date, (vii) fully vested retirement benefits
and (viii) outplacement services for a period of 12 months. If, during his
employment with the Company or within one year after his employment with the
Company ends (the "Restricted Period"), Mr. Eagleson engages in the Business in
North America, (a) this change in control agreement shall be rescinded, (b) Mr.
Eagleson shall return to the Company the entire amount of the Separation
Payment, (c) the exercise, payment, delivery or sale pursuant to any stock
options and/or stock grants shall be rescinded and Mr. Eagleson shall return to
the Company any amounts he received in connection therewith, (d) the Company's
obligation to provide the benefits described in (iii)-(viii) above shall cease
and (e) Mr. Eagleson shall reimburse the Company for the full cost of any
payments and benefits provided to him pursuant to (iii)-(viii) above during the
Restricted Period in which Mr. Eagleson engaged in the Business in North
America.
Kenneth M. Roessler is party to a change in control agreement with the
Company dated as of August 9, 2001. Benefits are payable under the agreement
upon a Change In Control in exchange for Mr. Roessler's continued employment
with the company. The principal benefits to be provided to Mr. Roessler under
the agreement are: (i) accelerated vesting of all stock options and stock grants
held by Mr. Roessler as of the date of the Change In Control, provided Mr.
Roessler is employed by the Company at any time during the 30 day period prior
to the Change In Control, (ii) a lump sum payment equal to the sum of two times
Mr. Roessler's
-22-
annual base salary and one times his target incentive bonus in effect as of the
date of the Change In Control (the "Separation Payment"), provided Mr. Roessler
has been continuously employed within 30 days prior to or 24 months following a
Change In Control and either Mr. Roessler terminates his employment for good
reason or the Company or its successor entity terminates his employment for any
reason other than for cause, (iii) continued payments of any executive
perquisites until the later of nine months from the Separation Date or the end
of the calendar year in which the Separation Date occurs, (iv) reimbursement of
COBRA premiums for the period Mr. Roessler is eligible to receive such
continuation coverage, (v) procurement of individual medical and dental
insurance policies provided by the Company as of the Separation Date for a
period of six months following the expiration of the COBRA period, (vi)
procurement and payment of individual life insurance premiums for a period of
two years following the Separation Date, (vii) fully vested retirement benefits
and (viii) outplacement services for a period of 12 months. If, during his
employment with the Company or within one year after his employment with the
Company ends (the "Restricted Period"), Mr. Roessler engages in the Business in
North America, (a) this change in control agreement shall be rescinded, (b) Mr.
Roessler shall return to the Company the entire amount of the Separation
Payment, (c) the exercise, payment, delivery or sale pursuant to any stock
options and/or stock grants shall be rescinded and Mr. Roessler shall return to
the Company any amounts he received in connection therewith, (d) the Company's
obligation to provide the benefits described in (iii)-(viii) above shall cease
and (e) Mr. Roessler shall reimburse the Company for the full cost of any
payments and benefits provided to him pursuant to (iii)-(viii) above during the
Restricted Period in which Mr. Roessler engaged in the Business in North
America.
401(k) Plan
The Company maintains a savings plan (the "Savings Plan") qualified
under Sections 401(a) and 401(k) of the Internal Revenue Code. Generally, all
salaried employees of the Company in the United States are eligible to
participate in the Savings Plan upon their employment by the Company and become
eligible for Company matching contributions after completing one year of
service. For each employee who elects to participate in the Savings Plan and
makes a contribution thereto, the Company makes a matching contribution of 100%
of the first 4% of annual compensation contributed. The maximum contribution for
any participant for any year is 15% of such participant's eligible compensation.
Management Resources, Nominating and Compensation Committee Interlocks and
Insider Participation
Messrs. Puth, Donahoe, Dyer and Jones served as members of the
Management Resources, Nominating and Compensation Committee during all of fiscal
2001. The Company has no Management Resources, Nominating and Compensation
Committee interlocks or insider participation relationships of such persons with
the Company to report.
Management Resources, Nominating and Compensation Committee Report on Executive
Compensation
The Management Resources, Nominating and Compensation Committee reviews
and makes recommendations to the Board regarding salaries, compensation and
benefits of executive officers of the Company and develops and administers
programs providing stock-based incentives. After consideration of the Management
Resources, Nominating and Compensation Committee's recommendations, the entire
Board reviews and approves the salaries and bonuses and the stock and benefit
programs for the Company's
-23-
executive officers. This Management Resources, Nominating and Compensation
Committee report documents the components of the Company's executive officer
compensation programs and describes the bases upon which compensation will be
determined by the Management Resources, Nominating and Compensation Committee
with respect to the executive officers of the Company.
This Management Resources, Nominating and Compensation Committee report
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Compensation Philosophy. The compensation philosophy of the Company is
to link executive compensation to continuous improvements in corporate
performance and increases in stockholder value. The goals of the Company's
executive compensation programs are as follows:
. To establish pay levels that are necessary to attract and
retain highly qualified executives in light of the overall
competitiveness of the market for high quality executive
talent.
. To recognize superior individual performance, new
responsibilities and new positions within the Company.
. To balance short-term and long-term compensation to
complement the Company's annual and long-term business
objectives and strategy and to encourage executive
performance in furtherance of the fulfillment of those
objectives.
. To provide variable compensation opportunities based on the
Company's performance.
. To encourage stock ownership by executives.
. To align executive remuneration with the interests of
stockholders.
Compensation Program Components. The Management Resources, Nominating
and Compensation Committee regularly reviews the Company's compensation program
to ensure that pay levels and incentive opportunities are competitive with the
market and reflect the performance of the Company. The particular elements of
the compensation program for executive officers are further explained below.
Base Salary. The base pay level for each of Messrs. Ergas and Eagleson
is set forth in each such executive's employment agreement. Mr. Ergas' base pay
level was negotiated in November 2001. Mr. Kern's base pay level was negotiated
in February 2001. Mr. Eagleson's base pay level was negotiated in May 2001. Mr.
Roessler's base pay level was negotiated in February 2001. See "-Management
Employment Agreements."
Annual Incentives. The annual bonuses for Messrs. Ergas, Kern, Eagleson
and Roessler are determined annually by the Management Resources, Nominating and
Compensation Committee. See "-
-24-
Management Employment Agreements." The Company uses annual bonuses to enhance
management's contribution to stockholder returns by offering competitive levels
of compensation for the attainment of the Company's financial objectives. In
particular, the Company utilizes annual bonuses to focus corporate behavior on
the achievement of goals for growth, financial performance and other items.
Stock Ownership. The Management Resources, Nominating and Compensation
Committee believes that it can align the interests of stockholders and
executives by providing those persons who have substantial responsibility over
the management and growth of the Company with an opportunity to establish a
meaningful ownership position in the Company. Under the Company's Incentive
Plan, the Company granted stock options to Messrs. Ergas, Kern, Eagleson and
Roessler during fiscal 2001. See "-Option/SAR Grants in Last Fiscal Year." In
addition, the Company granted other key employees stock options during fiscal
2001.
Report on Repricing of Options. On July 27, 2001, the Company
repurchased from certain employees, directors and other eligible option holders
certain outstanding options with an exercise price of $9.00 per share or more.
In connection therewith and in consideration therefor, on January 28, 2002 or
shortly thereafter (the "Reissue Date"), the Company will be obligated to
reissue to such persons options to acquire a number of shares equal to the
number of shares subject to the surrendered options. The new options will have
an exercise price equal to the closing price of the Company's Common Stock on
the Reissue Date. However, if, for any reason, any person who surrendered
options to the Company in connection with this offer does not continuously
remain an employee or director of the Company or any of the Company's
subsidiaries from July 27, 2001 through the Reissue Date, he or she will not be
entitled to receive any new options or any other consideration in exchange for
the options surrendered to the Company in July 2001. 50% of the new options
issued to each person will be immediately exercisable on the Reissue Date and
the remaining 50% will be exercisable on the first anniversary of the Reissue
Date. For information regarding the options surrendered in connection with this
offer by the executive officers of the Company, see the table under the heading
"-Option/SAR Repricing in Last Fiscal Year" above.
At the time of the Company's decision to commence its option repricing
offer, many of the Company's outstanding options had exercise prices that were
significantly higher than the market price of the Company's Common Stock. At the
time, the Company believed that such options were unlikely to be exercised in
the near future. By offering to repurchase certain outstanding options and issue
in exchange therefor new options having an exercise price equal to the fair
market value of the Company's Common Stock on the Reissue Date, the Company
intended to provide option holders with the benefit of owning options possessing
a greater potential to increase in value over time. The Company believed that
this benefit would not only create performance incentives for options holders,
many of whom are employees of the Company, but would also maximize shareholder
value.
Chief Executive Officer Compensation. The base pay level and annual
incentive bonus compensation for Mr. Ergas, who has served as the Company's
Chief Executive officer since January 1, 2000, was determined by the Management
Resources, Nominating and Compensation Committee in its discretion based on
achievement of goals and objectives determined by it and in accordance with
their respective employment agreements. The Board has set Mr. Ergas' base salary
for the year beginning on January 1, 2002 and ending on December 31, 2002 at
$500,000 per annum, subject to increase by the Board. See "-Management
Employment Agreements."
-25-
Certain Tax Considerations. Section 162(m) of the Internal Revenue Code
of 1986, as amended, limits the deductibility on the Company's tax return of
compensation over $1 million to any of the Named Executive Officers, unless, in
general, the compensation is paid pursuant to a plan which is performance-based,
is non-discretionary and has been approved by the Company's stockholders. The
Company's policy with respect to Section 162(m) is to make reasonable efforts to
ensure that compensation is deductible without limiting the Company's ability to
attract and retain qualified executives.
Summary. After its review of all existing programs, the Management
Resources, Nominating and Compensation Committee believes that the total
compensation program for executives of the Company is focused on increasing
values for stockholders and enhancing corporate performance. The Management
Resources, Nominating and Compensation Committee currently believes that the
compensation of executive officers is properly tied to stock appreciation
through stock options or stock ownership. The Management Resources, Nominating
and Compensation Committee believes that executive compensation levels at the
Company are competitive with the compensation programs provided by other
corporations with which the Company competes. The foregoing report has been
approved by all members of the Management Resources, Nominating and Compensation
Committee.
MANAGEMENT RESOURCES, NOMINATING AND
COMPENSATION COMMITTEE
Alexander P. Dyer
Chairman
Thomas A. Donahoe
John E. Jones
John W. Puth
Members
-26-
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on an investment of $100 since September 27, 1996 with that of the New
York Stock Exchange Composite Index and the Dow Jones Complete Return Index
(Complete Industrial Sector).
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period
(Fiscal 2001, Fiscal 2000, Fiscal
1999, Fiscal 1998, Fiscal 1997 and
Fiscal 1996) BWAY NYSE CI Dow Jones CRI
----------- ---- ------- -------------
9/27/96 $100.00 $100.00 $100.00
9/26/97 $169.66 $135.20 $134.89
9/25/98 $107.07 $140.79 $136.71
10/1/99 $ 77.59 $161.76 $174.92
9/29/00 $ 40.86 $181.02 $181.36
9/28/01 $ 52.14 $148.48 $150.65
-27-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Milton is party to a non-competition agreement with the Company
dated as of May 28, 1996. Pursuant to the terms of the agreement, Mr. Milton may
not compete with, induce any employee to leave their employ with, hire any
person who was an employee of, own, manage, control or render services to any
business in competition with or induce any supplier, licensor or other business
relation to cease doing business with the Company or any of its respective
subsidiaries. In consideration of the non-competition covenants, Mr. Milton will
be entitled to $2,000,000 paid by the Company in twenty equal installments of
$100,000 per quarter during the term of the agreement payable on the first day
of each June, October, January and April.
The Company is party to a lease agreement with Division Street Partners
("DSP"), a limited partnership, pursuant to which the Company leases a
manufacturing facility. Mr. Milton, George Milton, Patrick Milton and Michael
Milton each hold (i) a 12.5% limited partnership interest in DSP and (ii) a
12.5% interest in the general partner of DSP. The Company is obligated to pay
annual rent in the amount of $676,695 through the term of the lease, which ends
in September 2004. The Company has the option to extend the term of the lease
for one additional five-year period. Each of George Milton, Patrick Milton and
Michael Milton is a brother of James W. Milton, who is a director of the Company
and was Executive Vice President of the Company until his retirement in May
2001.
The Company is party to another lease agreement pursuant to which the
Company leases a warehouse from Fairmont Realty LLC ("Fairmont"), which is owned
by Bill Milton, Patrick Milton, George Milton, Michael Milton and Carolyn Milton
Walker. The Company is obligated to pay annual rent to Fairmont in the amount of
$238,568. Each of Patrick Milton, George Milton and Michael Milton is a brother
of, and each of Bill Milton and Carolyn Milton Walker is a cousin of, James W.
Milton, who is a director of the Company and was Executive Vice President of the
Company until his retirement in May 2001.
Pursuant to his prior employment with the Company, David P. Hayford
received $79,500 in severance from the Company in fiscal 2001. David P. Hayford
is the son of Warren J. Hayford, the non-executive Vice-Chairman of the Board.
SOLICITATION AND EXPENSES OF SOLICITATION
The solicitation of proxies will be made initially by mail. The
Company's directors, officers and employees may also solicit proxies in person
or by telephone without additional compensation. In addition, proxies may be
solicited by certain banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries who will mail material to or otherwise
communicate with the beneficial owners of shares of the Company's Common Stock.
All expenses of solicitation of proxies will be paid by the Company.
-28-
ANNUAL REPORT AND FORM 10-K
Copies of the Company's Annual Report to Stockholders, which includes
portions of the Company's Annual Report on Form 10-K for the Fiscal Year ended
September 30, 2001, are being mailed with this Proxy Statement to each
stockholder entitled to vote at the Annual Meeting of Stockholders. Stockholders
not receiving a copy of the Annual Report may obtain one by writing or calling
Mr. Jeffrey M. O'Connell, Vice President, Treasurer and Secretary, BWAY
Corporation, 8607 Roberts Drive, Suite 250, Atlanta, Georgia 30350, telephone
(770) 645-4800.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 2002 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement to be issued
in connection with the 2003 Annual Meeting of Stockholders must be mailed to the
Corporate Secretary, BWAY Corporation, 8607 Roberts Drive, Suite 250, Atlanta,
Georgia 30350, and must have been received by the Corporate Secretary on or
before September 20, 2002. The Company will consider only proposals meeting the
requirements of applicable SEC rules.
The Board of Directors
January 18, 2002
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Annex A
-------
B.WAY Corporation
Internal Audit Department
Audit Committee of The Board of Directors Charter
--------------------------------------------------------------------------------
Organization
------------
The audit committee shall be composed of at least three and not more than six
directors who are independent of the management of the corporation and are free
of any relationship that, in the opinion of the board of directors, would
interfere with their exercise of independent judgment as a committee member.
Statement of Policy
-------------------
The audit committee shall provide assistance to the directors in fulfilling
their responsibility to the shareholders, potential shareholders, and the
investment community by reviewing financial information which will be provided
to the shareholders and others, the system of internal controls which management
and the board of directors have established, management's assessment of business
risk and the audit process.
Responsibilities
----------------
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality. The committee shall have full
access to the independent public accountants, the internal auditors, any of the
Corporation's non-employee attorneys and advisors, and executive and financial
management. Similarly, the Corporation's independent public accountants,
internal auditors and executive and financial management will have full access
to the committee and to the Board of Directors. It is also understood that the
outside auditor is ultimately accountable to the Company's Board of Directors
and that the audit committee and the Board have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the outside
auditor.
In carrying out these responsibilities, the audit committee will:
. Remain compliant with the Corporation's Audit Committee policy and
procedure.
. Recommend to the board of directors the independent accountants to be
nominated, review the independent accountant's auditing of the
Corporation's financial statements, approve the compensation of the
independent accountant, and review and approve the discharge of the
independent accountant.
. Review the formal statement submitted annually by the outside auditor
describing all relationships provided by the Corporation's independent
public accountants and related fees, considering the possible effect they
have on the independence of such accountants.
. Review the scope and results of the Corporation's internal audit plans and
procedures.
B.WAY Corporation
Internal Audit Department
Audit Committee of The Board of Directors Charter
--------------------------------------------------------------------------------
. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to minimize
such risk to the company.
. Review the Corporation's processes to maintain an adequate system of
internal controls.
. Review policies and procedures with respect to officer's expense accounts
and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the internal auditor or independent
accountant.
BWAY CORPORATION
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
PROXY
Solicited by the Board of Directors
The undersigned hereby appoints Jeffrey M. O'Connell, Kevin C. Kern and
each of them, proxies, with power of substitution and revocation, acting
together or, if only one is present and voting, then that one, to vote the stock
of BWAY Corporation which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on February 20, 2002 and at any adjournments
or postponements thereof, with all the powers the undersigned would possess if
personally present, as designated herein and authorizes the proxies to vote in
accordance with the recommendations of the Company's management upon such other
business as may properly come before the Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
1. Election of directors.
[_] FOR ALL [_] WITHHELD ALL [_] FOR ALL EXCEPT
Nominees: John E. Jones and John W. Puth
(To withhold authority to vote for any nominee, strike out that
nominee's name.)
2. Ratification of the appointment of Deloitte & Touche LLP as the Company's
independent public accountants.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed and dated on the reverse side.)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
Please date and sign exactly as names appear
on this Proxy. Joint owners should each
sign. Trustees, executors, etc. should
indicate the capacity in which they are
signing.
Dated:_________________________, 2002
Signature(s):_______________________________
[_] Check here if you plan to ____________________________________________
attend the annual meeting.
[_] Check here for address change.
New Address