EXHIBIT 10
[LETTERHEAD OF XXXXXXX, XXXXXX & CO.]
June 16, 1997
The Board of Directors
SEDA Specialty Packaging Corp.
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Gentlemen:
SEDA Specialty Packaging Corp. ("SEDA" or the "Company"), CCL Industries Inc.
("CCL") and Seawolf Acquisition Corporation ("SEAWOLF"), an indirect wholly
owned subsidiary of CCL, contemplate entering into a merger agreement (the
"Merger Agreement") and certain related agreements providing for the
acquisition of 100% of the Company's common stock and 100% of its outstanding
options and warrants to purchase common stock of the Company by SEAWOLF,
through a tender offer (the "Tender Offer") and subsequent merger of SEAWOLF
into the Company (such merger, collectively with the Tender Offer, the
"Transaction"), pursuant to which (a) the shareholders of the issued and
outstanding shares of common stock (the "Common Shares") of SEDA, other than
Xx. Xxxxx Xxxxxxxx, would receive US$29.00 per share in cash, (b) the holders
of SEDA's outstanding options and warrants, other than Xx. Xxxxx Xxxxxxxx,
would receive the cash difference between US$29.00 per share and the respective
per share exercise price of such options and warrants and (c) SEDA would become
a wholly owned subsidiary of CCL.
We understand that it is contemplated that Xx. Xxxxx Xxxxxxxx would receive
for his Common Shares in the Transaction: (a) consideration equal to US$26.00
per share payable: (i) in part, by the issue of securities of SEAWOLF
exchangeable under certain circumstances for an aggregate of 1,000,000 Class B
non-voting shares of CCL as valued on the Toronto Stock Exchange (the "TSE")
for the 20 trading days prior to the announcement of the Transaction (the
current trading price of the Class B shares is approximately Cdn$17.00); and
(ii) as to the balance, by cash; and (b) the right to earn additional
consideration for his shares (the "Top-Up") as follows: (i) US$1,579,999.50 if
SEDA achieves 1997 EBITDA of US$20 million (i.e. US$1.50 per share x 1,053,333
= US$1,579,999.50) plus interest on this amount from the closing date of the
Transaction payable at a rate equal to the prime rate of interest quoted by
CCL's U.S. Bankers (the "CCL Reference Rate"), (ii) US$1,579,999.50 if 1998
EBITDA is the greater of US$24 million or 20% higher than 1997 actual EBITDA,
plus interest on such amounts from the closing date of the Transaction until
any such amount is paid, payable at the CCL Reference Rate and
(iii) US$1,579,999.50 if and only if the payment described in (i) was not
received and if the aggregate EBITDA for the two fiscal years ended December
31, 1998 is at least US$44 million, plus interest on such amounts from the
closing date of the Transaction until any such amount is paid, payable at the
CCL Reference Rate. Xx. Xxxxx Xxxxxxxx will also be subject to separate
arrangements with respect to his options to purchase the Company's Common
Shares and will enter into a written employment arrangement pursuant to which
he will be engaged as the surviving company's Chief Executive Officer.
You have requested our opinion (the "Opinion") as investment bankers as to
the fairness, from a financial point of view, of the consideration (the
"Consideration") to be received by the holders of the Common Shares (the
"Public Shareholders") in the Transaction. As used herein, Public Shareholders
means all holders of the Common Shares other than officers and directors of the
Company (including Xx. Xxxxx Xxxxxxxx),
Xx. Xxxxxxx Xxxxxxxx and Xxx. Xxxxxx Xxxxxxxx. You have not requested, and we
therefore do not express, any opinion with respect to the consideration to be
received in this Transaction by Xx. Xxxxx Xxxxxxxx, Xx. Xxxxxxx Xxxxxxxx, Xxx.
Xxxxxx Xxxxxxxx or any other person or entity other than the Public
Shareholders.
Xxxxxxx, Xxxxxx & Co. ("Xxxxxxx"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers, acquisitions, private placements and
valuations for estate, corporate and other purposes. In the ordinary course of
our business as broker-dealer, we may actively trade the securities of SEDA
for our own account or for the accounts of our customers and, accordingly, at
any time hold a long or short position in such securities.
In arriving at our Opinion, we have, among other things, read, reviewed and
analyzed: the Merger Agreement; SEDA's Annual Reports on Form 10-K for the
three fiscal years ended December 31, 1996; and SEDA's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997. In addition, we held
discussions with certain members of the senior management of SEDA concerning
its past and current business operations, present financial condition and
future prospects. These discussions included a review of the condition and
prospects of the plastic packaging industry in general. We also held
discussions with representatives of SEDA's independent certified public
accountants, and performed such other inquiries and analyses as we deemed
appropriate. In addition, we reviewed the price and volume trading history of
the Common Shares; compared the financial position and operations of SEDA with
those of certain public companies in the packaging industry which we deemed to
be relevant; and reviewed the financial terms of certain recent business
combinations in the packaging industry.
In connection with our Opinion, we have assumed and relied upon the accuracy
and completeness of all the financial and other information provided or made
available to us by SEDA and other parties for the purpose of this Opinion and
do not assume any responsibility for independent verification of such
information. We have not conducted nor had conducted for us any evaluation or
appraisal of the assets of SEDA. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and our knowledge of the plastic packaging industry generally. Our
Opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof and the information made available to us through
the date hereof. We have also assumed that there have been no material changes
in the assets, financial condition, results of operations, business or
prospects of SEDA since the date of the most recent financial statements that
SEDA has made available to us.
Our Opinion as to fairness is limited to the fairness of the Consideration,
from a financial point of view, to the Public Shareholders, and we are not
opining in any other respect whatsoever on the terms of the Transaction.
This Opinion is delivered to you based on your understanding that it is for
the benefit and use of the Board of Directors of SEDA in considering the
Transaction and that SEDA will not use this Opinion for any other purpose and
will not reproduce, disseminate or refer to this Opinion without our prior
written consent; provided, however, that this Opinion may be reproduced in
full in the filings with the Securities and Exchange Commission and in Tender
Offer and proxy materials relating to the Transaction submitted to the
Company's shareholders.
Based upon our review and subject to the foregoing and such other matters as
we consider relevant, and in reliance thereon, it is our opinion, as
investment bankers, that as of the date hereof the Consideration to be
received in the Transaction is fair, from a financial point of view, to the
Public Shareholders.
Very truly yours,
/s/ Xxxxxxx, Xxxxxx & Co.
Xxxxxxx, Xxxxxx & Co.
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