As filed with the Securities and Exchange Commission on October 17, 2007

Registration No. 333-145849

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Amendment No. 1
to
FORM S-4

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

 

 

 

NEW GIANT CORPORATION

(Exact name of registrant as specified in its charter)

 

 

814 Livingston Court

Marietta, Georgia 30067

(770) 644-3000

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Stephen A. Hellrung, Esq.

Senior Vice President, General Counsel and Secretary

814 Livingston Court

Marietta, Georgia 30067

(770) 644-3000

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

 

 

 

Copies to:

 

 

 

     Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

PRELIMINARY COPY — SUBJECT TO COMPLETION, DATED [    l    ], 2007

 

 

BUSINESS COMBINATION PROPOSED — YOUR VOTE IS IMPORTANT

 

To our stockholders:

 

I am pleased to invite you to attend the special meeting of stockholders of Graphic Packaging Corporation (“Graphic”) to be held on [    l    ], [    l    ], 2007 at 10:00 a.m., local time at the offices of Alston & Bird LLP, Atlantic Center Plaza, 1180 West Peachtree Street, 15th Floor, Atlanta, Georgia 30309. At the special meeting, you will be asked to consider and vote on (1) a proposal to adopt the transaction agreement and agreement and plan of merger, dated as of July 9, 2007, that Graphic and certain of its affiliates entered into with Bluegrass Container Holdings, LLC (“BCH”), the company that holds all of the equity interests of Altivity Packaging, LLC (“Altivity”), and BCH’s equity holders, which provides for the combination of the businesses of Graphic and Altivity, (2) a proposal to approve provisions in New Giant Corporation’s restated certificate of incorporation authorizing 1.1 billion shares of capital stock, including 1 billion shares of common stock and 100 million shares of preferred stock, and (3) any proposal by Graphic to adjourn or postpone the special meeting, if determined to be necessary.

 

If the transactions contemplated by the transaction agreement are completed, you will receive one share of common stock of a new company, currently named New Giant Corporation, which we refer to as “New Graphic,” for each share of Graphic common stock that you held immediately prior to the effective time of the merger. New Graphic will also issue shares of its common stock to BCH’s current equity holders such that upon the completion of these transactions, BCH’s current equity holders will own approximately 40.6% of New Graphic common stock, and holders of Graphic common stock immediately prior to the effective time will own approximately 59.4% of New Graphic common stock, each calculated on a fully diluted basis. In connection with these transactions, New Graphic will be renamed Graphic Packaging Holding Company, and its common stock will be listed on the New York Stock Exchange under the symbol “GPK,” which is the symbol under which Graphic common stock is currently traded on the NYSE.

 

The board of directors of Graphic has unanimously approved the transaction agreement and the transactions and has determined that the transactions are advisable and in the best interests of Graphic and its stockholders.

 

This proxy statement/prospectus describes these transactions and provides specific information concerning the special meeting. We encourage you to read this entire document carefully.

 

Sincerely,

 

 

David W. Scheible

President and Chief Executive Officer

 

 

For a discussion of certain risk factors that you should consider in evaluating the transactions contemplated by the transaction agreement and an investment in New Graphic common stock, see “Risk Factors” beginning on page 20.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the transactions or passed on the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

We may amend or supplement this proxy statement/prospectus from time to time by filing amendments or supplements as required.

 

 

 

 

This proxy statement/prospectus is dated [    l    ], 2007, and is first being mailed to Graphic stockholders on or about [    l    ], 2007.

 

GRAPHIC PACKAGING CORPORATION

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD [    l    ], 2007

 

 

To our stockholders:

 

Graphic Packaging Corporation (“Graphic”) will hold a special meeting of its stockholders on [    l    ], 2007 at 10:00 a.m., local time, at the offices of Alston & Bird LLP, Atlantic Center Plaza, 1180 West Peachtree Street, 15th Floor, Atlanta, Georgia 30309, for the following purposes:

 

1. To vote on a proposal to adopt the transaction agreement and agreement and plan of merger, dated as of July 9, 2007, by and among Graphic, Bluegrass Container Holdings, LLC (“BCH”), TPG Bluegrass IV, L.P., TPG Bluegrass IV-AIV 2, L.P., TPG Bluegrass V, L.P., TPG Bluegrass V-AIV 2, L.P., Field Holdings, Inc., TPG FOF V-A, L.P., TPG FOF V-B, L.P., BCH Management, LLC, (collectively with TPG Bluegrass IV, L.P., TPG Bluegrass IV-AIV 2, L.P., TPG Bluegrass V, L.P., TPG Bluegrass V-AIV 2, L.P., Field Holdings, Inc., TPG FOF V-A, L.P., TPG FOF V-B, L.P. and any transferees of their interests in BCH, the “Sellers”), New Giant Corporation (“New Graphic”) and Giant Merger Sub, Inc. (“Merger Sub”) and to approve the transactions contemplated by such transaction agreement. The transaction agreement contemplates, among other transactions, that:

 

 

2. To vote on a proposal to approve provisions in New Graphic’s restated certificate of incorporation authorizing 1.1 billion shares of capital stock, including 1 billion shares of common stock and 100 million shares of preferred stock. THIS PROVISION WILL ONLY BE IMPLEMENTED IF PROPOSAL 1 IS ALSO APPROVED.

 

3. To vote upon any proposal by Graphic to adjourn or postpone the special meeting, if determined to be necessary.

 

A copy of the transaction agreement is attached to this proxy statement/prospectus as Annex A. The certificate of incorporation and by-laws of New Graphic to be in effect following the merger are set forth as Annex B and Annex C, respectively, to this proxy statement/prospectus.

 

The board of directors of Graphic has unanimously approved the transaction agreement and the transactions and has determined that the transactions are advisable and in the best interests of Graphic and its stockholders. The board of directors of Graphic recommends that you vote “FOR” the adoption of the transaction agreement and the approval of the transactions, “FOR” the approval of the provisions of New Graphic’s restated certificate of incorporation increasing New Graphic’s authorized capital stock, and “FOR” the adjournment or postponement of the special meeting, if determined to be necessary.

 

Only Graphic stockholders of record at the close of business on [    l    ], 2007 are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. No business other than the proposals described in this notice will be considered at the special meeting or any adjournment or postponement thereof. A complete list of Graphic stockholders of record entitled to vote at the special meeting will be available for inspection at the special meeting.

 

Your vote is very important, regardless of the number of shares you own. Graphic cannot complete the transactions unless the transaction agreement is adopted and the transactions are approved by the affirmative vote of a majority of the issued and outstanding shares of Graphic common stock. Please submit your proxy as soon as possible to make sure that your shares are represented at the special meeting.

For your shares to be voted, you may complete, sign, date and return the enclosed proxy card or you may submit your proxy by telephone or over the Internet. If you are a holder of record, you may also cast your vote in person at the special meeting. If your shares are held in an account by a broker, bank or other nominee, you must instruct them on how to vote your shares. If you do not submit your proxy, vote in person or instruct your broker, bank or other nominee how to vote, it will have the same effect as voting “AGAINST” the adoption of the transaction agreement and the approval of the transactions.

 

By order of the board of directors,

 

Stephen A. Hellrung

Senior Vice President, General Counsel and Secretary

[    l    ], 2007

 

REFERENCE TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about Graphic from other documents that are not included in or delivered with this proxy statement/prospectus. The Securities and Exchange Commission (the “SEC”) maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information regarding registrants, like Graphic, that file reports with the SEC electronically. The SEC’s website address is http://www.sec.gov. You may also read and copy any document Graphic files with the SEC at the SEC’s public reference room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. The information Graphic files with the SEC and other information about Graphic is also available on Graphic’s website at http://www.graphicpkg.com. However, the information on Graphic’s website is not a part of, nor incorporated by reference into, this proxy statement/prospectus. For a listing of the documents incorporated by reference, please see “Where You Can Find More Information.”

 

You can also obtain those documents incorporated by reference in this proxy statement/prospectus without charge by contacting Graphic at:

 

Graphic Packaging Corporation

814 Livingston Court

Marietta, Georgia 30067

(770) 644-3000

Attention: Investor Relations Department

 

In order to ensure timely delivery of requested documents, any request should be made at least five business days prior to the date on which an investment decision is to be made and, in any event, no later than [    l    ], 2007, which is five business days prior to the special meeting.

 

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

 

The following questions and answers are intended to briefly address some frequently asked questions regarding the merger (as defined below) and the exchange (as defined below and together with the merger, the “transactions”) contemplated by the transaction agreement (as defined below). These questions and answers may not address all questions that may be important to you as a stockholder of Graphic Packaging Corporation (“Graphic”). You are urged to read this entire proxy statement/prospectus carefully and the other documents to which Graphic and New Graphic (as defined below) refer you before casting your vote on adoption of the transaction agreement and approval of the transactions.

 

 

 

 

 

 

 

 

	•	The Graphic board of directors believed that the combination of the operations of Graphic and Altivity would provide stronger and more stable cash flows, and therefore greater financial stability, than could have been achieved by Graphic on a stand-alone basis. This enhanced financial performance and position should permit New Graphic to accelerate its debt reduction, enhance the company’s credit profile, improve leverage ratios and finance ongoing investments.
	•	The complementary product offerings of Graphic and Altivity, which when combined create an ability to offer comprehensive consumer packaging solutions to existing and new customers of both companies.
	•	The new company will have expanded market reach into smaller specialty segments of the folding carton market, as well as new packaging markets, including labels, flexible packaging and multi-wall bags.
	•	The opportunity to achieve significant cost synergies identified in connection with the transactions, including:

	–	operating and overhead expense reductions;
	–	supply chain procurement improvements;
	–	facility optimization; and
	–	manufacturing process improvements.

	•	The opportunity for additional cost savings from Altivity’s ongoing integration of Smurfit-Stone Container Corporation’s Consumer Packaging Division and the Field Companies (as defined below) as a result of manufacturing network optimization efforts, overhead reduction and supply chain improvements.

	•	The ability to offer a tax-free transaction to Altivity’s current owners by structuring the transactions under the federal income tax laws as a contribution by Graphic and BCH of their respective businesses to New Graphic.

	•	The opinion of Goldman Sachs, dated July 9, 2007, provided to the Graphic board of directors, that, as of the date of the opinion, and based upon and subject to the factors and assumptions set forth in the opinion, the 139,445,038 shares of New Graphic common stock, taken in the aggregate, to be issued by New Graphic in exchange for 100% of the outstanding equity interests in BCH pursuant to the transaction agreement was fair from a financial point of view to Graphic, as more fully described below under “The Transactions — Opinion of Financial Advisor to Graphic.”

	•	the adoption of the transaction agreement and the approval of the transactions by Graphic stockholders;

	•	no law, order or judgment having been issued, enacted, entered or enforced by any court or other governmental authority preventing or making illegal the consummation of the transactions;

	•	the expiration or termination of any waiting period applicable to the transactions in respect of filings by Graphic and BCH under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
	•	the approval of the listing on the NYSE of New Graphic common stock to be issued in connection with the transactions;
	•	the registration statement of which this proxy statement/prospectus forms a part shall have become effective under the Securities Act of 1933, as amended (the “Securities Act”) and shall not be the subject of any stop order or proceedings seeking a stop order; and
	•	other customary conditions set forth in the transaction agreement, including the receipt of tax opinions, the accuracy of the representations and warranties, and the performance of obligations under the transaction agreement having been satisfied or waived.

	•	by mutual consent of the Sellers Representative (as defined herein) and Graphic;
	•	by either the Sellers Representative or Graphic if:

	–	any governmental law or order prohibiting the completion of the transactions becomes final;
	–	the transactions have not been completed by March 31, 2008 (which date may be extended to May 31, 2008 if the delay is the result of the failure to obtain antitrust approvals);
	–	Graphic stockholders fail to adopt the transaction agreement and approve the transactions at the special meeting; or

	–	there shall have been a breach by the other party of any of the covenants, agreements, representations or warranties of such other party contained in the transaction agreement in a material way; or

	•	by the Sellers Representative if the Graphic board of directors (i) changes its recommendation regarding the transaction agreement and the transactions or (ii) fails to publicly reaffirm its recommendation regarding the transaction agreement and the transactions or if Graphic otherwise breaches certain provisions of the transaction agreement relating to its obligations not to solicit alternative takeover proposals.

	•	The closing of a new $1.2 billion senior secured term loan facility to refinance the outstanding amounts under BCH’s existing first and second lien credit facilities.
	•	The closing of a new $600 million senior secured asset-based revolving credit facility. However, if an asset-based revolving credit facility containing terms that are satisfactory to Graphic cannot be arranged prior to the closing of the transactions, Graphic Packaging International, Inc. may instead elect to increase the size of its existing revolving credit facility to up to $400 million from $300 million.
	•	An amendment or amendment and restatement of Graphic Packaging International, Inc.’s existing May 16, 2007 credit agreement to, among other things, accommodate the transactions and to allow for the reprioritization of liens in connection with the above-described asset-based revolving credit facility if obtained.

		Six Months Ended
		June 30,								Years Ended December 31,
		2007				2006				2006				2005				2004				2003(a)				2002
		(unaudited)								In millions, except per share amounts
Statement of Operations Data:
Net Sales		$	1,256.0			$	1,205.9			$	2,413.0			$	2,384.0			$	2,386.5			$	1,683.3			$	1,247.3
Cost of Sales			1,103.3				1,066.0				2,109.8				2,071.3				2,026.7				1,398.5				984.8
Selling, General and Administrative			97.0				100.6				201.2				206.1				202.3				153.1				117.3
Research, Development and Engineering			5.0				6.0				11.4				9.9				9.6				7.4				5.2
Other Expense (Income), Net			1.6				(0.5	)			0.3				9.8				32.3				18.2				(0.6	)
Income from Operations			49.1				33.8				90.3				86.9				115.6				106.1				140.6
Interest Income			0.3				0.4				0.6				0.6				0.6				1.0				1.4
Interest Expense			(86.6	)			(84.7	)			(172.2	)			(156.5	)			(149.6	)			(144.5	)			(147.4	)
Loss on Early Extinguishment of Debt			(9.5	)			—				—				—				—				(45.3	)			(11.5	)
Loss before Income Taxes and Equity in Net Earnings of Affiliates			(46.7	)			(50.5	)			(81.3	)			(69.0	)			(33.4	)			(82.7	)			(16.9	)
Income Tax Expense			(13.8	)			(9.5	)			(20.2	)			(23.3	)			(28.9	)			(14.3	)			(33.1	)
Loss before Equity in Net Earnings of Affiliates			(60.5	)			(60.0	)			(101.5	)			(92.3	)			(62.3	)			(97.0	)			(50.0	)
Equity in Net Earnings of Affiliates			0.5				0.5				1.0				1.2				1.4				1.3				1.0
Net Loss			(60.0	)			(59.5	)			(100.5	)			(91.1	)			(60.9	)			(95.7	)			(49.0	)
Loss Per Share:
Basic			(0.30	)			(0.30	)			(0.50	)			(0.46	)			(0.31	)			(0.65	)			(0.43	)
Diluted			(0.30	)			(0.30	)			(0.50	)			(0.46	)			(0.31	)			(0.65	)			(0.43	)
Weighted Average Shares Outstanding:
Basic			201.5				200.9				201.1				200.0				198.9				148.3				115.1
Diluted			201.5				200.9				201.1				200.0				198.9				148.3				115.1
Balance Sheet Data:
Cash and Cash Equivalents			11.8				7.3				7.3				12.7				7.3				17.5				13.8
Total Assets			3,203.5				3,346.2				3,233.6				3,356.0				3,465.3				3,612.0				2,251.2
Total Debt			1,968.4				1,998.0				1,922.7				1,978.3				2,025.2				2,154.6				1,528.4
Total Shareholders’ Equity			134.8				214.2				181.7				268.7				386.9				438.4				87.8

		Six Months Ended
		June 30,								Years Ended December 31,
		2007				2006				2006				2005				2004				2003(a)				2002
		(unaudited)								In millions, except per share amounts
Other Data:
Depreciation and Amortization			103.5				98.8				196.0				205.3				228.9				160.4				133.8
Capital Spending(b)			42.6				43.4				94.5				110.8				149.1				136.6				56.0

(a)		Graphic (formerly known as Riverwood Holding, Inc.) was incorporated on December 7, 1995 under the laws of the State of Delaware. On August 8, 2003, the corporation formerly known as Graphic Packaging International Corporation (“GPIC”) merged with and into Riverwood Acquisition Sub LLC, a wholly-owned subsidiary of Riverwood Holding, Inc. (“Riverwood Holding”), with Riverwood Acquisition Sub LLC as the surviving entity. Riverwood Acquisition Sub LLC then merged into Riverwood Holding, which was renamed Graphic Packaging Corporation.
(b)		Includes capitalized interest and amounts invested in packaging machinery.

		Successor				Predecessor				Successor
		Company				Company				Company					Predecessor Company
		Six Months Ended								July 1, 2006 to					January 1, 2006 to
		June 30,								December 31,					June 30,				Years Ended December 31,
		2007				2006				2006					2006				2005				2004				2003
		(unaudited)								In millions
Statement of Operations Data:
Net Sales		$	1,000.3			$	789.4			$	964.2				$	789.4			$	1,584.4			$	1,541.2			$	1,520.2
Cost of Sales			870.2				699.0				881.3					699.0				1,381.1				1,338.2				1,316.8
Selling, General and Administrative			96.9				75.4				89.7					75.4				141.0				137.9				136.5
Litigation Charge			—				—				—					—				4.0				—				—
Restructuring Charges			—				—				—					—				5.0				1.9				10.8
Loss (Gain) on Sale of Assets			0.3				(0.1	)			—					(0.1	)			(0.1	)			0.1				0.1
Gain on Insurance Claim			(1.3	)			—				—					—				—				—				—
Income (Loss) from Operations			34.2				15.1				(6.8	)				15.1				53.4				63.1				56.0
Interest Expense, Net			(47.4	)			(0.6	)			(45.8	)				(0.6	)			(1.2	)			(0.9	)			(0.8	)
Other (Expense) Income, Net			(0.2	)			—				(0.4	)				—				0.1				0.2				0.4
Income (Loss) before Income Taxes and Cumulative Effect of Accounting Change			(13.4	)			14.5				(53.0	)				14.5				52.3				62.4				55.6
Income Tax Expense			(1.1	)			(5.8	)			(0.5	)				(5.8	)			(20.9	)			(24.8	)			(22.1	)
Income (Loss) before Cumulative Effect of Accounting Change			(14.5	)			8.7				(53.5	)				8.7				31.4				37.6				33.5
Cumulative Effect of Accounting Change			—				—				—					—				—				—				(0.1	)
Net (Loss) Income			(14.5	)			8.7				(53.5	)				8.7				31.4				37.6				33.4
Balance Sheet Data:
Cash and Cash Equivalents			100.0				—				99.2					—				—				—				0.1
Total Assets			1,691.6				836.0				1,671.2					836.0				821.8				841.8				830.1
Total Debt			1,159.1				17.0				1,163.3					17.0				16.9				17.6				10.6
Total Equity			242.9				615.0				244.5					615.0				576.6				587.9				596.3
Other Data:
Depreciation and Amortization			44.3				20.4				42.5					20.4				40.4				39.5				36.8
Capital Spending			39.9				39.0				21.4					39.0				37.9				31.5				37.8

		Six Months Ended				Year Ended
		June 30,				December 31,
		2007				2006
		In millions, except per share data
Statement of Operations Information
Net Sales		$	2,234.3			$	4,364.3
Income from Operations			67.2				70.2
Loss per Basic and Diluted Share			(0.22	)			(0.43	)
Balance Sheet Information
Cash and Cash Equivalents			14.0
Total Assets			5,261.9
Total Debt			3,073.7
Total Shareholders’ Equity			794.5

		As of and for the
		Six Months				As of and for the
		Ended				Year Ended
		June 30,				December 31,
		2007				2006
		(Unaudited)
Basic earnings per share
Historical		$	(0.30	)(1)		$	(0.50	)(2)
Pro forma			(0.22	)			(0.43	)
Diluted earnings per share
Historical			(0.30	)(1)			(0.50	)(2)
Pro forma			(0.22	)			(0.43	)
Dividends per share
Historical			—				—
Pro forma			—				—
Book value per share
Historical			0.67				0.91
Pro forma			2.32				—

(1)		Amounts derived from Graphic’s unaudited condensed consolidated financial statements as of, and for the six months ended June 30, 2007.
(2)		Amounts derived from Graphic’s audited consolidated financial statements as of, and for the year ended December 31, 2006.

		High				Low
2007
First Quarter		$	6.04			$	4.11
Second Quarter		$	5.40			$	4.52
Third Quarter		$	6.10			$	4.07
Fourth Quarter (through [    l    ], 2007)		$	[ l ]			$	[ l ]
2006
First Quarter		$	3.00			$	1.94
Second Quarter		$	4.09			$	2.09
Third Quarter		$	4.09			$	3.20
Fourth Quarter		$	4.57			$	3.45
2005
First Quarter		$	7.42			$	4.26
Second Quarter		$	4.63			$	2.98
Third Quarter		$	3.97			$	2.72
Fourth Quarter		$	3.04			$	2.09

 

RISK FACTORS

 

Risks Related to the Transactions

 

In addition to the other information included or incorporated by reference in this proxy statement/prospectus, Graphic stockholders should carefully consider the matters described below to determine whether to vote to adopt the transaction agreement and approve the transactions. Many of the risks described below are present with Graphic’s current business activities and opportunities and will continue after the completion of the transactions.

 

 

Graphic and BCH entered into the transaction agreement with the expectation that the transactions would result in various benefits, including, among other things, cost synergies and operating efficiencies. However, the achievement of the anticipated benefits of the transactions, including the cost synergies, cannot be assured or may take longer than expected. In addition, New Graphic may not be able to integrate Altivity’s operations with Graphic’s existing operations without encountering difficulties, including:

 

 

These risks may be exacerbated by the fact that Altivity is the result of the combination of the Smurfit-Stone Container Corporation’s Consumer Packaging Division and the Field Companies in 2006, and Altivity continues to integrate these predecessor companies and receive integration support from Smurfit-Stone Container Corporation. As a result of these risks, New Graphic may not be able to realize the expected revenue and cash flow growth and other benefits that it expects to achieve from the transactions. In addition, New Graphic may be required to spend additional time or money on integration efforts that would otherwise have been spent on the development and expansion of its business and services.

 

 

Uncertainty about the effect of the transactions on customers or suppliers could cause customers, suppliers and others that deal with Graphic and Altivity to seek to change existing business relationships with Graphic and Altivity prior to the close of the transactions, which may have an adverse effect on New Graphic. In addition, if key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain an employee of New Graphic, New Graphic’s business could be materially affected. Further, the transaction agreement restricts Graphic and Altivity, without the other party’s consent, from making certain acquisitions and taking other specified actions until the transactions occur or the transaction agreement terminates. These restrictions may prevent Graphic and Altivity from pursuing otherwise attractive business opportunities and making other changes to their businesses that may arise prior to completion of the transactions or termination of the transaction agreement.

 

 

In the event the transactions are not completed, Graphic may bear certain fees and expenses associated with the transactions that would not be offset by any benefits from the transactions, in addition to the

significant costs incurred prior to any termination of the transaction agreement. In addition, investors, potential investors and customers may consider the failure to complete the transactions to be a significantly negative development regarding Graphic. The market price of Graphic common stock may reflect positive market assumptions that the transactions will be completed and the related benefits will be realized. As a consequence of any or all of the foregoing, Graphic’s stock price may be negatively impacted by the failure to complete the transactions.

 

 

Each of the conditions to Graphic’s obligation to complete the transactions may be waived, in whole or in part, by Graphic, to the extent permitted by applicable law. Graphic’s board of directors will evaluate the materiality of any waiver to determine whether amendment of this proxy statement/prospectus and resolicitation of proxies is necessary. If Graphic’s board of directors determines that a waiver is not significant enough to require resolicitation of its stockholders’ proxies, it will have the discretion to complete the transactions without seeking further stockholder approval. See “The Transaction Agreement and Agreement and Plan of Merger — Conditions.” Because certain conditions may not be satisfied prior to the date of the special meeting, there is a risk that Graphic’s board of directors may waive a condition that is important to you without your approval.

 

 

The transactions, which have been unanimously approved by the boards of directors of Graphic and New Graphic and the board of managers of BCH, are subject to various regulatory approvals, approval by Graphic’s stockholders and other customary closing conditions. If the necessary approvals are not obtained by the contractual deadline of March 31, 2008 (which date may be extended to May 31, 2008 if the delay is the result of the failure to obtain antitrust approvals), the transactions may not be completed, which could cause Graphic’s earnings or stock price to decline.

 

With respect to the approval required from the Federal Trade Commission and the Antitrust Division of the DOJ, a request was received on August 22, 2007 for additional information, commonly referred to as a “second request,” from the Antitrust Division of the DOJ regarding the transactions. The second request extends the waiting period imposed by the HSR Act until 30 days after the second request has been substantially complied with, unless that period is extended voluntarily by the parties or terminated sooner by the DOJ. In addition, the DOJ, the Federal Trade Commission or others could take additional action under the antitrust laws with respect to the transactions, including seeking to enjoin the consummation of the transactions before the effective time of the transactions or to impose conditions on, or to require divestitures relating to, the divisions, operations or assets of Graphic or BCH. These conditions or divestitures may jeopardize or delay completion of the transactions or may reduce the benefits of the transactions and negatively impact the pro forma financial information included in this proxy statement/prospectus. Even if all governmental approvals are obtained, no assurance can be given as to the terms, conditions and timing of the governmental approvals.

 

 

Certain of the directors and executive officers of Graphic are parties to agreements or participate in other arrangements that give them interests in the transactions that are different from, or in addition to, your interests as a stockholder of Graphic. In voting on the adoption of transaction agreement and approval of the transactions, you should consider whether these interests may have influenced the decisions of Graphic’s directors and executive officers in pursuing, executing, approving and recommending the transaction agreement and the transactions. These different interests include vesting of certain equity compensation awards, arrangements under certain executive officer employment agreements, continuing board positions,

indemnification obligations and reimbursement of certain legal fees and are described under “The Transaction — Interests of Graphic’s Directors and Executive Officers in the Transactions.”

 

 

As is often the case in stock for stock transactions, the representations and warranties made by Graphic and BCH to each other in the transaction agreement will not survive the completion of the transactions. As a result, Graphic and its stockholders will not have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the transaction consideration if any representation or warranty made by BCH or Sellers in the transaction agreement proves to be inaccurate or incorrect. Accordingly, to the extent such representation or warranties are incorrect, our financial condition or results of operations could be adversely affected.

 

Risks Relating to the Business of New Graphic

 

After completion of the transactions, New Graphic will be subject to many risks and uncertainties. Many of these risks are substantially similar to the risks currently faced by Graphic. New Graphic’s risks and uncertainties include the following.

 

 

New Graphic will be highly leveraged and will have pledged substantially all of its assets to secure its debt. Assuming hypothetically that the transactions were closed on June 30, 2007, on that date New Graphic would have total pro forma net debt (defined as total debt minus cash and cash equivalents) of $3.1 billion, which includes:

 

 

New Graphic’s significant level of debt could:

 

 

New Graphic may incur additional indebtedness as part of completing the transactions and in the future. If new debt is added to the current debt levels of New Graphic and its subsidiaries, the related risks that New Graphic and its subsidiaries face could increase significantly.

 

 

The financing agreements under which certain of New Graphic’s subsidiaries will be borrowers and New Graphic will be a guarantor will contain certain restrictions on the payment of dividends on New Graphic common stock similar to those to which Graphic is currently subject. See “Per Share Market Price Information — Dividend Policy.” Moreover, even if permitted under New Graphic’s financing agreements, dividend payments on New Graphic common stock will be at the discretion of New Graphic’s board of directors. Graphic has not paid a dividend on its common stock since 1996, and New Graphic does not intend to pay dividends at this time.

 

 

New Graphic will be a highly leveraged company that may require additional capital from time to time. Unlike those companies in New Graphic’s industry that are “investment grade” and for which the capital markets are typically open, New Graphic’s access to the capital markets may be limited (following the closing of the transactions). Moreover, the timing of any capital-raising transaction may be impacted by unforeseen events, such as strategic growth opportunities, which could require New Graphic to pursue additional capital in the near term. New Graphic’s ability to obtain capital and the costs of such capital are dependent on numerous factors, including:

 

 

New Graphic may not be successful in obtaining additional capital for these or other reasons. An inability to access capital may limit New Graphic’s ability to pursue development projects, plant improvements or acquisitions that it may rely on for future growth and to comply with regulatory requirements and, as a result, may have a material adverse effect on New Graphic’s financial condition, results of operations and cash flows, and on its ability to execute its business strategy.

 

 

The loss of one or more key customers or strategic relationships, or a declining market in which these customers reduce orders or request reduced prices, may result in decreased revenues, negatively impact New Graphic’s cash flows and harm its financial condition. New Graphic’s success will depend upon its relationships with the key customers of Graphic and Altivity, including Anheuser-Busch Companies, SABMiller plc, Molson Coors Brewing Company, numerous Coca-Cola and Pepsi bottling companies, Inbev, Asahi

Breweries, Kraft Foods, Inc., General Mills, Inc. Nestle Group, Unilever, PepsiCo, Inc., The Schwann’s Food Company, and Perseco, among others. Graphic’s top ten customers accounted for approximately 48% of its net sales in 2006, and Altivity’s top ten customers accounted for approximately 29% of its net sales in 2006.

 

From time to time New Graphic’s contracts with its customers will come up for renewal, and New Graphic may be unable to renew agreements with its key customers. New Graphic may not be able to enter contracts with new customers to replace any key customers or strategic relationships that are lost or reduced. In addition, Graphic’s and Altivity’s contracts typically do not require customers to purchase any minimum level of products and many of New Graphic’s contracts will permit customers to obtain price quotations from its competitors, which New Graphic would generally have to meet to retain their business.

 

 

Graphic and Altivity currently are, and New Graphic will be, subject to strong competition. New Graphic has a number of large domestic and foreign competitors in the paperboard packaging industry. New Graphic’s primary competitors in one or more of the segments in which it competes include Caraustar Industries, Inc., Cascades, Inc., Stora Enso (OYJ) Corporation, Ponderosa Paper, LLC, Klabin S.A., Hansol Paper Manufacturing Company, International Paper Company, MeadWestvaco Corporation (“MeadWestvaco”), Packaging Corporation of America, R.A. Jones & Company, Inc. and Rock-Tenn Company. In addition, companies not currently in direct competition with Graphic or Altivity may introduce competing products in the future, and New Graphic may face increasing competition from products imported from Asia and South America. There are also substitutes for paperboard packaging for many products currently packaged in paperboard, including plastic, corrugated and shrink-wrap packaging.

 

New Graphic’s highly leveraged capital structure could limit its ability to respond to market conditions or to make necessary or desirable capital expenditures as quickly as its competitors. In addition, New Graphic could experience increased competition if there are new entrants in segments in which it operates. In beverage multiple packaging, cartons made from CUK board compete with plastics and corrugated packaging for packaging glass or plastic bottles, cans and other primary containers. Plastics and corrugated packaging generally provide lower-cost packaging solutions.

 

New Graphic’s paperboard sales for use in consumer products packaging are affected by competition from other substrates, including CUK board, solid bleached sulfate and recycled clay-coated news and, internationally, white lined chip board and folding boxboard. Paperboard grades compete based on price, strength and printability. There are a large number of suppliers in paperboard packaging which are subject to significant competitive and other business pressures. Suppliers of paperboard compete primarily on the basis of strength and printability of their paperboard, quality, service and price. These grades of paperboard face substitution in folding carton applications for each other or by alternative substrates including corrugated paperboard, flexible packaging and a variety of paper and film laminated structures.

 

 

Increases in the cost and availability of raw materials, including petroleum-based materials, the cost of energy, transportation and other necessary services could have an adverse effect on New Graphic’s financial results. New Graphic may also be limited in its ability to pass along such cost increases to customers due to contractual provisions and competitive reasons.

 

 

New Graphic will utilize a global continuous improvement initiative that uses statistical process control to help design and manage many types of activities, including production and maintenance. New Graphic’s ability to implement successfully its business strategies and to realize anticipated savings is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond New Graphic’s control. These strategies include the infrastructure and reliability improvements at New Graphic’s West

Monroe mill. In addition, Altivity has been actively engaged in integrating the recently acquired Smurfit-Stone Container Corporation’s Consumer Packaging Division and the Field Companies, and New Graphic will continue to focus on realizing cost savings from manufacturing network, overhead and supply chain improvements. If New Graphic cannot successfully implement the strategic cost reductions or other cost savings plans, it may not be able to compete successfully against other manufacturers. In addition, any failure to generate anticipated efficiencies and savings could adversely affect New Graphic’s financial results.

 

 

New Graphic’s future success will depend, in significant part, upon the service of David W. Scheible, who will be its President and Chief Executive Officer, and Daniel J. Blount, who will be its Senior Vice President and Chief Financial Officer. New Graphic has employment agreements with each of these executive officers. The loss of the services of one or both of these executive officers could adversely affect its future operating results because of their experience and knowledge of New Graphic’s business and customer relationships. New Graphic does not expect to maintain key person insurance on any of its executive officers.

 

 

Approximately 46% of Graphic’s and Altivity’s workforce is represented by labor unions, whose goals and objectives may differ significantly from New Graphic’s. The collective bargaining agreements covering these employees expire between October 31, 2008 and February 28, 2013, with seventeen agreements covering approximately 37% of the workforce expiring in 2008. Graphic or New Graphic may not be able to successfully negotiate agreements on terms that are advantageous to New Graphic without work stoppages or other labor difficulties. These events may also occur in the ordinary course of business apart from contract re-negotiations. In addition, labor organizing activities could occur at any of New Graphic’s facilities. Increased unionization of the workforce or a prolonged disruption at any of New Graphic’s facilities due to work stoppages or other labor difficulties could have a material adverse effect on its net sales, margins and cash flows. In addition, if new union agreements contain significant increases in wages or other benefits, New Graphic’s margins would be adversely impacted.

 

 

New Graphic’s future success and competitive position depend in part upon its ability to obtain and maintain protection for certain proprietary carton and packaging machine technologies used in its products, particularly those incorporating the Fridge Vendor^®, IntegraPak^®, MicroFlex Q^®, Micro-Rite^®, Quilt Wave^®, Qwik Crisp^® and Z-Flute^®, Alti-Kraft^®, Alti-Print^®, Cap-Sac^®, DI-NA-Cal^®, Force Flow^®, Kitchen Master^®, Lithoflute^®, Lustergrip^®, Master Impressions^®, Master Coat^®, Peel Pak^®, Shape FX^®, Soni-Lok^®, Soni-Seal^®, The Yard Master^® technologies. Failure to protect New Graphic’s existing intellectual property rights may result in the loss of valuable technologies or may require it to license other companies’ intellectual property rights. It is possible that any of the patents owned by New Graphic may be invalidated, circumvented, challenged or licensed to others or any of its pending or future patent applications may not be issued within the scope of the claims sought by New Graphic, if at all. Further, others may develop technologies that are similar or superior to New Graphic’s technologies, duplicate its technologies or design around its patents, and steps taken by New Graphic to protect its technologies may not prevent misappropriation of such technologies.

 

 

New Graphic will be subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations that change from time to time, including those governing discharges to air, soil

and water, the management, treatment and disposal of hazardous substances, solid waste and hazardous wastes, the investigation and remediation of contamination resulting from historical site operations and releases of hazardous substances, and the health and safety of employees. Compliance initiatives could result in significant costs, which could negatively impact New Graphic’s financial position, results of operations or cash flows. Any failure to comply with such laws and regulations or any permits and authorizations required thereunder could subject New Graphic to fines, corrective action or other sanctions.

 

In addition, some of New Graphic’s current and former facilities may be the subject of environmental investigations and remediation resulting from historical operations and the release of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations may be imposed in the future or for which indemnification claims may be asserted against New Graphic. Also, potential future closures or sales of facilities may necessitate further investigation and may result in future remediation at those facilities.

 

 

New Graphic will have a mill and several converting plants in 7 foreign countries and will sell its products worldwide. For 2006, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 21% of Graphic’s net sales and approximately 5% of BCH’s net sales. New Graphic’s revenues from export sales will fluctuate with changes in foreign currency exchange rates. At December 31, 2006, approximately 8% of Graphic’s total assets and approximately 4% of BCH’s total assets were denominated in currencies other than the U.S. dollar. New Graphic will have significant operations in countries that use the Swedish krona, the British pound sterling, the Australian dollar, the Japanese yen, the Euro, the Canadian dollar and the Mexican peso as their functional currencies. New Graphic cannot predict major currency fluctuations. New Graphic will continue to pursue Graphic’s currency hedging program in order to limit the impact of foreign currency exchange fluctuations on financial results.

 

New Graphic will be subject to the following significant risks associated with operating in foreign countries:

 

 

If any of the above events were to occur, New Graphic’s financial position, results of operations or cash flows could be adversely impacted, possibly materially.

 

 

New Graphic’s ability to utilize previously incurred net operating losses (“NOLs”) of Graphic to offset future taxable income would be reduced if New Graphic were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code. In general, an “ownership change” occurs whenever the percentage of the stock of a corporation owned, directly or indirectly, by “5-percent stockholders” (within the meaning of Section 382 of the Internal Revenue Code) increases by more than 50 percentage points over the lowest percentage of the stock of such corporation owned, directly or indirectly, by such “5-percent stockholders” at any time over the preceding three years. Under certain circumstances, issuances of New Graphic common stock by New Graphic or sales or other dispositions of New Graphic common stock by the Coors Family Stockholders, the CDR Fund, EXOR, the TPG Entities or other stockholders could trigger

an “ownership change,” and New Graphic will have limited control over the timing of any such issuances, sales or other dispositions of New Graphic common stock. Additionally, under certain circumstances, issuances, sales or other dispositions of interests in the CDR Fund, the TPG Entities or other stockholders could trigger an “ownership change,” and New Graphic will have no control over the timing of any such issuances, sales or other dispositions of interests in such entities. Any such future ownership change could result in limitations, pursuant to Section 382 of the Internal Revenue Code, on New Graphic’s utilization of NOLs to offset its future taxable income.

 

More specifically, depending on prevailing interest rates and New Graphic’s market value at the time of such future ownership change, an ownership change under Section 382 of the Internal Revenue Code would establish an annual limitation which might prevent full utilization of the deferred tax assets attributable to Graphic’s previously incurred NOLs against the total future taxable income of a given year. The transactions will increase the likelihood that previously incurred NOLs will become subject to the limitations set forth in Section 382 of the Internal Revenue Code. If such an ownership change were to occur, New Graphic’s ability to raise additional equity capital may be adversely affected.

 

The magnitude of such limitations and their effect on New Graphic is difficult to assess and depends in part on New Graphic’s value at the time of any such ownership change and prevailing interest rates. For accounting purposes, at December 31, 2006, Graphic’s United States federal net operating loss was approximately $1.3 billion and the related deferred tax asset attributable to its previously incurred NOLs was valued at approximately $514.3 million fully offset by a corresponding valuation allowance. Graphic believes that it has generated material incremental NOLs in 2007.

 

Risks Associated with New Graphic Common Stock

 

 

The exchange ratio of Graphic common stock for New Graphic common stock in the merger, as well as the number of shares to be issued to the Sellers, is fixed and will not be adjusted in the event of any change in the stock price of Graphic or the value of BCH before the completion of the transactions. The relative price of shares of Graphic common stock and the value of BCH may vary significantly between the date of this proxy statement/prospectus, the date of the special meeting and the date of the completion of the transactions. These variations may be caused by, among other things, changes in the businesses, operations and results of Graphic or BCH, market expectations of the likelihood that the transactions will be completed and the timing of completion, the prospects of post-transaction operations, the effect of any conditions or restrictions imposed on or proposed with respect to New Graphic by regulatory agencies and authorities, general market and economic conditions and other factors. In addition, it is impossible to predict accurately the market price of New Graphic common stock to be received by Graphic stockholders after the completion of the transactions. Accordingly, the price of Graphic common stock on the date of the special meeting may not be indicative of its price immediately before the completion of the transactions and the price of New Graphic common stock after the transactions are completed.

 

 

The interests of the Coors Family Stockholders, the CDR Fund, EXOR and the TPG Entities may not be fully aligned with your interests and this could lead to a strategy that is not in your best interest. Following the completion of the transactions, the Coors Family Stockholders, the CDR Fund and EXOR will beneficially own approximately 18.4%, 10.0% and 10.0%, respectively, and the TPG Entities will own approximately 38.6% of New Graphic common stock, each calculated on a fully diluted basis. As a result, the Coors Family Stockholders, the CDR Fund, EXOR and the TPG Entities will exercise significant influence over matters requiring stockholder approval. New Graphic has entered into a new stockholders agreement that will become effective upon the completion of the transactions, pursuant to which the Coors Family Stockholders, the CDR

Fund, EXOR and the TPG Entities will have the right to designate for nomination for election, in the aggregate, six members of New Graphic’s board of directors following the completion of the transactions. The concentrated holdings of the Coors Family Stockholders, the CDR Fund, EXOR and the TPG Entities and the presence of their designees on New Graphic’s board of directors may delay or deter possible changes in control of New Graphic, which may reduce the market price of New Graphic, or may otherwise result in New Graphic either taking actions that New Graphic’s other stockholders do not support or failing to take actions that New Graphic’s other stockholders do support. See “Other Agreements — Stockholders Agreement” and “Description of New Graphic Capital Stock.”

 

 

The transfer provisions in the stockholders agreement, subject to specified exceptions (see “Other Agreements — Stockholders Agreement — Transfer Restrictions”), restrict the covered stockholders from transferring shares of New Graphic common stock. Many of these restrictions will expire 180 days from the date of the closing of the transactions.

 

When the transfer restrictions in the stockholders agreement expire or are terminated, the covered stockholders will be free to sell their shares of New Graphic common stock, subject to certain exceptions and limitations under the securities laws, to any person on the open market, in privately negotiated transactions or otherwise in accordance with law. In addition, at any time after 180 days from the date of the closing of the transactions, the covered stockholders will be able to exercise their rights, subject to certain limitations, to require New Graphic to register their shares of New Graphic common stock for resale in a public offering. These sales or transfers could create a substantial decline in the price of shares of New Graphic common stock. See “Other Agreements — Stockholders Agreement” and “Other Agreements — Registration Rights Agreement.”

 

 

Provisions in New Graphic’s proposed certificate of incorporation and by-laws attached to this proxy statement/prospectus as Annexes B and C, respectively, New Graphic’s proposed stockholder rights plan and provisions of Delaware corporate law, may delay, deter, prevent or render more difficult a takeover attempt which is not approved by New Graphic’s board of directors but which New Graphic stockholders might consider in their best interests. These provisions include:

 

 

These provisions may prevent New Graphic stockholders from receiving the benefit from any premium to the market price of New Graphic common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of New Graphic common stock if they are viewed as discouraging takeover attempts in the future. These provisions may also make it difficult for stockholders to replace or remove New Graphic’s management. See “Description of New Graphic Capital Stock.”

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement/prospectus includes or incorporates by reference statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements included or incorporated by reference in this proxy statement/prospectus, other than statements of historical fact, that address activities, events or developments that New Graphic or its management expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements represent New Graphic’s reasonable judgment regarding the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause, among other statements, the actual results and financial position of New Graphic and the effects and consequences of the transactions to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They may use words such as “anticipate,” “estimate,” “project,” “forecast,” “plan,” “may,” “will,” “should,” “expect” and other words of similar meaning. In addition to factors previously disclosed in Graphic’s SEC reports and those identified elsewhere in this proxy statement/prospectus, including those matters discussed under the caption “Risk Factors” the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

 

Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and New Graphic undertakes no obligation to update such statements.

 

THE SPECIAL MEETING

 

General

 

The Graphic board of directors is using this proxy statement/prospectus to solicit proxies from the holders of shares of Graphic common stock for use at the special meeting. This proxy statement/prospectus and accompanying proxy card are first being mailed to Graphic stockholders on or about [    l    ], 2007.

 

Date, Time and Place of the Special Meeting

 

Graphic will hold its special meeting of stockholders on [    l    ], [    l    ], 2007, at 10:00 a.m., local time, at the offices of Alston & Bird LLP, Atlantic Center Plaza, 1180 West Peachtree Street, 15th Floor, Atlanta, Georgia 30309, or at any reconvened meeting after an adjournment or postponement of the special meeting.

 

Purpose of the Special Meeting

 

At the special meeting, holders of Graphic common stock will be asked (1) to adopt the transaction agreement and approve the transactions, (2) to approve the provisions in New Graphic’s restated certificate of incorporation authorizing 1.1 billion shares of capital stock, including 1 billion shares of common stock and 100 million shares of preferred stock and (3) to approve any proposal by Graphic to adjourn or postpone the special meeting, if determined to be necessary.

 

The Graphic board of directors has unanimously approved the transaction agreement and the transactions and recommends that Graphic stockholders vote “FOR” the adoption of the transaction agreement and the approval of the transactions, “FOR” the proposal to approve provisions of New Graphic’s restated certificate of incorporation authorizing additional capital stock and “FOR” the adjournment or postponement of the special meeting, if determined to be necessary. Implementation of the proposal relating to the authorization of additional capital stock is conditioned upon the adoption of the transaction agreement and approval of the transactions.

 

Record Date and Outstanding Shares

 

The Graphic board of directors has fixed the close of business on [    l    ], 2007 as the record date for determining holders of outstanding shares of Graphic common stock entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. As of the record date, there were outstanding [    l    ] shares of Graphic common stock held of record by [    l    ] stockholders. Graphic common stock is the only class of outstanding securities entitled to notice of, and to vote at, the special meeting. Each holder of Graphic common stock is entitled to one vote at the special meeting for each share of Graphic common stock held by that stockholder at the close of business on the record date.

 

Quorum

 

In order to carry out the business of the special meeting, there must be a quorum. This means that at least one-third (1/3) of the outstanding shares eligible to vote must be represented at the special meeting, either by proxy or in person. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of votes present at the special meeting for purposes of calculating whether a quorum is present.

 

Vote Required

 

Adoption of the transaction agreement and approval of the transactions and approval of the provisions of New Graphic’s restated certificate of incorporation increasing the authorized capital stock requires the affirmative vote of a majority of the issued and outstanding shares of Graphic common stock. In accordance with the rules of the NYSE, brokers, banks and other nominees who hold shares in street name for customers may not exercise discretionary voting authority with respect to the adoption of the transaction agreement and

the approval of the transactions. Thus, absent specific instructions from the beneficial owner of such shares, brokers, banks and other nominees may not vote such shares with respect to the adoption of the transaction agreement and the approval of the transactions. Shares represented by these “broker non-votes” will not vote, effectively counting as votes “AGAINST” the proposal to adopt the transaction agreement and approve the transactions and the proposal to approve provisions of New Graphic’s restated certificate of incorporation increasing the authorized capital stock of New Graphic. Abstentions also have the same effect as shares voted “AGAINST” the proposal to adopt the transaction agreement and approve the transactions.

 

Approval of a proposal to adjourn or postpone the special meeting, if determined to be necessary, requires the affirmative vote of holders of a majority of the shares present in person or by proxy and entitled to vote at the special meeting (whether or not a quorum is present). Abstentions and broker non-votes with respect to the adjournment or postponement of the special meeting, if determined to be necessary, will have the effect of a vote against such proposal.

 

Voting Agreement

 

Pursuant to the voting agreement, dated as of July 9, 2007, entered into by and among BCH, Graphic, the Coors Family Stockholders, the CDR Fund and EXOR, each of the Coors Family Stockholders, the CDR Fund and EXOR has agreed to vote all of its shares of Graphic common stock, subject to certain exceptions, in favor of adopting the transaction agreement and approving the transactions and any other action reasonably requested by BCH in furtherance thereof. The Coors Family Stockholders, the CDR Fund and EXOR collectively hold 129,376,414 issued and outstanding shares of Graphic common stock, which represented approximately 65% of the total number of shares of Graphic common stock issued and outstanding as of July 9, 2007 and as of the record date. See “The Transactions — Voting Agreement.”

 

As of the record date, Graphic’s executive officers and directors (excluding representatives of the Coors Family Stockholders, the CDR Fund and EXOR) had the right to vote less than 1% of the shares of Graphic common stock outstanding and entitled to vote at the special meeting. Graphic’s directors and executive officers have indicated their intention to vote their shares of Graphic common stock for the adoption of the transaction agreement and the approval of the transactions.

 

Solicitation of Proxies

 

Graphic will bear the cost of soliciting proxies. Proxies may be solicited by mail or facsimile, or by Graphic’s directors, officers or employees, without extra compensation, in person or by telephone. Graphic will reimburse brokers, banks and other nominees for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Graphic common stock.

 

Questions concerning the proposal to be acted upon at the special meeting should be directed to Graphic’s Investor Relations Department at (770) 644-3000. Additional copies of this proxy statement/prospectus or the proxy card may be obtained from Graphic’s Investor Relations Department at its principal executive office at 814 Livingston Court, Marietta, Georgia 30067, and the telephone number is (770) 644-3000. For a period of at least ten days prior to the special meeting, a complete list of stockholders entitled to vote at the special meeting will be available for inspection during ordinary business hours at Graphic’s executive offices by stockholders of record for proper purposes.

 

Revocation of Proxies

 

The enclosed proxy, even though executed and returned, may be revoked at any time before the special meeting by:

 

 

In the absence of a revocation, shares represented by proxies submitted in response to this solicitation will be voted at the special meeting.

 

Voting by Telephone or Internet

 

Stockholders of record can simplify their voting and reduce Graphic’s costs by voting their shares by telephone or through the Internet. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, allow stockholders to vote their shares and confirm that their instructions have been properly recorded. If your shares are held in the name of a broker, bank or other nominee, the availability of telephone and Internet voting will depend upon the voting processes of the broker, bank or other nominee. Accordingly, stockholders should follow the voting instructions on the form they receive from their broker, bank or other nominee.

 

Stockholders who elect to vote by telephone or through the Internet may incur telecommunications and Internet access charges and other costs for which they are solely responsible. The telephone and Internet voting facilities for stockholders of record will close at 11:59 p.m., Eastern Time, on [    l    ], 2007. Instructions for voting by telephone or through the Internet are contained on the enclosed proxy card. Voting your shares by telephone or through the Internet will not affect your right to vote in person if you decide to attend the special meeting; however, if you attend and vote at the special meeting, any votes you cast previously via telephone or the Internet will automatically be revoked and superseded by the votes cast at the special meeting.

 

Voting by Mail

 

Stockholders who elect to vote by mail are asked to sign, date and return the enclosed proxy card using the postage-paid envelope provided. The persons named as proxies on the proxy card were designated by the Graphic board of directors. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the stockholders giving those proxies. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the transaction agreement and approval of the transactions and “FOR” any proposal by Graphic to adjourn or postpone the special meeting.

 

Special Meeting Attendance and Voting in Person

 

Only stockholders, their designated proxies and guests of Graphic may attend the special meeting. If you plan to attend the special meeting, you must be a stockholder of record as of [    l    ], 2007 or, if you have beneficial ownership of shares of Graphic common stock held by a broker, bank or other nominee, you must bring an account statement or letter from your broker, bank or other nominee showing that you are the beneficial owner of shares of Graphic common stock as of the record date in order to be admitted to the special meeting.

 

If your shares are held by a broker, bank or other nominee and you wish to vote your shares in person at the special meeting, please also bring a letter from your broker, bank or other nominee granting you a proxy to vote those shares at the special meeting.

 

Dissenters’ Rights

 

Although Graphic stockholders that are not subject to the voting agreement may vote against adoption of the transaction agreement and approval of the transactions, under no circumstances are holders of Graphic common stock entitled to dissenters’ rights of appraisal under Delaware law in connection with the transactions.

 

THE TRANSACTIONS

 

Background of the Transactions

 

In 2006, having substantially completed the integration of Graphic Packaging International Corporation and Riverwood Holding, Inc. and related business optimization initiatives, Graphic began exploring various strategic alternatives to strengthen its business, expand its product offerings and increase stockholder value, including potential acquisitions and business combinations.

 

In October and November 2006, representatives of Goldman Sachs, Graphic’s financial advisor, met several times with Stephen M. Humphrey, President and Chief Executive Officer of Graphic, and David W. Scheible, then Senior Vice President and Chief Operating Officer and, as of January 1, 2007, President and Chief Executive Officer of Graphic, to discuss a potential transaction with Altivity.

 

On October 24, 2006 Messrs. Humphrey and Scheible and representatives of Goldman Sachs met with Michael G. MacDougall, a partner of TPG and a member of the Altivity board of directors, and discussed briefly the potential for a transaction between Graphic and Altivity.

 

On November 16, at a regularly scheduled meeting of the Graphic board of directors, representatives of Goldman Sachs discussed several potential acquisition opportunities for Graphic, including Altivity. At this meeting, the Graphic board of directors authorized the retention of Goldman Sachs to assist it in evaluating a potential transaction with Altivity and authorized Graphic management to continue their work in such regard. In determining to engage Goldman Sachs as financial advisor to Graphic in connection with a potential transaction with Altivity, the board of directors considered that Goldman Sachs is an internationally recognized investment banking firm that has substantial experience in transactions similar to the potential transaction. The board of directors also carefully considered the terms and structure of the proposed engagement letter with Goldman Sachs and determined that such terms, including the amount of the transaction fee and that such fee would be payable in its entirety only upon consummation of the potential transaction were customary and appropriate for this engagement. After the adjournment of the Graphic board meeting, Graphic executed an engagement letter with Goldman Sachs.

 

During November and December 2006, Goldman Sachs and Graphic management commenced a preliminary financial analysis of the Altivity business and began to evaluate strategic considerations related to the acquisition of Altivity by Graphic based on publicly available information and the limited information exchanged by the parties.

 

On December 21, the Graphic board of directors held a special meeting by teleconference to discuss the preliminary financial analysis of the Altivity business. Goldman Sachs and Graphic management discussed the results of this valuation and answered questions from the board of directors. At the conclusion of this meeting, the Graphic board of directors authorized Goldman Sachs to begin discussions with TPG regarding a transaction in which Graphic would acquire Altivity.

 

During late December and early January, Mr. Scheible and representatives of Goldman Sachs held several conversations with Mr. MacDougall and other representatives of TPG to discuss a potential combination of Graphic and Altivity and to exchange further limited information on the two companies.

 

On January 9, 2007, Mr. Scheible held an introductory meeting with Altivity and TPG representatives in Chicago to discuss the business and prospects of Graphic and Altivity and the potential for a transaction between the two companies. As a result of the favorable discussions at this meeting, the parties agreed to conduct preliminary due diligence activities and to exchange limited non-public information about their respective businesses. On January 10, TPG, Altivity and Graphic signed a customary reciprocal confidentiality agreement.

 

During January, the parties exchanged limited, high level due diligence materials and conducted discussions about the Graphic and Altivity businesses and the potential benefits of a combination of the two companies.

On January 29 and 30, Mr. Scheible, Daniel J. Blount, Senior Vice President and Chief Financial Officer, Michael P. Doss, Senior Vice President, Consumer Products Packaging, other representatives of Graphic and Goldman Sachs met with Mr. MacDougall, Nathan Wright, Jeffrey Liaw and Benjamin Landis, representatives of TPG, Lawrence I. Field, a member of Altivity’s board of directors and the President of Field Holdings, Inc., George V. Bayly, Chairman and interim Chief Executive Officer of Altivity, Donald Sturdivant, Executive Vice President of Operations of Altivity, and representatives of Altivity’s financial advisor, Banc of America Securities LLC. At this meeting, the parties discussed their respective businesses and financial performance as well as the benefits and challenges of a combination. Based upon these initial discussions, the parties agreed to initiate a process to further explore a transaction including high level discussions regarding the financial performance and outlook of the respective businesses.

 

On February 8, the Graphic board of directors held a special meeting by teleconference to discuss the potential transaction with Altivity and related matters. Mr. Scheible and representatives of Goldman Sachs reported on the meeting among the parties at the end of January. At this meeting, the Graphic board of directors authorized management to expand its due diligence investigation of Altivity and discussions with Altivity and TPG and their advisors regarding a potential transaction.

 

During the remainder of February, the parties continued high level due diligence investigations focused primarily on the historical financial performance and prospective outlook for the respective businesses and worked with their respective financial advisors to determine an appropriate ownership split in the combined entity between the equity holders of each company in a potential combination transaction.

 

On March 2, the Graphic board of directors held a special meeting by teleconference to discuss the progress of the company’s investigation of a potential transaction with Altivity. At this meeting, representatives of Goldman Sachs discussed their preliminary financial analysis relating to a potential transaction with Altivity, and the board and management discussed potential valuation ranges for Altivity and other proposed principal terms of a potential transaction, including board composition and other governance matters. The Graphic board of directors then authorized Goldman Sachs to discuss with Altivity’s financial advisors a proposed division of ownership interests in a combined entity prepared by Graphic management and other principal terms of a potential transaction.

 

On March 6, based on the then-known information and subject to confirmatory due diligence, Goldman Sachs, on behalf of Graphic, had discussions with TPG and Altivity’s financial advisor relating to preliminary terms of a potential transaction in which Graphic proposed that the owners of BCH would receive 40% of Graphic’s common stock in exchange for their ownership interests in BCH and the Graphic stockholders would retain 60% of Graphic’s common stock. Graphic also proposed that the post-closing Graphic board of directors be comprised of a majority of independent directors with Graphic designating five of the independent directors and TPG designating one independent director and the balance of the board to be comprised of two TPG designees, one designee from each of the Coors Family Stockholders, the CDR Fund and EXOR and the Chief Executive Officer of Graphic. In addition, Graphic proposed that the current Graphic Chairman of the Board John R. Miller would become Chairman of the Board of the combined company, that Mr. Scheible would become President and Chief Executive Officer and that the headquarters of the combined business would be in Atlanta, Georgia. The proposal also noted that there would be a registration rights agreement with customary terms and a stockholders agreement that was generally consistent with the terms of the existing Graphic stockholders agreement.

 

The parties participated in several telephonic discussions regarding the preliminary terms between March 6 and March 14. Among other things, later in the week of March 6, BCH’s financial advisors, at the direction of Altivity, proposed to Goldman Sachs that Altivity’s owners should receive 45% of the common stock of the combined company and greater governance rights in the combined company. On March 14, Graphic again proposed that the equity holders of BCH should receive 40% of the combined company and that the current Graphic stockholders should receive 60% of the combined company, in each case on a fully diluted basis and subject to adjustments relating to the apportionment of transaction costs. The parties continued to discuss the ownership split proposed by Graphic and the other Graphic proposed terms, including board composition over

the next two weeks. During these discussions, TPG indicated that it would be a condition to any transaction that each of the Coors Family Stockholders, the CDR Fund and EXOR agree to support the transaction.

 

Also during this period, Graphic, TPG and their respective financial and legal advisors began preliminary discussions regarding potential transaction structures that would provide the owners of BCH with tax-free treatment of any Graphic common stock received in the transaction, which was also indicated by TPG to be a requirement of a transaction with Graphic.

 

On March 28 and April 9, the Graphic board of directors held special meetings by teleconference to discuss the proposed principal terms. At these board meetings, management and representatives of Goldman Sachs updated the board as to the status of negotiations with TPG regarding the potential transaction with Altivity. Also, at the board meeting on April 9, representatives of Alston & Bird LLP, legal advisors to Graphic, advised the directors as to their fiduciary duties under Delaware law and discussed issues relating to the transaction. Alston & Bird also led a discussion with the directors relating to governance matters arising from the issuance to affiliates of TPG of a significant percentage of Graphic’s outstanding common stock and potential terms of a standstill agreement that would, among other things, restrict TPG from acquiring additional shares of Graphic common stock after completion of the transactions.

 

On April 13, Graphic distributed a term sheet that included modified proposals regarding board composition and other governance matters. Discussions were held during this week among Messrs. Miller, Scheible, MacDougall and Liaw and Graphic’s and TPG’s respective financial advisors regarding board composition and other governance matters.

 

In late April, based on the progress reached with respect to the principal terms and the preliminary results of high level due diligence, the parties agreed to conduct more detailed due diligence investigations. During late April through early June, the parties performed detailed due diligence, including several meetings among Graphic and its advisors and TPG, Altivity and their advisors.

 

During April and May, the parties held several meetings with a consulting firm to discuss potential cost savings and other cost synergies from a combination of the two companies.

 

Also during this period, the parties and their advisors agreed on the proposed structure of the transaction involving the creation of a new holding company as described in detail elsewhere in this proxy statement/prospectus.

 

On May 15, the Graphic board of directors held a meeting and discussed the status of the transaction and due diligence. Messrs. Blount and Scheible reported on the status of the discussions between the parties and the progress of due diligence. Graphic’s legal advisor discussed some of the specific governance provisions being negotiated, including the board composition and proposed standstill provisions that would, among other things, restrict TPG from acquiring additional shares of Graphic common stock after completion of the transactions. Graphic’s legal advisors also advised the directors as to their fiduciary duties under Delaware law and discussed potential issues relating to the antitrust clearance process in connection with the potential transaction. The directors discussed the status of the proposed transaction and due diligence and asked questions of management and Graphic’s financial and legal advisors.

 

From May 15 through May 17, Messrs. Scheible, Blount and Doss, and other Graphic representatives met with Messrs. Liaw, Wright, Sturdivant, Landis and Mr. Edward Byczynski, Altivity’s chief financial officer, and other TPG and Altivity representatives for mutual management presentations and discussions regarding year-to-date performance, 2007 full-year forecast and potential cost savings opportunities. The meeting was also attended by representatives of the legal, financial and other advisors to Graphic and Altivity.

 

On May 16, Mr. Scheible met with Kelvin L. Davis, a senior partner of TPG, to discuss the management team of the new combined company, as well as potential approaches to appoint key managers following the close of the transactions.

 

On May 25, Altivity’s legal advisors, Simpson Thacher & Bartlett LLP, circulated an initial draft transaction agreement and agreement and plan of merger. On May 29, Graphic’s legal advisors circulated an initial draft stockholders agreement and registration rights agreement.

On June 4, Altivity’s legal advisors circulated an initial draft voting agreement that contemplated that the Coors Family Stockholders, the CDR Fund and EXOR would agree to vote all of the shares of Graphic common stock owned by them in favor of the adoption of the transaction agreement at the special meeting of Graphic stockholders that would be called to consider the transaction agreement.

 

On June 5, representatives of TPG, Altivity and Graphic, including their respective legal and financial advisors, met to discuss plans to finalize their respective due diligence processes. At this meeting, it was decided that KPMG, Graphic’s accounting advisor, would be granted additional access to Altivity management to finalize their diligence. Representatives from KPMG and Mr. Blount traveled to Altivity’s offices in the Chicago area on June 7 to spend additional time with management on key open diligence points, primarily related to the cost savings initiatives at Altivity.

 

Also on June 5, Graphic’s legal advisors delivered to Altivity’s legal advisors comments on the draft transaction agreement. During the period from June 5 through July 9, Graphic’s and Altivity’s legal advisors negotiated the provisions of the transaction agreement and the related disclosure schedules. The negotiations, among other things, addressed the nature of the representations and warranties to be made by the parties, the limitations on the conduct of business between signing and closing, the extent of Graphic’s obligation to take actions to obtain requisite regulatory approvals, the parties’ respective rights and obligations in the event a third party sought to make a takeover proposal for Graphic and various provisions relating to termination fees and expense reimbursements.

 

In addition, during that period, Graphic’s and Altivity’s legal advisors, together with representatives of and advisors to the Coors Family Stockholders, the CDR Fund and EXOR, negotiated the provisions of the voting agreement, the stockholders agreement and the registration rights agreement. The negotiations, among other things, addressed the circumstances under which these stockholders would be required to vote their shares of Graphic common stock in favor of the transaction agreement and transactions, board and committee composition and related designation rights, the mechanics, timing and limitations under which these stockholders could sell New Graphic common stock, and the restrictions and limitations on the ability of the parties to acquire additional shares of New Graphic common stock and to take other actions with respect to controlling New Graphic after completion of the transactions.

 

On June 6 and 7, Messrs. Blount and Liaw and other representatives from Graphic and Altivity held several conference calls with potential lenders regarding the transaction financing. Throughout this period and through July 8, representatives of Graphic, in particular Mr. Blount, with the assistance of potential financing sources, including representatives of TPG, negotiated the terms of the financing for the transactions with representatives of a bank group that included Bank of America, N.A., Goldman Sachs Credit Partners, L.P. and JPMorgan Chase Bank, N.A.

 

On June 11, the Graphic board of directors, together with Graphic’s legal and financial advisors, met by telephone. During this meeting, Messrs. Scheible and Blount updated the directors on the status of the negotiations of the transactions. They also provided a summary of due diligence conducted by representatives of and advisors to Graphic. In addition, Goldman Sachs discussed a preliminary financial analysis of Altivity, and Graphic’s legal advisor discussed some of the principal transaction terms. The directors asked management and Graphic’s financial and legal advisors questions related to these matters and discussed the information presented.

 

On June 12, representatives of the Coors Family Stockholders, the CDR Fund, EXOR, Messrs. MacDougall and Liaw and representatives of Graphic’s and Altivity’s financial and legal advisors met in New York to discuss the prospects of the combined company and to negotiate terms of the stockholders and registration rights agreement, including, among other things, board and committee composition and related designation rights, the mechanics, timing and limitations under which these stockholders could sell New Graphic common stock, and the restrictions and limitations on the ability of the parties to acquire additional shares of New Graphic common stock and to take other actions with respect to controlling New Graphic after completion of the transactions.

On June 14, Messrs. Blount and Liaw met by telephone to discuss the status of the financing for the transaction and related matters.

 

On June 15, Messrs. Scheible and Liaw and a representative of the Coors Family Stockholders met to discuss issues relating to the mechanics, timing and limitations under which the stockholders could sell New Graphic common stock following the transactions.

 

On June 22, Messrs. Scheible and Liaw continued ongoing discussions regarding the calculation of shares of New Graphic common stock to be issued to the Graphic stockholders and the equity holders of BCH in the proposed transactions. These discussions continued until shortly before the announcement of the transaction agreement in July.

 

On June 25, the Graphic board of directors held a special meeting by teleconference to discuss the status of the transaction. Representatives of Graphic’s financial and legal advisors were also in attendance.

 

On July 2, Mr. Scheible, representatives of TPG and representatives of Graphic’s and Altivity’s financial and legal advisors held a conference call in which they negotiated and finalized substantially all remaining issues in the transaction documents, including the number of shares to be issued to the equity holders of BCH in the transactions.

 

On July 9, the Graphic board of directors held a telephonic meeting, which was attended by Graphic’s legal and financial advisors. At the meeting, Graphic’s legal advisors summarized the principal terms of the draft transaction agreement and voting agreement, including the key deal protection provisions, the stockholders agreement and registration rights agreement, and again reviewed the fiduciary duties of the directors under Delaware law. Goldman Sachs reviewed its final financial analysis and rendered its oral opinion (subsequently confirmed in writing) to the Graphic board of directors that, as of July 9, 2007, and based upon and subject to the factors and assumptions therein, the 139,445,038 shares of New Graphic common stock, taken in the aggregate, to be issued by New Graphic in exchange for 100% of the outstanding equity interests in BCH pursuant to the transaction agreement was fair from a financial point of view to Graphic. The board of directors then discussed with Graphic’s management team and its legal and financial advisors the terms of the proposed transactions and, based on the factors outlined below under “Reasons for the Transactions and Recommendation of the Graphic Board of Directors,” determined to proceed with the proposed transactions. The Graphic board of directors, by unanimous vote, determined that the transaction agreement and the transactions were advisable, fair to and in the best interests of Graphic stockholders, and unanimously approved the transaction agreement and the transactions and the voting agreement, the stockholders agreement and the registration rights agreement. The Graphic board also approved an amendment to Graphic’s existing stockholder protection rights plan to exempt the transactions and related actions from the provisions of the plan.

 

Thereafter, in the evening of July 9, Graphic, New Graphic, Giant Merger Sub, Inc. and the other parties thereto executed the transaction agreement and Graphic, the Coors Family Stockholders, the CDR Fund, EXOR and BCH executed the voting agreement. In addition, New Graphic and certain individuals and entities that will be stockholders of New Graphic after the completion of the transactions entered into the stockholders agreement and the registration rights agreement. Graphic also entered into financing commitment letters with several institutional banks relating to the proposed refinancing of Altivity’s outstanding indebtedness and other debt facilities. See “The Transactions — Financing” for a detailed discussion of the terms of the proposed financing.

 

On July 10, before the opening of trading on the NYSE, Graphic and Altivity issued a joint press release announcing the execution of the transaction agreement. The terms of the transaction agreement, the voting agreement, the stockholders agreement and the registration rights agreement are detailed below under “The Transaction Agreement and Agreement and Plan of Merger,” “The Transactions — Voting Agreement,” “Other Agreements — Stockholders Agreement” and “Other Agreements — Registration Rights Agreement.”

 

Reasons for the Transactions and Recommendation of the Graphic Board of Directors

 

The Graphic board of directors, in reaching its unanimous decision to approve the transaction agreement and the transactions and recommend them to Graphic stockholders, consulted with Graphic’s management, its financial advisor and its legal counsel, and considered the following factors as generally supporting its decision:

 

 

 

 

 

 

 

 

 

The Graphic board of directors also considered the following risks and other potential adverse consequences of the proposed transactions to Graphic:

 

 

 

 

The Graphic board of directors determined that these potential adverse consequences were outweighed by the potential benefits of the transactions.

This discussion of the information and factors considered by the Graphic board of directors is for illustrative purposes only and is not intended to be exhaustive. In making its determination to approve the transaction agreement and the transactions, the Graphic board of directors did not assign any relative or specific weights to the various factors that it considered in reaching its determination that the transaction agreement and the transactions are advisable, fair to, and in the best interests of, Graphic and Graphic stockholders. Rather, the Graphic board of directors viewed its position and recommendation as being based on the totality of the information presented to it, and the factors it considered. In addition, individual members of the Graphic board of directors, in making their decisions, may have given different weight to different information and factors.

 

Graphic’s board of directors has unanimously determined that the transaction agreement and the transactions are advisable, fair to and in the best interests of Graphic stockholders, and has unanimously approved the transaction agreement and the transactions. Graphic’s board of directors recommends that you vote “FOR” the adoption of the transaction agreement and approval of the transactions. If the board of directors of Graphic amends, modifies or otherwise changes its recommendation regarding adoption of the transaction agreement and approval of the transactions, Graphic is still obligated to submit the transaction agreement and the transactions to a vote of its stockholders.

 

Opinion of Financial Advisor to Graphic

 

On July 9, 2007, Goldman Sachs rendered its opinion to Graphic’s board of directors that, as of July 9, 2007, and based upon and subject to the factors and assumptions set forth therein, the 139,445,038 shares of New Graphic common stock, taken in the aggregate, to be issued by New Graphic in exchange for 100% of the outstanding equity interests in BCH pursuant to the transaction agreement was fair from a financial point of view to Graphic.

 

The full text of the written opinion of Goldman Sachs, dated July 9, 2007, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex G. Goldman Sachs provided its advisory services and opinion for the information and assistance of Graphic’s board of directors in connection with its consideration of the transactions. The Goldman Sachs opinion is not a recommendation as to how any holder of Graphic common stock should vote with respect to the transactions or any other matter.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of the senior managements of Graphic and BCH regarding their assessment of the strategic rationale for, and the potential benefits of, the transactions and the past and current business operations, financial condition, and future prospects of Graphic and BCH. In addition, Goldman Sachs compared certain financial and stock market information for Graphic and certain financial information for BCH with similar financial and stock market information for certain other companies, the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the paper-based packaging industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, accounting, legal, tax and other information provided to, discussed with or reviewed by it. In that regard, Goldman Sachs assumed with Graphic’s consent that the forecasts, including the synergies, were reasonably prepared on a basis reflecting the best then currently available estimates and judgments of Graphic. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Graphic or BCH or any of their respective subsidiaries, and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs’ opinion does not address any legal, regulatory or tax matters. In addition, Goldman Sachs’ opinion does not address the underlying business decision of Graphic to engage in the transactions or the relative merits of the transactions as compared to any strategic alternative that may be available to Graphic, nor does it express any opinion as to the prices at which shares of Graphic common stock or New Graphic common stock will trade at any time. Goldman Sachs assumed with Graphic’s consent that all governmental, regulatory or other consents and approvals necessary for the consummation of the transactions will be obtained without any adverse effect on Graphic or BCH or on the expected benefits of the transactions in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs’ opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of the date of its opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after such date.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Graphic board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 9, 2007 and is not necessarily indicative of current market conditions.

 

 

Goldman Sachs analyzed the relative potential contribution of Graphic and BCH to the combined company’s equity value following consummation of the transactions based on earnings before interest, tax, depreciation and amortization, or EBITDA, and net cash provided by operating activities less capital expenditures, or free cash flow, in each case before taking into account any of the possible benefits that may be realized following the transactions. Goldman Sachs used these values to compare the approximate contribution by Graphic and BCH to the estimated EBITDA and free cash flows of the combined company to the pro forma ownership of the combined company by Graphic and BCH stockholders following the consummation of the transactions. This analysis was performed based on fiscal year 2006 EBITDA for Graphic and BCH provided by their respective managements, in each case as adjusted by Graphic management, and estimated EBITDA and free cash flows for fiscal years 2007 through 2009 for Graphic and BCH provided to Goldman Sachs by Graphic management. In addition, for illustrative purposes, Goldman Sachs also used in its analysis fiscal year 2007 EBITDA estimates provided by BCH management (unadjusted by Graphic management). For purposes of this analysis, Goldman Sachs assumed BCH was valued at

Graphic’s trading multiples for fiscal years 2006 through 2009. Goldman Sachs also assumed Graphic’s share price of $4.91 as of July 6, 2007, 203.9 million fully diluted shares outstanding and estimated net debt of BCH and Graphic based on amounts outstanding as of March 31, 2007 for each company. The following table presents the results of this analysis:

 

 

 

 

 

 

 

Goldman Sachs calculated an implied enterprise value of approximately $1.8 billion for BCH based on the approximately 59% pro forma ownership of the combined company by Graphic stockholders, net debt of BCH of approximately $1.1 billion, and Graphic’s equity value of approximately $1.0 billion as of July 6, 2007. Goldman Sachs then calculated the implied ratio of enterprise value to both EBITDA and EBITDA minus ordinary capital expenditures for BCH, in each case for fiscal years 2006, 2007, 2008 and 2009 based on the Graphic management forecasts for BCH. Goldman Sachs then compared such multiples with those of Graphic and Rock-Tenn Company. The following table presents the results of Goldman Sachs’ analysis:

 

 

Goldman Sachs performed an illustrative discounted cash flow analysis on Graphic and BCH using projections for the respective companies prepared by Graphic management. Goldman Sachs calculated indications of net present value as of September 30, 2007 of unlevered free cash flows for Graphic and BCH for fiscal years 2008 through 2010 using discount rates ranging from 10.0% to 14.0%. Goldman Sachs also calculated illustrative terminal values in fiscal year 2010 for each of Graphic and BCH based on multiples ranging from 7.0x EBITDA to 9.0x EBITDA. These illustrative terminal values were then discounted to calculate implied indications of present values using discount rates ranging from 10.0% to 14.0%. The ranges of discount rates were chosen to reflect a theoretical analysis of weighted average cost of capital for Graphic and BCH. The following table summarizes the illustrative ranges of equity value for Graphic and BCH implied by the illustrative discounted cash flow analysis and illustrates Graphic’s and BCH’s equity holders’ implied pro forma ownership of the combined company calculated on this basis, which Goldman Sachs compared to the pro forma ownership of the combined company by Graphic and BCH stockholders following the consummation of the transactions.

 

 

 

Goldman Sachs analyzed certain public information relating to the following selected transactions in the folding carton and paper-based packaging industry since 1994 (listed by acquirer, followed by target and announcement year):

 

 

 

For each of the selected transactions, Goldman Sachs calculated and compared levered aggregate consideration as a multiple of latest twelve months sales and EBITDA. While none of the companies that participated in the selected transactions are directly comparable to Graphic, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Graphic’s results, market size and product profile.

 

The following table presents the results of this analysis:

 

 

Levered aggregate consideration as a multiple of current year EBITDA for this transaction was approximately 8.7x.

 

 

Goldman Sachs performed an illustrative analysis of the implied present value of the future stock price of Graphic, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated forward EBITDA and its assumed EBITDA trading multiple. For this analysis, Goldman Sachs used the financial forecasts for Graphic prepared by its management for fiscal years 2008 through 2010 under three scenarios:

 

 

Goldman Sachs calculated implied per share values for the common stock under each scenario for each of the fiscal years 2007 to 2009 by applying a forward EBITDA multiple of 8.5x to EBITDA estimates prepared by Graphic management of fiscal years 2008 to 2010 adjusted to include synergies, but which excludes costs to achieve such synergies. Goldman Sachs then discounted those values to July 6, 2007 using an equity

discount rate of 12.0%. Goldman Sachs assumed 343.4 million pro forma diluted shares outstanding of the combined entity. This analysis resulted in a range of implied present values per share of Graphic common stock of $6.96 to $8.74 for Graphic as a standalone company, as compared to a range of implied present values per share of common stock of the combined company of $6.99 to $9.99 for scenarios two and three on a combined basis.

 

 

Goldman Sachs prepared illustrative pro forma analyses of the potential financial impact of the transactions using earnings estimates for Graphic on a standalone and combined basis prepared by Graphic management. For each of fiscal years 2008 and 2009, Goldman Sachs compared the projected earnings per share, cash earnings per share and free cash flows per share of Graphic common stock, on a standalone basis, to the projected earnings per share, cash earnings per share and free cash flows per share of the common stock of the combined companies, respectively. The earnings per share and cash earnings per share calculations added back expensed cost to achieve synergies. Goldman Sachs assumed no limitations on the use of Graphic’s NOLs. Based on such analyses, the proposed transactions would be accretive to Graphic stockholders on an earnings per share, cash earnings per share and free cash flows per share basis in fiscal years 2008 and 2009.

 

Goldman Sachs also performed the foregoing analyses assuming an NOL limitation per Graphic management’s guidance. Based on such analyses, the proposed transactions would be accretive to Graphic stockholders on an earnings per share basis in fiscal years 2008 and 2009; accretive on a cash earnings per share basis in fiscal year 2008 and neither accretive nor dilutive in fiscal year 2009; and dilutive on a free cash flow per share basis in fiscal years 2008 and 2009.

 

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Graphic or BCH or the contemplated transactions.

 

Goldman Sachs prepared these analyses for purposes of providing its opinion to Graphic’s board of directors as to the fairness, from a financial point of view to Graphic, of the 139,445,038 shares of New Graphic common stock, taken in the aggregate, to be issued by New Graphic in exchange for 100% of the outstanding equity interests in BCH pursuant to the transaction agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Graphic, BCH, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

 

The transaction consideration was determined through arm’s-length negotiations between Graphic and BCH and was approved by Graphic’s board of directors. Goldman Sachs provided advice to Graphic during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Graphic or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the transaction.

 

As described below, Goldman Sachs’ opinion to the Graphic’s board of directors was one of many factors taken into consideration by the Graphic board of directors in making its determination to approve the transaction agreement. The foregoing summary does not purport to be a complete description of the analyses

performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex G.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to Graphic in connection with, and have participated in certain of the negotiations leading to, the transactions contemplated by the transaction agreement. An affiliate of Goldman Sachs entered into financing commitments to provide Graphic with one third of the senior secured credit facilities in connection with the consummation of the transactions, and has agreed to act as joint lead arranger and bookrunner in respect of the syndication of such credit facilities and the consummation of certain amendments to Graphic’s existing senior secured credit facilities, in each case subject to the terms of such commitments and agreements. Goldman Sachs expects to receive fees in connection with these financing commitments and facilities that are contingent upon their closing upon consummation of the transactions.

 

In addition, Goldman Sachs and its affiliates have provided certain investment banking and other financial services to Graphic and its affiliates from time to time, including having acted as joint book manager in connection with the refinancing of Graphic’s senior secured credit facility in May 2007. Goldman Sachs also has provided certain investment banking and other financial services to Clayton, Dubilier and Rice, Inc., or CD&R, an affiliate of a significant stockholder of Graphic, and its affiliates and portfolio companies from time to time, including having acted as its financial advisor in connection with the sale of Kinko’s, a former portfolio company of CD&R, in February 2004; and as its financial advisor in connection with the sale of VWR International, a former portfolio company of CD&R, announced in May 2007. Goldman Sachs also has provided certain investment banking and other financial services to TPG Capital, or TPG, a significant equity holder of BCH, and its affiliates and portfolio companies from time to time, including having acted as its financial advisor in connection with the acquisition of Texas Genco Holdings Inc. by TPG in December 2004; as underwriter with respect to the initial public offering of shares of common stock of Burger King Holdings, Inc., or Burger King, a portfolio company of TPG, in May 2006; as underwriter with respect to the initial public offering of shares of common stock of J. Crew Group, Inc., or J. Crew, a portfolio company of TPG, in June 2006; as joint bookrunner with respect to a follow on offering of shares of common stock of J. Crew in January 2007; as joint bookrunner with respect to a follow on offering of shares of common stock of Burger King in February 2007; as financial advisor to the consortium that includes TPG with respect to its proposed acquisition of Biomet, Inc, including acting as joint bookrunner and joint lead arranger with respect to the financing of such acquisition, announced December 2006; and as financial advisor to the consortium that includes TPG with respect to its acquisition of TXU Corp., completed in October 2007. Goldman Sachs may provide investment banking and other financial services to Graphic and its affiliates and CD&R and TPG and their respective affiliates and portfolio companies in the future. In connection with the above-described services Goldman Sachs has received, and may receive, compensation.

 

Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to Graphic and its affiliates, BCH, CD&R and TPG and their respective affiliates and portfolio companies, may actively trade the debt and equity securities (or related derivative securities) of Graphic, BCH and affiliates and portfolio companies of CD&R and TPG for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities. Affiliates of Goldman Sachs have co-invested with CD&R and TPG and their respective affiliates from time to time and such affiliates of Goldman Sachs have invested and may invest in the future in limited partnership units of affiliates of CD&R and TPG.

 

The board of directors of Graphic selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions. Pursuant to a letter agreement dated November 13, 2006, as amended on July 9, 2007, Graphic engaged Goldman Sachs to act as its financial advisor in connection with the contemplated

transactions. Pursuant to the terms of this engagement letter, as amended, Graphic has agreed to pay Goldman Sachs a transaction fee of $20 million, all of which is payable only upon consummation of the transactions. The board of directors does not believe that the structure of the engagement letter with Goldman Sachs should materially affect your consideration of the transactions. In addition, Graphic has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Voting Agreement

 

The following is a summary of the material provisions of the voting agreement. This summary is qualified in its entirety by reference to the voting agreement, which is incorporated by reference in its entirety and attached to this proxy statement/prospectus as Annex D. This summary may not contain all of the information about the voting agreement which is important to you, and we encourage you to read the voting agreement in its entirety.

 

Concurrently with the execution of the transaction agreement, BCH executed a voting agreement with the Coors Family Stockholders, the CDR Fund, EXOR and Graphic to facilitate the transactions. As of July 9, 2007 and as of the record date, the Coors Family Stockholders, the CDR Fund and EXOR collectively beneficially owned 129,376,414 shares of Graphic common stock, which represented approximately 65% of Graphic common stock outstanding as of July 9, 2007 and as of the record date.

 

 

Under the voting agreement, and as further described below, each of the Coors Family Stockholders, the CDR Fund and EXOR has agreed, prior to termination of the voting agreement, at the special meeting and at any other meeting of the stockholders of Graphic, however called, including any adjournment or postponement thereof, and in connection with any written consent of the stockholders of Graphic, such stockholder shall, in each case to the fullest extent that its shares of Graphic common stock are entitled to vote thereon or consent thereto, vote or consent:

 

 

The obligations of the Coors Family Stockholders, the CDR Fund and EXOR to vote as described in the paragraph above apply whether or not the transactions or any action described above is recommended by the Graphic board of directors. However, if the Graphic board of directors changes adversely its recommendation with respect to the transaction agreement in connection with a takeover proposal, the obligation of such stockholders to vote in the manner described in the paragraph above will only apply to an aggregate number of such stockholders’ shares equal to 32% of the outstanding shares of Graphic common stock. In that instance, each of such stockholders has agreed to cause its remaining shares so entitled to vote to be voted in a manner that is proportionate to the manner in which all shares of Graphic common stock (other than shares voted by the stockholders subject to the voting agreements) which are voted in respect of such matter, are voted.

 

In furtherance of the voting agreement, each of the Coors Family Stockholders, the CDR Fund and EXOR granted an irrevocable proxy to designated officers of BCH to vote its shares in the manner described in the two immediately preceding paragraphs.

 

 

Each of the Coors Family Stockholders, the CDR Fund and EXOR has agreed that beginning July 9, 2007, until the termination of the voting agreement, it will not:

 

 

No Solicitation

 

Each of the Coors Family Stockholders, the CDR Fund and EXOR has also agreed not to, and not to permit any of its subsidiaries, representatives or affiliates to:

 

 

For purposes of the voting agreement, the term takeover proposal has the meaning described under “The Transaction Agreement and Agreement and Plan of Merger — No Other Transactions Involving Graphic or the Sellers.”

 

The voting agreement terminates on the earlier to occur of:

 

 

 

Interests of Graphic’s Directors and Executive Officers in the Transactions

 

In considering the recommendation of the Graphic board of directors with respect to the transaction agreement and the transactions, Graphic stockholders should be aware that some of Graphic’s executive officers and directors have interests in the transactions and have arrangements that are different from, or in addition to, those of Graphic stockholders generally. The Graphic board of directors was aware of these interests, which include the vesting of certain equity compensation awards, arrangements under certain executive officer employment agreements, continuing board positions, indemnification obligations and reimbursement of certain legal fees and considered them, among other matters, in reaching its decisions to approve the transaction agreement and the transactions and to recommend that Graphic stockholders vote in favor of adopting the transaction agreement and approving the transactions.

 

 

The transaction agreement provides that upon completion of the merger, each Graphic stock option, including those held by executive officers and directors of Graphic, will be converted into an option to purchase New Graphic common stock on a one-for-one basis. In addition, the transaction agreement provides that, upon completion of the merger, each share of restricted stock or performance unit and other equity awards based upon shares of Graphic common stock other than restricted stock units, including those held by executive officers and directors of Graphic, will be converted into equity-based awards with respect to New Graphic common stock on a one-for-one basis. In accordance with the terms of Graphic’s 2004 Stock and Incentive Compensation Plan, 4.8 million restricted stock units will immediately vest and become payable upon completion of the transactions. In connection with the payments in respect of these units, New Graphic will issue an aggregate of 1.8 million shares of New Graphic common stock and make aggregate cash payments of $14.7 million. The executive officers of Graphic listed below have restricted stock units that will vest and become payable, one-half in shares and one-half in cash, upon completion of the transactions. The gross number of shares and gross amount of cash payable (prior to the withholding of shares and cash for taxes) is set forth beside each such officer’s name:

 

 

 

 

 

Although final determinations have not been made with respect to the senior management of New Graphic, other than the President, Chief Executive Officer and Chief Financial Officer, New Graphic expects that some, if not all, of Graphic’s executive officers will serve as executive officers of New Graphic upon completion of the transactions. Although New Graphic has not finalized its management team, New Graphic expects to retain the majority of Altivity’s employees, including members of Altivity’s management team.

 

New Graphic’s board of directors will consist initially of 13 directors. Eight members of Graphic’s current board of directors, John D. Beckett, G. Andrea Botta, Kevin J. Conway, Jeffrey H. Coors, Harold R. Logan, John R. Miller, Robert W. Tieken and David W. Scheible, are each expected to serve as members of New Graphic’s board of directors.

 

 

New Graphic has agreed to indemnify officers, directors and managers of BCH, Altivity and Graphic against claims arising from facts or events that occurred before the closing date of the transaction agreement to the fullest extent permitted by law (including with respect to the advancement of expenses). Such provisions will not be amended, repealed or otherwise modified for six years from the closing date of the transaction agreement in any manner that would affect adversely the rights of individuals who at or at any time before the closing date of the transaction agreement were employees, directors, members or managers of BCH, Altivity and Graphic, as applicable.

 

 

Graphic has previously reimbursed each of the Coors Family Stockholders, the CDR Fund, and EXOR $125,000 for filing fees associated with filings submitted by each of them relating to the transactions under the HSR Act and has agreed to reimburse them for legal fees incurred in the preparation of the filings under the HSR Act and negotiation of the transactions.

 

Accounting Treatment

 

New Graphic will account for the transactions using the purchase method of accounting in accordance with generally accepted accounting principles in the United States (“GAAP”), with Graphic being treated as the acquirer for accounting purposes. Under the purchase method of accounting, the purchase price will be allocated to the individual tangible and intangible assets acquired and liabilities assumed from BCH based on their fair market values at the date of the completion of the transactions. Any excess of the purchase price over these fair market values will be treated as goodwill. The acquired assets, liabilities and results of operations will be consolidated into the assets, liabilities and results of operations of New Graphic on a prospective basis after the completion of the transactions.

 

Regulatory Approvals

 

In order to complete the transactions, Graphic and BCH were required to submit filings with, and obtain certain orders or approvals from, a number of regulatory authorities. The material regulatory approvals and filings are described below. Graphic and BCH are not aware of any other material approvals or filings that are required before completing the transactions.

 

 

The transactions are subject to the requirements of the HSR Act and the rules and regulations promulgated thereunder. Each of Graphic, BCH, the Coors Family Stockholders, the CDR Fund, EXOR and the TPG Entities have submitted their required filings under the HSR Act to the Federal Trade Commission and the DOJ. A request was received on August 22, 2007 for additional information, commonly referred to as a “second request,” from the Antitrust Division of the DOJ regarding the transactions. The second request extends the waiting period imposed by the HSR Act until 30 days after the second request has been substantially complied with, unless that period is extended voluntarily by the parties or terminated sooner by the DOJ. In addition, the DOJ, the Federal Trade Commission or others could take additional action under the antitrust laws with respect to the transactions, including seeking to enjoin the consummation of the transactions before the effective time of the transactions or to impose conditions on, or to require divestitures relating to, the divisions, operations or assets of Graphic or BCH. There can be no assurance that a challenge to the transactions on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

 

The transactions are also subject to the approval by the German Cartel Office. On August 2, 2007, Graphic made a filing with the German Cartel Office. Clearance of the transactions from the German Cartel Office was received on August 28, 2007.

 

Material U.S. Federal Income Tax Consequences to Graphic Stockholders

 

The following summary discusses the anticipated material U.S. federal income tax consequences of the transactions to Graphic stockholders. This summary does not deal with special situations. For example, the summary does not address:

 

 

If a partnership holds Graphic common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership holding Graphic common stock, you are strongly encouraged to consult your own tax advisor as to your tax treatment as a partner.

 

This summary is based on the Internal Revenue Code, its legislative history, Treasury Department regulations, IRS rulings, and judicial decisions, all as of the date hereof. Any of these authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. This discussion assumes that Graphic stockholders hold their Graphic common stock, and will hold New Graphic common stock, as a capital asset within the meaning of Section 1221 of the Internal Revenue Code.

 

This summary is not binding on the IRS and no ruling will be sought from the IRS as to the tax consequences of the transactions. This summary is not a complete analysis or description of all potential U.S. federal income tax consequences of the transactions. There can be no assurance that the IRS or the courts will agree with the statements and conclusions in the summary. Accordingly, you are strongly encouraged to consult your own tax advisor concerning the specific U.S. federal income and estate tax consequences to you of the transactions relating to your own personal tax situation and any consequences arising under the laws of any state, local, foreign or other taxing jurisdiction.

 

 

Alston & Bird LLP, counsel to Graphic, will deliver a tax opinion to Graphic, dated as of the closing date of the transactions, to the effect that, on the basis of the facts, representations and assumptions set forth in

such opinion, the exchange of Graphic common stock for New Graphic common stock, taken together with the exchange of equity interests of BCH held by the Sellers for New Graphic common stock, will constitute an exchange to which Section 351 of the Internal Revenue Code applies, or the exchange of Graphic common stock for New Graphic common stock will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or both. Any change in currently applicable law, which may or may not be retroactive, or failure of any factual representations or assumptions to be true, correct and complete in all material respects, could affect the continuing validity of the Alston & Bird tax opinion.

 

 

The following is a summary of the material U.S. federal income tax consequences if you are a U.S. holder of Graphic common stock. Certain considerations for non-U.S. holders of Graphic common stock are described under “Considerations for Non-U.S. Holders of Graphic Common Stock” below. “U.S. holder” means a beneficial owner of Graphic common stock that is for U.S. federal income tax purposes:

 

 

You will not recognize gain or loss on the exchange of your Graphic common stock for New Graphic common stock pursuant to the transactions. Your aggregate tax basis in New Graphic common stock received in the transactions will be the same as your aggregate tax basis in Graphic common stock exchanged in the transactions. Your holding period for New Graphic common stock received in the transactions will include the period for which you held Graphic common stock exchanged in the transactions. If you acquired different blocks of Graphic common stock at different times and at different prices, your tax basis and holding period in your New Graphic common stock may be determined with reference to each block of Graphic common stock.

 

Distributions, if any, on New Graphic common stock will constitute dividends for U.S. federal income tax purposes to the extent of New Graphic’s current or accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent that a U.S. holder receives a distribution on common stock that exceeds New Graphic’s current and accumulated earnings and profits, the distribution will be treated first as a non-taxable return of capital reducing the holder’s tax basis in New Graphic common stock. Any distribution in excess of the U.S. holder’s tax basis in the common stock will be treated as capital gain. Dividends paid to an individual U.S. holder in taxable years beginning before 2011 that constitute qualified dividend income generally will be taxable at a preferential rate of 15%.

 

A U.S. holder of New Graphic common stock will generally recognize gain or loss upon the sale, exchange, redemption or other taxable disposition of such common stock measured by the difference between:

 

 

Gain or loss on the disposition of New Graphic common stock will be capital gain or loss and will be long-term capital gain or loss if the holding period of the common stock disposed of exceeded one year. Net long-term capital gain recognized by non-corporate U.S. holders prior to 2011 is generally taxable at a maximum rate of 15%. The deductibility of net capital losses is subject to limitations.

 

The following is a summary of the material U.S. federal income tax consequences if you are a non-U.S. holder of Graphic common stock. Non-U.S. holder means a beneficial owner of a share of common stock that is not a U.S. holder. Special rules may apply to certain non-U.S. holders such as “controlled foreign corporations,” “passive foreign investment companies,” and “foreign personal holding companies.” All non-U.S. holders are strongly urged to consult their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them.