U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998 Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of registrant as specified in its charter)
State of Delaware 31-4388903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Winter Road, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 740-549-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Class "A" Common Stock
Class "B" Common Stock
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 12, 1999 was approximately $90,825,669.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of January 12, 1999 was as follows:
Class A Common Stock - 10,909,672
Class B Common Stock - 12,001,793
Listed hereunder are the documents, portions of which are incorporated by
reference, and the parts of this Form 10-K into which such portions are
incorporated:
1. The Registrant's Proxy Statement for use in connection with the Annual
Meeting of Shareholders to be held on February 22, 1999, portions of which are
incorporated by reference into Part III of this Form 10-K, which Proxy
Statement will be filed within 120 days of October 31, 1998.
<PAGE> 1
PART I
Item 1. Business
The Company principally manufactures industrial shipping containers
and containerboard and related products which it sells to customers in many
industries, primarily in the United States, Canada and Mexico, through
direct sales contact with its customers. There were no significant changes
in the business since the beginning of the year.
The Company operates over 100 locations in 28 states of the United
States, three provinces of Canada and one state of Mexico and, as such, is
subject to federal, state, local and foreign regulations in effect at the
various localities.
Due to the variety of products, the Company has many customers buying
different types of the Company's products and, due to the scope of the
Company's sales, no one customer is considered principal in the total
operation of the Company.
Because the Company supplies a cross section of industries, such as
chemicals, food products, petroleum products, pharmaceuticals and metal
products, and because the Company must make spot deliveries on a day-to-day
basis as its product is required by its customers, the Company does not
operate on a backlog to any significant extent and maintains only limited
levels of finished goods. Many customers place their orders weekly for
delivery during the week.
The Company's business is highly competitive in all respects (price,
quality and service), and the Company experiences substantial competition
in selling its products. Many of the Company's competitors are larger than
the Company.
While research and development projects are important to the Company's
continued growth, the amount expended in any year is not material in
relation to the results of operations of the Company.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins. In the current year, as in prior
years, certain of these materials have been in short supply, but to date
these shortages have not had a significant effect on the Company's
operations.
The Company's business is not materially dependent upon patents,
trademarks, licenses or franchises.
The business of the Company is not seasonal to any significant extent
and has not recently been significantly affected by inflation.
The approximate number of persons employed during the year was 5,150.
<PAGE> 2
Item 1. Business (concluded)
Acquisitions and Dispositions
A description of significant acquisitions and dispositions is included
in Note 2 to the Consolidated Financial Statements on pages 43-45 of this
Form 10-K, which Note is part of the financial statements contained in Item
8 of this Form 10-K, and which Note is incorporated herein by reference.
In January 1999, the Company purchased the assets of the intermediate
bulk containers business of Sonoco Products Company. Prior to the
acquisition, the Company has been marketing and selling this product under
a distributorship agreement that was entered into on March 30, 1998.
Industry Segments
Financial information concerning the Company's industry segments as
required by Item 101(b) is included in Note 11 to the Consolidated
Financial Statements on pages 55-57 on this Form 10-K, which Note is
incorporated herein by reference.
<PAGE> 3
<TABLE>
Item 2. Properties
The following are the Company's principal locations and products
manufactured at such facilities or the use of such facilities. The Company
considers its operating properties to be in satisfactory condition and
adequate to meet its present needs. However, the Company expects to make
further additions, improvements and consolidations of its properties as the
Company's business continues to expand.
<CAPTION>
Location Products Manufactured/Use Industry Segment
<S> <C> <C>
Alabama:
Creola (1) Fibre drums Industrial shipping
containers
Cullman Steel drums Industrial shipping
containers
Arkansas:
Batesville (2) Fibre drums Industrial shipping
containers
California:
Fontana Steel drums Industrial shipping
containers
LaPalma Fibre drums Industrial shipping
containers
Merced Steel drums Industrial shipping
containers
Morgan Hill Fibre drums Industrial shipping
containers
Sante Fe
Springs (3) Warehouse Industrial shipping
containers
Stockton Corrugated honeycomb Containerboard
Connecticut:
Windsor Locks (4) Fibre drums Industrial shipping
containers
Colorado:
Denver (5) Warehouse Industrial shipping
containers
Georgia:
Dalton (6) Packaging services Industrial shipping
containers
Lithonia Fibre drums and laminator Industrial shipping
containers
Macon Corrugated honeycomb Containerboard
Marietta (7) General office Industrial shipping
containers
<PAGE> 4
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Illinois:
Blue Island Fibre drums Industrial shipping
containers
Centralia Corrugated containers and sheets Containerboard
Chicago Steel drums Industrial shipping
containers
Lockport Plastic drums Industrial shipping
containers
Lombard (8) General office Industrial shipping
containers
Lombard (9) Research center Industrial shipping
containers
Naperville (10) Fibre drums Industrial shipping
containers
Northlake Fibre drums and plastic drums Industrial shipping
containers
Oreana Corrugated containers Containerboard
Posen Corrugated honeycomb Containerboard
Posen (11) Warehouse Containerboard
Quincy (37) Warehouse Containerboard
Indiana:
Ferdinand (12) Corrugated containers Containerboard
Kansas:
Kansas City (13) Fibre drums Industrial shipping
containers
Winfield Steel drums Industrial shipping
containers
Kentucky:
Erlanger (14) Corrugated containers Containerboard
Louisville Corrugated sheets Containerboard
Louisville (15) Corrugated containers Containerboard
Louisville (37) Warehouse Containerboard
Mt. Sterling Plastic drums Industrial shipping
containers
Mt. Sterling (37) Warehouse Industrial shipping
containers
Winchester Corrugated containers Containerboard
Winchester (16) Warehouse Containerboard
Louisiana:
St. Gabriel Steel drums and plastic drums Industrial shipping
containers
<PAGE> 5
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Massachusetts:
Mansfield Fibre drums Industrial shipping
containers
West
Springfield (17) Sales office Industrial shipping
containers
Worcester Plywood reels Industrial shipping
containers
Michigan:
Canton Warehouse Containerboard
Grand Rapids Corrugated sheets Containerboard
Mason Corrugated sheets Containerboard
Roseville Corrugated containers Containerboard
Taylor Fibre drums Industrial shipping
containers
Minnesota:
Minneapolis Fibre drums Industrial shipping
containers
Rosemount Multiwall bags Industrial shipping
containers
St. Paul Tight cooperage Industrial shipping
containers
St. Paul (18) General office Industrial shipping
containers
Mississippi:
Durant Plastic products Industrial shipping
containers
Jackson (19) General office
Missouri:
Wright City (20) Fibre drums Industrial shipping
containers
Nebraska:
Omaha (21) Multiwall bags Industrial shipping
containers
Omaha Warehouse Industrial shipping
containers
<PAGE> 6
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
New Jersey:
Englishtown (22) Fibre drums Industrial shipping
containers
Rahway Fibre drums and plastic drums Industrial shipping
containers
Spotswood Fibre drums Industrial shipping
containers
Teterboro Fibre drums Industrial shipping
containers
New York:
Syracuse Fibre drums Industrial shipping
containers
Tonawanda Fibre drums Industrial shipping
containers
North Carolina:
Bladenboro Steel drums Industrial shipping
containers
Charlotte (23) Fibre drums Industrial shipping
containers
Concord Corrugated sheets Containerboard
Ohio:
Caldwell Steel drums Industrial shipping
containers
Canton (37) Corrugated containers Containerboard
Cincinnati Corrugated sheets Containerboard
Cleveland Corrugated containers Containerboard
Columbus (24) General office Industrial shipping
containers
Columbus (25) General office
Delaware Principal office
Delaware (26) Research center Industrial shipping
containers
Fostoria Corrugated containers Containerboard
Hebron Plastic drums Industrial shipping
containers
Massillon Recycled containerboard Containerboard
Massillon Corrugated sheets Containerboard
Tiffin Corrugated containers Containerboard
Van Wert Fibre drum Industrial shipping
containers
Zanesville Corrugated containers and sheets Containerboard
<PAGE> 7
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Pennsylvania:
Hazelton Corrugated honeycomb Containerboard
Hazelton (27) Plastic drums Industrial shipping
containers
Reno (37) Corrugated containers Containerboard
Stroudsburg Drum hardware Industrial shipping
containers
Twin Oaks Fibre drums Industrial shipping
containers
Washington Corrugated containers and sheets Containerboard
Wayne (28) Sales office Industrial shipping
containers
Tennessee:
Kingsport Fibre drums Industrial shipping
containers
Texas:
Angleton Steel drums Industrial shipping
containers
Fort Worth Fibre drums Industrial shipping
containers
Houston (29) Fibre drums Industrial shipping
containers
Houston (30) Plastic drums Industrial shipping
containers
Houston (31) Sales office Industrial shipping
containers
LaPorte Steel drums and plastic drums Industrial shipping
containers
Waco Corrugated honeycomb Containerboard
Virginia:
Riverville Containerboard Containerboard
Washington:
Vancouver (32) Corrugated honeycomb Containerboard
Vancouver (33) Warehouse Containerboard
West Virginia:
Culloden (34) Fibre drums Industrial shipping
containers
Huntington (35) Corrugated containers and sheets Containerboard
Huntington (36) Warehouse Containerboard
Wisconsin:
Sheboygan Fibre drums Industrial shipping
containers
<PAGE> 8
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Canada
Alberta:
Lloydminster Steel drums, fibre drums Industrial shipping
and plastic drums containers
Ontario:
Belleville Fibre drums and plastic products Industrial shipping
containers
Bowmanville Spiral tubes Industrial shipping
containers
Fort Frances Spiral tubes Industrial shipping
containers
Fruitland Drum hardware Industrial shipping
containers
Milton Fibre drums Industrial shipping
containers
Niagara Falls General office Industrial shipping
containers
Oakville Steel drums Industrial shipping
containers
Stoney Creek Steel drums Industrial shipping
containers
Winona Research center and drum hardware Industrial shipping
containers
Quebec:
La Salle Fibre drums Industrial shipping
containers
Maple Grove Pallets Industrial shipping
containers
Pointe Aux
Trembles Fibre drums and spiral tubes Industrial shipping
containers
Mexico
Estado de Mexico:
Naucalpan
de Juarez Fibre drums Industrial shipping
containers
</TABLE>
<PAGE> 9
Item 2. Properties (concluded)
Note: All properties are held in fee except as noted below:
Exceptions:
(1) Lease expires June 30, 2000
(2) Lease expires August 31, 1999
(3) Lease expires February 28, 1999
(4) Lease expires December 31, 1998
(5) Lease expires December 15, 1998
(6) Lease expires September 30, 2002
(7) Lease expires April 14, 2001
(8) Lease expires April 30, 1999
(9) Lease expires July 31, 2007
(10) Lease expires June 30, 2000
(11) Lease expires April 30, 1999
(12) Lease expires October 26, 1999
(13) Lease expires March 31, 1999
(14) Lease expires October 6, 2003
(15) Lease expires December 31, 1998
(16) Lease expires December 31, 1998
(17) Lease expires August 31, 1999
(18) Lease expires December 31, 1999
(19) Lease expires August 31, 2001
(20) Lease expires August 31, 2005
(21) Lease expires June 30, 1999
(22) Lease expires February 28, 2003
(23) Lease expires September 30, 2003
(24) Lease expires November 30, 1999
(25) Lease expires August 31, 2001
(26) Lease expires June 30, 2001
(27) Lease expires April 30, 2006
(28) Lease expires December 31, 2000
(29) Lease expires December 31, 2001
(30) Lease expires September 30, 2002
(31) Lease expires June 30, 2001
(32) Lease expires January 31, 2002
(33) Lease expires February 28, 2002
(34) Lease expires January 31, 2002
(35) Lease expires October 7, 2001
(36) Lease expires March 31, 2000
(37) Lease operates month to month
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 319,000 acres in the states of Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia and the
provinces of Nova Scotia, Ontario and Quebec in Canada.
<PAGE> 10
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise at Federal, State
or Local levels involving environmental sites to which the Company has
shipped, directly or indirectly, small amounts of toxic waste, such as
paint solvents, etc. The Company, to date, has been classified as a "de
minimis" participant and, as such, has not been subject, in any instance,
to material sanctions or sanctions greater than $100,000.
In addition, from time to time, but less frequently, the Company has
been cited for violations of environmental regulations. Except for the
following situation, none of these violations involve or are expected to
involve sanctions of $100,000 or more.
Currently, the only exposure known to the Company which may exceed
$100,000 relates to a pollution situation at its Strother Field plant in
Winfield, Kansas. A record of decision issued by the U.S. Environmental
Protection Agency (EPA) has set forth estimated remedial costs which could
expose the Company to approximately $3,000,000 in expense under certain
assumptions. If the Company ultimately is required to incur this expense,
a significant portion would be paid over 10 years. The Kansas site
involves groundwater pollution and certain soil pollution that was found to
exist on the Company's property. The estimated costs of the remedy
currently preferred by the EPA for the soil pollution on the Company's land
represents approximately $2,000,000 of the estimated $3,000,000 in expense.
The final remedies have not been selected. In an effort to minimize
its exposure for soil pollution, the Company has undertaken further
engineering borings and analysis to attempt to identify a more definitive
soil area which would require remediation. However, there can be no
assurance that the Company will be successful in minimizing such exposure,
and there can be no assurance that the total expense incurred by the
Company in remediating this site will not exceed $3,000,000.
A reserve for $2,000,000 was recorded by the Company during fiscal
1995 since it was considered the most likely amount of loss. To date,
$385,000 has been charged against the reserve. The remaining reserve is
considered adequate.
<PAGE> 11
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Company
<TABLE>
The following information relates to Executive Officers of the Company
(elected annually):
<CAPTION>
Year first became
Name Age Positions and Offices Executive Officer
<S> <C> <C> <C>
Michael J. Gasser 47 Chairman of the Board 1988
of Directors and Chief
Executive Officer,
Chairman of the
Executive and
Nominating Committees
William B. Sparks, Jr. 57 Director, President 1995
and Chief Operating
Officer, member of the
Executive Committee
Charles R. Chandler 63 Director, Vice 1996
Chairman, member of
the Executive
Committee
Joseph W. Reed 61 Chief Financial 1997
Officer and Secretary
Michael L. Roane 43 Vice President, Human 1998
Resources
Lloyd D. Baker 65 President of Soterra, 1975
Incorporated
(subsidiary company)
John P. Berg 78 President Emeritus 1972
Michael M. Bixby 55 Vice President, 1980
Strategic Accounts
Ronald L. Brown 51 Vice President, Sales 1996
and Marketing
<PAGE> 12
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Wayne R. Carlberg 55 Vice President, 1998
Marketing
John K. Dieker 35 Corporate Controller 1996
Elco Drost 53 President of Greif 1996
Containers Inc.
(subsidiary company)
Russell A Fazio 55 Vice President, Field 1998
Sales
Michael A. Giles 48 Vice President, 1996
Manufacturing,
Containerboard Mill
Operations
C.J. Guilbeau 51 Vice President and 1986
Associate Director of
Manufacturing
Sharon R. Maxwell 49 Assistant Secretary 1997
Philip R. Metzger 51 Treasurer 1995
Bruce J. Miller 43 Vice President, Sales 1998
and Marketing,
Corrugated Products
and Services
Mark J. Mooney 41 Vice President, 1997
Packaging Services
William R. Mordecai 46 Vice President, Sales 1997
and Marketing,
Containerboard and
Paper
Jerome B. Nolder, Jr. 40 Vice President, 1996
Container Operations
William R. Shew 68 Special Assistant to 1996
the Vice Chairman
<PAGE> 13
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Kent P. Snead 53 Corporate Director of 1997
Strategic Projects
Karl Svendsen 57 Vice President, 1998
Manufacturing
</TABLE>
Except as indicated below, each Executive Officer has served in his
present capacity for at least five years.
Mr. Michael J. Gasser was elected Chairman of the Board of Directors
and Chief Executive Officer during 1994. Prior to that time, and for more
than five years, he served as a Vice President of the Company.
Mr. William B. Sparks, Jr. was elected President and Chief Operating
Officer during 1995. Prior to that time, and for more than five years, he
served as Chief Executive Officer of Down River International, Inc., a
former subsidiary of the Company.
Mr. Charles R. Chandler was elected Vice Chairman during 1996. Prior
to that time, and for more than five years, he served as President and
Chief Operating Officer of Virginia Fibre Corporation (now Greif Bros.
Corporation of Virginia), a subsidiary of the Company.
Mr. Joseph W. Reed was elected Chief Financial Officer and Secretary
in 1997. Prior to that time, and for more than five years, he served as
Senior Vice President, Finance and Administration - CFO of Pharmacia, Inc.
Mr. Michael L. Roane was elected Vice President, Human Resources, in
1998. Prior to that time, and for more than the past five years, Mr. Roane
served as Vice President, Human Resources, for Owens and Minor, Inc.
Mr. Lloyd D. Baker was elected President of Soterra, Incorporated
(subsidiary company) during 1997. Prior to that time, and for more than
five years, he served as a Vice President of the Company.
Mr. John P. Berg was elected President Emeritus in 1996. Prior to
that time, he served as President of the Company and General Manager of one
of its divisions for more than five years.
Mr. Michael M. Bixby became Vice President, Strategic Accounts, during
1998. During the past five years, he has been a Vice President of the
Company.
<PAGE> 14
Executive Officers of the Company (continued)
Mr. Ronald L. Brown became Vice President, Sales and Marketing, during
1997. Prior to that time, and for more than five years, he served as
President and Chief Operating Officer for Down River International (former
subsidiary company).
Mr. Wayne R. Carlberg was elected Vice President, Marketing, during
1998. Prior to that time, and for more than five years, he held the
position of Sales Manager for the Industrial Container Division of Sonoco
Products Company, which was acquired on March 31, 1998.
Mr. John K. Dieker was elected Corporate Controller in 1995. Prior to
that time, and for more than five years, he served as Assistant Corporate
Controller.
During 1996, Mr. Elco Drost was elected President of Greif Containers
Inc. (subsidiary company) and continues to serve in this capacity. Prior
to that time, and for more than five years, he served as Vice President for
the subsidiary company.
Mr. Russell A. Fazio was elected Vice President, Field Sales, during
1998. Prior to that time, and for more than five years, he held the
position of Manager, Strategic Account Programs, for the Industrial
Container Division of Sonoco Products Company, which was acquired on March
31, 1998.
Mr. Michael A. Giles became Vice President, Manufacturing,
Containerboard Mill Operations, in 1997. He was Executive Vice President of
Virginia Fibre Corporation (now Greif Bros. Corporation of Virginia,
subsidiary company) in 1996. From 1995 to 1996, he served as Vice
President of Manufacturing and, prior to that time, Vice President of
Finance and Treasurer at the subsidiary company for more than five years.
Mr. C.J. Guilbeau became Vice President and Associate Director of
Manufacturing during 1997. During the past five years, he has served as
Vice President of the Company.
Ms. Sharon R. Maxwell was elected Assistant Secretary during 1997.
Prior to that time, and for more than five years, she served as
administrative assistant to the Chairman.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that
time, and for more than the past five years, he served as Assistant
Treasurer and Assistant Controller.
<PAGE> 15
Executive Officers of the Company (concluded)
Mr. Bruce J. Miller was elected Vice President, Sales and Marketing,
Corrugated Products and Services, during 1998. In 1997 and early 1998, Mr.
Miller served as Director, Vendor Management Programs, for the Industrial
Shipping Containers segment. Prior to that time, and for more than five
years, he served as a Vice President of Down River International, Inc.
(former subsidiary company).
Mr. Mark J. Mooney became Vice President, Packaging Services, during
1998. Prior to that time, Mr. Mooney served as Vice President, National
Sales, and prior to 1996, and for more than the past five years, he served
as the Operations Director, Multiwall Bags, at one of its divisions.
Mr. William R. Mordecai became Vice President, Sales and Marketing,
Containerboard and Paper, during 1997. During 1996 to 1997, Mr. Mordecai
served as Director, Containerboard Marketing, for Virginia Fibre
Corporation (now Greif Bros. Corporation of Virginia, subsidiary company).
Prior to that time, and for more than five years, he served as President of
Pimlico Paper Corporation.
Mr. Jerome B. Nolder, Jr. became Vice President, Container Operations,
during 1997. Prior to that time, he served as General Manager of one of its
divisions since 1994, and prior to that time, he served as Operations
Manager for the division for more than five years.
Mr. William R. Shew became Special Assistant to the Vice Chairman
during 1997. Prior to that time, and for more than the past five years, he
served as President of Greif Board Corporation (subsidiary company).
Mr. Kent P. Snead became Corporate Director of Strategic Projects
during 1997. Prior to that time, and for more than the past five years, he
served as the Engineering Manager for Virginia Fibre Corporation
(subsidiary company).
Mr. Karl Svendsen was elected Vice President, Manufacturing, during
1998. Prior to that time, he served as Vice President, Operating
Resources, for the Industrial Container Division of Sonoco Products
Company, acquired on March 30, 1998, for more than five years.
<PAGE> 16
<TABLE>
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters
The Class A and Class B Common Stock are traded on the NASDAQ Stock Market.
The high and low sales prices for each quarterly period during the
last two fiscal years are as follows:
<CAPTION>
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1998 1998 1998 1998
<S> <C> <C> <C> <C>
Market price (Class A Common Stock):
High $35 3/4 $41 1/4 $40 3/4 $40 5/8
Low $32 $35 $35 $27 1/2
Market price (Class B Common Stock):
High $40 $44 $43 3/4 $43
Low $33 1/2 $37 1/2 $40 3/4 $34
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1997 1997 1997 1997
Market price (Class A Common Stock):
High $31 $31 1/4 $31 1/4 $36 1/2
Low $27 $25 $23 3/4 $30
Market price (Class B Common Stock):
High $35 $35 $33 $37 1/4
Low $30 $28 1/4 $26 3/4 $31 1/4
</TABLE>
As of December 18, 1998, there were 747 shareholders of record of the
Class A Common Stock and 181 shareholders of record of the Class B Common
Stock.
The Company paid five dividends of varying amounts during its fiscal
year computed on the basis described in Note 5 to the Consolidated
Financial Statements on page 48 of this Form 10-K, which is hereby
incorporated by reference. The annual dividends paid for the last three
fiscal years are as follows:
1998 fiscal year dividends per share - Class A $.48; Class B $.71
1997 fiscal year dividends per share - Class A $.60; Class B $.89
1996 fiscal year dividends per share - Class A $.48; Class B $.71
<PAGE> 17
<TABLE>
Item 6. Selected Financial Data
The 5-year selected financial data is as follows (Dollars in
thousands, except per share amounts):
Years Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $801,131 $648,984 $637,368 $719,345 $583,526
Net income $ 33,104 $ 18,086 $ 42,747 $ 60,133 $ 33,754
Total assets $829,363 $550,089 $512,338 $467,662 $419,074
Long-term
obligations $235,000 $ 52,152 $ 25,203 $ 14,365 $ 28,215
Dividends per share:
Class A Common
Stock $ .48 $ .60 $ .48 $ .40 $ .30
Class B Common
Stock $ .71 $ .89 $ .71 $ .59 $ .44
Basic and diluted earnings per share:
Class A Common
Stock $ 1.15 $ .63 $ 1.48 $ 1.96 $ 1.10
Class B Common
Stock $ 1.71 $ .94 $ 2.22 $ 2.93 $ 1.64
</TABLE>
Current year amounts include the results of operations and assets of
the industrial containers business of Sonoco Products Company acquired on
March 30, 1998. The increase in long-term obligations is a result of this
acquisition.
The results of operations include the effects of pretax restructuring
charges of $27.5 million and $6.2 million for 1998 and 1997, respectively.
Prior year earnings per share have been restated to reflect the
adoption of SFAS No. 128 (see Note 1 to the Consolidated Financial
Statements).
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
FINANCIAL DATA
Presented below are certain comparative data illustrative of the
following discussion of the Company's results of operations, financial
condition and changes in financial condition (Dollars in thousands):
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net sales:
Industrial Shipping Containers $444,130 $333,005 $322,330
Containerboard 357,001 315,979 315,038
Total $801,131 $648,984 $637,368
Operating profit:
Industrial Shipping Containers $ 26,928 $ 10,687 $ 13,533
Containerboard 40,972 2,480 40,129
Total $ 67,900 $ 13,167 $ 53,662
Net income $ 33,104 $ 18,086 $ 42,747
Current ratio 2.6:1 2.9:1 3.7:1
Cash flows from operations $ 76,862 $ 40,115 $ 81,906
Increase (decrease) in working
capital $ 46,001 $(22,257) $(13,973)
Capital expenditures $ 38,093 $ 36,193 $ 74,395
Acquisitions $185,395 $ 41,724 $ 9,275
</TABLE>
RESULTS OF OPERATIONS
The Company had net income, excluding the effect of a $27.5 million
restructuring charge, of $49.4 million, or $1.71 and $2.56 per share for
the Class A and Class B Common Stock, respectively, compared to net income,
excluding the effect of a $6.2 million restructuring charge, of $21.9
million, or $.76 and $1.13 per share for the Class A and Class B Common
Stock, respectively, last year. Including the effect of the restructuring
charge, the Company reported net income of $33.1 million, or $1.15 and
$1.71 per share for the Class A and Class B Common Stock, respectively, for
1998. Prior year net income, inclusive of the effect of that year's
restructuring charge, was $18.1 million, or $.63 and $.94 per share for the
Class A and Class B Common Stock, respectively.
<PAGE> 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The increase in net income, excluding the effect of the restructuring
charges, was due primarily to improved operating profits for the
Containerboard segment resulting from higher average paper prices over the
prior year. In addition, the acquisition of the industrial containers
business of Sonoco and several timberland sales contributed to the
improvement in net income.
Historically, revenues or earnings may or may not be indicative of
future operations because of various economic factors. As explained below,
the Company is subject to the general economic conditions of its customers
and the industry in which it operates.
The Company's Industrial Shipping Containers segment, where packages
manufactured by the Company are purchased by other manufacturers and
suppliers, is substantially subject to the general economic conditions and
business success of the Company's customers.
Similarly, the Company's Containerboard segment is subject to the
general economic conditions and the effect of the operating rates of the
containerboard industry, including pricing pressures from its competitors.
The Company remains confident that, with the financial strength that
it has built over its 121-year existence, it will be able to effectively
compete in its highly competitive markets.
Net Sales
Net sales increased $152.1 million or 23.4% during the current year as
compared to the previous year.
The net sales of the Industrial Shipping Containers segment increased
by $111.1 million or 33.4% in comparison to the prior year. This increase
was primarily the result of the acquisition of the industrial containers
business of Sonoco which contributed $123.5 million of net sales during
1998.
The net sales of the Containerboard segment increased by $41.0 million
or 13.0% in comparison to the prior year. This increase was primarily the
result of a $35.9 million increase in net sales from the Company's paper
mills which was attributed primarily to the improved sales prices of its
products. The higher sales prices were caused by the overall improvement
of the containerboard market. In addition, the purchase of Independent
Container, Inc. and Centralia Container, Inc. in May 1997 and June 1997,
respectively, contributed $24.0 million in additional net sales as a result
of higher sales volume. In August 1997, the Company disposed of its wood
components plants in Kentucky, California, Washington and Oregon with prior
year net sales of $37.0 million.
<PAGE> 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Industrial Shipping Containers segment had an increase in net
sales of $10.7 million or 3.3% in 1997 as compared to 1996. The increase
was due primarily to the purchase of two steel drum operations located in
Merced, California and Oakville, Ontario, Canada in 1997 which contributed
$19.1 million in sales during 1997. The increase that resulted from this
acquisition was partially offset by the disposal of one of the Company's
injection molding facilities located in Ohio during February 1997. Net
sales for the location sold amounted to $3.6 million in 1997 and $12.3
million in 1996. The location was sold since it was determined that it no
longer met the strategic objectives of the Company.
The Containerboard segment had a slight increase in net sales in 1997
as compared to 1996. Excess capacity in the containerboard market caused
sales prices for containerboard and related products to be lower. In fact,
paper prices reached a 19-year low in May 1997. This reduction in sales
prices from the Company's paper mills was partially offset by an increase
in sales volume in 1997 as compared to 1996. In addition, the sale of the
wood components plants caused a decrease in sales since the prior year.
Net sales for these locations amounted to $37.0 million in 1997 and $42.5
million in 1996. Furthermore, the Company completed three acquisitions of
corrugated container companies: Aero Box Company located in Roseville,
Michigan; Independent Container, Inc. with locations in Louisville and
Erlanger, Kentucky and Ferdinand, Indiana; and Centralia Container, Inc.
located in Centralia, Illinois. These acquisitions, as well as the two
acquisitions from the prior year, contributed $48.7 million of net sales
during 1997. In the prior year, there were $7.3 million of net sales
relating to the 1996 acquisitions.
Operating Profit
During 1998, the increase in operating profit of $54.7 million was due
primarily to an improvement in gross profit margin of 19.5% this year
compared to 13.4% last year. This increase was caused by higher sales
prices per unit in the Containerboard segment without a corresponding
increase in the cost of products sold. In addition, the inclusion of the
industrial containers business of Sonoco contributed to this increase. The
increase in gross profit was partially offset by higher selling, general
and administrative expenses included in both segments over the prior year.
The higher selling, general and administrative expenses were due primarily
to additional expenses related to the industrial containers business of
Sonoco, prior year acquisitions and amortization of goodwill.
<PAGE> 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The operating profit of the Industrial Shipping Containers segment was
$10.7 million or 3.2% of net sales in 1997 as compared to $13.5 million or
4.2% of net sales in 1996. Price pressures on its products affected the
operating profits of this segment. During 1997, the Company experienced
lower profitability due to higher cost of raw materials without a
corresponding increase in sales prices.
The operating profit of the Containerboard segment was $2.5 million or
0.8% of net sales in 1997 as compared to $40.1 million or 12.7% of net
sales in 1996. The decrease in 1997 is due to the reduction in sales prices
resulting in less favorable gross profit margins.
Restructuring Costs
During the third quarter of 1998, the Company approved a plan to
consolidate some of its locations in order to improve operating
efficiencies and capabilities. The plan was a result of a study to
determine whether certain locations, either existing or newly acquired,
should be closed or relocated to a different facility. As a result of this
plan, the Company recognized a restructuring charge of $27.5 million in
connection with eighteen of the Company's existing plants that will be
closed during 1998 and 1999. These plants were not part of the industrial
containers business of the Sonoco acquisition. The charge relates to $20.9
million in employee separation costs (approximately 500 employees) and $6.6
million in other anticipated costs of closing and disposing of the
facilities. As of October 31, 1998, the Company has paid approximately
$2.7 million consisting primarily of severance payments. The Company
expects the remaining liability of $24.8 million to be expended during
1999.
In connection with the consolidation plan, an additional five
locations purchased as part of the industrial containers business of Sonoco
will be closed. Accordingly, the Company recorded a $9.5 million
restructuring liability related to these locations. The liability
consisted of $6.1 million in employee separation costs (approximately 100
employees) and $3.4 million in other anticipated closing and disposition
costs. As of October 31, 1998, the Company has paid approximately $1.9
million consisting primarily of severance payments. The Company believes
the remaining liability of $7.6 million will be expended during 1999.
The Company's management believes that, upon completion of the
consolidation, positive contributions to earnings on an annualized basis
from these actions could approximate an amount equal to the third quarter
restructuring charge as a result of reductions in labor costs and an
improvement in operating efficiencies. These contributions are expected to
begin in the latter part of 1998; however, the most significant impact will
not be realized until the end of 1999 after the plan has been fully
implemented.
<PAGE> 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
During 1997, the Company adopted a plan to consolidate its operations
which included the relocation of certain key operating employees, the
realignment of some of its administrative functions and the reduction of
certain support functions. As a result, there was a charge to income of
$6.2 million during the fourth quarter of 1997. As of October 31, 1998,
all expenditures related to the charge have been made and the liability
accordingly eliminated.
Other Income
Other income increased $3.4 million in 1998 from the prior year due
primarily to $8.9 million of additional sales of timber and timber
properties. The Company analyzes market factors as well as the condition of
its timberlands in order to maximize the gain on its timber sales. In the
prior year, there were $3.7 million of gains on the sale of an injection
molding facility and wood components plants.
In 1997, other income increased $10.8 million from the prior year due
to $3.0 million of additional sales of timber properties. Also, the
Company sold its wood components plants and one of its injection molding
facilities during the year which resulted in $3.7 million of gains on the
sale of capital assets.
Interest Expense
In 1998, interest expense increased $9.3 million from the prior year
due to increased debt relating to the acquisition of the industrial
containers business of Sonoco.
In 1997, interest expense increased $2.2 million from the prior year
as a result of additional debt issued in 1997 and 1996 relating to
acquisitions by the Company and certain capital improvements.
Income Before Income Taxes
Income before income taxes increased $26.1 million in 1998 as compared
to the prior year primarily due to more favorable gross profit margins
experienced by the Containerboard segment than in 1997. In addition, the
industrial containers business of Sonoco contributed $12.9 million and
there were $8.9 million of gains on the sale of timber and timberlands.
These increases were significantly offset by a $27.5 million restructuring
charge in 1998 as compared to a $6.2 million restructuring charge in 1997
and $9.3 million of additional interest expense.
<PAGE> 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Income before income taxes decreased $38.2 million in 1997 as compared
to the prior year due primarily to less favorable gross profit margins in
the Containerboard segment than in 1996. In addition, there was a $6.2
million restructuring charge and a $2.2 million increase in interest
expense. The $3.0 million of higher timber sales and $3.7 million of gains
on the sale of certain facilities offset these reductions.
Income Taxes
The Company anticipates that it will be able to fully realize its
recognized deferred tax assets based upon its projected taxable income.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Balance Sheets, elsewhere in this
report and in the financial data set forth above, the Company is dedicated
to maintaining a strong financial position. It is management's belief that
this dedication is extremely important during all economic times.
The Company's financial strength is important to continue to achieve
the following goals:
a. To protect the assets of the Company and the intrinsic value of
shareholders' equity in periods of adverse economic conditions.
b. To respond to any large and presently unanticipated cash demands that
might result from future adverse events.
c. To be able to benefit from new developments, new products and new
opportunities in order to achieve the best results for our shareholders.
d. To continue to pay competitive remuneration, including the ever-
increasing costs of employee benefits, to Company employees who produce
the results for the Company's shareholders.
e. To replace and improve plants and equipment. When plants and production
machinery must be replaced, either because of wear or to obtain the
cost-reducing potential of technological improvement required to remain
a low-cost producer in the highly competitive environment in which the
Company operates, the cost of new plants and machinery are often
significantly higher than the historical cost of the items being
replaced.
<PAGE> 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
During 1998, the Company invested approximately $38 million in capital
additions and $185 million for its acquisitions. During the last three years,
the Company has invested $385 million in capital additions and acquisitions.
These investments are an indication of the Company's commitment to be
the quality, low-cost producer and the desirable long-term supplier to all
of our customers.
Management believes that the present financial strength of the Company
will be sufficient to achieve these goals.
On March 30, 1998, the Company acquired all of the outstanding shares
of the industrial containers business of Sonoco for approximately $185
million in cash. The industrial containers business includes twelve fibre
drum plants and five plastic drum plants along with facilities for research
and development, packaging services and distribution. In addition, the
Company entered into an agreement with Sonoco to acquire its intermediate
bulk containers business, which the parties intend to finalize as soon as
necessary approvals are obtained. Pending receipt of such approvals, the
Company markets and sells intermediate bulk containers for Sonoco under a
distributorship agreement.
During 1997, the Company purchased three corrugated container
companies: Aero Box Company, Independent Container, Inc. and Centralia
Container, Inc. In addition, the Company purchased two steel drum
operations. Furthermore, the paper mill in Ohio added a power plant to its
operations and a corrugated carton plant increased its capacity with new
machinery and equipment.
As discussed in prior annual reports, the Company's paper mill in
Virginia made significant improvements to its facilities by adding a new
woodyard and a manufacturing control system. The Company's paper mill in
Ohio made significant improvements to its machinery and equipment. In
addition, a new sheet feeder plant in Michigan was completed during
November 1995. The Company purchased two corrugated container companies,
Decatur Container Corporation and Kyowva Corrugated Container Company, Inc.
during 1996.
The purchase of the industrial containers business of Sonoco has been
the primary reason for the increase in accounts receivable, inventories,
goodwill, property, plant and equipment and accounts payable since October
31, 1997.
<PAGE> 25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The increase in the restructuring reserve is primarily due to the
recording of a restructuring charge of $27.5 million, as discussed above,
during the third quarter of 1998. The remaining increase is due to a
restructuring reserve that was set up for certain Sonoco locations,
purchased on March 30, 1998, that will be closed. These amounts primarily
relate to severance arrangements and other costs of closing the plants.
During 1998, the Company entered into a credit agreement which
provides for a revolving credit facility of up to $325 million. The
Company has borrowed money under the credit facility to purchase the
industrial containers business of Sonoco and repay the other long-term
obligations of the Company. The credit agreement contains certain
covenants including maintaining a certain leverage ratio, sufficient
coverage of interest expense and a minimum net worth. In addition, the
Company is limited with respect to additional debt. Finally, there are
certain non-financial covenants including sales of assets, financial
reporting, mergers and acquisitions, investments, change in control and
Employee Retirement Income Security Act compliance.
The increase in other long-term liabilities is primarily the result of
the postretirement health care benefits related to certain employees of the
acquired businesses of Sonoco.
Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company, including those pertaining to
environmental, product liability, safety and health matters. While the
amounts claimed may be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist.
Therefore, it is possible that results of operations or liquidity in a
particular period could be materially affected by certain contingencies.
However, based upon the facts currently available, management believes that
the disposition of matters that are pending or asserted will not have a
materially adverse affect on the financial position of the Company.
During 1997, the Company embarked on a program to implement a new
management information system. The purpose of the new management
information system is to focus on using information technology to link
operations in order to become a low-cost producer and more effectively
service the Company's customers. The ultimate cost of this project is
dependent upon management's final determination of the locations, timing
and extent of integration of the new management information system. As of
October 31, 1998, the Company has spent approximately $12.5 million towards
this project.
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In addition to the intermediate bulk containers business of Sonoco and
the new management information system, as described above, the Company has
approved future purchases of approximately $46.5 million. These purchases
are primarily to replace and improve equipment.
Borrowing and self-financing have been the primary sources for past
capital expenditures and acquisitions. The Company anticipates financing
future capital expenditures in a like manner and believes that it will have
adequate funds available for planned expenditures.
On November 1, 1998, a joint venture named CorrChoice was formed to
operate the sheet feeder plants of Michigan Packaging, a subsidiary of the
Company, and Ohio Packaging. The joint venture was formed by the
stockholders of Michigan Packaging and Ohio Packaging contributing their
stock in these companies to CorrChoice in exchange for stock of CorrChoice.
The Company was not required to commit any additional capital resources to
fund the joint venture. The joint venture is expected to be self-
supporting.
During December 1998, the Company and Abzac, a privately held company
in France, entered into a letter of intent for the exchange of the
Company's spiral core manufacturing assets for a 49% equity interest in
Abzac's fibre drum business. The Company manufactures spiral cores at three
of its Canadian locations. Abzac manufacturers fibre drums at three of its
locations in France. The transaction is subject to due diligence and is
anticipated to be completed during the third quarter of 1999.
YEAR 2000 MATTERS
Historically, certain information technology ("IT") systems of the
Company have used two digits rather than four digits to define that
applicable year, which could result in recognizing a date using "00" as the
year 1900 rather than the year 2000. IT systems include computer software
and hardware in the mainframe, midrange and desktop environments as well as
telecommunications. Additionally, the impact of the problem extends to
non-IT systems, such as automated plant systems and instrumentation. The
Year 2000 issues could result in major failures or misclassifications.
<PAGE> 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company is actively assessing the Year 2000 readiness of its IT
and non-IT systems, and has begun to remediate certain IT systems. In
addition, the Company is in the process of determining the extent to which
the systems of third parties with whom the Company has significant
relationships may be vulnerable to Year 2000 issues and what impact, if
any, these Year 2000 issues will have on the Company. As part of these
assessments, a compliance plan, which includes the formation of a steering
committee and a timetable for identifying, evaluating, resolving and
testing its Year 2000 issues, has been developed. The steering committee
includes members of the Company's senior management and internal audit
department to ensure that the issues are adequately addressed and completed
in a timely manner.
The timetable provides for the Company's completion of its remediation
of any Year 2000 issues by the end of 1999. According to the compliance
plan, the inventory and assessment phase related to the Company's IT and
non-IT systems are expected to be complete by the end of the second quarter
of 1999. Further, corrections and testing of critical Year 2000 issues are
expected to be complete by the end of the third quarter of 1999. For non-
critical Year 2000 issues, corrections and testing are expected to be
complete by the end of the fourth quarter of 1999.
While it is difficult, at present, to fully quantify the overall cost
of this work, the Company currently estimates its total spending for Year
2000 remediation efforts to be approximately $6 million to $10 million. The
range is a function of ongoing evaluation as to whether certain systems and
equipment will be corrected or replaced, which is largely dependent on
information to be obtained from suppliers or other external sources. This
amount will primarily be expended during 1999. Costs for system maintenance
and modification are expensed as incurred while spending for new hardware,
software or equipment will be capitalized and depreciated over the assets'
useful lives. The Company anticipates funding its Year 2000 expenditures
out of its cash flows from operations. As of October 31, 1998,
approximately $400,000 has been spent related to this effort.
The Company anticipates timely completion of its Year 2000
remediation. However, if the Company does not become Year 2000 compliant on
a timely basis, there could be adverse financial and operational effects on
the Company. The amount of these effects can not be ascertained at this
time.
The Year 2000 steering committee is continuously reviewing the status
of the Company's remediation efforts and, as a necessary part of the
compliance plan discussed above, a contingency plan will be created during
1999. The plan will address alternative solutions to the Company's Year
2000 issues.
<PAGE> 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which is effective in 1999 for the Company. Currently, the only
item in addition to net income that would be included in comprehensive
income is the cumulative translation adjustment.
During 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", which is effective in 1999 for
the Company. The impact on the presentation of the Company's segments has
not yet been determined.
In February 1998, the FASB issued SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits - an amendment
to FASB Statements No. 87, No. 88 and No. 106", which is effective in 1999
for the Company. SFAS No. 132 will not affect the Company's results of
operations, however, the impact on the presentation of the Company's Notes
to Consolidated Financial Statements has not been determined.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective in 2000 for the
Company. The Company has not determined what impact SFAS No. 133 will have
on the Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS; CERTAIN FACTORS AFFECTING FUTURE RESULTS
Statements contained in this Form 10-K or any other reports or
documents prepared by the Company or made by management of the Company may
be "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject
to certain risks and uncertainties that could cause the Company's operating
results to differ materially from those projected. The following factors,
among others, in some cases have affected and in the future could affect
the Company's actual financial performance.
Changes in General Economic Conditions. The Company's customers
generally consist of other manufacturers and suppliers who purchase the
Company's industrial shipping containers and containerboard for their own
containment and shipping purposes. Because the Company supplies a cross
section of many industries, such as chemicals, food products, petroleum
products, pharmaceuticals, and metal products, demand for the Company's
industrial shipping containers and containerboard and related corrugated
products has historically corresponded to changes in general economic
conditions of the United States, Canada and Mexico. Accordingly, the
Company's financial performance is substantially dependent upon the general
economic conditions existing in the United States, Canada and Mexico.
<PAGE> 29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Competition. The Company's business of manufacturing and selling
industrial shipping containers and containerboard is highly competitive.
The most important competitive factors are price, quality and service.
Many of the Company's competitors are substantially larger and have
significantly greater financial resources.
Excess Capacity in Containerboard Segment. Industry demand for
containerboard products has declined in recent years causing excess
capacity in this segment of the Company's business. This excess capacity
has in turn caused lower sales prices in the containerboard market,
evidenced by paper prices reaching a 19-year low in May 1997. These excess
capacity levels and competitive pricing pressures in the containerboard
market have negatively impacted the Company's financial performance in
recent years. Management does not anticipate that paper prices will be as
favorable in 1999 as in 1998, which could negatively impact the Company's
net sales and operating profits.
Raw Material Shortages. The Company's raw materials are principally
pulpwood, waste paper for recycling, paper, steel and resins. Certain of
these materials have been, and in the future may be, in short supply.
Shortages in raw materials could adversely affect the Company's operations.
Failure of Year 2000 Compliance. The Company is actively assessing
its Year 2000 readiness, including the extent to which third parties with
whom the Company has significant relationships may be vulnerable to Year
2000 issues and what impact, if any, these Year 2000 issues will have on
the Company. As part of these assessments, a compliance plan, which
includes the formation of a steering committee and a timetable for
identifying, evaluating, resolving and testing its Year 2000 issues, has
been developed. The Company anticipates timely completion of its Year 2000
remediation by the end of 1999. However, the failure to become Year 2000
compliant on a timely basis could have a material adverse affect on the
Company's operations and financial performance. The Year 2000 steering
committee is continuously reviewing the status of the Company's remediation
efforts and, as a necessary part of the compliance plan discussed above, a
contingency plan will be created during 1999 to address alternative
solutions to the Company's Year 2000 issues.
<PAGE> 30
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
Environmental and Health and Safety Matters; Product Liability
Claims. The Company must comply with extensive rules and regulations
regarding federal, state and local environmental matters, such as air and
water quality and waste disposal. The Company must also comply with
extensive rules and regulations regarding safety and health matters. The
failure to materially comply with such rules and regulations could
adversely affect the Company's operations. Furthermore, litigation or
claims against the Company with respect to such matters could adversely
affect the Company's financial performance. The Company may also become
subject to product liability claims which could adversely affect the
Company.
Risks Associated with Acquisitions. During the past several years the
Company has invested, and for the foreseeable future the Company
anticipates investing, a substantial amount of capital in acquisitions.
Acquisitions involve numerous risks, including the failure to retain key
employees and contracts and the inability to integrate businesses without
material disruption. In addition, other companies in the Company's
industries have similar acquisition strategies. There can be no assurance
that any future acquisitions will be successfully integrated into the
Company's operations, that competition for acquisitions will not intensify
or that the Company will be able to complete such acquisitions on
acceptable terms and conditions. In addition, the costs of unsuccessful
acquisition efforts may adversely affect the Company's financial
performance.
Timberland Sales. The Company has a significant inventory of standing
timber and timberlands. The frequency and volume of sales of timber and
timberland will have an effect on the Company's financial performance.
<PAGE> 31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk:
The Company is subject to interest rate risk related to its financial
instruments which include borrowings under its $325 million revolving
credit facility and interest rate swap agreements with an aggregate
notional amount of $160 million. The Company does not enter into financial
instruments for trading or speculative purposes. The interest rate swap
agreements have been entered into to manage the Company's exposure to its
variable rate borrowing.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. For the revolving credit facility, the table
presents principal cash flows and related weighted average interest rates
by contractual maturity dates. For interest rate swaps, the table presents
annual amortization of notional amounts and weighted average interest rates
by contractual maturity dates. Under the swap agreements, the Company
receives interest quarterly from the counterparty and pays interest
quarterly to the counterparty. The fair value of the revolving credit
facility is based on current rates available to the Company for debt of the
same remaining maturity. The fair values of the interest rate swap
agreements have been determined by the counterparty.
<TABLE>
Financial Instruments
(Dollars in millions)
<CAPTION>
Expected Maturity Date
There- Fair
1999 2000 2001 2002 2003 after Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Revolving credit
facility:
Variable rate $ -- $ -- $ -- $ -- $235 (a) $ -- $ 235 $ 235
Average interest
rate 5.50%(b)
Interest rate
derivatives
Interest rate swaps:
Variable to
fixed rates $ 10 $ 20 $ 30 $ 10 $ 20 $ 70 $160 $ (7)
Average pay rate 6.15% 6.15% 5.53% 6.15% 6.15% 6.15% 6.03%
Average receive
rate (c) 5.22% 5.22% 5.22% 5.22% 5.22% 5.22% 5.22%
<FN>
(a) Includes $235 million of borrowings under the $325 million unsecured
revolving credit facility which expires in 2003. The Company has the
option under the credit facility to repay borrowings prior to 2003 or
to request an extension.
<FN>
(b) Variable rate specified is based on the prime rate or LIBOR rate
plus a calculated margin at October 31, 1998. Interest is paid and
reset quarterly.
</TABLE>
<PAGE> 32
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
(concluded)
[FN]
(c) The average receive rate is based upon the LIBOR rate at October
31,1998. The rates presented are not intended to project the
Company's expectations for the future.
Foreign Currency Risk:
The Company's exposure to foreign currency fluctuations on its
financial instruments is not material because most of these instruments are
denominated in U.S. dollars. The net sales and total assets of the Company
which are denominated in foreign currencies (i.e., Canadian dollars and
Mexican pesos) represent less than 10% of the consolidated net sales and
total assets.
Commodity Price Risk:
The Company has no financial instruments subject to commodity price
risks.
<PAGE> 33
Item 8. Financial Statements and Supplementary Data
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<CAPTION>
For the years ended October 31, 1998 1997 1996
<S> <C> <C> <C>
Net sales $801,131 $648,984 $637,368
Other income:
Interest and other 7,466 12,918 5,214
Gain on timber sales 21,553 12,681 9,626
830,150 674,583 652,208
Costs and expenses (including
depreciation of $35,585 in 1998,
$30,660 in 1997 and $26,348 in
1996):
Cost of products sold 644,892 562,165 515,775
Selling, general and administrative 90,282 74,058 68,220
Restructuring costs 27,461 6,185 --
Interest 11,928 2,670 517
774,563 645,078 584,512
Income before income taxes 55,587 29,505 67,696
Income taxes 22,483 11,419 24,949
Net income $ 33,104 $ 18,086 $ 42,747
Basic and diluted earnings per share:
</TABLE>
<TABLE>
1998 1997 1996
<S> <C> <C> <C>
Class A Common Stock $ 1.15 $ .63 $ 1.48
Class B Common Stock $ 1.71 $ .94 $ 2.22
</TABLE>
[FN]
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 34
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS
October 31, 1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 41,329 $ 17,719
Canadian government securities 6,654 7,533
Trade accounts receivable - less allowance of
$2,918 for doubtful items ($847 in 1997) 113,931 81,582
Inventories 64,851 44,892
Deferred tax asset 13,355 5,719
Prepaid expenses and other 16,626 15,473
Total current assets 256,746 172,918
LONG-TERM ASSETS
Goodwill - less amortization 123,677 17,352
Other long-term assets 27,395 22,022
151,072 39,374
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 9,067 6,884
Land 17,294 11,139
Buildings 60,839 139,713
Machinery and equipment 505,236 424,177
Capital projects in progress 17,045 17,546
Accumulated depreciation (287,936) (261,662)
421,545 337,797
$829,363 $550,089
</TABLE>
[FN]
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 35
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
October 31, 1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Outstanding checks in excess of funds on
deposit $ 6,951 $ 5,122
Accounts payable 38,410 30,589
Current portion of long-term obligations -- 8,504
Accrued payrolls and employee benefits 9,859 9,502
Restructuring reserves 32,411 4,319
Other current liabilities 10,604 2,372
Total current liabilities 98,235 60,408
LONG-TERM LIABILITIES
Long-term obligations 235,000 43,648
Deferred tax liability 36,412 29,740
Postretirement benefit liability 25,554 --
Other long-term liabilities 17,230 16,155
Total long-term liabilities 314,196 89,543
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,936 9,739
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,909,672 shares
(10,900,672 in 1997)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 12,001,793 shares
Treasury stock, at cost (41,858) (41,868)
Class A Common Stock: 10,231,288 shares
(10,240,288 in 1997)
Class B Common Stock: 5,278,207 shares
Retained earnings 456,898 437,550
Cumulative translation adjustment (8,044) (5,283)
416,932 400,138
$829,363 $550,089
</TABLE>
[FN]
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 36
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
For the years ended October 31, 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 33,104 $ 18,086 $ 42,747
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 39,686 31,926 26,420
Deferred income taxes (964) 4,703 9,308
Gain on disposals of properties, plants
and equipment, net (1,747) (7,023) (412)
Increase (decrease) in cash from changes
in certain assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable (4,271) (769) 4,831
Inventories (2,794) 9,660 6,356
Prepaid expenses and other (1,367) (2,563) 420
Other long-term assets (5,447) (11,719) (75)
Outstanding checks in excess of funds on
deposit 1,829 3,979 (1,840)
Accounts payable (467) (2,170) (3,641)
Accrued payrolls and employee benefits (2,729) 130 (1,904)
Restructuring reserves 17,858 4,319 --
Other current liabilities 6,288 (6,989) 5,412
Postretirement benefit liability (1,765) -- --
Other long-term liabilities (352) (1,455) (5,716)
Net cash provided by operating activities 76,862 40,115 81,906
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired (186,472) (41,121) (284)
Disposals of investments in government
securities -- 12,585 1,481
Purchases of investments in government
securities -- (639) (1,979)
Purchases of properties, plants and
equipment (38,093) (36,193) (74,395)
Proceeds on disposals of properties,
plants and equipment 3,041 7,634 851
Net cash used in investing activities (221,524) (57,734) (74,326)
Cash flows from financing activities:
Proceeds from issuance of
long-term obligations 271,000 52,753 11,329
Payments on long-term obligations (88,152) (25,804) (3,692)
Payments on short-term obligations -- -- (6,668)
Debt issuance costs (410) -- --
Acquisitions of treasury stock -- (31) --
Exercise of stock options 207 735 --
Dividends paid (13,756) (17,208) (13,740)
Net cash provided by (used in) financing
activities 168,889 10,445 (12,771)
Effects of exchange rates on cash (617) (1,667) 139
Net increase (decrease) in cash and cash
equivalents 23,610 (8,841) (5,052)
Cash and cash equivalents at beginning
of year 17,719 26,560 31,612
Cash and cash equivalents at end of year $ 41,329 $ 17,719 $ 26,560
</TABLE>
[FN]
See accompanying notes to Consolidated Financial Statements.
<PAGE> 37
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per share amounts)
<CAPTION>
Cumulative
Capital Stock Treasury Stock Retained Translation Shareholders'
Shares Amount Shares Amount Earnings Adjustment Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
at November
1, 1995 24,075 $9,034 14,346 $(40,776) $407,665 $(3,390) $372,533
Net income 42,747 42,747
Dividends paid
(Note 5):
Class A - $.48 (5,219) (5,219)
Class B - $.71 (8,521) (8,521)
Treasury shares
acquired (1,200) 1,200 (1,091) (1,091)
Foreign currency
Translation 183 183
Balance at
October
31, 1996 22,875 $9,034 15,546 $(41,867) $436,672 $(3,207) $400,632
Net income 18,086 18,086
Dividends paid
(Note 5):
Class A - $.60 (6,526) (6,526)
Class B - $.89 (10,682) (10,682)
Treasury shares
acquired (1) 1 (31) (31)
Stock options
exercised 28 705 (28) 30 735
Foreign currency
translation (2,076) (2,076)
Balance at
October
31, 1997 22,902 $9,739 15,519 $(41,868) $437,550 $(5,283) $400,138
Net income 33,104 33,104
Dividends paid
(Note 5):
Class A - $.48 (5,235) (5,235)
Class B - $.71 (8,521) (8,521)
Stock options
exercised 9 197 (9) 10 207
Foreign currency
translation (2,761) (2,761)
Balance at
October
31, 1998 22,911 $9,936 15,510 $(41,858) $456,898 $(8,044) $416,932
</TABLE>
[FN]
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 38
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufactures industrial shipping containers and containerboard
and related products which it sells to customers in many industries
primarily in the United States, Canada and Mexico. The Company operates
over 100 locations in 28 states of the United States, three provinces of
Canada and one state of Mexico.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of Greif
Bros. Corporation and its subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The most significant estimates are
related to the allowance for doubtful accounts, expected useful lives
assigned to property, plant and equipment and goodwill, restructuring
reserves, postretirement benefits, income taxes and contingencies. Actual
amounts could differ from those estimated.
Revenue Recognition
Revenue is recognized when goods are shipped.
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". In accordance
with this statement, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, as measured by enacted tax rates that are
expected to be in effect in the periods which the deferred tax liabilities
and assets are expected to be settled or realized.
<PAGE> 39
Item 8. Financial Statements and Supplementary Data (continued)
Cash and Cash Equivalents
The Company considers highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents. Included
in these amounts are repurchase agreements of $23,300,000 in 1998
($9,300,000 in 1997).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of trade
accounts receivable. Such credit risk is considered by management to be
limited due to the Company's many customers, none of whom are considered
principal in the total operations of the Company, doing business in a
variety of industries throughout the United States, Canada and Mexico.
Canadian Government Securities
The Canadian government securities are classified as available-for-
sale and, as such, are reported at their fair value which approximates
amortized cost.
The Company received $10,600,000 in proceeds from the sale of
available-for-sale securities in 1997. The realized gains and losses
included in income are immaterial.
Inventories
Inventories are stated at the lower of cost (approximately 90% on
last-in, first-out basis) or market. The inventories are comprised as
follows (Dollars in thousands):
<TABLE>
1998 1997
<S> <C> <C>
Finished goods $ 20,557 $ 9,833
Raw materials and work-
in-process 87,694 82,059
108,251 91,892
Reduction to state certain
inventories on last-in, first-
out basis (43,400) (47,000)
$ 64,851 $ 44,892
</TABLE>
During 1997 and 1996, the Company experienced last-in, first-out
liquidations which were deemed to be immaterial to the Consolidated
Financial Statements.
<PAGE> 40
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided by the
straight-line method over the estimated useful lives of the assets as
follows:
Years
<S> <C>
Buildings 30-45
Machinery and equipment 3-19
</TABLE>
[FN]
Expenditures for repairs and maintenance are charged to expense as
incurred.
Depletion on timber properties is computed on the basis of cost and
the estimated recoverable timber acquired.
When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related
allowance accounts. Gains or losses are credited or charged to income as
incurred.
Internal Use Software
In 1998, the Company adopted Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". Internal use software is software that is acquired,
internally developed or modified solely to meet the entity's needs and for
which, during the software's development or modification, a plan does not
exist to market the software externally. Costs incurred to develop the
software during the application development stage, upgrades and
enhancements that provide additional functionality should be capitalized.
Adoption of SOP 98-1 did not have a significant impact on the Company's
financial position or results of operations.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen to twenty-
five year periods. Amortization expense was $3,547,000 in 1998, $1,032,000
in 1997 and $20,000 in 1996. Accumulated amortization was $4,599,000 at
October 31, 1998 ($1,052,000 at October 31, 1997).
The Company's policy is to periodically review its goodwill and other
long-lived assets based upon the evaluation of such factors as the
occurrence of a significant adverse event or change in the environment in
which the business operates or if the expected future net cash flows
(undiscounted and without interest) would become less than the carrying
amount of the asset. An impairment loss would be recorded in the period
such determination is made based on the fair value of the related
businesses.
<PAGE> 41
Item 8. Financial Statements and Supplementary Data (continued)
Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long-term obligations approximate their fair values. The
carrying amounts of the interest rate swap agreements are zero at October
31, 1998 and $(13,000) at October 31, 1997. The fair values of the interest
rate swap agreements are $(7,020,000) at October 31, 1998 and $(514,000) at
October 31, 1997.
The fair values of the long-term obligations are estimated based on
current rates available to the Company for debt of the same remaining
maturities. The fair values of the interest rate swap agreements have been
determined by the counterparties.
The Company uses interest rate swaps for the purpose of hedging its
exposure to fluctuations in interest rates. The swaps meet the requirements
of designation and correlation for use of the accrual method of accounting.
Differentials in the swapped amounts are recorded as adjustments of the
underlying periodic cash flows that are being hedged.
Foreign Currency Translation
In accordance with SFAS No. 52, "Foreign Currency Translation", the
assets and liabilities denominated in foreign currency are translated into
U.S. dollars at the current rate of exchange existing at year-end and
revenues and expenses are translated at the average monthly exchange rates.
The cumulative translation adjustments, which represent the effects of
translating assets and liabilities of the Company's foreign operations, are
presented in the Consolidated Statements of Changes in Shareholders'
Equity. The transaction gains and losses included in income are
immaterial.
Earnings Per Share
During 1998, the Company adopted SFAS No. 128, "Earnings Per Share".
The provisions of SFAS No. 128 have been retroactively applied to 1997 and
1996.
The Company has two classes of common stock and, as such, applies the
"two-class method" of computing earnings per share as prescribed in SFAS
No. 128. In accordance with the statement, earnings are allocated first to
Class A and Class B Common Stock to the extent that dividends are actually
paid and the remainder allocated assuming all of the earnings for the
period have been distributed in the form of dividends.
<PAGE> 42
<TABLE>
Item 8. Financial Statements and Supplementary Data (continued)
The following is a reconciliation of the shares used to calculate
basic and diluted earnings per share:
<CAPTION>
For the year ended October 31,
1998 1997 1996
<S> <C> <C> <C>
Class A Common Stock:
Basic earnings per share 10,905,692 10,878,233 10,873,172
Assumed conversion of stock
options 69,014 16,670 13,904
Diluted earnings per share 10,974,706 10,894,903 10,887,076
Class B Common Stock:
Basic and diluted earnings per
share 12,001,793 12,001,793 12,021,793
</TABLE>
[FN]
There are 12,000 options that are antidilutive for 1998 (298,600 for
1997 and 164,100 for 1996).
Environmental Cleanup Costs
The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernable. Expenditures which extend the
life of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a
site by site basis and records a liability at the time when it is probable
and can be reasonably estimated. The Company's estimated liability is
reduced to reflect the anticipated participation of other potentially
responsible parties in those instances where it is probable that such
parties are legally responsible and financially capable of paying their
respective shares of the relevant costs.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
1998 presentation.
Recent Accounting Standards
During 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 130, which will not be effective until 1999 for the Company,
requires companies to present comprehensive income, which is comprised of
net income and other charges and credits to equity that are not the result
of transactions with the owners, in its financial statements. Currently,
the only item in addition to net income that would be included in
comprehensive income is the cumulative translation adjustment.
<PAGE> 43
Item 8. Financial Statements and Supplementary Data (continued)
SFAS No. 131, which will not be effective until 1999 for the Company,
requires that reporting segments be redefined in terms of a company's
operating segments. The impact on the presentation of the Company's
segments has not yet been determined.
In February 1998, the FASB issued SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits - an amendment
to FASB Statements No. 87, No. 88 and No. 106", which is effective in 1999
for the Company. The statement requires the Company to revise disclosures
about pension and other postretirement benefit plans. SFAS No. 132 will not
affect the Company's results of operations, however, the impact on the
presentation of the Company's Notes to Consolidated Financial Statements
has not been determined.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective in 2000 for the
Company. The statement requires that all derivatives be recorded in the
balance sheet as either assets or liabilities and be measured at fair
value. The accounting for changes in fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The
Company has not determined what impact SFAS No. 133 will have on the
Consolidated Financial Statements.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement
between the Company and Sonoco Products Company ("Sonoco"), the Company
acquired the industrial containers business of Sonoco by purchasing all of
the outstanding shares of KMI Continental Fibre Drum, Inc., a Delaware
corporation ("KMI"), Sonoco Plastic Drum, Inc., an Illinois corporation
("SPD"), GBC Holding Co., a Delaware corporation ("GBC Holding"), and Fibro
Tambor, S.A. de C.V., a Mexican corporation ("Fibro Tambor") and the
membership interest of Sonoco in Total Packaging Systems of Georgia, LLC, a
Delaware limited liability company ("TPS"). KMI, SPD, GBC Holding, Fibro
Tambor, TPS and their respective subsidiaries are in the business of
manufacturing and selling plastic and fibre drums principally in the United
States and Mexico and refurbishing and reconditioning plastic drums
principally in the United States and Mexico.
On March 30, 1998, the Company entered into an agreement with Sonoco
to acquire its intermediate bulk containers business, which the parties
intend to finalize as soon as receipt of necessary approvals are obtained.
Pending receipt of such approvals, the Company markets and sells
intermediate bulk containers for Sonoco under a distributorship agreement.
<PAGE> 44
Item 8. Financial Statements and Supplementary Data (continued)
As consideration for the shares of KMI, SPD, GBC Holding and Fibro
Tambor and the membership interest of Sonoco in TPS, the Company paid
$185,395,000 in cash. In addition, the Company paid $1,218,000 in legal and
professional fees related to the acquisition. The acquisition was funded
through new long-term obligations (see Note 4).
The acquisition of the industrial containers business of Sonoco has
been accounted for using the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets purchased
and liabilities assumed based upon their fair values at the date of
acquisition. The fair values of the tangible assets acquired and the
liabilities assumed were $129,504,000 and $52,298,000 respectively. The
excess of the purchase price over the fair values of the net assets
acquired of $109,407,000 has been recorded as goodwill. The Company's
purchase price allocation has not been finalized with respect to certain
employee benefit and tax matters which could possibly reduce goodwill up to
$10 million. The goodwill is being amortized on a straight-line basis over
twenty-five years based on consideration regarding the age of the acquired
companies, their customers and the risk of obsolescence of their products.
The Consolidated Financial Statements include the operating results of
the acquired businesses from the date of acquisition. In addition, the
income resulting from the distributorship agreement relating to the
intermediate bulk containers business has been included in the Consolidated
Financial Statements since March 30, 1998. However, the income related to
the intermediate bulk containers business has not been reflected in the pro
forma figures prior to that time. The following summarized pro forma
(unaudited) information assumes the acquisition had occurred on November 1,
1996 (Dollars in thousands, except per share amounts):
<TABLE>
For the year
ended October 31,
1998 1997
<S> <C> <C>
Net sales $871,969 $830,912
Net income $ 30,876 $ 15,425
Basic and diluted earnings per share:
Class A Common Stock $ 1.07 $ .54
Class B Common Stock $ 1.60 $ .80
</TABLE>
[FN]
The above amounts reflect adjustments for interest expense related to the
debt issued for the purchase, amortization of goodwill and depreciation
expense on the revalued property, plant and equipment.
<PAGE> 45
Item 8. Financial Statements and Supplementary Data (continued)
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the
transactions occurred at November 1, 1996, nor are they necessarily
indicative of future results.
In November 1996, the Company purchased the assets of Aero Box
Company, a corrugated container company, located in Michigan. In March
1997, the Company acquired the assets of two steel drum manufacturing
plants located in California and Ontario, Canada. In May 1997, the Company
purchased all of the outstanding common stock of Independent Container,
Inc., a corrugated container company with two locations in Kentucky and a
location in Indiana. In June 1997, the Company purchased all of the
outstanding common stock of Centralia Container, Inc., located in Illinois.
The prior year acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets purchased and liabilities assumed based upon the
fair values at the date of acquisition. The excess of the purchase price
over the fair values of the net assets acquired has been recorded as
goodwill. The Consolidated Financial Statements include the operating
results of each business from the date of acquisition. Pro forma results
of operations have not been presented because the results of these
acquisitions were not significant to the Company.
In February 1997, the Company sold its injection molding plant in
Ohio. In addition, the Company sold its wood component facilities, which
manufactured door panels, wood moldings and window and door parts, with
locations in Kentucky, California, Washington and Oregon in August 1997.
The transactions resulted in a gain of $3.7 million which is included in
other income.
NOTE 3 - RESTRUCTURING COSTS
During the third quarter of 1998, the Company approved a plan to
consolidate some of its locations in order to improve operating
efficiencies and capabilities. The plan was the result of a study to
determine whether certain locations, either existing or newly acquired,
should be closed or relocated to a different facility. Eighteen existing
fibre drum, steel drum and corrugated container plants will be closed. As
a result, the Company recognized a pretax restructuring charge of
approximately $27.5 million, consisting of $20.9 million in employee
separation costs (approximately 500 employees) and $6.6 million in other
anticipated facility closing and disposition costs. The Company expects to
sell its owned facilities. As of October 31, 1998, the Company has paid
approximately $2.7 million consisting primarily of severance payments. The
Company expects the remaining liability of $24.8 million to be expended in
connection with the ongoing consolidation effort during 1999.
<PAGE> 46
Item 8. Financial Statements and Supplementary Data (continued)
In addition, in connection with the consolidation plan, five locations
purchased as part of the industrial containers business of Sonoco (see Note
2) will also be closed. Accordingly, the Company recognized a $9.5 million
restructuring liability related to these locations. The liability
consisted of $6.1 million in employee separation costs (approximately 100
employees) and $3.4 million in other anticipated facility closing and
disposition costs. The Company expects to sell its owned facilities. As of
October 31, 1998, the Company has paid approximately $1.9 million
consisting primarily of severance payments. The Company believes the
remaining liability of $7.6 million will be expended in connection with the
ongoing consolidation during 1999.
During the fourth quarter of 1997, the Company adopted a plan to
consolidate its operations. This plan included the relocation of certain
key operating people to the corporate office. In addition, there was a
realignment of some of the administrative functions that were being
performed at the subsidiary and division offices which resulted in some
staff reductions. Finally, costs associated with the reduction of certain
support functions were incurred. As a result, a restructuring charge of
$6.2 million, consisting primarily of severance benefits, was recorded in
the results of operations. As of October 31, 1998, all expenditures
related to the charge have been made and the liability accordingly
eliminated.
NOTE 4 - LONG-TERM OBLIGATIONS
<TABLE>
The Company's long-term obligations, which are primarily with banks,
include the following as of October 31 (Dollars in thousands):
<CAPTION>
1998 1997
<S> <C> <C>
Notes payable:
Fixed rate notes - 5.91% to 9.69%, due 1998 -
2015, secured by certain equipment, real
estate, inventory and receivables $ -- $ 1,558
Variable rate notes - LIBOR plus .25% to .49%
or Prime Rate plus 1%, due 1999 - 2004,
certain notes secured by equipment -- 35,544
Revolving credit agreement and lines of
credit:
Variable rate - tied to LIBOR or Prime Rate,
expiring in 2003 (in 2000 for 1997) 235,000 15,050
Total 235,000 52,152
Less: current portion -- 8,504
Long-term obligations $235,000 $43,648
</TABLE>
<PAGE> 47
Item 8. Financial Statements and Supplementary Data (continued)
On March 30, 1998, the Company entered into a credit agreement with
various financial institutions, as banks, and KeyBank National Association,
as agent, which provides a revolving credit facility of up to $325 million.
The Company is required to pay a facility fee each quarter equal to .025%
to .050% of the total commitment amount based upon the Company's leverage
ratio. As of October 31, 1998, the Company has borrowed $235 million
primarily to purchase the industrial containers business of Sonoco and to
consolidate all of the Company's other long-term borrowings. The costs
associated with consolidation of the Company's debt are not material to the
results of operations. The interest rate is either based on the prime rate
or LIBOR rate plus a calculated margin amount (.28% at October 31, 1998).
Interest resets on a quarterly basis. At October 31, 1998, the interest
rate is 5.50%. The revolving credit loans are due on March 31, 2003,
however, management intends to extend a portion of the debt beyond that
date.
At October 31, 1998, the Company has outstanding $6.8 million in
letters of credit under the credit agreement. The quarterly fee related to
these letters of credit is .03% of the outstanding amount plus a calculated
margin (.28% at October 31, 1998).
The revolving credit facility contains certain covenants. Under the
most restrictive of these covenants, the Company is required to maintain a
certain leverage ratio, sufficient coverage of interest expense and a
minimum net worth. In addition, the Company is limited with respect to
additional debt. Finally, there are certain non-financial covenants
including sales of assets, financial reporting, mergers and acquisitions,
investments, change in control and Employee Retirement Income Security Act
compliance.
During 1998, the Company entered into an interest rate swap agreement
with a notional amount of $140 million, expiring on March 30, 2008, which
periodically reduces through 2008. The Company entered into another swap
agreement during 1998 with a notional amount of $20 million, expiring on
October 31, 2001. The interest rate swaps were entered into to manage the
Company's exposure to its variable rate debt. Under the agreements, the
Company receives interest quarterly from the counterparty equal to the
LIBOR rate and pays interest quarterly to the counterparty at a fixed rate
of 6.15% and 5.22% for the $140 million and $20 million swap agreements,
respectively. The differentials to be currently paid or received under
these agreements are recorded as an adjustment to interest expense and are
included in interest receivable or payable. The adjustment to interest
expense resulting from the differencials was an increase of $348,000 during
1998.
<PAGE> 48
Item 8. Financial Statements and Supplementary Data (continued)
During 1997, the Company entered into interest rate swap agreements
with aggregate notional amounts of $32.7 million without the exchange of
underlying principal. Under such agreements, the Company received interest
from the counterparties equal to amounts incurred under its existing
variable rate debt and paid interest to the counterparties at fixed rates
ranging from 6.43% to 7.39%. During 1998, all of these swap agreements
were terminated. The amounts paid by the Company to terminate these
agreements were immaterial to the Consolidated Financial Statements.
Annual maturities of long-term obligations are $235 million in 2003.
During 1998, the Company paid $11,500,000 of interest ($3,726,000 in
1997 and $862,000 in 1996) related to the long-term obligations. Interest
of $344,000 in 1998, $1,163,000 in 1997 and $569,000 in 1996 was
capitalized.
The Company has entered into non-cancelable operating leases for
buildings, trucks and computer equipment. The future minimum lease payments
for the non-cancelable operating leases are $5,164,000 in 1999, $4,312,000
in 2000, $3,890,000 in 2001, $2,589,000 in 2002, $1,864,000 in 2003 and
$2,762,000 thereafter. Rent expense was $8,615,000 in 1998, $5,684,000 in
1997 and $3,592,000 in 1996.
NOTE 5 - CAPITAL STOCK
Class A Common Stock is entitled to cumulative dividends of 1 cent a
share per year after which Class B Common Stock is entitled to non-
cumulative dividends up to 1/2 cent a share per year. Further distribution
in any year must be made in proportion of 1 cent a share for Class A Common
Stock to 1 1/2 cents a share for Class B Common Stock. The Class A Common
Stock shall have no voting power nor shall it be entitled to notice of
meetings of the shareholders, all rights to vote and all voting power being
vested exclusively in the Class B Common Stock unless four quarterly
cumulative dividends upon the Class A Common Stock are in arrears. There
is no cumulative voting.
NOTE 6 - STOCK OPTIONS
The Company has an Incentive Stock Option Plan ("Option Plan") which
provides the discretionary granting of incentive stock options to key
employees and non-statutory options for non-employees. The aggregate
number of the Company's Class A Common Stock which options may be granted
shall not exceed 1,000,000 shares. Under the terms of the Option Plan,
options are granted at exercise prices equal to the market value on the
date the options are granted and become exercisable two years after date of
grant. Options expire ten years after date of grant.
<PAGE> 49
Item 8. Financial Statements and Supplementary Data (continued)
A Directors' Stock Option Plan ("Directors' Plan") which was adopted
in 1996, provides the granting of stock options to Directors who are not
employees of the Company. The aggregate number of the Company's Class A
Common Stock which options may be granted may not exceed 100,000 shares.
Under the terms of the Directors' Plan, options are granted at exercise
prices equal to the market value on the date options are granted and become
exercisable immediately. Options expire ten years after date of grant.
In 1998, 206,275 incentive stock options were granted with option
prices of $31.75 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $36.53 per share.
In 1997, 136,500 incentive stock options were granted with option
prices of $30.00 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.50 per share.
In 1996, 152,100 incentive stock options were granted with option
prices of $29.62 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.00 per share.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its stock option plans. If compensation cost would have been
determined based on the fair values at the date of grant under SFAS No.
123, "Accounting for Stock-Based Compensation", pro forma net income and
earnings per share would have been as follows (Dollars in thousands, except
per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net income $31,718 $17,232 $42,534
Basic earnings per share:
Class A Common Stock $ 1.10 $ .60 $ 1.48
Class B Common Stock $ 1.64 $ .89 $ 2.20
Diluted earnings per share:
Class A Common Stock $ 1.10 $ .60 $ 1.47
Class B Common Stock $ 1.64 $ .89 $ 2.20
</TABLE>
<PAGE> 50
<TABLE>
Item 8. Financial Statements and Supplementary Data (continued)
The fair value for each option is estimated on the date of grant using
the Black-Scholes option pricing model, as allowed under SFAS No. 123, with
the following assumptions:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Dividend yield 1.36% 1.31% 1.16%
Volatility rate 22.00% 20.60% 29.20%
Risk-free interest rate 5.36% 6.29% 6.52%
Expected option life 6 years 6 years 6 years
</TABLE>
The fair value of shares granted were $9.08, $9.03 and $10.95 at
October 31, 1998, 1997 and 1996, respectively. Stock option activity was
as follows (Shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Beginning
balance 456 $28.26 374 $27.25 210 $25.38
Granted 218 32.01 148 30.04 164 29.62
Forfeited 6 29.63 38 27.11 -- --
Exercised 9 22.94 28 25.79 -- --
Expired -- -- -- -- -- --
Ending balance 659 $29.56 456 $28.26 374 $27.25
</TABLE>
As of October 31, 1998, the outstanding stock options had exercise
prices ranging from $22.94 to $36.53 and a remaining weighted average
contractual life of 8.42 years.
There are 317,000 options which were exercisable at October 31, 1998
(181,000 options at October 31, 1997).
<PAGE> 51
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
NOTE 7 - INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
State
U.S. and
Federal Foreign Local Total
<S> <C> <C> <C> <C>
1998:
Current $15,755 $ 2,768 $ 3,039 $21,562
Deferred 1,763 -- (842) 921
$17,518 $ 2,768 $ 2,197 $22,483
1997:
Current $ 3,617 $ 2,097 $ 1,607 $ 7,321
Deferred 4,087 (96) 107 4,098
$ 7,704 $ 2,001 $ 1,714 $11,419
1996:
Current $11,330 $ 3,075 $ 1,630 $16,035
Deferred 7,903 (59) 1,070 8,914
$19,233 $ 3,016 $ 2,700 $24,949
</TABLE>
[FN]
Foreign income before income taxes amounted to $6,212,000 in 1998
($5,241,000 in 1997 and $7,729,000 in 1996).
<TABLE>
The following is a reconciliation of the U.S. Federal statutory income
tax rate to the Company's effective tax rate:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal tax benefit 2.6% 3.8% 3.6%
Other 2.9% (0.1%) (1.7%)
Effective income tax rate 40.5 % 38.7% 36.9%
</TABLE>
<PAGE> 52
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):
<CAPTION>
1998 1997
<S> <C> <C>
Restructuring reserve $ 8,964 $ --
Other 4,391 5,729
Current deferred tax asset $13,355 $ 5,729
Current deferred tax liability $ -- $ 10
Book basis on acquired assets $10,108 $10,159
Postretirement benefit liability 8,237 --
Other 2,496 2,249
Long-term deferred tax asset $20,841 $12,408
Property, plant and equipment $41,896 $35,448
Intangibles 8,410 78
Timber condemnation 3,868 3,557
Other 3,079 3,065
Long-term deferred tax liability $57,253 $42,148
</TABLE>
[FN]
At October 31, 1998 and 1997, the Company has provided deferred income
taxes on all of its undistributed Canadian earnings.
[FN]
During 1998, the Company paid $22,697,000 in income taxes ($13,334,000
in 1997 and $10,318,000 in 1996).
NOTE 8 - RETIREMENT PLANS
The Company has non-contributory defined benefit pension plans that
cover most of its employees. These plans include plans self-administered
by the Company along with Union administered multi-employer plans. The
self-administered hourly and Union plans' benefits are based primarily upon
years of service. The self-administered salaried plans' benefits are based
primarily on years of service and earnings. The Company contributes an
amount that is not less than the minimum funding nor more than the maximum
tax-deductible amount to these plans. The plans' assets consist of
unallocated insurance contracts, equity securities, government obligations
and the allowable amount of the Company's stock (127,752 shares of Class A
Common Stock and 80,355 shares of Class B Common Stock at October 31, 1998
and 1997).
<PAGE> 53
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The pension expense for the plans included the following (Dollars in
thousands):
1998 1997 1996
<S> <C> <C> <C>
Service cost, benefits earned during
the year $ 2,956 $ 2,714 $ 2,648
Interest cost on projected benefit
obligation 4,584 4,548 4,277
Actual return on assets (3,280) (8,986) (6,404)
Net amortization (2,721) 3,974 1,759
1,539 2,250 2,280
Multi-employer and non-U.S. pension
expense 386 370 593
Total pension expense $ 1,925 $ 2,620 $ 2,873
</TABLE>
[FN]
The range of weighted average discount rates and expected long-term
rates of return on plan assets used in the actuarial valuation was 7.0% -
9.0% for 1998, 1997 and 1996. The rates of compensation increases for
salaried employees used in the actuarial valuation range from 4.0% - 6.5%
for 1998, 1997 and 1996.
<TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Consolidated Financial Statements (Dollars in thousands):
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $13,697 $34,190 $44,478 $10,636
Accumulated benefit
obligation $13,824 $34,569 $44,872 $12,279
Projected benefit obligation $18,785 $46,246 $57,438 $12,279
Plan assets at fair value $23,376 $59,836 $51,610 $10,718
Plan assets greater than
(less than) projected
benefit obligation $ 4,591 $13,590 $(5,828) $(1,561)
Unrecognized net (gain) loss (1,361) (8,942) 4,620 641
Prior service cost not yet
recognized in net periodic
pension cost 312 6,096 9,617 2,788
Adjustment required to
Recognize minimum liability -- -- (3,422) (1,048)
Unrecognized net (asset)
obligation from transition (352) (7,345) (6,099) (2,381)
Prepaid pension cost
(liability) $ 3,190 $ 3,399 $(1,112) $(1,561)
</TABLE>
<PAGE> 54
Item 8. Financial Statements and Supplementary Data (continued)
During 1998 and 1997, the Company, in accordance with the provisions
of SFAS No. 87, "Employers' Accounting for Pensions", recorded the
"adjustment required to recognize minimum liability" in other long-term
liabilities. The amount was offset in other long-term assets by an equal
amount.
In addition to the defined benefit pension plans, the Company has
several voluntary 401(k) savings plans which cover eligible employees at
least 21 years of age with one year of service. For certain plans, the
Company matches 25% of each employee's contribution, up to a maximum of 5%
or 6% of base salary. Company contributions to the 401(k) plans were
$566,000 in 1998, $350,000 in 1997 and $234,000 in 1996.
NOTE 9 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
On March 30, 1998, the Company acquired the industrial containers
business of Sonoco. As part of this acquisition, the Company assumed an
obligation to reimburse Sonoco for their actual costs incurred in providing
the postretirement health care benefits to certain employees.
Contributions by the Company are limited to an aggregate annual payment of
$1,350,000 ($1,012,500 in 1998) for eligible employees at the date of
purchase. Further, the Company is responsible for the cost of certain union
hourly employees who were not eligible at the date of closing. The Company
intends to fund these benefits from operations.
<TABLE>
Cost for the postretirement benefits include the following components
(Dollars in thousands):
<CAPTION>
1998
<S> <C>
Service cost $ 380
Interest cost 1,133
$1,513
</TABLE>
<TABLE>
The following table summarizes the postretirement liability (Dollars
in thousands):
<CAPTION>
1998
<S> <C>
Accumulated postretirement
benefit obligations:
Retired participants $(19,378)
Other participants (7,879)
(27,257)
Unrecognized net loss 1,703
Postretirement benefit liability $(25,554)
</TABLE>
<PAGE> 55
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The measurement assumes a discount rate of 6.75%. The health care
cost trend rates on gross eligible charges are as follows:
<CAPTION>
Medical Dental
<S> <C> <C>
Current trend rate 8.75% 6.75%
Ultimate trend rate 4.75% 4.75%
</TABLE>
A one percentage-point increase in the assumed health care cost trend
rates would increase the accumulated postretirement benefit liability as of
October 31, 1998 by approximately $57,000 and the total of the service and
interest cost components of net postretirement health care cost for the
year then ended by approximately $122,000.
NOTE 10 - CONTINGENT LIABILITIES
Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company, including those pertaining to
environmental, product liability, safety and health matters. While the
amounts claimed may be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist.
Therefore, it is possible that results of operations or liquidity in a
particular period could be materially affected by certain contingencies.
However, based upon the facts currently available, management believes that
the disposition of matters that are pending or asserted will not have a
materially adverse affect on the financial position of the Company.
NOTE 11 - INDUSTRY SEGEMENTS
The Company operates in two industry segments, industrial shipping
containers and materials ("Industrial Shipping Containers") and
containerboard and related products ("Containerboard").
Operations in the Industrial Shipping Containers segment involve the
production and sale of fibre, steel and plastic drums, multiwall bags and
miscellaneous items. These products are manufactured and principally sold
throughout the United States, Canada and Mexico.
Operations in the Containerboard segment involve the production and
sale of containerboard, both virgin and recycled, and related corrugated
products including corrugated sheets and corrugated containers. The
products are manufactured and sold in the United States and Canada.
In computing operating profit for the two industry segments, gain on
timber sales, interest expense, other income and expense, gains on
disposals of certain facilities and income taxes have not been allocated to
such segments. Furthermore, the restructuring costs (see Note 3) have not
been allocated to the separate segments. These amounts, excluding income
taxes, comprise "general corporate other income and expense, net".
<PAGE> 56
Item 8. Financial Statements and Supplementary Data (continued)
Each segments' operating assets are those assets used in the
manufacture and sale of Industrial Shipping Containers or Containerboard.
Corporate assets are principally cash and cash equivalents, timber
properties, corporate facilities and other.
<TABLE>
The following segment information is presented for the three years
ended October 31, 1998, except as to asset information which is as of
October 31, 1998, 1997 and 1996 (Dollars in thousands):
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net sales:
Industrial Shipping Containers $444,130 $333,005 $322,330
Containerboard 357,001 315,979 315,038
Total $801,131 $648,984 $637,368
Operating profit:
Industrial Shipping Containers $ 26,928 $ 10,687 $ 13,533
Containerboard 40,972 2,480 40,129
Total segment 67,900 13,167 53,662
General corporate other income
and expense, net 15,148 22,523 14,034
Restructuring costs 27,461 6,185 --
Income before income taxes 55,587 29,505 67,696
Income taxes 22,483 11,419 24,949
Net income $ 33,104 $ 18,086 $ 42,747
Identifiable assets:
Industrial Shipping Containers $439,614 $175,980 $166,235
Containerboard 324,052 309,373 290,009
Total segment 763,666 485,353 456,244
Corporate 65,697 64,736 56,094
Total $829,363 $550,089 $512,338
<PAGE> 57
Item 8. Financial Statements and Supplementary Data (continued)
1998 1997 1996
Depreciation expense:
Industrial Shipping Containers $ 16,092 $ 11,971 $ 11,750
Containerboard 19,305 18,371 14,509
Total segment 35,397 30,342 26,259
Corporate 188 318 89
Total $ 35,585 $ 30,660 $ 26,348
Property additions:
Industrial Shipping Containers $ 22,046 $ 3,843 $ 16,588
Containerboard 8,708 22,923 56,160
Total segment 30,754 26,766 72,748
Corporate assets 7,339 9,427 1,647
Total $ 38,093 $ 36,193 $ 74,395
</TABLE>
NOTE 12 - SUBSEQUENT EVENTS
CorrChoice Joint Venture:
On November 1, 1998, the Company entered into a Joint Venture
Agreement to form CorrChoice, Inc. ("CorrChoice"). The Joint Venture
Agreement provides for the consolidation into CorrChoice of three sheet
feeder plants of Michigan Packaging Company ("Michigan Packaging"), a
wholly-owned subsidiary of the Company, and three sheet feeder plants of
Ohio Packaging Corporation and its subsidiaries ("Ohio Packaging").
Pursuant to the terms of the Joint Venture Agreement, the Company
contributed all of its stock of Michigan Packaging and Ohio Packaging in
exchange for a 63.24% ownership interest in CorrChoice and the minority
interest contributed all of its stock of Ohio Packaging in exchange for a
36.76% ownership interest in CorrChoice. The ownership percentages of the
Company and minority interest in CorrChoice were determined by an appraisal
of Michigan Packaging and Ohio Packaging performed by an independent third
party.
The three Michigan Packaging plants are located in Mason, Michigan,
Grand Rapids, Michigan and Concord, North Carolina. The three Ohio
Packaging plants are located in Massillon, Ohio, Louisville, Kentucky and
Cincinnati, Ohio. In addition to these locations, CorrChoice plans to
establish a sheet feeder plant in the Atlanta, Georgia area.
<PAGE> 58
Item 8. Financial Statements and Supplementary Data (continued)
Prior to the formation of the joint venture, the Company accounted for
its investment in Ohio Packaging's non-voting stock under the cost method
of accounting since it had no significant influence over the operations of
Ohio Packaging. However, as a result of the Company's controlling interest
in the joint venture effective November 1, 1998, the results of which will
be consolidated, generally accepted accounting principles require the
Company to retroactively adjust the financial statements of prior years
using the equity method of accounting. The prior year adjustments will be
a $4.1 million, $3.5 million and $3.5 million increase to net income during
1998, 1997 and 1996, respectively, and will be reflected in all future
reports. As a result of the cumulative adjustments, the Company's
investment will be recorded as $49.1 million as of October 31, 1998. Based
on independent appraisals, as discussed above, the fair value of this
investment is $99.2 million.
<TABLE>
As discussed above, the Company will include the results of CorrChoice
in its Consolidated Financial Statements subsequent to November 1, 1998.
The following summarized pro forma (unaudited) information assumes the
joint venture had occurred on November 1, 1997 (Dollars in thousands,
except per share amounts):
<CAPTION>
1998
<S> <C>
Net sales $895,723
Net income $ 36,169
Basic earnings per share:
Class A Common Stock $ 1.26
Class B Common Stock $ 1.87
Diluted earnings per share:
Class A Common Stock $ 1.25
Class B Common Stock $ 1.87
</TABLE>
[FN]
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the
transactions occurred at November 1, 1997, nor are they necessarily
indicative of future results.
Abzac Joint Venture:
During December 1998, the Company and Abzac s.a., a privately held
company in France ("Abzac"), entered into a letter of intent for the
exchange of the Company's spiral core manufacturing assets for a 49% equity
interest in Abzac's fibre drum business. The Company manufactures spiral
cores at three of its Canadian locations. Abzac, at three of its locations,
manufactures fibre drums in France. The transaction is subject to due
diligence and is anticipated to be completed during the third quarter of
1999.
<PAGE> 59
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF MANAGEMENT'S RESPONSIBILITIES
To the Shareholders of
Greif Bros. Corporation
The Company's management is responsible for the financial and
operating information included in this Annual Report to Shareholders,
including the Consolidated Financial Statements of Greif Bros. Corporation
and its subsidiaries. These statements were prepared in accordance with
generally accepted accounting principles and, as such, include certain
estimates and judgments made by management.
The system of internal accounting control, which is designed to
provide reasonable assurance as to the integrity and reliability of
financial reporting, is established and maintained by the Company's
management. This system is continually reviewed by the internal auditors
of the Company. In addition, PricewaterhouseCoopers LLP, an independent
accounting firm, audits the financial statements of Greif Bros. Corporation
and its subsidiaries and considers the internal control structure of the
Company in planning and performing its audit. The Audit Committee of the
Board of Directors meets periodically with the internal auditors and
independent accountants to discuss the internal control structure and the
results of their audits.
/s/ Michael J. Gasser /s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman and Chief Executive Chief Financial Officer
Officer and Secretary
<PAGE> 60
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Greif Bros. Corporation and its subsidiaries at
October 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended October 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP Columbus, Ohio
December 4, 1998
<PAGE> 61
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 1998 and 1997 are shown
below (Dollars in thousands, except per share amounts):
<CAPTION>
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1998 1998 1998 1998
<S> <C> <C> <C> <C>
Net sales $169,697 $191,269 $218,631 $221,534
Gross profit $ 31,520 $ 37,637 $ 38,382 $ 48,700
Net income (loss) $ 9,616 $ 12,592 $ (4,467) $ 15,363
Earnings per share:
Basic:
Class A Common Stock $ .34 $ .44 $ (.15) $ .53
Class B Common Stock $ .50 $ .65 $ (.23) $ .80
Diluted:
Class A Common Stock $ .34 $ .43 $ (.15) $ .53
Class B Common Stock $ .50 $ .65 $ (.23) $ .80
Earnings per share were
calculated using the
following number of shares:
Basic:
Class A Common Stock 10,901,962 10,904,755 10,906,582 10,909,468
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
Diluted:
Class A Common Stock 10,950,796 10,977,776 10,906,582 10,957,745
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
</TABLE>
<PAGE> 62
<TABLE>
Item 8. Financial Statements and Supplementary Data (concluded)
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1997 1997 1997 1997
<S> <C> <C> <C> <C>
Net sales $152,370 $152,529 $167,062 $177,023
Gross profit $ 21,041 $ 17,608 $ 22,193 $ 25,977
Net income $ 4,485 $ 3,580 $ 4,682 $ 5,339
Earnings per share:
Basic:
Class A Common Stock $ .16 $ .12 $ .16 $ .18
Class B Common Stock $ .23 $ .19 $ .24 $ .28
Diluted:
Class A Common Stock $ .16 $ .12 $ .16 $ .18
Class B Common Stock $ .23 $ .19 $ .24 $ .28
Earnings per share were
calculated using the
following number of shares:
Basic:
Class A Common Stock 10,873,172 10,873,172 10,874,038 10,892,550
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
Diluted:
Class A Common Stock 10,889,792 10,886,060 10,883,518 10,925,198
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
</TABLE>
Prior quarter earnings per share amounts have been restated to reflect
the adoption of SFAS No. 128 (see Note 1 to the Consolidated Financial
Statements). The earnings per share were reported as $.39 and $.44 for the
Class A and Class B Common Stock, respectively, for the quarter ended
January 31, 1998, $.52 and $.58 for the Class A and Class B Common Stock,
respectively, for the quarter ended April 30, 1998 and $(.23) and $(.17)
for the Class A and Class B Common Stock, respectively, for the quarter
ended July 31, 1998. The amounts have been adjusted to the amounts reported
above to reflect the use of the "two-class method", as defined by SFAS No.
128, "Earnings Per Share".
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There has not been a change in the Company's principal independent
accountants and there were no matters of disagreement on accounting and
financial disclosure.
<PAGE> 63
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the Company and disclosures
pursuant to Item 405 of Regulation S-K is incorporated by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 1998. Information regarding the executive officers
of the Registrant may be found under the caption "Executive Officers of the
Company" in Part I, and is also incorporated by reference into this Item
10.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated
herein by reference to the Registrant's Proxy Statement, which Proxy
Statement will be filed within 120 days of October 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to Security Ownership of Certain Beneficial
Owners and Management is incorporated herein by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 1998.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the Registrant's Proxy
Statement, which Proxy Statement will be filed within 120 days of October
31, 1998.
<PAGE> 64
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
<TABLE>
<CAPTION>
(a) The following documents are filed as part of this Report:
Page
<S> <C>
(1) Financial Statements:
Consolidated Statements of Income for the three
years ended October 31, 1998 33
Consolidated Balance Sheets at October 31,
1998 and 1997 34-35
Consolidated Statements of Cash Flows
for the three years ended October 31, 1998 36
Consolidated Statements of Changes in
Shareholders' Equity for the three years
ended October 31, 1998 37
Notes to Consolidated Financial Statements 38-58
Report of Management's Responsibilities 59
Report of Independent Accountants 60
Quarterly Financial Data (Unaudited) 61-62
(2) Financial Statement Schedules:
Report of Independent Accountants on
Financial Statement Schedules 70
Consolidated Valuation and Qualifying Accounts
and Reserves (Schedule II) 71
</TABLE>
<PAGE> 65
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K (continued)
<TABLE>
<CAPTION>
(3) Exhibits:
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
<S> <C> <C>
2(a) Stock Purchase Agreement Current Report on Form 8-K dated
dated March 30, 1998, April 14, 1998, File No. 1-566
between Greif Bros. (see Exhibit 2 therein).
Corporation and Sonoco
Products Company.
2(b) Joint Venture Agreement Current Report on Form 8-K dated
dated as of November 1, November 13, 1998, File No. 1-566
1998, among CorrChoice, (see Ehibit 2 therein).
Inc., Greif Bros.
Corporation, Geoffrey A.
Jollay and R. Dean Jollay,
and John J. McLaughlin.
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October 31,
of Greif Bros. Corporation. 1997, File No. 1-566 (see Exhibit
3(a) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(b) therein).
3(c) Amendment to Amended and Included herein.
Restated By-Laws of Greif
Bros. Corporation.
10(a) Greif Bros. Corporation 1996 Registration Statement on Form S-
Directors Stock Option Plan. 8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, fiscal year ended October 31,
as Amended and Restated. 1997, File No. 1-566 (see Exhibit
10(b) therein).
10(c) Greif Bros. Corporation Included herein.
Directors Deferred
Compensation Plan.
10(d) Employment Agreement between Included herein.
Michael J. Gasser and Greif
Bros. Corporation.
<PAGE> 66
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K (continued)
If Incorporated be Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(e) Employment Agreement between Included herein.
William B. Sparks and Greif
Bros. Corporation.
10(f) Employment Agreement, as Included herein.
amended, between Charles R.
Chandler and Greif Bros.
Corporation.
10(g) Employment Agreement, as Included herein.
amended, between Joseph W.
Reed and Greif Bros.
Corporation.
10(h) Credit Agreement dated as of Current Report on Form 8-K for
March 30, 1998, among Greif April 14, 1998, File No. 1-566
Bros. Corporation, as (see Exhibit 99(b) therein).
Borrower, Various Financial
Institutions, as Banks, and
KeyBank National
Association, As Agent.
21 Subsidiaries of the Contained herein.
Registrant.
23 Consent of Contained herein.
PriceWaterhouseCoopers LLP.
24(a) Powers of Attorney for Annual Report on Form 10-K for
Michael J. Gasser, Charles the fiscal year ended October 31,
R. Chandler, Michael H. 1997, File No. 1-566 (see Exhibit
Dempsey, Naomi C. Dempsey, 24(a) therein).
Daniel J. Gunsett, Robert C.
Macauley, David J. Olderman,
William B. Sparks, Jr., and
J Maurice Struchen.
27 Financial Data Schedule Contained herein.
</TABLE>
<PAGE> 67
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(concluded)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during
the last quarter of fiscal 1998.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
The individual financial statements of the Registrant have been
omitted since the Registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements, in the
aggregate, do not have minority equity interests and/or indebtedness to any
person other than the Registrant or its consolidated subsidiaries in
amounts which exceed 5% of total consolidated assets at October 31, 1998.
<PAGE> 68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Greif Bros. Corporation
(Registrant)
Date January 25, 1999 By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael J. Gasser /s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman of the Board of Directors Chief Financial Officer and
Chief Executive Officer Secretary
(principal executive officer) (principal financial officer)
/s/ John K. Dieker Charles R. Chandler *
John K. Dieker Charles R. Chandler
Corporate Controller Member of the Board of Directors
(principal accounting officer)
Michael H. Dempsey * Naomi C. Dempsey *
Michael H. Dempsey Naomi C. Dempsey
Member of the Board of Directors Member of the Board of Directors
Daniel J. Gunsett * Robert C. Macauley *
Daniel J. Gunsett Robert C. Macauley
Member of the Board of Directors Member of the Board of Directors
David J. Olderman * William B. Sparks, Jr. *
David J. Olderman William B. Sparks, Jr.
Member of the Board of Directors Member of the Board of Directors
J Maurice Struchen *
J Maurice Struchen
Member of the Board of Directors
[Signatures continued on the next page]
<PAGE> 69
SIGNATURES (concluded)
* The undersigned, Michael J. Gasser, by signing his name hereto, does
hereby execute this Annual Report on Form 10-K on behalf of each of the
above-named persons pursuant to powers of attorney duly executed by such
persons and filed as an exhibit to this Annual Report on Form 10-K.
By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
Chief Executive Officer
Each of the above signatures is affixed as of January 25, 1999.
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Greif Bros. Corporation
Our audits of the consolidated financial statements referred to in our
report dated December 4, 1998, appearing on page 60 of this Form 10-K also
included an audit of the Financial Statement Schedules listed in Item
14(a)(2) of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements.
/s/ PricewaterhouseCoopers LLP Columbus, Ohio
December 4, 1998
<PAGE> 71
<TABLE>
SCHEDULE II
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
<CAPTION>
Charged Charged Balance
Balance at to to at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended
October 31, 1996:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $ 789 $201 $22 B $186 C $ 826
For doubtful items-
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable assets $1,486 $201 $22 $186 $1,523
Year ended
October 31, 1997:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $ 826 $431 $11 B $421 C $847
For doubtful items-
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable
assets $1,523 $431 $11 $421 $1,544
Year ended
October 31, 1998:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $1,652 A $1,489 $142 B $365 C $2,918
For doubtful items-
other notes and
accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable assets $2,349 $1,489 $142 $365 $3,615
</TABLE>
[FN]
(A) Includes an $805,000 adjustment related to the industrial containers
business of Sonoco Products Company which was acquired on March 30, 1998.
[FN]
(B) Collections of accounts previously written-off.
[FN]
(C) Accounts written-off.
<PAGE> 72
<TABLE>
EXHIBIT INDEX
<CAPTION>
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
<S> <C> <C>
2(a) Stock Purchase Agreement Current Report on Form 8-K dated
dated March 30, 1998, April 14, 1998, File No. 1-566
between Greif Bros. (see Exhibit 2 therein).
Corporation and Sonoco
Products Company.
2(b) Joint Venture Agreement Current Report on Form 8-K dated
dated as of November 1, November 13, 1998, File No. 1-566
1998, among CorrChoice, (see Exhibit 2 therein).
Inc., Greif Bros.
Corporation, Geoffrey A.
Jollay and R. Dean Jollay,
and John J. McLaughlin.
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October 31,
of Greif Bros. Corporation. 1997, File No. 1-566 (see Exhibit
3(b) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(b) therein).
3(c) Amendment to Amended and Included herein.
Restated By-Laws of Greif
Bros. Corporation.
10(a) Greif Bros. Corporation 1996 Registration Statement on Form S-
Directors Stock Option Plan. 8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, the fiscal year ended October 31,
as Amended and Restated. 1997, File No. 1-566 (see Exhibit
10(b) therein).
10(c) Greif Bros. Corporation Included herein.
Directors Deferred
Compensation Plan.
10(d) Employment Agreement between Included herein.
Michael J. Gasser and Greif
Bros. Corporation.
<PAGE> 73
EXHIBIT INDEX (concluded)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(e) Employment Agreement between Included herein.
William B. Sparks and Greif
Bros. Corporation.
10(f) Employment Agreement, as Included herein.
amended, between Charles R.
Chandler and Greif Bros.
Corporation
10(g) Employment Agreement, as Included herein.
amended, between Joseph W.
Reed and Greif Bros.
Corporation.
10(h) Credit Agreement dated as of Current Report on Form 8-K dated
March 30, 1998, among Greif April 14, 1998, File No. 1-566
Bros. Corporation, as (see Exhibit 99(b) therein).
Borrower, Various Financial
Institutions, as Banks, and
KeyBank National
Association, As Agent.
21 Subsidiaries of the Contained herein.
Registrant.
23 Consent of Contained herein.
PriceWaterhouseCoopers LLP.
24(a) Powers of Attorney for Annual Report on Form 10-K for
Michael J. Gasser, Charles the fiscal year ended october 31,
R. Chandler, Michael H. 1997, File No. 1-566 (see Ehxibit
Dempsey, Naomi C. Dempsey, 24(a) therein).
Daniel J. Gunsett, Robert C.
Macauley, David J. Olderman,
William B. Sparks, Jr., and
J Maurice Struchen.
27 Financial Data Schedule Contained herein.
</TABLE>
<PAGE> 74
EXHIBIT 3(c)
AMENDMENT TO
AMENDED AND RESTATED BY-LAWS
OF GREIF BROS. CORPORATION
RESOLVED, that Article II, Section 1, of the Company's Amended
and Restated By-Laws is hereby amended in its entirety to read as
follows:
Section 1. Number of Directors. Until changed
in accordance with the provisions of Article IX, below,
the number of directors of the Corporation shall be
nine (9).
<PAGE> 75
EXHIBIT 10(c)
GREIF BROS. CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
Effective
September 5, 1996
<PAGE> 76
EXHIBIT 10(c) (continued)
GREIF BROS. CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
(the "Plan")
I
PURPOSE
Greif Bros. Corporation (the "Company") is willing to provide
supplemental retirement benefits out of its general assets to members of
its Board of Directors (the "Board") as an incentive for those individuals
to continue their relationship with the Company and to provide them the
opportunity to defer the payment of their Board fees for retirement savings
purposes. The Company's goal is to retain and reward its Board members by
helping them to accumulate benefits for a comfortable retirement.
II
ELIGIBILITY
All members of the Board are eligible to participate in the Plan. If
you are eligible to participate in the Plan, you will sign a Deferred
Compensation Agreement which details the requirements you must satisfy to
be eligible to receive this supplemental retirement benefit from the
Company.
III
DEFERRED COMPENSATION ACCUMULATIONS
The benefits provided to Directors under their Deferred Compensation
Agreements are paid from the Company's general assets. The program is,
therefore, considered to be an "unfunded" arrangement as amounts are not
set aside or held by the Company in a trust, escrow, or similar account or
fiduciary relationship on your behalf. Each participant's rights to
benefits under the Plan are equivalent to the rights of any unsecured
general creditor of the Company. If the Company makes any investment of
funds in conjunction with this Plan, all such investments shall at all
times continue to be a part of the Company's general assets for all
purposes.
To measure the amount of the Company's obligations to a participant in
this program, the Company will maintain a bookkeeping record or account of
each participant's "Accumulations". You may elect (within 30 days of when
you first become eligible to participate in the Plan for your initial year
of participation or, for subsequent years, not later than the December 31
prior to each such year) to defer payment of a portion (minimum of 25%) or
all of your director's fees to be earned during the balance of the current
or next calendar year, as applicable, as a credit to your Accumulations.
<PAGE> 77
EXHIBIT 10(c) (continued)
If you desire, your election can continue in effect from year to year
until you change it, but any change will be effective only as of the
January 1 of the year following the year you change your election. Your
election will apply to your periodic (quarterly) fee for service on the
Board, or to fees you earn for attendance at meetings of the Board or of
any committee of the Board, or to both, as you elect. These credits to
your Accumulations, adjusted for changes in capitalization and dividends,
as described below, are known as the "Deferral Value."
Value of Your Accumulations: The amount payable to you when you
retire from the Board will be based on the value credited to your
Accumulations account. Your Deferral Value will be credited as "Phantom
Shares." "Phantom Shares" shall have a value equal to the market value
from time to time of the Company's Class A Common Stock, without par value.
The number of Phantom Shares credited to your account will be based on the
dollar amount of the fees being deferred, divided by the then current per
share value of the Company's Class A Common Stock, without par value. For
example, if you are deferring $1,000 of fees at a time when the per share
value of the Company's Class A Common Stock is $40, your account will be
credited with 25 Phantom Shares ($1,000 divided by 40 = 25).
The value of your Accumulations will be based on the value of the
Company's Class A Common Stock, without par value, as determined from time
to time. If there is a change in the capitalization structure of the
Company (e.g., due to a stock dividend, stock split, recapitalization,
merger, consolidation, etc.), then a corresponding equitable adjustment
will be made in the number of Phantom Shares credited to your account. The
Phantom Shares will also have dividend rights comparable to the Company's
Class A Common Stock, in the Company's discretion. If any dividends are
declared on the Phantom Shares, they will automatically be treated as
though they were reinvested in additional Phantom Shares. The Company also
reserves the right to adjust the earnings or other amounts credited to
your Accumulations and to determine the value of your Accumulations as of
any date by adjusting such earnings or fair market value for the Company's
tax and other costs of providing this Plan.
Hypothetical dividends and earnings credited to your account will
compensate for the postponement of the receipt of the Accumulations and
give you the benefit of tax-deferred growth of the accumulating amounts.
Under current federal income tax rules, the amounts credited to your
Accumulations, including earnings, will not be taxable income to you in the
year they are credited to your account. You, or your beneficiaries in the
event of your death, will generally be taxable on these amounts and the
credited earnings only if and when benefits are actually paid to you.
Thus, this program provides the opportunity to defer income and the payment
of income taxes.
<PAGE> 78
EXHIBIT 10(c) (continued)
IV
BENEFITS
A. Vesting. All contributions to the Plan will always be 100% "vested".
This means you will always be entitled to receive benefits from your
Accumulations.
B. Payment of Benefits.
1. Retirement Benefits. You will be eligible to receive retirement
benefits under the plan upon your retirement from the Board after
attaining age 65. Retirement benefits will generally be paid in
cash either in a single lump sum or as a monthly benefit payable
for 120 months. The amount of monthly benefit payments will
equal the amount necessary to amortize your total Accumulations
over the 120 month period. The amount payable each month will be
based alternatively on an approximately equal amortization based
on an assumed interest rate declared by the Company from time to
time during the period of distribution, or based on the actual
investment results of a like sum invested by the Company. If the
Company elects to invest funds equal to your Accumulations, the
funds shall remain an asset solely of the Company for all
purposes. In this event, monthly installments payable during a
calendar year shall be based on the fair market value of the
Company's investments as of the preceding December 31, divided by
the number of monthly installments remaining to be paid. You
must give the Company at least 30 days advance written notice of
your intention to retire and receive retirement benefits. Actual
benefit payments will begin no later than the first day of the
second month following your satisfaction of all requirements for
payment.
2. Disability Benefits. If you become totally disabled before
satisfying the requirements for retirement benefits, you will be
eligible to receive payment of the amounts credited to your
Accumulations in a single lump sum or as a monthly benefit
payable for 120 months. The amount of any monthly benefits will
be determined in the same manner as retirement benefits. For
this purpose, "total disability" means a physical or mental
condition which totally and presumably permanently prevents you
from engaging in your usual occupation or any occupation for
which you are qualified by reason of training, education, or
experience. It is up to the Company to determine whether you
qualify as being totally disabled and the Company may require you
to submit to periodic medical examinations to confirm that you
are, and continue to be, totally disabled. If your disability
ends, your disability benefit payments will stop. However, you
could continue to qualify for benefits under another provision of
the Plan.
<PAGE> 79
EXHIBIT 10(c) (continued)
3. Death Benefits. In the event of your death while receiving
benefit payments under the Plan, the Company will pay the
beneficiary or beneficiaries designated by you any remaining
payments due under the terms of your Deferred Compensation
Agreement, using the same method of distribution in effect to you
at the date of your death. In the event of death prior to
beginning to receive benefits under the Deferred Compensation
Agreement, the Company will pay benefits to your beneficiary or
beneficiaries, beginning as soon as practicable after your death.
In this case, benefits will be paid in a single lump sum or as a
monthly benefit payable for 120 months computed in the same
manner as retirement benefits. The Company will provide you with
the form for designating your beneficiary or beneficiaries. If
you fail to make a beneficiary designation, or if your designated
beneficiary predeceases you or cannot be located, any death
benefits will be paid to your estate.
4. Other Termination of Board Membership. If your membership on the
Board terminates for any reason other than retirement, death, or
total disability, then your Accumulations will be paid to you in
a single lump sum or as a monthly benefit payable for 120 months
computed in the same manner as retirement benefits, beginning as
soon as administratively practicable after your term of office
ends.
5. Payment Alternatives. Whether your benefits are payable as
single lump sum or in installments for 120 months will be
determined by an election you make when you first are eligible
for this plan. Once made, your election of a payment method may
not be changed. However, at the Company's election, or upon your
request and the Company's consent, benefits may be paid over a
shorter or longer period of time than you elected. However, no
request by you or your beneficiaries for a different payment
method will be binding on the Company, and any accelerated or
deferred payment of benefits shall be made only in the sole
discretion of the Company. In addition, the Company may alter
the payment method in effect from time to time in its discretion.
If the payment method is altered, the amount you or your
beneficiaries will receive will be computed under one of the
alternative methods for determining payment amounts provided for
under the normal installment payment form of distribution for
your Accumulations, determined by the Company in its discretion.
<PAGE> 80
EXHIBIT 10(c) (concluded)
6. Insider Trading Rules. The federal securities laws now treat
"derivative" securities, such as the Phantom Shares, as subject
to the restrictions on "insider trading." To qualify for an
exemption from the insider trading rules, Phantom Shares must be
held for at least 6 months. Therefore, distribution to you of
amounts deferred within 6 months of your retirement or other
termination from the Board will be delayed until 6 months after
the date of deferral. This special rule will not delay the
payment of amounts deferred more than 6 months before your
retirement or other termination.
V
MISCELLANEOUS PROVISIONS
A. No Right to Company Assets. As explained previously, this Directors
Deferred Compensation Plan is an unfunded arrangement and the
agreement you will enter into with the Company does not create a trust
of any kind or a fiduciary relationship between the Company and you,
your designated beneficiaries or any other person. To the extent you,
your designated beneficiaries, or any other person acquires a right to
receive payments from the Company under the Directors Deferred
Compensation Agreement that right is no greater than the right of any
unsecured general creditor of the Company.
B. Modification or Revocation. Your Directors Deferred Compensation
Agreement will continue in effect until revoked, terminated, or all
benefits are paid. However, the Deferred Compensation Agreement and
this Plan may be amended or revoked at any time, in whole or in part,
by the Company in its sole discretion. Unless you agree otherwise,
you will still be entitled to the benefit, if any, that you have
earned through the date of any amendment or revocation. Such benefits
will be payable at the times and in the amounts provided for in the
Deferred Compensation Agreement, or the Company may elect to
accelerate distribution and pay all amounts due immediately.
C. Rights Preserved. Nothing in the Deferred Compensation Agreement or
this Plan gives any director the right to continue to hold such
office. The relationship between you and the Company shall continue
to be determined by the applicable provisions of the Articles of
Incorporation and Code of Regulations of the Company and by applicable
law.
D. Controlling Documents. This is merely a summary of the key provisions
of the Deferred Compensation Agreement currently in use by the
Company. In the event of any conflict between the provisions of this
Plan and the Deferred Compensation Agreement, the agreement shall in
all cases control.
<PAGE> 81
EXHIBIT 10(d)
EMPLOYMENT CONTRACT
This Agreement by and between GREIF BROS. CORPORATION (the "Employer")
and MICHAEL J. GASSER (the "Employee"), in consideration of the mutual
covenants and agreements, the parties agree as follows:
ARTICLE 1. TERM OF EMPLOYMENT
1.01 Term. The Employer continues the employment of the Employee and
the Employee accepts such continued employment from the Employer for a
period of fifteen (15) years from November 1, 1995 unless earlier
terminated in accordance with the provisions of this Agreement provided
below.
1.02 Continuation of Employment. It is further agreed that at or
prior to the end of the term of agreement specified in Paragraph 1.01
above, the Employee may elect to continue employment under the provisions
and terms of this Agreement, on a year-to-year basis, beginning at the
beginning of the corporate fiscal year first occurring after the expiration
of the original term of the Agreement, that is, beginning November 1, 2010.
Such yearly continuation shall be at the option of the Employee up until
and including the year that the Employee shall reach the age of 65 years.
Such option shall be exercisable only for one year at a time and shall be
exercisable only within the last 60 days of the original term or of the
current extended year. Such additional yearly continuation shall be
subject to the consent of the Employer but the Employer agrees that such
consent will not be unreasonably withheld in any circumstance and will be
absolutely granted if the corporation's economic performance (as measured
by net profit, exclusive of sales or profit arising other than in the
ordinary course of business) for the period immediately prior to the
renewal period is at least seventy percent (70%) of the average economic
performance in the preceding three fiscal years. This 70% requirement shall
be suspended in times of general and substantial economic decline in the
<PAGE> 82
EXHIBIT 10(d) (continued)
principal industry or industries in which the corporation has earned its
major manufacturing income. In the event that any operations of the company
have been sold or spun off, the above 70% figure shall be adjusted
accordingly.
1.03 Modification in the Event of Change of Control. Notwithstanding
the provisions of Paragraph 1.02 above, the option of the Employee to elect
year-to-year continuation until the age of 65 shall be absolute and
unconditional in the event that control of the corporation has changed
during the term of this agreement or any extension thereof.
ARTICLE 2. EMPLOYMENT POSITION OF THE EMPLOYEE
2.01 Duties. The Employee shall be employed as chief executive of the
Corporation and shall perform such duties consistent with such office and
also such additional duties as may be assigned to such office from time to
time by the Board of Directors.
2.02 Change of Duties. In the event that the Board of Directors, with
the consent of the Employee, decides that the Employee shall have a
different responsibility and position, the other provisions of this
Agreement shall continue to apply.
2.03 Change of Duties if Employee is Disabled. If the Employee, at
any time during the term of this Agreement or any continuation
thereof, should be unable because of illness, personal injury or
other disability to perform the duties specified under this
Agreement, the Employer may assign the Employee to other duties
which the Employee may be able to perform, as determined by the
Employer in the Employer's sole discretion. If the Employee is
unwilling, as distinguished from unable, to accept the
modification of duties, this Agreement shall terminate ninety
(90) days after the Employee rejects the modification. Such
disability shall be determined by the opinion of a doctor
competent in the field.
<PAGE> 83
EXHIBIT 10(d) (continued)
2.04 Place of Employment. Except with the express consent of the
Employee, the Employee shall perform Employee's duties within the vicinity
of Delaware County, Ohio.
2.05 Scope of Employment. The Employee agrees that Employee shall
work full time for the Employer and shall devote the Employee's entire
productive time, ability and attention to the business of the Employer
during the term of this Agreement. The Employee shall not directly or
indirectly render any services of a business, commercial or professional
nature to any other person or organization, whether for compensation or
otherwise without the prior written consent of the Employer. However, this
restriction shall not apply to reasonable activities on behalf of charity
or to the usual requirements of a director for any other corporation,
whether or not related to the Employer.
Employee shall not perform any act that would injure or tend to injure
the Employer, or the Employer's reputation or any entity affiliated with
the Employer, or that entity's reputation, and the Employee recognizes that
at all times the Employee shall perform under a duty of loyalty.
ARTICLE 3. COMPENSATION
3.01 Basic Compensation. Except as otherwise provided in this
Agreement, the current salary of the Employee (including any raises
authorized by the Board of Directors within two fiscal years following
October 31, 1995) shall not be diminished in any way during the period of
Employee's employment pursuant to the terms of this Agreement. The Board
of Directors of the Employer shall retain the right to increase the salary
beyond that specified in the preceding sentence but such further increases
shall not increase the minimum guaranteed salary of the Employee.
<PAGE> 84
EXHIBIT 10(d) (continued)
3.02 Other Compensation. In addition to the salary provisions of
Paragraph 3.01 above, the Employee shall be eligible to participate in
any incentive or bonus plan adopted by the Board of Directors from time to
time, or any stock option, stock purchase, deferred compensation or any other
supplemental benefit plan, under the provisions of such plan or plans, if
the Board of Directors so desires, exclusive of any such plan adopted by or
for any subsidiary of the Employer.
ARTICLE 4. EMPLOYEE BENEFITS
4.01 Medical and Dental Benefits. The Employer agrees to include
the Employee in any life or disability plans and any hospital, surgical,
medical or dental benefit plan adopted by the Employer as of the date of
this Agreement or thereafter and in which the Employee is or would be
within the covered employee group. Such benefit shall include the
Employee's spouse and any children who qualify as the Employee's dependents
under the Internal Revenue Code.
4.02 Reimbursement of Business and Other Expenses. The Employee is
authorized to incur and will be reimbursed by the Employer for reasonable
business expenses, including expenditures for entertainment, gifts and
travel under such reasonable rules and regulations as the Employer shall
specify.
4.03 Vacation, Holidays and Sick Leave. The Employee shall be
entitled to vacation time, holidays and sick leave in accordance with any
program of the Employer or as specified by the Board of Directors.
4.04 Other Payments by the Employer. The Employer, in its
discretion, may make additional payments to, or for the benefit of, the
Employee not restricted by the foregoing provisions, in the event that such
additional payments are deemed justified by the circumstances and are in
the best interests of the Employer and its continuing business.
<PAGE> 85
EXHIBIT 10(d) (continued)
ARTICLE 5. PROPERTY RIGHTS
5.01 Inventions and Patents. The Employee agrees that Employee will
promptly and fully inform and disclose to the Employer all inventions,
designs, improvements, and discoveries that the Employee may create,
conceive, find, or participate in during the term of this Agreement that
pertain to the Employer's business or to any experimental work carried on
by the Employer, whether conceived by the Employee alone or with others and
whether or not conceived during regular working hours. All inventions,
designs, improvements, and discoveries described in the preceding sentence
shall be the exclusive property of the Employer. The Employee shall assist
the Employer in obtaining patents on all of the inventions, designs,
improvements, and discoveries deemed by the Employer to be worth of patent
and shall execute all documents and do all things necessary to obtain
letters patent, vest the Employer with full and exclusive title to them,
and protect them against infringement by others.
5.02 Trade Secrets. During the term of this Agreement, the Employee
will have access to and become familiar with various trade secrets,
consisting of formulas, patterns, devices, secret inventions, processes,
and compilations of information, records, and specifications that are owned
by the Employer and that are regularly used in the operation of the
business of the Employer. The Employee shall not disclose any of these
trade secrets, directly or indirectly, or use them in any way, either
during the term of this Agreement or at any later time, except as required
in the course of his employment. All files, records, documents, drawings,
specifications, equipment, and similar items relating to the business of
the Employer, whether prepared by the Employee or otherwise coming into his
possession, shall remain the exclusive property of the Employer and shall
not be removed from the premises of the Employer, except in the ordinary
course of the Employee's work for the Employer, nor shall copies be made by
<PAGE> 86
EXHIBIT 10(d) (continued)
the Employee of said documents (other than in the ordinary course of
business) for storage at the premises of the Employer without the prior
written consent of the Employer. Neither company documents, nor copies,
physical or of other nature, may be kept by the Employee at the Employee's
home or other site not the premises of the Employer.
5.03 Non-Competition by Employee. During the term of this Agreement,
the Employee shall not, directly or indirectly, either as an Employee,
employer, consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any manner
with the business of the Employer. During the term of this Agreement and
for a period of three years after termination of this Agreement, the
Employee shall not, directly or indirectly, solicit for employment or
employ any employee of the Employer for any reason, whether that Employee
is employed on the date of this Agreement or at any time during the term
of this Agreement, except in the case of a former employee who has had no
affiliation with the Employer for the past two years.
Except in the case of termination of employment by reason of the
breach of this Agreement by the Employer, for a period of two years after
leaving the employment of the Employer, the Employee agrees that, without
the written consent of the Employer, the Employee will not be involved,
directly or indirectly in any enterprise competitive with any business
engaged in by the Employer or its subsidiaries. The Employee further
agrees that the damages for non-performance of this covenant would be very
difficult to determine, and that injunctive relief in such cases would be
appropriate.
<PAGE> 87
EXHIBIT 10(d) (continued)
ARTICLE 6. MILITARY SERVICE
6.01 Military Training Leave. If the Employee is or becomes a member
of a military reserve or National Guard unit, Employee shall be entitled to
apply for and be granted a leave of absence for a period of fourteen (14)
days plus travel time each year to attend training camp. During this
leave, the Employee shall receive full compensation less the amount of
military base pay received, and the leave shall be in addition to any
vacation the Employee may be entitled to under this Agreement.
6.02 Compensation During Military Service. If the Employee is
involuntarily inducted into the armed forces of the United States during
the term of this Agreement, Employee shall continue to receive sixty-five
percent (65%) of Employee's salary under this Agreement, less any service
pay received. This compensation shall continue for the duration of
Employee's term in the armed forces up to a maximum of four years.
ARTICLE 7. TERMINATION
7.01 Termination by Employer for Cause. If the Employee willfully
breaches or habitually neglects the duties that the Employee is required to
perform under this Agreement, the Employer may at the Employer's option
terminate this Agreement by giving written notice of termination to the
Employee without prejudice to any other remedy to which the Employer may be
entitled either at law, in equity, or under this Agreement. No discharge
for cause under this paragraph shall be made unless the Employee is first
given written warning of such neglect or breach and given reasonable time
to correct such breach or neglect except if such breach involves the
commission of a criminal offense, in which case termination may occur
without said written warning.
<PAGE> 88
EXHIBIT 10(d) (continued)
7.02 Termination by Employer if Employee is Permanently Disabled. If
the Employee becomes permanently disabled because of sickness, physical or
mental disability, or any other reason, so that it reasonably appears that
Employee will be unable, for a continuous period of one year or more, to
complete the duties under this Agreement, the Employer shall have the
option to terminate this Agreement by giving written notice of termination
to the Employee. Such disability shall be determined by a doctor competent
in the field. Termination shall be without prejudice to any right or
remedy that the Employer or the Employee has either at law, in equity, or
under this Agreement. Termination shall not release the Employee of
Employee's obligations under Article 5 of this Agreement.
7.03 Termination by Employee in Certain Circumstances. This Agreement
may be terminated upon ninety (90) days written notice by the Employee at
Employee's option and without prejudice to any other remedy that Employee
has either at law, in equity, or under this Agreement by giving written
notice of termination to the Employer:
(1) If the Employer does not or is not able to fulfill any
of the obligations of Employer under this Agreement, and refuses to correct
said breach within a reasonable time upon having been given notice; or
(2) If Employee's status of chief executive officer of the
Employer shall change because the merger or acquisition of the Employer
renders the Employer a subsidiary of another business enterprise of which
enterprise the Employee is not the chief executive officer; or
(3) The change of voting control of the Employer causes a
curtailment or restriction of the Employee's privileges, autonomy or
authority to manage the Employer as presently enjoyed by the Employee.
<PAGE> 89
EXHIBIT 10(d) (continued)
ARTICLE 8. EFFECT OF TERMINATION ON COMPENSATION
8.01 Termination by Employer. In the event the Agreement is
terminated by the Employer pursuant to Section 7.01, above, or by the
Employee under Section 7.03 above, all rights of the Employee shall be
terminated immediately except for previously earned or accrued compensation
or benefits under any incentive compensation plan and except for rights
under health, welfare, pension and life insurance plans, and except for
provisions of Articles VIII or IX and rights arising out of a breach of
this agreement.
8.02 Termination if Employee Is Disabled. In the event the Agreement
is terminated pursuant to Section 7.02, above, the Employee shall continue
to be entitled to benefits under any health or welfare plan of the Employer
and shall be assured, by the Employer that the Employee shall receive at
least sixty-five percent (65%) of the Employee's guaranteed compensation
under Paragraph 3.01 from such plans and from payments under Workmen's
Compensation, if applicable, and from any disability plan of the Employer
or insurance therefor and that if said payments shall fall short of the
guaranteed 65%, the Employer shall contribute the necessary funds to
eliminate said shortfall. Such guarantee shall continue as long as the
Employee's disability continues.
8.03 Termination by Employee. In the event that the termination
occurs because of the option of the Employee under Paragraph 7.03, above,
the Employee's guaranteed compensation shall continue to the end of the
employment term and any current extension thereof.
<PAGE> 90
EXHIBIT 10(d) (continued)
ARTICLE 9. ARBITRATION
9.01 Agreement to Submit Disputes to Arbitration on Written Request.
Any unresolved controversy between the parties involving the construction
or application of any of the terms, covenants, or conditions of this
Agreement shall be submitted to arbitration in compliance with and pursuant
to the provisions of Sections 2711.01 through 2711.24 of the Ohio Revised
Code on the written request of one party served on the other.
ARTICLE 10. BINDING EFFECT, ASSIGNMENT
10.01 Binding Effect. This Agreement shall be binding upon the
parties, their successors, personal representatives and assigns. The
Employer specifically agrees that in any merger, acquisition or sale of
substantially all of the assets of the company, or in the event of any
change of control of the Employer, the Employer is and remains obligated to
see that any successor to the Employer or any purchaser of substantially
all the assets of the company (except in proceedings under the United
States Bankruptcy Act) shall be specifically obligated by the Employer for
the benefit of the Employee to fulfill the obligations of this Agreement.
10.02 Assignment. No party may assign it rights under this Agreement
without the prior written consent of the other party, except as may be
permitted under any employee benefit plan maintained by the Employer.
ARTICLE 11. GENERAL PROVISIONS
11.01 Notices. Any notices to be given under this Agreement by
either party to the other shall be effected either by
personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed, if to the Employer, at
the Employer's principal office and, if to the Employee, at
the most recent address listed in the Employer's payroll
records, but each party may
<PAGE> 91
EXHIBIT 10(d) (continued)
adopt a new address by giving written notice in accordance with this
paragraph. Notices delivered personally shall be deemed communicated
as of actual receipt; mailed notices shall be deemed communicated as
of ten (10) days after mailing or upon the date of delivery specified
upon the return receipt, whichever is earlier.
11.02 Entire Agreement. This Agreement supersedes all other oral
and written agreements between the parties with respect to the Employer's
employment of the Employee, and this Agreement contains all of the
covenants and agreements between the parties with respect to the
employment.
11.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio.
11.04 Attorneys' Fees and Costs. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees,
costs, and necessary disbursements in addition to any other relief that may
be proper.
11.05 Payment of Moneys Due Deceased Employee. If the Employee
dies prior to the expiration of the term of employment, any moneys that may
be due him from the Employer under this Agreement as of the date of death
shall be paid to the executor, administrator, or other personal
representative of the Employee's estate.
11.06 Unenforcibility of Provisions. If any provision or provisions
of this Agreement are judicially determined to be illegal or unenforceable,
such decision shall not affect any other provisions of this Agreement,
which shall remain in full force and effect.
<PAGE> 92
EXHIBIT 10(d) (concluded)
11.07 Approval by the Directors. In the instance of an
employee who is an elected officer of the Employer the execution of
this Agreement on behalf of the corporation represents to the Employee
that this Agreement has received the approval of the Compensation
Committee of the Board of Directors and the approval of the Board of
Directors.
EMPLOYER:
GREIF BROS. CORPORATION
By: /s/ William B. Sparks, Jr.
Title: President
EMPLOYEE:
/s/ Michael J. Gasser
Michael J. Gasser
The foregoing Agreement has received the approval of the Compensation
Committee of the Board of Directors of Greif Bros. Corporation.
/s/ Robert C. Macauley
Robert C. Macauley
/s/ Naomi C. Dempsey
Naomi C. Dempsey
/s/ J Maurice Struchen
J Maurice Struchen
<PAGE> 93
EXHIBIT 10(e)
EMPLOYMENT CONTRACT
This Agreement by and between GREIF BROS. CORPORATION (the "Employer")
and WILLIAM B. SPARKS, JR. (the "Employee"), in consideration of the mutual
covenants and agreements, the parties agree as follows:
ARTICLE 1. TERM OF EMPLOYMENT
1.01 Term. The Employer continues the employment of the Employee and
the Employee accepts such continued employment from the Employer for a
period of eleven (11) years from November 1, 1995 unless earlier terminated
in accordance with the provisions of this Agreement provided below.
ARTICLE 2. EMPLOYMENT POSITION OF THE EMPLOYEE
2.01 Duties. The Employee shall be employed as president of the
corporation and shall perform such duties consistent with such office and
also such additional duties as may be assigned to such office from time to
time by the Board of Directors.
2.02 Change of Duties. In the event that the Board of Directors, with
the consent of the Employee, decides that the Employee shall have a
different responsibility and position, the other provisions of this
Agreement shall continue to apply.
2.03 Change of Duties if Employee is Disabled. If the Employee, at
any time during the term of this Agreement or any continuation thereof,
should be unable because of illness, personal injury or other disability to
perform the duties specified under this Agreement, the Employer may assign
the Employee to other duties which the Employee may be able to perform, as
determined by the Employer in the Employer's sole discretion. If the
Employee is unwilling, as distinguished from unable, to accept the
modification of duties, this Agreement shall terminate ninety (90) days
after the Employee rejects the modification. Such disability shall be
determined by the opinion of a doctor competent in the field.
<PAGE> 94
EXHIBIT 10(e) (continued)
2.04 Place of Employment. Except with the express consent of the
Employee, the Employee shall perform Employee's duties within the vicinity
of Delaware County, Ohio.
2.05 Scope of Employment. The Employee agrees that Employee
shall work full time for the Employer and shall devote the Employee's
entire productive time, ability and attention to the business of the
Employer during the term of this Agreement. The Employee shall not
directly or indirectly render any services of a business, commercial or
professional nature to any other person or organization, whether for
compensation or otherwise without the prior written consent of the
Employer. However, this restriction shall not apply to reasonable
activities on behalf of charity or to the usual requirements of a director
for any other corporation, whether or not related to the Employer.
Employee shall not perform any act that would injure or tend to injure
the Employer, or the Employer's reputation or any entity affiliated with
the Employer, or that entity's reputation, and the Employee recognizes that
at all times the Employee shall perform under a duty of loyalty.
ARTICLE 3. COMPENSATION
3.01 Basic Compensation. Except as otherwise provided in this
Agreement, the current salary of the Employee (including any raises
authorized by the Board of Directors within two fiscal years following
October 31, 1995) shall not be diminished in any way during the period of
Employee's employment pursuant to the terms of this Agreement. The Board
of Directors of the Employer shall retain the right to increase the salary
beyond that specified in the preceding sentence but such further increases
shall not increase the minimum guaranteed salary of the Employee.
<PAGE> 95
EXHIBIT 10(e) (continued)
3.02 Other Compensation. In addition to the salary provisions of
Paragraph 3.01 above, the Employee shall be eligible to participate in any
incentive or bonus plan adopted by the Board of Directors from time to
time, or any stock option, stock purchase, deferred compensation or any
other supplemental benefit plan, under the provisions of such plan or
plans, if the Board of Directors so desires, exclusive of any such plan
adopted by or for any subsidiary of the Employer.
ARTICLE 4. EMPLOYEE BENEFITS
4.01 Medical and Dental Benefits. The Employer agrees to include
the Employee in any life or disability plans and any hospital, surgical,
medical or dental benefit plan adopted by the Employer as of the date of
this Agreement or thereafter and in which the Employee is or would be
within the covered employee group. Such benefit shall include the
Employee's spouse and any children who qualify as the Employee's dependents
under the Internal Revenue Code.
4.02 Reimbursement of Business and Other Expenses. The Employee is
authorized to incur and will be reimbursed by the Employer for reasonable
business expenses, including expenditures for entertainment, gifts and
travel under such reasonable rules and regulations as the Employer shall
specify.
4.03 Vacation, Holidays and Sick Leave. The Employee shall be
entitled to vacation time, holidays and sick leave in accordance with any
program of the Employer or as specified by the Board of Directors.
4.04 Other Payments by the Employer. The Employer, in its
discretion, may make additional payments to, or for the benefit of, the
Employee not restricted by the foregoing provisions, in the event that such
additional payments are deemed justified by the circumstances and are in
the best interests of the Employer and its continuing business.
<PAGE> 96
EXHIBIT 10(e) (continued)
ARTICLE 5. PROPERTY RIGHTS
5.01 Inventions and Patents. The Employee agrees that Employee will
promptly and fully inform and disclose to the Employer all inventions,
designs, improvements, and discoveries that the Employee may create,
conceive, find, or participate in during the term of this Agreement that
pertain to the Employer's business or to any experimental work carried on
by the Employer, whether conceived by the Employee alone or with others and
whether or not conceived during regular working hours. All inventions,
designs, improvements, and discoveries described in the preceding sentence
shall be the exclusive property of the Employer. The Employee shall assist
the Employer in obtaining patents on all of the inventions, designs,
improvements, and discoveries deemed by the Employer to be worth of patent
and shall execute all documents and do all things necessary to obtain
letters patent, vest the Employer with full and exclusive title to them,
and protect them against infringement by others.
5.02 Trade Secrets. During the term of this Agreement, the Employee
will have access to and become familiar with various trade secrets,
consisting of formulas, patterns, devices, secret inventions, processes,
and compilations of information, records, and specifications that are owned
by the Employer and that are regularly used in the operation of the
business of the Employer. The Employee shall not disclose any of these
trade secrets, directly or indirectly, or use them in any way, either
during the term of this Agreement or at any later time, except as required
in the course of his employment. All files, records, documents, drawings,
specifications, equipment, and similar items relating to the business of
the Employer, whether prepared by the Employee or otherwise coming into his
possession, shall remain the exclusive property of the Employer and shall
not be removed from the premises of the Employer, except in the ordinary
course of the Employee's work for the Employer, nor shall copies be made by
the Employee of said documents (other than in the ordinary course of
<PAGE> 97
EXHIBIT 10(e) (continued)
business) for storage at the premises of the Employer without the prior
written consent of the Employer. Neither company documents, nor copies,
physical or of other nature, may be kept by the Employee at the Employee's
home or other site not the premises of the Employer.
5.03 Non-Competition by Employee. During the term of this Agreement,
the Employee shall not, directly or indirectly, either as an Employee,
employer, consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any manner
with the business of the Employer. During the term of this Agreement and
for a period of three years after termination of this Agreement, the
Employee shall not, directly or indirectly, solicit for employment or
employ any employee of the Employer for any reason, whether that Employee
is employed on the date of this Agreement or at any time during the term
of this Agreement, except in the case of a former employee who has had no
affiliation with the Employer for the past two years.
Except in the case of termination of employment by reason of the
breach of this Agreement by the Employer, for a period of two years after
leaving the employment of the Employer, the Employee agrees that, without
the written consent of the Employer, the Employee will not be involved,
directly or indirectly in any enterprise competitive with any business
engaged in by the Employer or its subsidiaries. The Employee further
agrees that the damages for non-performance of this covenant would be very
difficult to determine, and that injunctive relief in such cases would be
appropriate.
<PAGE> 98
EXHIBIT 10(e) (continued)
ARTICLE 6. MILITARY SERVICE
6.01 Military Training Leave. If the Employee is or becomes a member
of a military reserve or National Guard unit, Employee shall be entitled to
apply for and be granted a leave of absence for a period of fourteen (14)
days plus travel time each year to attend training camp. During this
leave, the Employee shall receive full compensation less the amount of
military base pay received, and the leave shall be in addition to any
vacation the Employee may be entitled to under this Agreement.
6.02 Compensation During Military Service. If the Employee is
involuntarily inducted into the armed forces of the United States during
the term of this Agreement, Employee shall continue to receive sixty-five
percent (65%) of Employee's salary under this Agreement, less any service
pay received. This compensation shall continue for the duration of
Employee's term in the armed forces up to a maximum of four years.
ARTICLE 7. TERMINATION
7.01 Termination by Employer for Cause. If the Employee willfully
breaches or habitually neglects the duties that the Employee is required to
perform under this Agreement, the Employer may at the Employer's option
terminate this Agreement by giving written notice of termination to the
Employee without prejudice to any other remedy to which the Employer may be
entitled either at law, in equity, or under this Agreement. No discharge
for cause under this paragraph shall be made unless the Employee is first
given written warning of such neglect or breach and given reasonable time
to correct such breach or neglect except if such breach involves the
commission of a criminal offense, in which case termination may occur
without said written warning.
<PAGE> 99
EXHIBIT 10(e) (continued)
7.02 Termination by Employer if Employee is Permanently Disabled. If
the Employee becomes permanently disabled because of sickness, physical or
mental disability, or any other reason, so that it reasonably appears that
Employee will be unable, for a continuous period of one year or more, to
complete the duties under this Agreement, the Employer shall have the
option to terminate this Agreement by giving written notice of termination
to the Employee. Such disability shall be determined by a doctor competent
in the field. Termination shall be without prejudice to any right or
remedy that the Employer or the Employee has either at law, in equity, or
under this Agreement. Termination shall not release the Employee of
Employee's obligations under Article 5 of this Agreement.
7.03 Termination by Employee in Certain Circumstances. This Agreement
may be terminated upon ninety (90) days written notice by the Employee at
Employee's option and without prejudice to any other remedy that Employee
has either at law, in equity, or under this Agreement by giving written
notice of termination to the Employer:
(1) If the Employer does not or is not able to fulfill any
of the obligations of Employer under this Agreement, and refuses to correct
said breach within a reasonable time upon having been given notice; or
(2) If Employee's status of president of the Employer shall
change because the merger or acquisition of the Employer renders the
Employer a subsidiary of another business enterprise of which enterprise
the Employee is not the president; or
(3) The change of voting control of the Employer causes a
curtailment or restriction of the Employee's privileges, autonomy or
authority to manage the Employer as presently enjoyed by the Employee.
<PAGE> 100
EXHIBIT 10(e) (continued)
ARTICLE 8. EFFECT OF TERMINATION ON COMPENSATION
8.01 Termination by Employer. In the event the Agreement is
terminated by the Employer pursuant to Section 7.01, above, or by the
Employee under Section 7.03 above, all rights of the Employee shall be
terminated immediately except for previously earned or accrued compensation
or benefits under any incentive compensation plan and except for rights
under health, welfare, pension and life insurance plans, and except for
provisions of Articles VIII or IX and rights arising out of a breach of
this agreement.
8.02 Termination if Employee Is Disabled. In the event the Agreement
is terminated pursuant to Section 7.02, above, the Employee shall continue
to be entitled to benefits under any health or welfare plan of the Employer
and shall be assured, by the Employer that the Employee shall receive at
least sixty-five percent (65%) of the Employee's guaranteed compensation
under Paragraph 3.01 from such plans and from payments under Workmen's
Compensation, if applicable, and from any disability plan of the Employer
or insurance therefor and that if said payments shall fall short of the
guaranteed 65%, the Employer shall contribute the necessary funds to
eliminate said shortfall. Such guarantee shall continue as long as the
Employee's disability continues.
8.03 Termination by Employee. In the event that the termination
occurs because of the option of the Employee under Paragraph 7.03, above,
the Employee's guaranteed compensation shall continue to the end of the
employment term and any current extension thereof.
<PAGE> 101
EXHIBIT 10(e) (continued)
ARTICLE 9. ARBITRATION
9.01 Agreement to Submit Disputes to Arbitration on Written Request.
Any unresolved controversy between the parties involving the construction
or application of any of the terms, covenants, or conditions of this
Agreement shall be submitted to arbitration in compliance with and pursuant
to the provisions of Sections 2711.01 through 2711.24 of the Ohio Revised
Code on the written request of one party served on the other.
ARTICLE 10. BINDING EFFECT, ASSIGNMENT
10.01 Binding Effect. This Agreement shall be binding upon the
parties, their successors, personal representatives and assigns. The
Employer specifically agrees that in any merger, acquisition or sale of
substantially all of the assets of the company, or in the event of any
change of control of the Employer, the Employer is and remains obligated to
see that any successor to the Employer or any purchaser of substantially
all the assets of the company (except in proceedings under the United
States Bankruptcy Act) shall be specifically obligated by the Employer for
the benefit of the Employee to fulfill the obligations of this Agreement.
10.02 Assignment. No party may assign it rights under this Agreement
without the prior written consent of the other party, except as may be
permitted under any employee benefit plan maintained by the Employer.
<PAGE> 102
EXHIBIT 10(e) (continued)
ARTICLE 11. GENERAL PROVISIONS
11.01 Notices. Any notices to be given under this Agreement by
either party to the other shall be effected either by personal delivery in
writing or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed, if to the Employer,
at the Employer's principal office and, if to the Employee, at the most
recent address listed in the Employer's payroll records, but each party may
adopt a new address by giving written notice in accordance with this
paragraph. Notices delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated as of ten (10)
days after mailing or upon the date of delivery specified upon the return
receipt, whichever is earlier.
11.02 Entire Agreement. This Agreement supersedes all other oral
and written agreements between the parties with respect to the Employer's
employment of the Employee, and this Agreement contains all of the
covenants and agreements between the parties with respect to the
employment.
11.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio.
11.04 Attorneys' Fees and Costs. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees,
costs, and necessary disbursements in addition to any other relief that may
be proper.
11.05 Payment of Moneys Due Deceased Employee. If the Employee
dies prior to the expiration of the term of employment, any moneys that may
be due him from the Employer under this Agreement as of the date of death
shall be paid to the executor, administrator, or other personal
representative of the Employee's estate.
<PAGE> 103
EXHIBIT 10(e) (concluded)
11.06 Unenforcibility of Provisions. If any provision or provisions
of this Agreement are judicially determined to be illegal or unenforceable,
such decision shall not affect any other provisions of this Agreement,
which shall remain in full force and effect.
11.07 Approval by the Directors. In the instance of an employee who
is an elected officer of the Employer the execution of this Agreement on
behalf of the corporation represents to the Employee that this Agreement
has received the approval of the Compensation Committee of the Board of
Directors and the approval of the Board of Directors.
EMPLOYER:
GREIF BROS. CORPORATION
By: /s/ Michael J. Gasser
Title: Chairman and CEO
EMPLOYEE:
/s/ William B. Sparks, Jr.
William B. Sparks, Jr.
The foregoing Agreement has received the approval of the Compensation
Committee of the Board of Directors of Greif Bros. Corporation.
/s/ Robert C. Macauley
Robert C. Macauley
/s/ Naomi C. Dempsey
Naomi C. Dempsey
/s/ J Maurice Struchen
J Maurice Struchen
<PAGE> 104
EXHIBIT 10(f)
September 5, 1996
Mr. Charles R. Chandler
President and Chief Operating Officer
Virginia Fibre Corporation
P.O. Box 339
Amherst, Virginia 24521
Dear Mr. Chandler:
This letter will confirm our agreement with you regarding your future
employment by Greif Bros. Corporation.
1. As of September 5, 1996, you will become an employee of Greif Bros.
Corporation ("Greif Bros."), remaining on Virginia Fibre
Corporation's payroll for the sake of simplicity through December
31, 1996. Effective January 1, 1997, you will be placed on Greif
Bros.' payroll.
2. Effective September 5, 1996, Greif Bros. Shall assume and honor all
obligations under your Employment Contract with Virginia Fibre
Corporation dated as of June 1, 1992 ("Employment Contract") with
the following modifications, effective September 5, 1996:
a. Paragraph 1 of your Employment Contract shall be modified by
deleting the provisions of Paragraph 1 and inserting a new
paragraph to the effect that Greif Bros. shall employ you as
Vice-Chairman of Greif Bros. or in such other comparable
capacity as its Board of Directors shall from time to time deem
appropriate, and you agree to continue to serve Greif Bros. as
such until August 1, 2000, unless such date shall be extended by
mutual consent, subject to the further terms and conditions of
your Employment Contract.
<PAGE> 105
EXHIBIT 10(f) (continued)
b. Paragraph 2 of your Employment Contract shall be modified to
provide that during your term of employment with Greif Bros.,
you agree to devote all of your time , attention, skill and
effort to the performance of your duty as an officer and
employee of Greif Bros. and that you agree, if elected from time
to time that you will serve as a Director of Greif Bros. or a
member of the Audit Committee of Greif Bros., or both, and any
other corporation owned or controlled by Greif Bros., and you
will perform faithfully the duties of such Directorship or
Membership without compensation in addition to that provided in
Paragraph 3 of your Employment Contract. The third and fourth
sentences of Paragraph 2 of your Employment Contract shall be
continued in full force and effect.
c. Paragraph 3 of your Employment Contract shall be modified to
provide that as long as you are employed by Greif Bros., it
shall compensate you for your service by paying you a salary
monthly at a rate of not less than $424,356.00 per year, which
shall hereinafter be called your "full base salary" for purposes
of your Employment Contract, in addition to any allowance for
(or reimbursement of) your expenses in connection with your
employment. Nothing in this modification shall prohibit Greif
Bros., in its sole discretion, from paying you more compensation
than that provided in the preceding sentence.
d. Paragraph 4 of your Employment Contract shall provide that Greif
Bros. may terminate your employment for disability as defined in
the second sentence of said Paragraph.
e. Paragraph 6 of your Employment Contract shall be modified so
that the term "Company" shall be read to mean Greif Bros.
Corporation and not Virginia Fibre Corporation.
f. Paragraph 7 of your Employment Contract shall be revised to: (i)
modify subparagraph (a) to refer to the assignment to you of
duties inconsistent with your new status as Vice-Chairman of
Greif Bros. Corporation or substantial alteration in the nature
or status of your responsibilities as of September 5, 1996; and
(ii) modify subparagraph (d) of this paragraph to refer to the
relocation of the principal office of Greif Bros. Corporation
outside the area of Delaware, Ohio.
<PAGE> 106
EXHIBIT 10(f) (continued)
g. Paragraph 10 of your Employment Contract shall be modified to
provide in subparagraph (a) thereof that Greif Bros. shall
continue to pay your full base salary, including fringe
benefits, until August 1, 2000, or you sooner die, at the rate
in effect at the date you receive notice of termination. In
addition to the benefits provided under Paragraph 10 of your
Employment Contract, you shall also be entitled to receive all
benefits payable to you under the Greif Bros. pension plan or
any other qualified or non-qualified or plan of Greif Bros. in
which you may be entitled to participate and any other plan or
agreement of Greif Bros. relating to retirement benefits to
which you are entitled to participate.
h. Greif Bros. will provide you with equivalent fringe and all
other benefits to which you are presently entitled under your
Employment Contract or make up any differential in cash payments
to you.
i. Paragraph 18 of your Employment Contract shall be revised to
make this Employment Contract also binding on Greif Bros., its
affiliates, successors, and assigns.
j. Except as modified above, all of the provisions of your
Employment Contract dated as of June 1, 1992 with Virginia Fibre
Corporation shall remain in full force and effect, except that
in event of any conflict, inconsistency, or incongruity between
the provisions of this your Employment Contract shall in all
respects govern and control.
3. Greif Bros., shall also assume and honor all obligations under your
Deferred Compensation Contract with Virginia Fibre Corporation
dated as of June 1, 1992 ("Deferred Compensation Contract"), with
the following modifications, effective as of September 5, 1996: (i)
subsection (i) of your Deferred Compensation Contract is revised to
refer to your retirement from Greif Bros.; (ii) your employment in
subsection (iii) of Paragraph 4 thereof shall, after September 4,
1996, refer to your employment with Greif Bros.; (iii) the "number
of years of your service" referred to in subparagraph (a) of
Paragraph 5 of your Deferred Compensation Contract shall include
years of service as an employee of Greif Bros. Corporation or any
affiliate thereof; and (iv) the term "Company" in Paragraph 8 shall
refer to Greif Bros. Where the context clearly requires the term
"Company" in your Deferred Compensation Contract shall, after
September 4, 1996, refer to Greif Bros. Corporation and not to
Virginia Fibre Corporation. In addition, Paragraph 12 shall be
revised to make this Deferred Compensation Contract also binding on
Greif Bros., its affiliates, successors, and assigns.
<PAGE> 107
EXHIBIT 10(f) (continued)
All other provisions of your Deferred Compensation Contract with
Virginia Fibre Corporation as of June 1, 1992 shall remain in full force
and effect except as otherwise modified herein, except in the event of any
conflict, inconsistency or incongruity between these modifications and the
provisions of the original Deferred Compensation Contract, these
modifications shall in all respects govern and control.
4. This will confirm that you shall retain all rights granted to you
under the Virginia Fibre Corporation Incentive Stock Option granted
on June 28, 1991 by Virginia Fibre Corporation.
If the foregoing terms meet with your approval, please signify your
acceptance thereof by signing and returning to me the enclosed photocopy of
this letter, which shall thereupon constitute a binding agreement between
us.
Very truly yours,
GREIF BROS. CORPORATION
By: /s/ Michael J. Gasser
ACCEPTED: ACCEPTED:
VIRGINIA FIBRE CORPORATION
/s/ Charles R. Chandler By: /s/ Michael A. Giles
Charles R. Chandler
September 24, 1996 September 24, 1996
<PAGE> 108
EXHIBIT 10(f) (continued)
As of June 1, 1992
Mr. Charles R. Chandler
President
Virginia Fibre Corporation
P.O. Box 7
Gladstone, Virginia 24553
Re: Employment Contract
Dear Mr. Chandler:
As we are all aware, you played an important part in the founding
of Virginia Fibre Corporation, in constructing its mill and in the
monumental work of making it the largest independent manufacturer of
corrugating medium in the country. You have been an employee continuously
since the Company was founded in 1972, and the successful future of the
Company depends in large part upon your remaining as its President and
Chief Operating Officer.
Accordingly, the Company would like to confirm its agreement with
you regarding your future employment by the Company, as follows:
1. The Company agrees to continue to employ you as its
President and Chief Operating Officer or in such other comparable capacity
as its Board of Directors shall from time to time deem appropriate, and you
agree to continue to serve the Company as such for a term of 15 years from
the date hereof, with the right exercisable solely by you upon written
notice to the Company prior to May 1, 2001 and each successive May 1 after
May 1, 2001 of your intention to extend the period of your employment
hereunder for a period of twelve additional months (but in no event beyond
August 1, 2006), subject to the terms and conditions hereof.
2. During the term of your employment hereunder, you agree to devote all
of your time, attention, skill and effort to the performance of your duties
as an officer and employee of the company pursuant to Paragraph 1 hereof.
You agree that, if elected from time to time, you will continue to serve as
a director or member of the Executive Committee, or both, of the
<PAGE> 109
EXHIBIT 10(f) (continued)
Company and any other corporation owned or controlled by the Company, and
you will perform faithfully the duties of such directorship or membership
without compensation in addition to that provided for in Paragraph 3 hereof
(except that you shall be entitled to the same fees, if any, for attending
meetings of the Board of Directors and committees thereof as are paid to
other directors). You may serve as a director or member of the executive
committee, or both, of any other business corporations, but you may not be
required to assume or perform duties as an officer or employee of any other
business corporation which is not owned or controlled by the Company (even
though such other corporation may own or control the Company). You may
serve without compensation as a director, officer or a member of the
executive committee of one or more not-for-profit corporations and devote
such time to your duties as such as does not conflict with your duties as
an officer and employee of the Company.
3. As long as you are employed hereunder, the Company shall
compensate you for your services by paying you a salary monthly at a rate
of not less than $275,000 per year (hereinafter called your "full base
salary"), in addition to any allowance for (or reimbursement of) your
expenses in connection with your employment. Nothing in this agreement
shall prohibit the Company, in its sole discretion, from paying you more
compensation than that provided for in the preceding sentence.
4. Notwithstanding Paragraph 1 hereof, the Company may terminate
your employment for disability. Disability shall mean that you are unable
to perform all of your duties with the Company under this agreement for a
period of more than eight (8) consecutive months due to a physical or
emotional illness or injury.
5. Your employment shall not be terminated by the fact that,
under the Company's pension plan, (i) the Company could otherwise require
you to retire, (ii) you in fact "retire" under such pension plan, or (iii)
you commence or continue to receive any pension or other benefits under
such pension plan or any deferred compensation contract with the Company by
reason of your having attained the age of 70-1/2, or otherwise.
<PAGE> 110
EXHIBIT 10(f) (continued)
6. Notwithstanding Paragraph 1 hereof, the Company may
terminate your employment for cause. Cause shall mean either of the
following:
(a) The willful and continued failure by you to
substantially perform your duties with the Company (other than
any such failure resulting from your incapacity due to physical
or mental illness or any such actual or anticipated failure
resulting from termination by you for good reason pursuant to
Paragraph 7 hereof) after a written demand for substantial
performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes
that you have not substantially performed your duties; or
(b) The willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise.
For purposes of this Paragraph, no act, or failure to act, on your part
shall be deemed "willful" unless your act or omission was not in good faith
and without reasonable belief that such act or omission was in the best
interest of the Company. Notwithstanding the foregoing, your employment
shall not be deemed to have been terminated for cause unless and until
there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board of Directors of the Company at a meeting of the
Board called and held for such purpose after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before the
Board, finding that in the good faith opinion of the Board, you were guilty
of conduct described in sub-paragraph (a) or (b) of this Paragraph.
7. Notwithstanding Paragraph 1 hereof, you shall be entitled to
terminate your employment for good reason. Good reason shall mean any of
the following without your express written consent:
(a) The assignment to you of any duties inconsistent with
your status as Chief Operating Officer of the Company or a
substantial alteration in the nature or status of your
responsibilities on the date hereof;
<PAGE> 111
EXHIBIT 10(f) (continued)
(b) A reduction by the Company in your full base salary
below the amount set forth in Paragraph 3 hereof, as adjusted in
accordance with Paragraph 4 hereof.
(c) The receipt by you of instructions, either to act or
not to act, in a manner which you believe in good faith would be
contrary to the laws of the United States or any other applicable
jurisdiction, or to constitute an unethical business, banking or
commercial transaction or improper legal, accounting or tax posi-
tion.
(d) The relocation of the principal office of the Company
outside the area of Amherst, Virginia;
(e) The failure by the Company to continue in effect any
compensation plan in which you are participating on the date
hereof, except the Company's Senior Management Bonus Plan, unless
an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made; or the failure by the Company to
continue your participation therein on substantially the same
basis as on the date hereof, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants;
(f) The failure by the Company to continue to provide you
with benefits substantially similar to those enjoyed by you under
any of the Company's pension, life insurance, medical, health and
accident, or disability plans in which you are participating on
the date hereof, or the taking of any action by the Company which
would, directly or indirectly, materially reduce any of such
benefits or deprive you of any material fringe benefit enjoyed by
you as of the date hereof;
(g) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
agreement, as contemplated by Paragraph 13 hereof; or
<PAGE> 112
EXHIBIT 10(f) (continued)
(h) Any purported termination of your employment that is
not effected pursuant to a notice of termination satisfying the
requirements of Paragraph 11 hereof (and, if applicable, the
requirements of Paragraph 6 hereof). For purposes of this
agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Paragraph 7 shall
not be affected by your incapacity due to physical or mental illness.
8. If your employment is terminated by reason of your death or
disability, your benefits shall be determined in accordance with the
insurance program, pension and deferred compensation contracts, stock
option and other agreements and programs then in effect.
9. If your employment is terminated by the Company for cause or
by you other than for good reason or disability, the Company shall pay you
your full base salary through the date of termination at the rate in effect
at the time you are given notice of termination or at the time you provide
written notice to the Company, whichever is earlier, and the Company shall
have no further obligations to you under this agreement.
10. If your employment by the Company shall be terminated (i) by
the Company other than for cause or disability or (ii) by you for good
reason, then you shall be entitled to the benefits provided below:
(a) The Company shall continue to pay your full base
salary, including fringe benefits, until August 1, 2006, or you
sooner die, at the rate in effect on the date you receive notice
of termination;
(b) Notwithstanding any provision of the Company's Senior
Management Bonus Plan, as amended from time to time, or any other
compensation arrangements then in effect, the Company shall pay
to you, not later than the fifth day following the date of
termination, a lump sum amount equal to the sum of any incentive
compensation which has been allocated or awarded to you for a
year, or other measuring period preceding the date of termination
but has not yet been paid;
<PAGE> 113
EXHIBIT 10(f) (continued)
(c) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
agreement);
(d) In addition to all other amounts payable to you under
this Paragraph, you shall be entitled to receive all benefits
payable to you under the Company's Pension Plan, Employee Thrift
Plan and any other plan or agreement relating to retirement
benefits; and
(e) You shall not be required to mitigate the amount of any
payment provided for in this Paragraph by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Paragraph be reduced by any
compensation earned by you as a result of employment by another
employer or by retirement benefits received by you after the date
of termination, or otherwise.
11. Any purported termination of your employment by the Company
or by you shall be communicated by written notice of termination to the
other party hereto. Notice of termination shall mean a notice which shall
indicate the specific termination provision of this agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated. Notices and all other communications provided for
in this agreement shall be in writing and shall be deemed to have been duly
given when delivered, or when mailed by United States registered mail
return receipt requested and postage prepaid, addressed to the respective
addresses set forth on the first page of this agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt. All notices to the Company shall be directed
to the attention of the Chairman of the Board, with a copy to the
Compensation Committee.
<PAGE> 114
EXHIBIT 10(f) (continued)
12. Date of termination shall mean (a) if your employment is
terminated for disability, thirty (30) days after notice of termination is
given or (b) if your employment is terminated for any other reason, the
date specified in the notice of termination (which, in the case of a
termination by the Company for cause pursuant to Paragraph 6 hereof shall
not be less than thirty (30) days, and in the case of a termination by you
for good reason pursuant to Paragraph 7 hereof shall not be less than sixty
(60) days, respectively, from the date such notice of termination is
given); provided that, if within thirty (30) days after any notice of
termination is given, the party receiving such notice of termination
notifies the other party that a dispute exists concerning the termination,
the date of termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable, or from which the time for
appeal has expired or from which no appeal has been perfected); provided
further that the date of termination shall be extended by such a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Company
will continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved in
accordance with this Paragraph. Amounts paid under this Paragraph are in
addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this agreement.
13. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume and agree
to perform this agreement in the same manner and to the same extent this
Company would be required to perform it if no such succession had taken
plan. Failure of the Company to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this
agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as
<PAGE> 115
EXHIBIT 10(f) (continued)
you would be entitled hereunder if you terminate your employment for good
reason following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of termination. As
used in this agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes or agrees to perform this agreement expressly, by operation of law
or otherwise, except that nothing herein shall be deemed to require you to
perform the duties of your office or position for any such successor with
respect to operations which extend materially beyond the scope of the
operations of the Company immediately prior to such succession.
14. This agreement shall be binding upon and inure to the
benefit of (i) the Company, its successor and assigns and (ii) you and your
legal representatives, but shall not be assignable by you. The agreement
shall survive the termination of your employment.
15. This agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia.
If the foregoing terms meet with your approval, please signify
your acceptance thereof by signing and returning to me the enclosed carbon
copy of this letter, which shall thereupon constitute a binding agreement
between us.
Very truly yours,
VIRGINIA FIBRE CORPORATION
By /s/ Robert C. Macauley
Robert C. Macauley
Chairman of the Board
ACCEPTED:
/s/ Charles R. Chandler
Charles R. Chandler
June 1, 1992
<PAGE> 116
EXHIBIT 10(f) (continued)
As of June 1, 1992
Mr. Charles R. Chandler
President
Virginia Fibre Corporation
P.O. Box 7
Gradstone, Virginia 24553
Re: Deferred Compensation Contract
Dear Mr. Chandler:
In a letter agreement dated August 1, 1986 as amended on February
11, 1988, September 14, 1988 and June 1, 1992, the Company agreed to employ
you, and you agreed to serve the Company for a term of 15 years [until
August 1, 2001]. You were born on August 1, 1935, and accordingly you will
be 66 years old at the termination of your employment contract on August 1,
2001.
In an agreement dated March 21, 1983, the Company agreed to
engage you as a consultant, and you agreed to serve the Company as a
consultant, commencing on the first day of the month following your
retirement under its pension plan (at or after age 65) and continuing until
the last day of the month in which you attain the age of 80. Because the
financial position of the Company now proposes to substitute a deferred
compensation arrangement, which would provide you with a more stable
retirement income, for this consulting agreement.
Accordingly, the Company would like to confirm, amend and restate
its agreements with you as follows:
1. The employment contract dated August 1, 1986, including all
subsequent amendments thereto, is confirmed.
2. The post-retirement consulting contract dated March 21, 1983 is
rescinded.
<PAGE> 117
EXHIBIT 10(f) (continued)
3. The Company agrees to compensate you for your services as an
employee, not only by paying you the salary set forth in Paragraph 3 of
your employment contract, but also by paying you deferred compensation, in
the circumstances described in Paragraph 4 hereof, commencing on (a) the
first day of the month following the month in which you attain the age of
65 or (b) on the date you retire, or the Company requires you to retire,
under the Company's pension plan (whether or not (i) you elect to defer
your pension starting date, or (ii) you commence or continue to receive any
pension under the Company's pension plan by reason of having attained the
age of 70-1/2 or otherwise), whichever is later, and continuing during the
joint lives of you and your spouse (or during your lifetime if you have no
spouse), but in no event for longer than 15 years.
4. The deferred compensation described in Paragraph 3 hereof
shall be paid in the event and only in the event that (i) you retire, or
the Company requires you to retire, under such pension plan at or after age
65, (ii) you are separated from service under the terms of such pension
plan by reason of becoming permanently disabled before you attain the age
of 65, or (iii) your employment is terminated before you attain the age of
65 under circumstances which entitle you to the benefits described in
Paragraph 10 of your employment contract. However, no deferred
compensation shall be payable under Paragraph 3 hereof by reason of your
death prior to your actual retirement. This is because you are insured
under the Company's life insurance plan as long as you remain an active
employee.
5. The amount of the deferred compensation payable to you or your
spouse during each of the first 10 years shall be equal to the
amount by which
(a) the product of (i) 2.67% of the base salary which is paid to you
by the Company pursuant to Paragraph 3 or 10 of your employment
contract during the 12 full calendar months before you attain the
age of 65 (on August 1, 2000) times (ii) the number of years of
your service as an employee of the Company (including any years
for which you are paid pursuant to Paragraph 10 of your
employment contract) prior to attaining the age of 65, exceeds
(b) your annual benefit under the Company's pension plan, determined
in accordance with Paragraph 7 hereof,
increased by an amount of interest, computed annually at a rate equal to
the average base prime rate of Citibank, N.A. during the period, if any,
between the first day of the month following the date on which you attain
age 65 and the date of your retirement. In determining the number of years
of your service, credit shall be given for a fraction of a year in the
proportion that the number of full months of employment in such year bears
to 12.
<PAGE> 118
EXHIBIT 10(f) (continued)
6. The deferred compensation payable to you or your spouse
during each of the five years following the 10-year period
described in Paragraph 5 hereof shall be at an annual rate equal to two-
thirds of the annual rate described in said Paragraph 5.
7. The annual benefit payable to you under the Company's
pension plan shall be deemed to be the annual benefit payable at age 65
under Paragraph A of Article XI of the plan (rather than Paragraph C of
said Article, even though you do not plan to retire under the plan at age
65). No adjustment shall be made in such annual benefit if a pension is
not payable to you for any reason.
8. If you are separated from the service of the Company by
reason of becoming permanently disabled prior to your retirement under the
Company's pension plan, you shall be given credit, under Paragraph 4
hereof, for your years of service up until the date of your disability or
the date on which you attained age 65, whichever is earlier, and the annual
benefit to which you are entitled under Paragraph 7 hereof, shall be deter-
mined as of the date you became disabled.
9. The Company shall not be under any obligation to insure or
otherwise fund the payment of any amounts payable under this agreement, nor
shall it be deemed a trustee in respect of any such amount, and your only
right to payment shall be that of a general creditor of the Company.
10. You may not assign, transfer, pledge, hypothecate, give or
otherwise dispose of or encumber your right or the right of your legal
representatives to any payment hereunder, and any attempt to do so by you,
whether voluntarily or by operation of law, shall be null and void.
11. The rights which you and your spouse have hereunder shall be
in addition to any rights that you or your spouse may have under any
employee benefit plan that the Company has instituted or may hereafter
institute.
12. This agreement shall be binding upon and inure to the
benefit of (i) the Company, its successors and assigns and (ii) you and
your legal representatives, but shall not be assignable by you. The
agreement shall survive the termination of your employment.
13. This agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia.
<PAGE> 119
EXHIBIT 10(f) (concluded)
If the foregoing terms meet with your approval, please signify
your acceptance thereof by signing and returning to me the enclosed
photocopy of this letter, which shall thereupon constitute a binding
agreement between us.
Very truly yours,
VIRGINIA FIBRE CORPORATION
By /s/ Robert C. Macauley
Robert C. Macauley
Chairman of the Board
ACCEPTED:
/s/ Charles R. Chandler
Charles R. Chandler
June 1, 1992
<PAGE> 120
EXHIBIT 10(g)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached
Exhibit A, is entered into between Greif Bros. Corporation ("Employer"),
and Joseph W. Reed ("Employee"), to be effective as of August 18, 1997 (the
"Effective Date").
WITNESSETH:
WHEREAS, Employer desires to employ Employee, effective as of the
Effective Date, pursuant to the terms and conditions and for the
consideration set forth in this Agreement, and Employee desires to enter
into such employment relationship pursuant to such terms and conditions and
for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer and Employee agree as
follows:
ARTICLE 1.
EMPLOYMENT AND DUTIES
1.1 Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing
until the date set forth on Exhibit A (the "Term"), subject to the terms
and conditions of this Agreement.
1.2 Employee initially shall be employed in the position set forth on
Exhibit A. Employee agrees to serve in the assigned position and to
perform diligently and to the best of Employee"s abilities the duties and
services appertaining to such position as determined by Employer, as well
as such additional or different duties and services appropriate to such
position which Employee from time to time may be reasonably directed to
perform by Employer. Employee shall at all times comply with and be
subject to such policies and procedures as Employer may establish from time
to time.
1.3 Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to
the business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes
with Employee's performance of Employee's duties hereunder, is contrary to
the interests of Employer, or requires any significant portion of
Employee's business time.
1.4 Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Employer. Employee shall not, during the Term of this
Agreement or any extension or renewal thereof, engage, directly or
indirectly, in any activity which constitutes a Conflict of Interest (as
defined below). For purposes of this Agreement: (a) "Conflict of Interest"
<PAGE> 121
EXHIBIT 10(g) (continued)
means, without limitation, any act or activity, or any interest in
connection with, or benefit from any act or activity, which is adverse to
the interests of or would in any way injure Employer or any of its
affiliates, provided that a passive investment of not more than 5% of the
outstanding equity securities of an entity whose securities are then being
regularly traded in open-market brokerage transactions (either on a stock
exchange or over-the-counter) shall not constitute a Conflict of Interest;
and (b) "directly or indirectly" means, without limitation, participation
for Employee's own account or as an owner, shareholder, partner, director,
officer, member, manager, employee, associate, creditor or agent of any
other person or organization or through Employee's spouse or other family
relation. In keeping with Employee's duties to Employer, Employee agrees
that Employee shall not knowingly become involved in a Conflict of Interest
with Employer or its affiliates, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that Employee shall
disclose to the reporting relationship person identified on Exhibit A any
facts that might involve such a Conflict of Interest that has not been
approved by Employer's Board of Directors.
ARTICLE 2.
COMPENSATION AND BENEFITS
2.1 Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A,
which shall be paid in equal or nearly equal installments in accordance
with Employer's standard payroll practice and not less frequently than
monthly. Employee's base salary shall be reviewed not less often than
annually and shall be subject to such upward adjustments as Employer may
deem appropriate in its discretion.
2.2 In addition to Employee's base salary, Employee shall be eligible
to participate in the Employer's Incentive Compensation Plan for Division
and Subsidiary Executives (the "Incentive Plan"). The summary of such
Incentive Plan is attached hereto as Exhibit B. In addition, Employee may
be awarded discretionary incentive stock options under the Employer's 1995
Incentive Stock Option Plan. The 1995 Plan and the form of Option
Agreement is attached hereto as Exhibit C.
2.3 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as
other employees of Employer, in all general employee benefit plans and
programs, including improvements or modifications of the same, which on the
Effective Date or thereafter are made available by Employer to all or
substantially all of Employer's employees. Such benefits, plans, and
programs may include, without limitation, medical, health, and dental care,
life insurance, disability protection, vacation, 401(k) and pension plans.
To the extent, but only to the extent, that any such plan or program
generally permits the participation or coverage of dependents of employees
of the Employer, the Employee's dependents may participate in or be covered
under any such plan or program. Nothing in this Agreement is to be
construed or interpreted to provide greater rights, participation,
coverage, or benefits under such benefit plans or programs than provided to
similarly situated employees pursuant to the terms and conditions of such
benefit plans and programs.
<PAGE> 122
EXHIBIT 10(g) (continued)
2.4 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing,
any employee benefit program or plan, so long as such actions are similarly
applicable to covered employees generally. Moreover, unless specifically
provided for in a written plan document adopted by the Board of Directors
of Employer, none of the benefits or arrangements described in this Article
2 shall be secured or funded in any way, and each shall instead constitute
an unfunded and unsecured promise to pay money in the future exclusively
from the general assets of Employer.
2.5 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as
may be required pursuant to any law or governmental regulation or ruling.
ARTICLE 3.
TERMINATION PRIOR TO EXPIRATION OF TERM AND
EFFECTS OF SUCH TERMINATION
3.1 Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under
this Agreement at any time prior to the expiration of the Term
for any of the following reasons:
(i) For "cause" upon the good faith determination by the
Employer that "cause" exists for the termination of the employment
relationship. As used in this Section 3.1(i), the term cause shall
mean (a) Employee's gross negligence or willful misconduct in the
performance of the duties and services required of Employee pursuant
to this Agreement; (b) Employee's final conviction of a felony or of a
misdemeanor involving moral turpitude; (c) a reasonable determination
by Employer that Employee has violated the Conflict of Interest
provisions of Section 1.4 of this Agreement and failure by Employee to
eliminate such Conflict of Interest within ten days after receipt of
written notice from Employer to do so, or, if it is impossible to
eliminate such Conflict of Interest within such ten days, failure to
commence within such ten days any action necessary to eliminate such
Conflict of Interest and thereafter to continue diligently to pursue
such action until elimination of such Conflict of Interest, within no
more than 30 days after such notice; or (d) Employee's material breach
of any material provision of this Agreement (other than Section 1.4)
that remains uncorrected for thirty (30) days following written notice
to Employee by Employer of such breach;
(ii) for any other reason whatsoever in the sole discretion of
Employer;
(iii) upon Employee's death; or
<PAGE> 123
EXHIBIT 10(g) (continued)
(iv) upon Employee's long-term disability. For purposes of this
Agreement, "long-term disability" shall have the same meaning as the
term "long-term disability" or "permanent disability" or similar term
in Employee's long-term or permanent disability policy provided by
Employer and covering Employee; provided that if there is no such
policy in effect covering Employee, "long-term disability" shall mean
that Employee has become incapacitated by accident, sickness, or other
circumstance which renders him mentally or physically incapable of
performing the duties and services required of Employee for a period
of more than 90 days out of any 180 day period.
The termination of Employee's employment by Employer prior to the
expiration of the Term shall constitute a "Termination for Cause" if made
pursuant to Section 3.1(i); the effect of such termination is specified in
Section 3.4. The termination of Employee's employment by Employer prior to
the expiration of the Term shall constitute an "Involuntary Termination" if
made pursuant to Section 3.1(ii); the effect of such termination is
specified in Section 3.5. The effect of the employment relationship being
terminated pursuant to Section 3.l (iii) as a result of Employee's death is
specified in Section 3.6. The effect of the employment relationship being
terminated pursuant to Section 3.1(iv) as a result of the Employee's long-
term disability is specified in Section 3.7.
3.2 Notwithstanding any other provisions of this Agreement except
Section 6.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of
the Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement that remains uncorrected for 30 days following written
notice of such breach by Employee to Employer; or
(ii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee prior to the
expiration of the Term shall constitute an "Involuntary Termination" if
made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.5. The termination of Employee's employment by
Employee prior to the expiration of the Term shall constitute a "Voluntary
Termination" if made pursuant to Section 3.2(ii); the effect of such
termination is specified in Section 3.3.
3.3 Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination; provided that this
Section 3.3 shall not constitute a waiver by Employee of any statutory
right or rights Employee may have to continue to receive benefits after
termination of employment. Employee shall be entitled to pro rata salary
through the date of such termination plus any other payments generally
available to other departing employees of Employer (such as unused personal
vacation, bonus and other similar items).
<PAGE> 124
EXHIBIT 10(g) (continued)
3.4 If Employee's employment hereunder shall be terminated by
Employer for Cause prior to expiration of the Term, all future compensation
to which Employee is entitled and all future benefits for which Employee is
eligible shall cease and terminate as of the date of termination; provided
that this Section 3.4 shall not constitute a waiver by Employee of any
statutory right or rights Employee may have to continue to receive benefits
after termination of employment. Employee shall be entitled to pro rata
salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (such as
unused personal vacation, bonus and other similar items).
3.5 Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall
be entitled, in consideration of Employee's continuing obligations
hereunder after such termination, to receive the compensation specified in
Section 2.l as if Employee's employment (which shall cease as of the date
of such Involuntary Termination) had continued for the full Term of this
Agreement. Furthermore, Employee shall be entitled to other payments
generally available to other departing employees of Greif (such as unused
personal vacation, bonus and other similar items). Employee may, but shall
have no duty or obligation to, seek or accept other employment following
Involuntary Termination, and if Employee accepts employment, the amounts
due Employee hereunder shall be offset and reduced by the amount of
compensation received by Employee for services rendered during the
remainder of the Term from Employee's subsequent employer(s). Employee's
rights under this Section 3.5 are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive
liability to Employee under this Agreement for any Involuntary Termination
of the employment relationship. Employee covenants not to sue or lodge any
claim, demand or cause of action against Employer for any sums for
Involuntary Termination other than those sums specified in this Section
3.5. If Employee breaches this covenant, Employer shall be entitled to
recover from Employee all sums expended by Employer (including costs and
attorneys fees) in connection with such suit, claim, demand or cause of
action.
3.6 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (such as unused personal vacation, bonus and other similar items).
3.7 Upon termination of the employment relationship as a result of
Employee's long-term disability, Employee shall be entitled to his or her
pro rata salary through the date of such termination plus any other
payments generally available to other departing employees of Employer
(e.g., unused personal vacation, bonus and other similar items).
3.8 In all cases, the compensation and benefits payable to Employee
under this Agreement upon termination of the employment relationship shall
be offset against any amounts to which Employee may otherwise be entitled
under any and all severance plans and policies of Employer or its
affiliates; provided that compensation for any accrued but unused vacation
shall not constitute a severance plan or policy of Employer under this
Agreement.
<PAGE> 125
EXHIBIT 10(g) (continued)
3.9 Termination of the employment relationship does not terminate
those obligations imposed by this Agreement that are continuing
obligations, including, without limitation, Employee's
obligations under Article 5.
ARTICLE 4.
CONTINUATION OF EMPLOYMENT BEYOND TERM;
TERMINATION AND EFFECTS OF TERMINATION
4.1 Should Employee remain employed by Employer beyond the expiration
of the Term specified on Exhibit A, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause. Upon such
termination of the employment relationship by either Employer or Employee
for any reason whatsoever, all future compensation to which Employee is
entitled and all future benefits for which Employee is eligible shall cease
and terminate. Employee shall be entitled to pro rata salary through the
date of such termination plus any other payments generally available to
other departing employees of Employer (e.g., unused personal vacation,
bonus and other similar items).
ARTICLE 5.
OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS
5.1 All information, ideas, concepts, improvements, discoveries, and
inventions, subject to or capable of patent or other forms of intellectual
property protection, which are conceived, made, developed or acquired by
Employee, individually or in conjunction with others, during the period of
and within the scope of Employee's employment by Employer (whether during
business hours or otherwise and whether on Employer's premises or
otherwise) and that relate to Employer's business, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading
terms, evaluations, opinions, interpretations, acquisition prospects, the
identity of customers or their requirements, the identity of key contacts
within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques,
prospective names, and marks) shall be disclosed to Employer and are and
shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings,
manuals, models, specifications, computer programs, maps and all other
writings or materials of any type embodying any of such information, ideas,
concepts, improvements, discoveries, and inventions are and shall be the
sole and exclusive property of Employer.
<PAGE> 126
EXHIBIT 10(g) (continued)
5.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their
products, equipment, services, and processes, procurement procedures and
pricing techniques, the names of and other information (such as credit and
financial data) concerning their customers and business affiliates, all
comprise confidential business information and trade secrets which are
valuable, special, and unique assets which Employer or its affiliates use
in their business to obtain a competitive advantage over their competitors.
Employee further acknowledges that protection of such confidential business
information and trade secrets against unauthorized disclosure and use is of
critical importance to Employer or its affiliates in maintaining their
competitive position. Employee hereby agrees that Employee will not, at
any time during or after his or her employment by Employer, make any
unauthorized disclosure of any confidential business information or trade
secrets of Employer or its affiliates, or make any use thereof, except in
the carrying out of his or her employment responsibilities hereunder. As a
result of Employee's employment by Employer, Employee may also from time to
time have access to, or knowledge of, confidential business information or
trade secrets of third parties, such as customers, suppliers, partners,
joint venturers, and the like, of Employer and its affiliates. Employee
also agrees to preserve and protect the confidentiality of such third party
confidential information and trade secrets to the same extent, and on the
same basis, as Employer's confidential business information and trade
secrets. Employee acknowledges that money damages would not be sufficient
remedy for any breach of this Article 5 by Employee, and Employer shall be
entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any
threatened breach. Such remedies shall not be deemed the exclusive
remedies for a breach of this Article 5, but shall be in addition to all
remedies available at law or in equity to Employer, including the recovery
of damages from Employee and his or her agents involved in such breach.
5.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and
remain the property of Employer or its affiliates, as the case may be.
Upon termination of Employee's employment by Employer, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to
Employer.
5.4 If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps,
architectural renditions, models, manuals, brochures, or the like) relating
to Employer's business, products, or services, whether such work is created
solely by Employee or jointly with others (whether during business hours or
otherwise and whether on Employer's premises or otherwise), Employee shall
disclose such work to Employer. Employer shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of
his or her employment but is specially ordered by Employer as a
<PAGE> 127
EXHIBIT 10(g) (continued)
contribution to a collective work, as a part of a motion picture or other
audiovisual work, as a translation, as a supplementary work, as a
compilation, or as an instructional text, then the work shall be considered
to be work made for hire and Employer shall be the author of the work. If
such work is neither prepared by the Employee within the scope of his or
her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these
presents does assign, to Employer all of Employee's worldwide right, title,
and interest in and to such work and all rights of copyright therein.
5.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in
the protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of
all formal assignment documents requested by Employer or its nominee and
the execution of all lawful oaths and applications for applications for
patents and registration of copyright in the United States and foreign
countries.
ARTICLE 6.
MISCELLANEOUS
6.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or
more intermediaries, is controlled by, or is under common control with
Employer.
6.2 For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed
to have been duly given when personally delivered or when mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Employer, to:
Greif Bros. Corporation
425 Winter Road
Delaware, Ohio 43015
Attention: Michael J. Gasser, Chairman and
Chief Executive Officer
<PAGE> 128
EXHIBIT 10(g) (continued)
If to Employee, to:
Joseph W. Reed
4 Sessions Drive
Bexley, Ohio 43209
Either Employer or Employee may furnish a change of address to the
other in writing in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.
6.3 This Agreement shall be governed in all respects by the laws of
the State of Ohio, excluding any conflict-of-law rule or principle that
might refer the construction of this Agreement to the laws of another State
or country.
6.4 No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time.
6.5 If a dispute arises out of or related to this Agreement, other
than a dispute regarding Employee's obligations under Article 5, and if the
dispute cannot be settled through direct discussions, then Employer and
Employee agree first to endeavor to settle the dispute in an amicable
manner by mediation, before having recourse to any other proceeding or
forum. Thereafter, if either party to this Agreement brings legal action
to enforce the terms of this Agreement, the party who prevails in such
legal action, whether plaintiff or defendant, in addition to the remedy or
relief obtained in such legal action shall be entitled to recover its, his,
or her expenses incurred in connection with such legal action, including,
without limitation, costs of Court and attorneys fees.
6.6 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof
to any person, association, or entity or circumstances shall, to any
extent, be construed to be invalid or unenforceable in whole or in part,
then such term, provision, covenant, or remedy shall be construed in a
manner so as to permit its enforceability under the applicable law to the
fullest extent permitted by law. In any case, the remaining provisions of
this Agreement or the application thereof to any person, association, or
entity or circumstances other than those to which they have been held
invalid or unenforceable, shall remain in full force and effect.
6.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under
Agreement hereof are personal and such rights, benefits, and obligations of
Employee shall not be voluntarily or involuntarily assigned, alienated, or
transferred, whether by operation of law or otherwise, without the prior
written consent of Employer.
<PAGE> 129
EXHIBIT 10(g) (continued)
6.8 This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered
herein: the nature of Employee's employment relationship with
Employer and the term and termination of such relationship. This
Agreement constitutes the entire agreement of the parties with
regard to such subject matters, and contains all of the
covenants, promises, representations, warranties, and agreements
between the parties with respect such subject matters. Each
party to this Agreement acknowledges that no representation,
inducement, promise, or agreement, oral or written, has been made
by either party with respect to such subject matters, which is
not embodied herein, and that no agreement, statement, or promise
relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any
modification of this Agreement will be effective only if it is in
writing and signed by each party whose rights hereunder are
affected thereby.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated
above.
GREIF BROS. CORPORATION
By: /s/ Michael J. Gasser
Michael J. Gasser
Chairman and Chief Executive Officer
This 18th day of August, 1997
EMPLOYEE
/s/ Joseph W. Reed
Joseph W. Reed
This 18th day of August, 1997
<PAGE> 130
EXHIBIT 10(g) (concluded)
EXHIBIT "A"
TO
EMPLOYMENT AGREEMENT
Employee Name: Joseph W. Reed
Term: Three (3) years after the Effective Date.
Position: Chief Financial Officer and Secretary
Reporting Relationship: Michael J. Gasser
Monthly Base Salary: $18,333.34
GREIF BROS. CORPORATION
By: /s/ Michael J. Gasser
Michael J. Gasser
Chairman and Chief Executive Officer
This 18th day of August, 1997
EMPLOYEE
/s/ Joseph W. Reed
Joseph W. Reed
This 18th day of August, 1997
<PAGE> 131
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary Incorporated Under Laws of
Barzon Corporation Delaware
CorrChoice, Inc. Ohio
Fibro Tambor, S.A. de C.V. Mexico
GPS of Georgia, LLC Georgia
Greif Bros. Corporation of Virginia Virginia
Greif Containers Inc. Canada
Greif Fibre Drum, Inc. Delaware
Greif Plastic Drum, Inc. Illinois
Greif Plastic Drum S.E. Division, Inc. Kentucky
Greif Plastic Drum S.W. Division, Inc. Texas
Soterra, Incorporated Delaware
Tainer Transport, Inc. Delaware
<PAGE> 132
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in Registration
Statements on Form S-8 (File No. 333-26767) and on Form S-8 (File No. 333-
26977) of Greif Bros. Corporation of our report dated December 4,1998
appearing on page 60 of this Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement
Schedules, which appears on page 70 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
January 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-K and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1997 OCT-31-1996
<PERIOD-END> OCT-31-1998 OCT-31-1997 OCT-31-1996
<CASH> 41,329 17,719 26,560
<SECURITIES> 6,654 7,533 19,479
<RECEIVABLES> 116,849 82,429 74,813
<ALLOWANCES> (2,918) (847) (826)
<INVENTORY> 64,851 44,892 49,290
<CURRENT-ASSETS> 256,746 172,918 185,447
<PP&E> 709,481 599,459 561,299
<DEPRECIATION> (287,936) (261,662) (249,123)
<TOTAL-ASSETS> 829,363 550,089 512,338
<CURRENT-LIABILITIES> 98,235 60,408 50,680
<BONDS> 235,000 43,648 22,748
0 0 0
0 0 0
<COMMON> 9,936 9,739 9,034
<OTHER-SE> 406,996 390,399 391,104
<TOTAL-LIABILITY-AND-EQUITY> 829,363 550,089 512,338
<SALES> 801,131 648,984 637,368
<TOTAL-REVENUES> 830,150 674,583 652,208
<CGS> 644,892 562,165 515,775
<TOTAL-COSTS> 644,892 562,165 515,775
<OTHER-EXPENSES> 117,743 80,243 68,220
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 11,928 2,670 517
<INCOME-PRETAX> 55,587 29,505 67,696
<INCOME-TAX> 22,483 11,419 24,949
<INCOME-CONTINUING> 33,104 18,086 42,747
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 33,104 18,086 42,747
<EPS-PRIMARY> 1.15<F1> .63<F1> 1.48<F1>
<EPS-DILUTED> 1.15<F1> .63<F1> 1.48<F1>
<FN> <F1> Amount represents the basic and diluted earnings per share for
the Class A Common Stock. The basic and diluted earnings per share for
the Class B Common Stock are $1.71, $.94 and $2.22 for 1998, 1997 and 1996,
respectively.
</FN>
</TABLE>
