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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended September 28, 1997
or
[ ] Transition Report pursuant to section 13 or 15 (d) of
The Securities Exchange Act of 1934
for the transition period from __________to _________.
Commission File Number 0-26178
BWAY Corporation
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-3624491
(I.R.S. Employer Identification No.)
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
(Address of principal executive offices, including zip code)
770-645-4800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $0.01 per share, registered on the New York Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), 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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
As of November 20, 1997, the aggregate market value of the voting stock held by
non-affiliates of BWAY Corporation was approximately $130,052,922.
As of November 20, 1997, there were 9,791,712 shares of BWAY Corporation's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of BWAY Corporation's Proxy Statement to be mailed to
stockholders on or about January 20, 1998 for the Annual Meeting of Stockholders
to be held on February 27, 1998 are incorporated in Part III hereof by
reference.
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BWAY CORPORATION
TABLE OF CONTENTS
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PART I Page
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Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings and Regulatory Matters 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 12
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners and Management 17
Item 13. Certain Relationships and Related Transactions 17
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 18
</TABLE>
ii
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BWAY CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 1997
PART I
Item 1. Business
--------
General
BWAY Corporation ("BWAY") (formerly known as Brockway Standard Holdings
Corporation) is a holding company whose principal subsidiaries, Brockway
Standard, Inc. ("BSI"), Brockway Standard (New Jersey), Inc., Milton Can
Company, Inc. and Brockway Standard (Ohio), Inc. (collectively the "Company")
are leading developers, manufacturers, and marketers of steel containers for the
general line category of the North American container industry.
Metal containers are currently utilized for three product categories:
beverage, food and general line (which includes containers for such products as
aerosol, paint and varnish, and automotive products). Management estimates,
based on industry data published by the Can Manufacturers Institute and the
United States Bureau of Statistics, that 1996 industry shipments totaled
approximately 99 billion units to the beverage category, 32 billion units to the
food category and 4 billion units to the general line category. Although the
general line category constitutes approximately 3% of the unit volume of metal
containers, management estimates that it represents approximately 10% of the
metal can industry revenues. Few companies compete in all three product
categories, and most of the companies which produce beverage and food cans do
not compete in the general line product categories.
The Company's principal products include a wide variety of steel cans and
pails used for packaging paint and related products, lubricants, cleaners, roof
and driveway sealants, food (principally coffee, vegetable oil and vegetable
shortening) and household and personal care aerosol products. The Company also
manufactures steel ammunition boxes and provides metal decorating services. The
Company's products are typically coated on the inside to customer specifications
based on intended use and are either decorated on the outside to customer
specifications or sold undecorated. The Company markets its products primarily
in North America. The Company's sales to customers located outside of the United
States were less than 5 percent for both fiscal 1996 and fiscal 1997. Sales are
made either by the Company's direct sales force, or third party distributors or
sales agents.
Over the past five years, the Company's net sales have grown at a compound
annual growth rate of 24.5% from approximately $134.3 million in fiscal 1992 to
approximately $402.2 million in fiscal 1997. Sales growth has been accomplished
primarily through acquisitions in the general line segment and to a lesser
extent, expanded market penetration in the sales of existing products and new
product development.
In January 1989, BWAY and BSI were formed to purchase the metal and plastic
container business of Owens-Illinois Corporation ("Owens-Illinois"). In June of
1995, BWAY completed an initial public offering ("Initial Public Offering") of
its common stock, par value $.01 per share (the "Common Stock").
The Company operates on a 52/53-week fiscal year ending on the Sunday
closest to September 30 of the applicable year. For simplicity of presentation,
the Company has presented year ends as September 30 and all other periods as the
nearest month end.
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Acquisitions
The Company completed two strategic acquisitions during fiscal 1996 and one
strategic acquisition during fiscal 1997.
On May 28, 1996, a newly created subsidiary of BWAY named Milton
Acquisition Corp. acquired all of the outstanding stock of Milton Can Company,
Inc. ("Milton Can") (the "BSNJ Acquisition"). Immediately thereafter, Milton
Acquisition Corp. changed its name to Milton Can Company, Inc. and on October
22, 1996 changed its name again to Brockway Standard (New Jersey), Inc.
("BSNJ"). BSNJ sells metal containers in the general line category of the North
American container industry, producing products similar to those of the Company.
This acquisition provided geographic expansion for the Company into the
northeast United States, enabling the Company to provide expanded coverage for
many of its products and to many of its customers. The acquired business had
revenues of approximately $55 million for the year ended December 31, 1995, and
operated three facilities, one in Peabody, Massachusetts, and two in Elizabeth,
New Jersey. The Company paid the shareholders of Milton Can approximately $29
million in approximately equal portions of cash and BWAY stock, and the Company
assumed approximately $12.3 million of debt of the acquired company, which was
retired by the Company at the time of acquisition. The transaction was accounted
for using the purchase method of accounting.
On June 17, 1996, a newly created subsidiary of BSI named Davies
Acquisition Corp. acquired substantially all of the assets of the Davies Can
division of the Van Dorn Company, a wholly-owned subsidiary of Crown Cork & Seal
Company, Inc. (the "BSO Acquisition") On June 19, 1996, Davies Acquisition Corp.
changed its name to Davies Can Company, Inc. and on March 21, 1997 changed its
name again to Brockway Standard (Ohio), Inc. ("BSO"). BSO sells metal containers
in the general line category of the North American container industry, producing
products similar to those of the Company. The acquired business had revenues of
approximately $55 million for the year ended December 31, 1995, and operated
three facilities in Covington, Georgia, Solon, Ohio and York, Pennsylvania. The
Company paid approximately $42 million in cash for the assets. The transaction
was accounted for using the purchase method of accounting.
On October 28, 1996, a newly created subsidiary of BWAY named Milton Can
Company, Inc. ("MCC"), which was incorporated on October 22, 1996, acquired the
assets of the aerosol can business of Ball Metal Food Container Corporation
("BMFCC"), a wholly owned and indirect subsidiary of Ball Corporation in an
asset purchase transaction (the "MCC Acquisition"). The acquired business had
revenues of approximately $45 million for the year ended December 31, 1995 and
operates a single manufacturing facility in Cincinnati, Ohio. MCC produces a
wide range of aerosol cans and operates a materials center providing steel
shearing, coating and lithography services ("Materials Center Services"). The
Company paid approximately $42.4 million in cash for the business. The
transaction was accounted for using the purchase method of accounting.
The operating results for BSNJ, BSO and MCC have been included in the
Company's consolidated financial statements since the date of acquisition. The
excess of the aggregate purchase price over the aggregate fair market value of
net identifiable assets acquired in the Recent Acquisitions was approximately
$79 million.
Management has committed to a plan to exit certain facilities of the
acquired companies, and integrate acquired assets and businesses with the
Company's facilities. In connection with recording the BSNJ Acquisition, BSO
Acquisition and the MCC Acquisition (collectively the "Recent Acquisitions"),
the Company established a reorganization liability of approximately $5.7 million
which was classified in other current liabilities. The liability represents the
direct costs expected to be incurred which have no future economic benefit to
the Company. These costs include charges relating to the closing of
manufacturing facilities and severance costs. As of September 28, 1997, the
Company had charged approximately $4.3 million against the reorganization
liability.
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Products and Markets
The Company participates in the container market and currently holds
leading positions in the sale of most of its general line products, other than
aerosol cans, and holds a strong position in the sale of coffee and vegetable
oil cans. The Company does not sell beverage containers. The Company also
manufactures steel ammunition boxes and provides metal decorating and container
component manufacturing services.
The following table sets forth the percentage of net sales of the Company
contributed by the product lines indicated for fiscal 1997, 1996 and 1995. The
Company's sales distribution by product line has been affected to some extent by
the Recent Acquisitions. Materials Center Services have historically accounted
for less than two percent of net sales.
<TABLE>
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Percentage of the Company's Net Sales
- -------------------------------------
Year Ended September 30,
-----------------------
Product 1997 1996 1995
------- ---- ---- ----
<S> <C> <C> <C> <C>
General Line Containers 84% 78% 73%
Food Cans 13% 17% 23%
Ammunition Boxes 3% 5% 4%
---- ---- ----
Total 100% 100% 100%
</TABLE>
General Line Products
The primary uses for the Company's containers are for paint and related
products, lubricants, cleaners, roof and driveway sealants, charcoal lighter
fluid, household and personal care products. Specific products include round
cans with rings and plugs (typical paint cans), oblong or "F" style cans
(typical paint thinner cans), specialty cans (typical PVC or rubber cement cans,
brake fluid and other automotive after-market products cans and an assortment of
other specialty containers), and pails. The Company produces a full line of
these products to serve the specific requirements of a wide range of customers.
The Company's products are typically coated on the inside to customer
specifications based on intended use, and are either decorated on the outside to
customer specifications or sold undecorated. Prior to May 1996, the only
significant general line product which the Company did not sell was aerosol
containers. The BSNJ Acquisition gave the Company a niche position in the
container market for the sale of aerosol products. The Company increased its
position for the sale of aerosol can products with the acquisition of the
aerosol can business of BMFCC. Most of the Company's products are manufactured
in facilities that are strategically located to allow the Company to deliver
product to customer filling locations for such products within a one day transit
time.
Paint Cans. The Company produces round paint cans in sizes ranging from
one-quarter pint to one gallon, with one gallon paint cans representing the
majority of all paint can sales.
Oblong or "F" Style Cans. Oblong or "F" style cans are typically used
for packaging paint thinners, lacquer thinners, turpentine, deglossers and
similar paint related products, charcoal lighter fluid, waterproofing products,
and vegetable oil. The Company produces oblong cans in sizes ranging from three
ounces to one imperial gallon.
Specialty Cans. Utility cans include small screw top cans which typically
have an applicator or brush attached to a screw cap and are used for PVC pipe
cleaner, PVC cement and rubber cement. Cone top cans are typically used for
packaging specialty oils and automotive after-market products including brake
fluid, gasoline additives and radiator flushes. The Company also produces
various specialty containers.
Aerosol Cans. Aerosol cans are typically used for packaging various
household and industrial products, including paint and related products,
personal care products, lubricants and insecticides. The Company produces a
variety of sizes, which are generally decorated to customer specifications.
Pails. Pails are typically used for packaging paint and related products,
roof and driveway sealants, marine coatings, vegetable oil, and water repellent.
Pails may be either "closed head" for easy pouring products, or "open
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head" for more viscous products, with a lid which is crimped on after filling.
The Company manufactures steel pails in sizes ranging from 2.5 to 7 gallons.
Food Products/Coffee Cans
The Company produces cans for coffee and vegetable oil with coffee
accounting for the majority of sales. The Company produces coffee cans in sizes
commonly referred to as 1 pound, 2 pound and 3 pound, and various smaller
specialty coffee can sizes and shapes. Coffee cans are generally sold to
nationally known coffee processing and marketing companies and are typically
printed to customer specifications. The Company does not sell sanitary food cans
in which soups, stews, vegetables, pie fillings and other foods are actually
cooked in the can.
Ammunition Boxes
The Company manufactures a variety of ammunition boxes. These containers
provide a hermetic seal, are coated with a corrosion-resistant finish and are
used to package small arms ammunitions and other ordnance products. The Company
sells ammunition boxes to the U.S. Department of Defense as well as to major
domestic and foreign producers of ordnance.
Materials Center Services
The Company also provides Materials Center Services for its can assembly
facilities and third party customers. To enhance its offering of Materials
Center Services, the Company has initiated a major capital investment program in
state-of-the-art lithography and coating equipment. The Company believes this
investment will significantly enhance its ability to expand third party sales of
Materials Center Services. In November 1997 the Company announced the formation
of a new strategic business unit, BMAT, to manage its Materials Center Services.
Customers
The Company sells its products to a large number of customers in numerous
industry sectors. Sales to the Company's ten largest customers accounted for
approximately 38% of sales in fiscal 1997. During fiscal 1997, sales to The
Sherwin-Williams Company accounted for approximately 10% of sales during the
period.
Raw Materials
The Company's principal raw materials consist of tinplate, blackplate and
cold rolled steel, various coatings, inks and compounds. Steel products
represent the largest component of raw material costs. Essentially all of the
Company's products are manufactured from tinplate steel, except for pails and
ammunition boxes, which are manufactured from blackplate and cold rolled steel.
Various domestic steel producers supply the Company with tinplate steel.
Procurement from suppliers depends on the suppliers' product offering, product
quality, service and price. Because a significant number of reliable suppliers
produce the steel used in the Company's process, management believes that it
would be able to obtain adequate replacement supplies in the market should one
of the current suppliers discontinue supplying the Company. The Company is
working with other companies to lower the overall cost of its steel
requirements. Tinplate consumers typically negotiate late in the year for the
next calendar year on terms of volumes and price. Terms agreed to have
historically held through the following year, but there is no assurance that
this practice will remain unchanged in the future.
Steel prices have historically been adjusted as of January 1 of a calendar
year. Most domestic tinplate and blackplate steel producers have announced a
3.0% price increase to become effective January 1, 1998. The Company has
historically arranged for raw material price increases which are lower than
those publicly announced by its suppliers, although there can be no assurances
that this practice will continue.
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In addition to steel products, the Company purchases various coatings,
inks, and compounds used in the manufacturing process. Based on ready
availability of these materials in the past and the number of current
manufacturers, management does not anticipate any shortages or supply problems
in the future.
Seasonality
Sales of certain of the Company's products are to some extent seasonal,
with sales levels generally higher in the second half of the Company's fiscal
year. On an aggregate basis, however, the Company's sales have not been
significantly affected by seasonality.
Environmental, Health and Safety Matters
The Company is subject to a broad range of federal, state and local
environmental and workplace health and safety requirements, including those
governing discharges to air and water, the handling and disposal of solid and
hazardous wastes, and the remediation of contamination associated with the
releases of hazardous substances. The Company believes that it is in substantial
compliance with all material environmental, health and safety requirements. In
the course of its operations, the Company handles hazardous substances. As is
the case with any industrial operation, if a release of hazardous substances
occurs on or from the Company's facilities or at offsite waste disposal sites,
the Company may be required to remedy such release. There were no material
capital expenditures relating to environmental compliance in fiscal 1997, and
none are expected for fiscal 1998.
Pursuant to the terms of the Company's 1989 acquisition of certain
facilities from Owens-Illinois, its fiscal 1996 acquisition of facilities from
Van Dorn Company ("Van Dorn"), the BSNJ Acquisition, and the MCC Acquisition,
the sellers in each transaction are obligated, subject to certain limitations,
to indemnify the Company for certain environmental matters related to the
facilities or businesses they conveyed. Notwithstanding such indemnifications,
the Company could bear liability in the first instance for indemnified
environmental matters, subject to obtaining reimbursement. There can be no
assurance that the Company will receive reimbursement with respect to the
indemnified environmental matters.
Environmental investigations voluntarily conducted by the Company at its
Homerville, Georgia facility in 1993 and 1994 detected certain conditions of
soil and groundwater contamination, that predated the Company's 1989 acquisition
of the facility from Owens-Illinois. Such contamination is subject to
indemnification by Owens-Illinois. The Company and Owens-Illinois have entered
into a supplemental agreement affirming Owens-Illinois's responsibility for this
matter and establishing procedures for Owens-Illinois' investigation and
remediation of the contamination. In 1994, the Georgia Department of Natural
Resources ("DNR") determined that further investigation must be completed before
DNR decides whether corrective action is needed. Owens-Illinois' investigation
of the contamination is continuing. Management does not believe that the final
resolution of this matter will have a material adverse effect on the results of
operations or financial condition of the Company.
The Cincinnati facility, which was acquired in the MCC Acquisition, is
listed on environmental agency lists as a site that may require investigation
for potential contamination. The listings could result in a requirement for the
Company to investigate and remediate the facility. To date, no agency has
required such action and the cost of any investigation or remediation can not be
reasonably estimated. BMFCC has agreed to indemnify the Company for liabilities
associated with any such required investigation or remediation as follows: (i)
BMFCC will bear the first $0.1 million of such liabilities and (ii) any
liabilities in excess of such amount will be subject to the general
environmental liability indemnification provisions of the agreement with BMFCC,
which provide that BMFCC will bear 100% of the first $0.3 million of
environmental liabilities, 80% of the next $3.0 million of environmental
liabilities, and 65% of all environmental liabilities exceeding $3.3 million.
At the Peabody, Massachusetts facility, which was previously leased by BSNJ,
groundwater remediation is underway. The owner of the facility has agreed to
retain all liability for the remediation. In addition, the former shareholders
of Milton Can, subject to certain limitations, indemnified the Company for
liabilities associated with the contamination. Management believes that none of
these matters will have a material adverse effect on the results of operations
or financial condition of the Company in light of both the potential
indemnification obligations of others to the Company and the Company's
understanding of the underlying potential liability.
The Company (and, in some cases, predecessors to the Company) have, from
time to time, received requests for information or notices of potential
responsibility pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") with respect to certain waste disposal
sites utilized by former or current facilities of the Company or its various
predecessors. To the Company's knowledge, all such matters which have not been
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resolved are, subject to certain limitations, indemnified by the sellers of the
relevant Company affiliates, and all such unresolved matters have been accepted
for indemnification by such sellers. Management believes that none of these
matters will have a material adverse effect on the results of operations or
financial condition of the Company. Because liability under CERCLA is
retroactive, it is possible that in the future the Company may incur liability
with respect to other sites.
Sales of aerosol cans currently comprise approximately 12% of the Company's
annual general line sales. Federal and certain state environmental agencies have
issued, and may in the future issue, environmental regulations which have the
effect of requiring reformulation by consumer product manufacturers (the
Company's customers) of aerosol propellants or aerosol-delivered consumer
products to mitigate air quality impacts (principally related to lower
atmosphere ozone formulation). Industry sources believe that aerosol product
manufacturers can successfully achieve any required reformulation. There can be
no assurance, however, that reformulation can be accomplished in all cases with
satisfactory results. Failure by the Company's customers to successfully achieve
such reformulation could affect the viability of aerosol cans as product
delivery containers and thereby have a material adverse effect on the Company's
sales of aerosol cans.
Competition
The markets for the Company's products are competitive and the Company faces
competition from a number of sources in most of its product lines. Competition
is based primarily on price, quality, service, and, to a lesser extent, product
innovation. The Company believes that its low cost of production and high
quality products, the geographic location of the Company facilities which
provide national coverage for most products to most customers, and its
commitment to strong customer relationships enable it to compete effectively.
Manufacturers of steel containers have historically faced competition from
other materials, primarily plastic, glass, and aluminum. Steel containers offer
a number of significant advantages over alternative materials, including fire
safety (critical in many products packaged in paint, oblong and specialty cans),
the capacity for vacuum packaging (important to coffee producers) and ability to
contain aggressive products (primarily certain solvent-based products).
Employees
As of September 28, 1997, the Company employed approximately 1,654 hourly
workers and 443 salaried employees. Certain of the Company's employees are
represented by various unions. As of September 28, 1997, BSI and its subsidiary
BSO together had approximately 240 union employees at two facilities covered by
three separate collective bargaining agreements. As of September 28, 1997, BSNJ
and its subsidiary Northeast Tinplate Company, Inc. ("NTC") had approximately
180 union employees at two facilities covered by three separate collective
bargaining agreements. As of September 28, 1997 MCC had approximately 310 union
employees at one facility covered by three separate collective bargaining
agreements.
During fiscal 1997, BSO and the International Association of Machinist and
Aerospace Workers, Local No. 233 ("IAM") representing substantially all the
hourly workers at BSO's Solon, Ohio plant agreed to renegotiate their collective
bargaining agreement which was scheduled to expire on March 7, 1998. On March
3, 1997, BSO and the members of the IAM reached agreement on a new collective
bargaining agreement that has made BSO more competitive within the industry and
provides BSO greater operating flexibility. The expiration date of the new
agreement was extended to March 7, 2001. On May 1, 1997 the labor agreement
between MCC and members of the International Union of Electronic, Electrical,
Salaried Machine and Furniture Workers, AFL-CIO Local No. 729 ("IUE") covering
approximately 50% of the hourly workers at MCC's Cincinnati, Ohio facility
expired and the union membership went on strike. On June 2, 1997, MCC and the
members of the IUE reached agreement on a new collective bargaining agreement,
expiring August 31, 2000, that has made MCC more competitive within the industry
and provides MCC greater operating flexibility. On October 15, 1997, the
collective bargaining agreements between BSNJ and the International Brotherhood
of Teamsters, Chauffeurs, Warehousemen, and Helpers of America, Local No. 1034
("Teamsters"), and NTC and the Teamsters expired. Negotiations have continued
with regard to both collective bargaining agreements.
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Management believes that safety performance, which is often considered as
an indicator of worker involvement, training and attitude, has been excellent at
the Company's facilities. In addition to worker attentiveness to safety,
employees are also actively involved in various quality and productivity
initiatives.
Item 2. Properties
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The following table sets forth certain information with respect to the
Company's headquarters and manufacturing plants, as of November 20, 1997.
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Approximate
Square Footage Type of Interest
Location --------------- ----------------
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Atlanta, Georgia (Headquarters) 24,000 Leased
Chicago, Illinois 141,000 Owned
Cincinnati, Ohio 469,000 Owned
Dallas, Texas (Thompson) 110,000 Owned
Dallas, Texas (Southwestern) 73,000 Owned
Elizabeth, New Jersey 209,000 Leased
Elizabeth, New Jersey 41,000 Leased
Fontana, California 72,000 Leased
Franklin Park, Illinois 92,000 Leased
Garland, Texas 78,000 Leased
Homerville, Georgia 427,000 Owned
Memphis, Tennessee 75,000 Leased
Picayune, Mississippi 60,000 Leased
Solon, Ohio 220,000 Owned
York, Pennsylvania 97,000 Owned
</TABLE>
During the fourth quarter of fiscal 1996, management announced plans to
close six facilities and open one new plant as part of the Company's
rationalization initiative associated with the Recent Acquisitions. As part of
this rationalization strategy, an acquired plant in Covington, Georgia was
closed in September 1996 and an acquired plant in Peabody, Massachusetts was
closed in fiscal year 1997. The majority of the equipment and business has been
assigned to other Company locations. The Company also moved its Memphis,
Tennessee operation to a larger facility during the first quarter of fiscal 1997
to accommodate production changes and the strategic expansion of the Company's
business. Following completion of the facility closings described above, the
Company continues to have excess manufacturing capacity and cost reduction
opportunities resulting from the Recent Acquisitions. Management currently plans
to close three more facilities during fiscal 1998, and believes that following
these closings, the Company's remaining facilities will be adequate for its
needs. Management continues to review opportunities to consolidate operations
and to maximize production efficiencies by rationalizing overlapping facilities.
The Company believes that its facilities are adequate for its present needs
and that its properties are generally in good condition, well maintained and
suitable for their intended use.
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Item 3. Legal Proceedings and Regulatory Matters
----------------------------------------
Litigation
The Company is involved in certain proceedings relating to environmental
matters as described under Item 1. "Business - Environmental, Health and Safety
Matters."
The Company is also involved in legal proceedings from time to time in the
ordinary course of its business. There are no such currently pending
proceedings, which are expected to have a material adverse effect on the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted during the fourth quarter of fiscal 1997 to a vote
of security holders of the Company through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
----------------------------------------------------------------------
As of November 20, 1997, there were 107 holders of record of the Common
Stock. Because BWAY is a holding company, its ability to pay dividends is
substantially dependent upon the receipt of dividends or other payments from its
subsidiaries. The Company's Credit Agreement dated June 17, 1996, as amended
(the "Credit Agreement"), among BWAY, BSI, BSNJ, MCC, BSO, BT Alex.Brown
Incorporated (formerly known as Bankers Trust Company), NationsBank, N.A.
(South) and various other lenders, restricts the ability of BWAY and its
subsidiaries to pay dividends or make other restricted payments in an amount
greater than $16.4 million, and places certain restrictions on the Company with
regard to incurring additional indebtedness, other than certain specified
indebtedness. In addition, the Company's Indenture dated April 11, 1997 (the
"Indenture"), among BWAY, Harris Trust and Savings Bank, BSNJ, MCC, BSI,
Materials Management, Inc., Brockway Standard (Canada), Inc., BSO, and
Platemasters, Inc., also restricts the ability of BWAY and its subsidiaries to
pay dividends or make other payments, and places certain restrictions on the
Company with regard to incurring additional indebtedness, other than certain
specified indebtedness. Any future determination to pay dividends will be made
by the Board of Directors in light of the Company's earnings, financial
position, capital requirements, credit agreements, indentures, business
strategies and such other factors as the Board of Directors deems relevant at
such time. The Company has not otherwise paid any cash distributions or other
dividends on the Common Stock and presently intends to retain its earnings to
finance the development of its business for the foreseeable future.
On May 28, 1996, in connection with the BSNJ Acquisition, BWAY issued an
aggregate 1,216,455 shares of Common Stock (in addition to cash and notes) to 19
persons who were the stockholders of Milton Can prior to the BSNJ Acquisition.
This issuance was not registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on exemptions provided by Section 4(2) of
the Securities Act for transactions by an issuer not involving any public
offering. See Item 1. "Business - Acquisitions."
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The Company's Common Stock was traded on the Nasdaq National Market under the
symbol "BWAY" through November 19, 1996. Since November 20, 1996, the Company's
Common stock has been traded on the New York Stock Exchange under the symbol
"BY". The table below sets forth the high and low bid information for the
Common Stock for each quarterly period during fiscal 1996, the high and low bid
or sales price information (whichever of the bid or sales price is higher or
lower, as appropriate) for the Common Stock for the first quarter of fiscal
1997, and the high and low sales price information for the Common Stock for the
second, third, and fourth quarters of fiscal 1997. Prior to the Initial Public
Offering, there was no established public trading market in the Common Stock.
On August 19, 1997 the Company's Board of Directors declared a three-for-two
stock split of the Company's Common Stock effected in the form of a stock
dividend which was paid on September 22, 1997 to stockholders of record on
September 2, 1997. All price information set forth below has been adjusted to
reflect the stock dividend. The bid information for each quarterly period in
fiscal 1996 and the first quarter of fiscal 1997 set forth below reflects inter-
dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Quarter High Low
-------------- ---- ---
<S> <C> <C>
First quarter, 1996 $11.67 $10.21
Second quarter, 1996 $10.58 $ 8.08
Third quarter, 1996 $12.83 $ 7.75
Fourth quarter, 1996 $12.50 $11.17
First quarter, 1997 $12.92 $11.67
Second quarter, 1997 $13.17 $11.83
Third quarter, 1997 $15.63 $12.83
Fourth quarter, 1997 $20.50 $15.33
</TABLE>
Item 6. Selected Financial Data
The selected historical consolidated financial data as of and for each of the
years in the five years ended September 30, 1997 have been derived from the
audited consolidated financial statements of the Company. The results of
operations include the results of acquisitions described under "Business--
Acquisitions" contained in Item 1 of this report and have been included in the
Company's consolidated financial statements from the date of the respective
acquisitions. The selected consolidated financial data is qualified by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item 7 of this
report and with the Company's consolidated financial statements and the related
notes thereto included in Item 8 of this report.
9
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, (1)
-------------------------------------------------------
1997 (2) 1996 (3) 1995 1994 1993(4)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(in thousands except per share data)
Income Statement Data:
NET SALES $402,150 $283,105 $247,480 $224,701 $180,963
-------- -------- -------- -------- --------
COSTS, EXPENSES AND OTHER
Cost of products sold (excluding depreciation and amortization) 341,406 236,741 208,091 193,497 157,415
Depreciation and amortization 13,024 7,425 5,940 5,057 3,150
Selling and administrative expense 19,651 14,589 10,335 9,998 7,424
Provision for restructuring (5) 12,860
Interest expense, net 10,649 4,872 5,211 5,730 2,795
Gain on curtailment of postretirement benefits (5,828)
AB Leasing fees and expenses (6) 1,389 1,318 1,284
AB Leasing termination expense (6) 1,995
Other, net 998 (340) (275) 100 8
-------- -------- -------- -------- ---------
Total costs, expenses, and other 379,900 276,147 232,686 215,700 172,076
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 22,250 6,958 14,794 9,001 8,887
Provision for income taxes 9,146 3,239 6,021 3,756 3,731
-------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING 13,104 3,719 8,773 5,245 5,156
-------- -------- -------- -------- --------
Extraordinary loss resulting from the extinguishment of debt, net
of tax benefit (7) (2,535)
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 13,104 $ 1,184 8,773 5,245 5,156
-------- -------- -------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS -
Net of related tax benefit of $137 (8) (213)
-------- -------- -------- -------- --------
NET INCOME $ 13,104 $ 1,184 $ 8,773 $ 5,032 $ 5,156
======== ======== ======== ======== ========
PER SHARE DATA:
Income before extraordinary item and cumulative effect of change in
Accounting $ 1.31 $ 0.40 $ 1.24 $ 0.84 $ 0.84
Extraordinary item (0.27)
Change in accounting (0.03)
-------- -------- -------- -------- --------
Net income $ 1.31 $ 0.13 $ 1.24 $ 0.81 $ 0.84
======== ======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
9,983 9,410 7,097 $ 6,206 6,107
======== ======== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
September 30,
(1)
---------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 6,890 $ 22,280 $ 38,811 $ 14,371 $ 8,938
Property, plant and equipment, net 123,617 94,800 67,668 58,996 54,816
Total assets 316,377 245,133 167,958 137,220 136,507
Long-term debt (including current
maturities) 115,532 95,198 50,218 55,476 55,797
Redeemable common stock 2,682
Stockholders' equity 85,466 72,629 65,837 27,015 23,917
</TABLE>
(1) The Company operates on a 52/53-week fiscal year ending on the Sunday
closest to September 30 of the applicable year. For simplicity of
presentation, the Company has presented year ends as September 30.
(2) The results of operations for the year ending September 30, 1997 include the
results from the October 28, 1996 acquisition of substantially all assets of
the aerosol can business of Ball Metal Food Container Corporation.
(3) The results of operations for the year ending September 30, 1996 include the
results from the following acquisitions. On May 28, 1996, BWAY acquired all
of the stock of Milton Can Company. On June 17, 1996, BSI acquired
substantially all of the assets of the Davies Can division of the Van Dorn
Company.
(4) The results of operations for the year ending September 30, 1993 include the
results from the following acquisitions. On March 4, 1993, BSI acquired
certain equipment, intellectual property and other assets related to
Ellisco, Inc.'s Monotop business. On April 27, 1993, BSI acquired all of
the stock of Armstrong Containers, Inc. (formerly Armstrong Industries,
Inc.). On May 27, 1993 BSI acquired substantially all of the assets of DK
Container, Inc.
(5) During the fourth quarter of fiscal 1996, the Company recorded a non-
recurring, non-cash restructuring charge comprised of a write-down of
certain assets. The restructuring charge was due to increased volumes
resulting from the BSNJ Acquisition and the BSO Acquisition providing the
opportunity for the Company to consolidate certain of its manufacturing
processes to meet customer demand and improve efficiencies, which will
result in the disposal of surplus equipment and currently productive
manufacturing equipment for an estimated nominal value beginning in early
fiscal 1997 and ending in fiscal 1998. See Note 13 of the Notes to
Consolidated Financial Statements set forth in Item 8.
(6) The Company was party to a management agreement (the "Management
Agreement") with AB Leasing and Management, Inc. ("AB Leasing") whereby
the Company paid to AB Leasing an annual fee (the "AB Leasing Fee") based
upon a formula, plus reimbursement for expenses. See Note 12 of the Notes to
Consolidated Financial Statements set forth in Item 8. The Company and AB
Leasing terminated the Management Agreement upon the consummation of the
Initial Public Offering. Pursuant to the termination agreement the Company
issued 199,500 shares of Common Stock to AB Leasing prior to the
effectiveness of the Initial Public Offering. The Company recorded a non-
recurring, non-cash, pre-tax charge to operations of $1,995,000 ($1,200,000
net of tax effect) in connection therewith in the period in which such
shares were issued.
(7) The Company recorded an extraordinary loss related to the prepayment of the
$50 million principal amount of 8.35% Senior Secured Notes during the third
quarter of fiscal 1996.
(8) Effective October 1, 1993, the Company changed its method of accounting for
post employment benefits as a result of adopting Statement of Financial
Accounting Standards No. 112 which resulted in a one-time non-cash charge of
$213,000 and had no material subsequent impact on income from operations.
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes thereto included elsewhere
in Item 8 of this report.
General
Industry
The Company currently derives substantially all of its revenues from the sale
of steel containers manufactured at the Company's plants. The packaging market
in which the Company competes is generally mature and stable. On average,
domestic industry growth rates have historically followed US GDP growth rates.
Management believes that companies that have managed sustained growth in these
markets above the GDP level have typically accomplished this growth primarily
through acquisitions. Industry consolidation has occurred during recent years.
Sales Growth
The Company's net sales have grown at a compounded annual rate of 24.5% over
the past five years, from approximately $134.3 million in fiscal 1992 to
approximately $402.2 million in fiscal 1997, primarily as a result of
acquisitions during this period and, to a lesser extent, market penetration in
key existing product segments and new product development. The acquisitions have
strengthened and expanded the Company's position in key product and geographic
markets and, through consolidation, have enabled the Company to achieve
operating synergies.
Raw Materials
The largest component of cost of sales is tinplate steel, which is currently
supplied by large, national manufacturers. Tinplate prices have historically
been negotiated once per year, with changes effective January 1, and have
typically remained stable for the subsequent one year period. The Company is
working with other companies to lower the overall cost of its steel purchases.
Tinplate consumers typically negotiate late in the year for the next calendar
year on terms of volumes and price. Terms agreed to have historically held
through the following year, but there is no assurance that this practice will
remain unchanged in the future.
Steel prices have historically been adjusted as of January 1 of a calendar
year. Most domestic tinplate and blackplate steel producers have announced a
3.0% price increase to become effective January 1, 1998. The Company has
historically arranged for raw material price increases which are lower than
those publicly announced by its suppliers, although there can be no assurances
that this practice will continue.
12
<PAGE>
Gross Profit Margins
Continuous advances in manufacturing productivity and cost reduction have been
critical to the industry and the Company's ability to improve gross profit
margins. The BSNJ Acquisition and the BSO Acquisition late in the third quarter
of fiscal 1996, and the MCC Acquisition early in the first quarter of fiscal
1997 increased the Company's sales by approximately 60%. The sales of the
acquired businesses historically provided lower gross margins than those
reported by the Company. The Company's objective is to improve margins by
maximizing synergies through employment of the Company's historically successful
3R strategic initiative to Rationalize, Reengineer and Recapitalize these
acquired businesses. Although certain employee termination costs in connection
with plant rationalizations, administrative workforce reductions, and other
plant exit costs associated with the Recent Acquisitions have been accrued for
through purchase accounting adjustments, the Company incurred during the fourth
quarter of fiscal 1996 and throughout fiscal 1997, and will continue to incur,
other non-recurring costs which, in accordance with current accounting
pronouncements, have been charged against operating gross margins. As a result
of the lower margins of the acquired businesses and the effect of
rationalization initiatives, overall margins for the Company decreased during
the fourth quarter of fiscal 1996, and then began to improve during fiscal 1997.
Results of Operations
Year ended September 30, 1997 (fiscal 1997) compared to year ended September 30,
1996 (fiscal 1996).
Net Sales. Net sales for fiscal 1997 were $402.2 million, an increase of
$119.1 million or 42.0% from $283.1 million in fiscal 1996. The increase
resulted from the BSNJ Acquisition and the BSO Acquisition late in the third
quarter of fiscal 1996, and the MCC Acquisition early in the first quarter of
fiscal 1997.
Cost of Products Sold. Cost of products sold (excluding depreciation and
amortization) in fiscal 1997 was $341.4 million, an increase of $104.7 million,
or 44.2%, from $236.7 million in fiscal 1996. The increase is primarily
attributable to increased sales from, and the higher cost of products sold
(excluding depreciation and amortization), of the Recent Acquisitions. Cost of
products sold as a percent of sales increased to 84.9% in fiscal 1997 from 83.6%
in fiscal 1996. The increase is primarily attributable to the Recent
Acquisitions where cost of products sold as a percent of sales was historically
higher than that of the Company's previously owned facilities, and to costs
associated with the Company's 3R strategic initiative to Rationalize, Reengineer
and Recapitalize the Recent Acquisitions. Although certain employee termination
costs in connection with plant rationalizations, administrative workforce
reductions, and other plant exit costs associated with the Recent Acquisitions
have been accrued for through purchase accounting adjustments, the Company
incurred during the fourth quarter of fiscal 1996, and during fiscal 1997, other
non-recurring costs which, in accordance with current accounting pronouncements,
were charged against operating income. Cost of products sold (excluding
depreciation and amortization) for fiscal 1997 was also adversely affected by an
approximately thirty day strike at MCC's Cincinnati, Ohio facility.
Income before Income Taxes and Extraordinary Item. Income before income taxes
and extraordinary items for fiscal 1997 was $22.3 million, an increase of $15.3
million, or 219.8%, from $7.0 million in fiscal 1996, when the Company recorded
a non-cash restructuring charge of $12.9 million (before taxes). Fiscal 1997
income before income taxes and extraordinary items increased by $2.4 million
over fiscal 1996, excluding the effect of the restructuring charge. This
increase resulted primarily from contributions from the Recent Acquisitions,
cost savings realized to date from rationalization initiatives, and productivity
and cost reductions resulting from capital spending initiatives, and the gain
recorded by the Company from curtailment of the post retirement benefits which
resulted from the elimination of post retirement health care costs for certain
employees at the Cincinnati facility. Partially offsetting these improvements
were period costs associated with rationalization initiatives, higher selling
and administration expenses, and higher interest expense. Depreciation and
amortization increased from $7.4 million in fiscal 1996 to $13.0 million in
fiscal 1997 due to the Recent Acquisitions and as a result of capital spending
related to the Company's cost reduction, productivity improvement, and growth
initiatives. Selling and administrative expense of $19.7 million for fiscal
1997 increased from $14.6 million in fiscal 1996, primarily due to the Recent
Acquisitions and building corporate infrastructure to support the Recent
Acquisitions and continue its growth plans. Interest expense, net, increased to
$10.6 million in fiscal 1997 from $4.9 million in fiscal 1996 due to interest on
borrowings to finance the Recent Acquisitions, and due to a higher interest rate
associated with the Company's
13
<PAGE>
issuance in the third quarter of fiscal 1997 of $100 million of unsecured senior
subordinated notes (see Liquidity and Capital Resources).
Net Income. Net Income for fiscal 1997 was $13.1 million, an increase of
$11.9 million from fiscal 1996. The improvement results from the factors
mentioned above.
Year ended September 30, 1996 (fiscal 1996) compared to year ended September 30,
1995 (fiscal 1995).
Net Sales. Net sales for fiscal 1996 were $283.1 million, an increase of $35.6
million or 14.4% from $247.5 million in fiscal 1995. The increase resulted
primarily from the BSNJ Acquisition and the BSO Acquisition late in the third
quarter of fiscal 1996. Fiscal 1996 sales excluding the acquisitions were up
slightly over fiscal 1995.
Cost of Products Sold. Cost of products sold (excluding depreciation and
amortization) in fiscal 1996 was $236.7 million, an increase of $28.6 million or
13.8% from $208.1 million in fiscal 1995. The increase is primarily
attributable to increased sales from the BSNJ Acquisition and the BSO
Acquisition late in the third quarter of fiscal 1996. Cost of products sold as
a percent of sales decreased to 83.6% in fiscal 1996 from 84.1% in fiscal 1995.
The Company's facilities existing prior to the BSNJ Acquisition and the BSO
Acquisition realized reductions in cost of products sold as a percent of sales
as a result of ongoing initiatives to reduce cost and increase productivity
through rationalization and capital initiatives, and as a result of more
effective steel purchasing. Gains were more than offset by higher costs at the
recently acquired facilities where the Company has initiated an aggressive
rationalization program. Although certain employee termination costs in
connection with plant rationalizations, administrative workforce reductions, and
other plant exit costs associated with the recent acquisitions have been accrued
for through purchase accounting adjustments the Company incurred in fiscal 1996
other non-recurring costs which, under current accounting pronouncements, were
charged against operating income.
Income before Income Taxes and Extraordinary Item. Income before income taxes
and extraordinary items for fiscal 1996 was $7.0 million, a decrease of $7.8
million or 53.0% from $14.8 million in fiscal 1995. The achieved gains
described above were more than offset by a non-cash restructuring charge of
$12.9 million (before taxes) recorded during fiscal 1996. The restructuring
charge was due to increased volumes resulting from the acquisitions providing
the opportunity for the Company to consolidate certain of its manufacturing
processes to improve efficiencies, which will result in the disposal of surplus
equipment and currently productive manufacturing equipment beginning in early
fiscal 1997 and ending in fiscal 1999. When fully implemented, the
rationalization is expected on an overall basis to result in reduced overhead
expense and enhanced operational efficiencies. Depreciation and amortization
increased from $5.9 million in fiscal 1995 to $7.4 million in fiscal 1996 due to
the BSNJ Acquisition and the BSO Acquisition and as a result of capital spending
related to the Company's cost reduction and productivity improvement
initiatives. Selling and administrative expense of $14.6 million for fiscal
1996 increased from $10.3 million in fiscal 1995, primarily due to the recent
acquisitions and building corporate infrastructure to support the recent
acquisitions, continued growth plans and the increased costs associated with
being a public company. Interest expense, net decreased to $4.9 million in
fiscal 1996 from $5.2 million in fiscal 1995, as the benefits accrued from the
cash received from the Initial Public Offering were partially offset by interest
on borrowings to finance the acquisitions late in the year.
Net Income. Net Income for fiscal 1996 was $1.2 million, a decrease of $7.6
million from fiscal 1995. In addition to the factors mentioned above, the
Company recorded an extraordinary charge of $2.5 million (after tax) associated
with the early repayment of the Company's debt.
Seasonality
Sales of certain of the Company's products are to some extent seasonal, with
sales levels generally higher in the second half of the Company's fiscal year.
On an aggregate basis, however, the Company's sales have not been significantly
affected by seasonality.
Liquidity and Capital Resources
During the third quarter of fiscal 1996, the Company repaid its existing debt
and established its new five year Credit Agreement, which the Company amended
subsequent to fiscal 1997 year end. The Credit Agreement
14
<PAGE>
provides that the Company and its subsidiaries can borrow up to $100 million,
and gives the Company an option to increase its borrowing limit by an additional
$50 million, provided certain conditions are met. The expiration of the Credit
Agreement was extended to June 17, 2002 in the recent amendment. Interest rates
under the Credit Agreement are based on rate margins ("Rate Margin") for either
the prime rate as announced by NationsBank, N.A. from time to time or LIBOR, at
the option of the Company. These Rate Margins were lowered in connection with
the recent amendment. The applicable rate margin is determined on a quarterly
basis by a review of the Company's leverage ratio. Loans under the Credit
Agreement are unsecured and can be repaid at the option of the Company without
premium or penalty. The Credit Agreement is subject to certain restrictive
covenants, including covenants which require the Company to maintain a certain
minimum level of net worth and certain leverage ratios. In addition, the Company
is restricted in its ability to pay dividends and make other restricted
payments. The recent amendment to the Credit Agreement improved certain of these
covenants to provide the Company with greater flexibility with regard to growth
investments in joint ventures and other subsidiaries. Funds provided under the
Credit Agreement were used to repay the Company's $50 million of 8.35% senior
notes due 2001, repay the Company's existing revolving credit facility, finance
acquisitions and meet operating needs. The Company incurred a $2.5 million,
after tax, one-time charge associated with this debt restructuring in fiscal
1996.
During the third quarter of fiscal 1997, the Company issued $100 million of
unsecured senior subordinated notes due April 15, 2007. The notes have an
interest rate of 10-1/4%, payable semi-annually on April 15 and October 15. Net
proceeds of approximately $96 million from the issuance of the notes were used
to reduce borrowings on the Company's Credit Agreement. The Company has filed a
registration statement with the Securities and Exchange Commission (the
"Commission") to register these notes under the Securities Act. Pursuant to the
terms of a registration rights agreement the Company executed in connection with
the offering of the notes, the Company has been paying additional interest on
the notes since August 9, 1997 because the registration statement has not been
declared effective by the Commission. Such additional interest accrued at a
rate of 0.25% per annum for the 90-day period beginning August 9, 1997 and has
continued to, and will continue to, accrue at a rate increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day period
until the registration statement is declared effective by the Commission, which
the Company expects will occur in the first half of fiscal 1998.
During fiscal 1997, net cash provided by operating activities was $45.1
million which was comprised primarily of income from operations ($13.1 million),
depreciation and amortization ($13.5 million), deferred income taxes ($3.0
million), and working capital excluding working capital acquired from the MCC
Acquisition ($19.8 million). The decrease in working capital was primarily
attributable to the increase in accounts payable ($13.5 million), income taxes
($2.9 million) and the reduction in accounts receivable ($3.0 million). Net cash
provided from operating activities was reduced by a non-cash gain on curtailment
of retirement benefits of $5.8 million.
During fiscal 1996, net cash provided by operating activities was $25.7
million which was comprised primarily of depreciation and amortization ($8.0
million), the non cash restructuring charge ($12.9 million) and working capital
excluding working capital acquired from the BSNJ Acquisition and the BSO
Acquisitions ($5.9 million). The decrease in working capital was primarily
attributable to the increase in accounts payable ($3.8 million) and the
reduction in accounts receivable ($3.3 million). Working capital was reduced by
an increase in inventory ($3.0 million).
During fiscal 1997, the Company used $64.3 million for investing activities
for the MCC Acquisition ($41.6 million) and capital expenditures ($23.0
million). Capital expenditures were primarily for equipment to improve
manufacturing processes and hardware and software to address the Year 2000 issue
and improve administrative and manufacturing systems. Management expects to
maintain this level of capital expenditures over the next five years.
During fiscal 1996, the Company used $82.3 million for investing activities
for the BSNJ Acquisition and the BSO Acquisition ($69.7 million) and capital
expenditures ($12.7 million). Capital expenditures were primarily for equipment
to improve manufacturing processes and hardware and software to address the Year
2000 issue and improve administrative and manufacturing systems.
During fiscal 1997, net cash provided by financing activities was $18.7
million. As described above, the Company refinanced its outstanding debt by
issuing $100 million of unsecured senior subordinated notes. Financing costs
incurred to obtain the notes was $4.0 million. Net repayments under the bank
revolving credit
15
<PAGE>
agreement, including the proceeds from the notes, were $80.3 million.
Additionally, unpresented bank drafts increased $4.2 million.
During fiscal 1996, the Company generated $35.0 million from financing
activities. The Company had net borrowings under the Credit Agreement of $93.8
million that were used to repay the $50 million private placement debt and
finance the investing activities of the business. The Company used $9.5 million
to purchase treasury stock prior to the BSNJ Acquisition. The treasury stock was
reissued along with additional new shares as part of the consideration for the
BSNJ Acquisition. Additionally, the Company repaid long term debt of $2.1
million and increased unpresented bank drafts of $4.3 million.
Cash and cash equivalents were $23.5 million at the beginning of fiscal 1996,
and were $1.9 million at the end of fiscal 1996.
At September 28, 1997, the Company was restricted in its ability to pay
dividends and make other restricted payments in an amount greater than
approximately $16.4 million. The Company's subsidiaries are restricted in their
ability to transfer funds to the Company, except for funds to be used to effect
approved acquisitions, pay dividends in specified amounts, reimburse the Company
for operating and other expenditures made on behalf of the subsidiaries and
repay permitted intercompany indebtedness. Restricted net assets of the
Company's subsidiaries collectively amounted to approximately $71 million at
September 28, 1997.
Management believes that cash provided from operations, borrowings available
under the Credit Agreement, and borrowings under the Indenture will provide it
with sufficient liquidity to meet its operating needs and continue the Company's
capital expenditure initiatives for the next twelve months. The Company
continues to pursue acquisition opportunities in the North American container
industry and in connection therewith may incur additional indebtedness, to
finance such acquisitions.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A variety of factors could cause business conditions and the
Company's actual results to differ materially from those expected by the Company
or expressed in the Company's forward-looking statements. These factors include
without limitation, the Company's ability to successfully integrate acquired
businesses and implement its 3R strategic initiatives; labor unrest; changes in
market price or market demand; changes in raw material costs or availability;
loss of business from customers; unanticipated expenses; changes in financial
markets; potential equipment malfunctions; and the other factors discussed in
the Company's filings with the Securities and Exchange Commission.
Environmental Matters
For information regarding environmental matters, see Item 1. "Business -
Environmental, Health and Safety Matters."
Effect of Inflation
Historically, the Company has generally been able to recover increased costs
of raw materials through price increases for the Company's products, although
there can be no assurances that this practice will continue. This ability,
together with cost reductions achieved through line rationalization and
productivity improvements, has mitigated the impact of inflation on the
Company's results of operations. Management currently believes that inflation
will not have a material adverse impact on the Company.
16
<PAGE>
Recent Accounting Pronouncements
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share." The Company has considered the impact of this new
standard and does not believe earnings per share determined under this statement
are materially different than earnings per share determined in accordance with
current accounting standards. The statement is effective for financial
statements for periods ending after December 15, 1997.
Item 8. Financial Statements and Supplementary Data
See the attached Consolidated Financial Statements (pages F-1 through
F-24).
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Inapplicable
PART III
Item 10. Directors and Executive Officers
Incorporated by reference to the Company's 1997 Proxy Statement to be filed
with the Commission.
Item 11. Executive Compensation
Incorporated by reference to the Company's 1997 Proxy Statement to be filed
with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to the Company's 1997 Proxy Statement to be filed
with the Commission.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to the Company's 1997 Proxy Statement to be filed
with the Commission.
17
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following documents are filed as a part of this report:
(a) (1) The Consolidated Financial Statements included in Item 8 hereof
and set forth on pages F-1 through F-24.
(2) The Financial Statement Schedules listed in the Index to the
Financial Statement Schedules.
(3) The exhibits listed in the Index to Exhibits.
(b) Reports on Form 8-K.
The Company did not file any Reports on Form 8-K during the fourth quarter
of fiscal 1997.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BWAY CORPORATION
By: /s/ Warren J. Hayford
---------------------------------------
Warren J. Hayford
Chairman of the Board and
Chief Executive Officer
Date: December 2, 1997
-------------------------------------
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 in the capacities indicated on December 2, 1997.
<TABLE>
<CAPTION>
Signatures Title
- ---------- -----
<S> <C>
/s/ Warren J. Hayford Chairman of the Board, Chief Executive Officer and Director
- ------------------------------
Warren J. Hayford
/s/ John T. Stirrup President, Chief Operating Officer and Director
- ------------------------------
John T. Stirrup (Principal Executive Officer)
/s/ James W. Milton Executive Vice President and Director
- ------------------------------
James W. Milton
/s/ David P. Hayford Senior Vice President and Chief Financial Officer
- ------------------------------
David P. Hayford (Principal Financial Officer)
/s/ Kevin C. Kern Vice President and Corporate Controller
- ------------------------------
Kevin C. Kern (Principal Accounting Officer)
/s/ Thomas A. Donahoe Director
- ------------------------------
Thomas A. Donahoe
/s/ Alexander P. Dyer Director
- ------------------------------
Alexander P. Dyer
/s/ Jean-Pierre Ergas Director
- ------------------------------
Jean-Pierre Ergas
/s/ John E. Jones Director
- ------------------------------
John E. Jones
/s/ John W. Puth Director
- ------------------------------
John W. Puth
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
BWAY Corporation
We have audited the accompanying consolidated balance sheets of BWAY Corporation
and subsidiaries (the "Company") as of September 28, 1997 and September 29, 1996
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended September 28, 1997.
Our audits also included the financial statement schedules listed in the Index
to the financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of September 28,
1997 and September 29, 1996 and the results of its operations and its cash flows
for each of the three years in the period ended September 28, 1997 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 10, 1997
F-1
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,374 $ 1,852
Accounts receivable, net of allowance for doubtful accounts
of $580 and $390 41,806 39,011
Inventories 46,615 37,044
Other current assets 2,150 1,293
Deferred tax asset 5,111 2,405
-------- --------
Total current assets 97,056 81,605
PROPERTY, PLANT, AND EQUIPMENT - Net 123,617 94,800
OTHER ASSETS:
Goodwill, net of accumulated amortization of $5,464 and $2,825 73,652 50,117
Intangible assets, net 13,580 14,690
Deferred financing costs, net of accumulated amortization
of $541 and $83 4,844 1,336
Other assets 3,628 2,585
-------- --------
Total other assets 95,704 68,728
-------- --------
$316,377 $245,133
======== ========
</TABLE>
(Continued)
F-2
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 57,443 $ 36,206
Accrued salaries and wages 8,949 4,820
Accrued income taxes 1,338 759
Other current liabilities 16,265 14,013
Accrued rebates 5,020 3,382
Current maturities of long-term debt 1,151 145
--------- ---------
Total current liabilities 90,166 59,325
LONG-TERM DEBT 114,381 95,053
LONG-TERM LIABILITIES:
Deferred income taxes 14,969 14,135
Other 11,395 3,991
--------- ---------
Total long-term liabilities 26,364 18,126
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized 5,000,000 shares
Common stock, $.01 par value; authorized 24,000,000 shares, issued
9,851,002 and 6,564,546 99 66
Additional paid-in capital 37,629 37,612
Retained earnings 48,673 35,569
--------- ---------
86,401 73,247
Less treasury stock, at cost, 51,790 and 49,186 935 618
--------- ---------
Total stockholders' equity 85,466 72,629
--------- ---------
$ 316,377 $ 245,133
========= =========
(Concluded)
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
<S> <C> <C> <C>
NET SALES $402,150 $283,105 $247,480
COSTS, EXPENSES, AND OTHER:
Cost of products sold (excluding depreciation and amortization) 341,406 236,741 208,097
Depreciation and amortization 13,024 7,425 5,934
Selling and administrative expense 19,651 14,589 10,335
Provision for restructuring 12,860
Interest expense, net 10,649 4,872 5,211
Gain on curtailment of postretirement benefits (5,828)
AB leasing fees and expenses 1,389
AB leasing termination expense 1,995
Other, net 998 (340) (275)
-------- -------- --------
Total costs, expenses, and other 379,900 276,147 232,686
-------- -------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 22,250 6,958 14,794
PROVISION FOR INCOME TAXES 9,146 3,239 6,021
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 13,104 3,719 8,773
EXTRAORDINARY LOSS RESULTING FROM THE
EXTINGUISHMENT OF DEBT - Net of related tax
benefit of $1,683 (2,535)
-------- -------- --------
NET INCOME $ 13,104 $ 1,184 $ 8,773
======== ======== ========
EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.31 $ 0.40 $1.24
Extraordinary item (0.27)
-------- -------- --------
Net income $1.31 $ 0.13 $1.24
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,983 9,410 7,097
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES ADDITIONAL
--------------------
COMMON TREASURY COMMON PAID-IN RETAINED TREASURY
STOCK STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - October 2, 1994 4,195 (55) $38 $ 3,994 $ 23,230 $ (247) $27,015
Net income 8,773 8,773
Issuance of common stock before
Initial Public Offering 65 1 504 505
Accretion of redeemable common stock (372) (372)
Lapse of put on redeemable common stock 4 296 2,754 3,054
Initial Public Offering of common stock 2,017 20 24,946 24,966
Common stock issued to AB Leasing
for termination of management contract 133 1 1,994 1,995
Purchase of treasury stock (15) (99) (99)
------ ------ ---- ------- ------ ------ ------
BALANCE - October 1, 1995 6,410 (70) 64 31,734 34,385 (346) 65,837
Net income 1,184 1,184
Issuance of common stock for acquisitions 155 656 2 5,984 8,614 14,600
Issuance of treasury stock under employee
savings plan 31 6 583 589
Purchase of treasury stock (650) (9,469) (9,469)
Other (112) (112)
----- ------ ---- ------- ------ ------ -------
BALANCE - September 29, 1996 6,565 (33) 66 37,612 35,569 (618) 72,629
Net income 13,104 13,104
Issuance of common stock for 3 for 2 stock split 3,283 (17) 33 (33)
Issuance of treasury stock under employee
savings plan 43 830 830
Purchase of treasury stock (45) (1,147) (1,147)
Stock options exercised 3 50 50
------- ------ ----- --------- ------- -------- --------
BALANCE - September 28, 1997 9,851 (52) $99 $ 37,629 $48,673 $ (935) $85,466
======= ====== ===== ========= ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,104 $ 1,184 $ 8,773
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 8,860 5,656 4,853
Amortization of goodwill and other intangibles 4,164 1,769 1,087
Amortization of deferred financing costs 458 525 609
Write-off of deferred loan fees related to debt extinguishment 2,466
Gain on curtailment of postretirement benefits (5,828)
Provision for doubtful accounts 190 188 (224)
Restructuring charge 12,860
Loss (gain) on disposition of property, plant, and equipment 1,397 (21) 68
Deferred income taxes 2,996 (4,837) 1,314
Termination of AB Leasing contract through issuance of common shares 1,995
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable 2,953 3,271 (4,836)
Inventories (1,088) (2,962) (730)
Other assets 1,268 (54) 623
Accounts payable 13,539 3,847 (1,597)
Accrued liabilities 249 1,628 (506)
Income taxes, net 2,851 131 642
-------- --------- ---------
Net cash provided by operating activities 45,113 25,651 12,071
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (41,619) (69,697)
Capital expenditures (22,961) (12,671) (13,593)
Proceeds from disposition of property, plant, and equipment 21
Other 302
-------- --------- ---------
Net cash used in investing activities (64,278) (82,347) (13,593)
</TABLE>
(Continued)
F-6
<PAGE>
BWAY CORPORATION AND SUBSIDIAIRES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net borrowings (repayments) under bank revolving credit agreement $ (80,293) $ 93,770 $ (5,000)
Proceeds from issuance of Notes 100,000
Extinguishment of long-term debt (50,000)
Net proceeds from Initial Public Offering 24,966
Proceeds from issuance of common stock before Initial Public Offering 505
Repayments on long-term debt (165) (2,095) (258)
Increase (decrease) in unpresented bank drafts 4,208 4,335 403
Purchases of treasury stock (1,147) (9,469) (99)
Financing costs incurred (3,966) (1,419) (75)
Other 50 (112)
---------- --------- ---------
Net cash provided by financing activities 18,687 35,010 20,442
---------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (478) (21,686) 18,920
CASH AND CASH EQUIVALENTS:
Beginning of year 1,852 23,538 4,618
---------- --------- ---------
End of year $ 1,374 $ 1,852 $ 23,538
========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 5,666 $ 6,010 $ 4,636
========== ========= =========
Income taxes $ 4,774 $ 6,544 $ 4,054
========== ========= =========
Details of businesses acquired were as follows:
Fair value of assets acquired $ 61,259 $107,553
Liabilities assumed (18,890) (22,256)
Value of common stock issued (14,600)
Long-term note issued (750) (1,000)
---------- ---------
Net cash paid for acquisitions $ 41,619 $ 69,697
========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Amounts owed for capital expenditures $ 4,140
==========
Common stock issued for acquisitions $ 14,600
=========
Common stock issued under employee savings plan $ 830 $ 589
========== =========
See notes to consolidated financial statements.
(Concluded)
</TABLE>
F-7
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
SEPTEMBER 28, 1997
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Operations - BWAY Corporation ("BWAY") is a holding company whose
subsidiaries, Brockway Standard, Inc. ("BSI"), Milton Can Company, Inc.
("MCC"), Brockway Standard (New Jersey), Inc. ("BSNJ"), Brockway Standard
(Ohio), Inc. ("BSO"), PlateMasters, Inc. ("PMI"), and Brockway Standard
(Canada), Inc. ("BSCI") (collectively the "Company") manufacture and
distribute metal containers in the United States and Canada.
Common Stock - On June 20, 1995, in connection with the Initial Public
Offering ("IPO") of the Company's stock, the Company increased the number of
common stock outstanding through an approximately 374-for-1 stock split.
On September 22, 1997, the Company increased the number of shares of common
stock outstanding through a 3-for-2 stock split, effected in the form of a
common stock dividend on the Company's issued and outstanding shares.
Accordingly, earnings per share and share data have been adjusted to give
retroactive effect to the stock splits for all periods presented.
Principles of Consolidation - The consolidated financial statements of the
Company include the accounts of BWAY and its wholly owned subsidiaries, BSI,
MCC, BSNJ, BSO, PMI, and BSCI. All material intercompany balances and
transactions have been eliminated in consolidation.
Fiscal Year - The Company operates on a 52/53-week fiscal year ending on the
Sunday closest to September 30 of the applicable year.
Inventories - Inventories are carried at the lower of cost or market, with
cost determined under the last-in, first-out (LIFO) method of inventory
valuation.
Property, Plant, and Equipment - Property, plant, and equipment is recorded
at cost. Depreciation is provided over the estimated useful lives of the
assets on a straight-line basis for financial reporting purposes.
Expenditures for major renewals and replacements are capitalized.
Expenditures for maintenance and repairs are charged to income as incurred.
When property items are retired or otherwise disposed of, amounts applicable
to such units are removed from the related asset and accumulated depreciation
accounts and any resulting gain or loss is credited or charged to income.
Useful lives are generally as follows:
Buildings and improvements 17-30 years
Machinery and equipment 10-17 years
Furniture and fixtures 5-7 years
Computer systems 5-7 years
F-8
<PAGE>
Computer Information Systems - Costs directly associated with the initial
purchase, development, and implementation of computer information systems are
deferred and included in property, plant, and equipment. Such costs are
amortized on a straight-line basis over the expected useful life of the
systems, principally five to seven years. Ongoing maintenance costs of
computer information systems are expensed.
Intangible Assets - Intangible assets consist of identifiable intangibles
(trademarks, customer lists, and covenants not-to-compete) and goodwill.
Identifiable intangibles are amortized over the term of the agreement (5 to 7
years) or estimated useful life (2 to 17 years). Goodwill is amortized over
30 years on a straight-line basis.
Deferred Financing Costs - Deferred financing costs are being amortized over
the term of the related loan agreement using the straight-line method, which
approximates the effective yield method.
Revenue Recognition - The Company recognizes revenue at the time the product
is shipped to the customer.
Accrued Rebates - The Company enters into contractual agreements for rebates
on certain products with its customers. As sales occur, a provision for
rebates is recorded as a reduction to arrive at net sales and is accrued on
the balance sheet.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for
Income Taxes." SFAS 109 requires, among other things, the use of the
liability method of computing deferred income taxes. Under the liability
method, the effect of changes in corporate tax rates on deferred income taxes
is recognized currently as an adjustment to income tax expense. The
liability method also requires that deferred tax assets or liabilities be
recorded based on the difference between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of - The
Company adopted SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets To Be Disposed of," as of September 29, 1996. In
accordance with SFAS 121, the Company has elected to review for impairment,
on a quarterly basis, long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount
of any asset may not be reasonable based on estimates of future undiscounted
cash flows. In the event of an impairment, the asset is written down to its
fair market value. Impairment of goodwill and write-down, if any, is
measured based on estimates of future undiscounted cash flows. Assets to be
disposed of are recorded at the lower of net book value or fair market value
less cost to sell at the date management commits to a plan of disposal.
There was no cumulative effect adjustment recorded upon adoption.
Cash and Cash Equivalents - For purposes of the presentation of the
consolidated statements of cash flows, the Company considers all highly
liquid investments purchased with original maturities of three months or less
to be cash equivalents.
Accounting for Stock Options - The Company adopted SFAS 123, "Accounting for
Stock-Based Compensation," as of September 28, 1997. As permitted under the
statement, the Company has continued to account for stock-based compensation
under the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees." Compensation cost
for employees' and directors' stock options is measured as the excess, if
any, of the quoted market
F-9
<PAGE>
price of the Company's stock at the date of grant over the exercise price
amount an employee or director must pay to acquire the stock.
Earnings Per Common Share - Earnings per common share are based on the
weighted average number of common shares and common stock equivalents
outstanding during each year. Common stock sold during the twelve-month
period prior to the June 1995 IPO has been included in the earnings per share
calculation for all periods presented in accordance with Staff Accounting
Bulletin 83. Common stock equivalents represent the dilutive effect of the
assumed exercise of the outstanding stock options. In February 1997, the
Financial Accounting Standards Board issued SFAS 128, "Earnings Per Share."
The Company has considered the impact of this new standard and does not
believe earnings per share determined under this statement are materially
different than earnings per share determined in accordance with current
accounting standards. The statement is effective for financial statements
for periods ending after December 15, 1997.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassifications - Certain amounts in the previously reported financial
statements have been reclassified to conform to the current presentation.
2. ACQUISITIONS
Milton Can Company - On May 28, 1996, the Company acquired all of the
outstanding stock of Milton Can Company, Inc. This subsidiary was renamed
Brockway Standard (New Jersey), Inc. ("BSNJ"). BSNJ is a manufacturer of
paint, oblong, and specialty cans within the general line segment of the
North American metal container industry. The Company paid $13.4 million in
cash, $1 million in notes, and $14.6 million in BWAY stock. The Company
issued a total of 1,216,455 shares in connection with the merger, comprised
of 984,261 shares of its treasury stock and 232,194 newly issued shares. In
addition, the Company repaid BSNJ's approximately $12.3 million in term and
revolving bank debt concurrent with consummation of the purchase transaction.
Davies Can Company - On June 17, 1996, the Company acquired substantially all
of the assets and assumed certain of the liabilities of Davies Can Company
("Davies"), an unincorporated division of the Van Dorn Company (a wholly
owned subsidiary of Crown Cork & Seal Company, Inc.). This subsidiary was
renamed Brockway Standard (Ohio), Inc. ("BSO"). BSO manufactures paint,
oblong, and utility cans within the general line segment of the North
American metal container industry. The Company paid approximately $41.7
million in cash, subject to an adjustment based on the change in working
capital from December 31, 1995 through June 17, 1996.
Ball Aerosol - On October 28, 1996, the Company acquired substantially all of
the assets related to the metal aerosol can business from Ball Metal Food
Container Corporation (the "BMFCC"), a wholly owned subsidiary of Ball
Corporation. This subsidiary was named Milton Can Company, Inc. ("MCC").
MCC consists of a facility in Cincinnati which includes a material center and
substantially all the assets used in connection with the marketing,
distribution, selling, manufacturing, designing, and engineering of metal
aerosol cans. The Company paid approximately $42.4 million for the acquired
business.
F-10
<PAGE>
Separately, the parties entered into supply agreements whereby certain
coating, decorating, and metal processing services will be provided by the
Company to the BMFCC.
The purchase method of accounting was used to establish and record a new cost
basis for the assets acquired and liabilities assumed. The operating results
for BSNJ, BSO, and MCC have been included in the Company's consolidated
financial statements since the dates of acquisition. The excess of the
aggregate purchase price over the aggregate fair market value of net
identifiable assets acquired was approximately $79 million.
The following pro forma results assume the acquisitions of BSNJ, BSO, and MCC
occurred at the beginning of the fiscal year ended September 29, 1996 after
giving affect to certain pro forma adjustments, consisting of an adjustment
to reflect the amortization of cost in excess of the net assets acquired,
increased interest expense, and the estimated related income tax effects:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------
SEPTEMBER 28, September 29,
1997 1996
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales $406,476 $413,750
Income before extraordinary item 13,202 1,005
Net income (loss) 13,202 (1,530)
Earnings (loss) per common share:
Income before extraordinary item 1.32 0.10
Net income (loss) 1.32 (0.16)
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisitions been
consummated as of the beginning of each period presented, nor is it
necessarily indicative of future operating results.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, September 29,
1997 1996
<S> <C> <C>
Inventories at FIFO cost:
Raw materials $12,661 $ 9,300
Work-in-progress 23,603 18,601
Finished goods 11,091 9,189
------- -------
47,355 37,090
LIFO reserve (740) (46)
------- -------
$46,615 $37,044
======= =======
</TABLE>
F-11
<PAGE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Land $ 3,788 $ 2,288
Building and improvements 19,823 14,145
Machinery and equipment 97,656 80,328
Furniture and fixtures 3,320 2,535
Construction in progress 24,126 12,423
------------ ------------
148,713 111,719
Less accumulated depreciation 25,096 16,919
------------ ------------
Property, plant, and equipment - net $123,617 $ 94,800
============ ============
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Customer lists $ 7,486 $ 7,071
Tradename 4,704 4,704
Noncompete agreements 4,494 4,494
------------- -------------
16,684 16,269
Less accumulated amortization 3,104 1,579
------------- -------------
$13,580 $14,690
============= =============
</TABLE>
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Included in accounts payable and accrued salaries and wages at September
28, 1997 and September 29, 1996 are bank drafts issued and outstanding for
which no rights of offset exist to cash and cash equivalents, as follows
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Bank drafts issued and outstanding included in:
Accounts payable $11,256 $7,942
Accrued salaries and wages 1,641 747
------------ -----------
$12,897 $8,689
============ ===========
</TABLE>
F-12
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
10.25% Notes $ 100,000
Credit agreement 13,500 $ 92,000
Other borrowings 2,032 3,198
--------- --------
115,532 95,198
Less current maturities of long-term debt 1,151 145
--------- --------
Total long-term debt $ 114,381 $ 95,053
========= ========
</TABLE>
On June 17, 1996, the Company terminated its existing bank agreement and
entered into a new credit agreement with BT Alex Brown (formerly Bankers
Trust Company) and NationsBank, N.A. (the "Credit Agreement"). Initial
borrowings under the Credit Agreement were used to repay all obligations
under the Company's previous revolving credit facility. Funds from the
Credit Agreement were also used to prepay the $50 million private placement
of 8.35% Senior Secured Notes maturing September 1, 2001. In conjunction
with the prepayment of the Senior Secured Notes, the Company recorded an
extraordinary loss related to the early extinguishment of debt in the
amount of $2.5 million, net of taxes.
In October 1997, the Company amended its Credit Agreement. The amendment
provides the Company with lower interest rate margins and greater
flexibility with regard to growth investments in joint ventures and other
subsidiaries. The amendment also provides the Company with a second option
to increase the borrowing limit by another $25 million for a maximum
borrowing limit of $150 million, provided certain conditions are met and
provided that only one $25 million increase occurs in any twelve-month
period. The amendment also extends the expiration of the Credit Agreement
one year to June 17, 2002.
The Credit Agreement allows the Company to borrow up to $100 million or
$150 million if certain conditions are met. The interest rates under the
Credit Agreement are based on rate margins for either prime rate as
announced by NationsBank from time to time ("Prime") or LIBOR, at the
option of the Company. The applicable rate margin is determined on a
quarterly basis by a review of the Company's leverage ratio. The Company's
borrowing rate is at its option either LIBOR plus 1.0%, or Prime. The
Company's borrowing rate is 6.9375% at September 28, 1997. Loans under the
Credit Agreement are unsecured and can be prepaid at the option of the
Company without premium or penalty. The Credit Agreement is subject to
certain restrictive covenants, including covenants which require the
Company to maintain a certain minimum level of net worth and a maximum
ratio for leverage. In addition, BWAY is restricted in its ability to pay
shareholder dividends and other restricted payments in an amount greater
than approximately $16.4 million at September 28, 1997 and to incur
additional indebtedness. The Company's subsidiaries are restricted in their
ability to transfer funds to the Company, except for funds to be used to
effect approved acquisitions, pay dividends, reimburse the Company for
operating and other expenditures made on behalf of the subsidiaries and
repay permitted intercompany indebtedness. Restricted net assets of the
Company's subsidiaries collectively amounted to approximately $71 million
at September 28, 1997.
On April 11, 1997, the Company received the net proceeds of approximately
$96 million from a private placement of $100 million 10 1/4% Senior
Subordinated Notes due 2007 (the "Notes"). The net proceeds were used by
the subsidiaries to repay a portion of the Company's indebtedness under the
Credit Agreement.
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 of each year, commencing on October 15, 1997. The Notes are
general unsecured senior subordinated obligations of
F-13
<PAGE>
the Company and are effectively subordinated to all secured indebtedness, as
defined, of the Company to the extent of the value of the assets securing any
such indebtedness. The Notes are redeemable, in whole or in part, at the
option of the Company, on or after April 15, 2002 at the prices specified in
the Notes (105.125% on April 15, 2002 declining annually to 100% on April 15,
2005). In addition, until April 15, 2000, the Company may, at its option,
redeem up to 33 1/3% of the aggregate principal amount of the Notes
originally issued at a redemption price equal to 110 1/4% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption,
with the net cash proceeds of one or more public or private sales of common
stock of the Company, subject to certain provisions of the indenture. Upon
the occurrence of a Change in Control, as defined in the Notes, the Company
will be required to make an offer to repurchase the Notes at 101% of the
principal amount plus accrued and unpaid interest to the date of repurchase.
The Notes contain certain restrictive covenants, including limitations on
asset sales, additional indebtedness, and mergers. In addition, the Company
is restricted in its ability to pay shareholder dividends and other
restricted payments in an amount greater than $29.3 million at September 28,
1997.
The Company has filed a registration statement relating to an offer to
exchange the Notes for the Company's 10 1/4% Senior Subordinated Notes due
2007, Series B (the "Exchange Notes"). BWAY is a holding company with no
independent operations although it incurs some limited expenses on behalf of
its operating subsidiaries. BWAY has no significant assets other than the
common stock of its subsidiaries. The Notes are, and the Exchange Notes will
be, fully and unconditionally guaranteed on a joint and several basis by
certain of the Company's direct and indirect subsidiaries. The subsidiary
guarantors are wholly owned by BWAY and constitute all of the direct and
indirect subsidiaries of BWAY except for four subsidiaries that are
individually, and in the aggregate, inconsequential. Separate financial
statements of the subsidiary guarantors are not presented because management
has determined that they would not be material to investors.
Scheduled maturities of long-term debt as of September 28, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
1998 $ 1,151
1999 131
2000
2001 750
2002 13,500
Thereafter 100,000
--------
$115,532
========
</TABLE>
Based on quoted market prices and the borrowing rates currently available to
the Company for bank loans with similar terms and maturities, the fair value
of long-term debt at September 28, 1997 was estimated at $123.5 million and
at September 29, 1996 was estimated to approximate book value.
8. STOCKHOLDERS' EQUITY
Initial Public Offering
On June 20, 1995, the Company completed its IPO with the sale of 2,486,799
shares of common stock and realized net proceeds of approximately $20.3
million. On July 25, 1995, an additional 538,629 shares of the Company's
stock were sold to cover overallotments, providing additional net proceeds of
approximately $4.7 million.
F-14
<PAGE>
Stock Option Plans
Immediately prior to the IPO in June 1995, the Company adopted the Brockway
Standard Holdings Corporation 1995 Long-Term Incentive Plan and the Formula
Plan for Non-Employee Directors (the "Formula Plan") for its directors,
officers, and key employees. On August 20, 1996, the Board of Directors i)
adopted the Amended and Restated 1995 Long-Term Incentive Plan (the "Amended
Incentive Plan"), which Amended Incentive Plan increased the aggregate number
of shares of common stock authorized for issuance under the Amended Incentive
Plan from 735,000 to 1,125,000, and ii) froze the Formula Plan with only
45,000 of the available 150,000 shares of common stock being granted
thereunder. The options generally become exercisable in installments of 33%
per year on each of the first through third anniversaries of the grant date
and the options expire ten years from date of grant; 4,200 of the options
have been exercised as of September 28, 1997.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-
average assumption: expected dividends of 0.0%, expected volatility of
30.00%, risk-free interest of 6.58%, and expected lives of 6.0 years.
A summary of the status of the Company's two stock option plans as of
September 28, 1997 and changes during fiscal 1995, 1996, and 1997 is
presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
FIXED OPTIONS SHARES PRICE
<S> <C> <C>
Outstanding at October 2, 1994 - $ -
Granted 319,500 9.81
Outstanding at October 1, 1995 319,500 9.81
Granted 579,600 12.49
Forfeited (6,300) 12.67
--------
Outstanding at September 29, 1996 892,800 11.52
Granted 66,300 14.06
Forfeited (12,600) 12.67
Exercised (4,200) 11.87
--------
Outstanding at September 28, 1997 942,300 11.72
========
Exercisable at October 1, 1995 - -
========
Exercisable at September 29, 1996 113,100 9.78
========
Exercisable at September 28, 1997 368,100 10.99
========
Weighted average grant date fair value of options granted
during the year ended September 28, 1997 $ 6.15
========
</TABLE>
F-15
<PAGE>
The following table summarizes information about stock options outstanding at
September 28, 1997:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
RANGE OF SEPTEMBER 28, CONTRACTUAL EXERCISE SEPTEMBER 28, EXERCISE
EXERCISE PRICES 1997 LIFE PRICE 1997 PRICE
<S> <C> <C> <C> <C> <C>
$ 9.00 - 10.00 271,500 7.7 $ 9.67 186,000 $ 9.67
10.01 - 11.00 50,000 7.9 10.69 21,700 10.68
11.01 - 12.00 28,800 9.0 11.67 - -
12.01 - 13.00 532,000 8.7 12.54 160,400 12.58
14.01 - 15.00 55,500 9.6 14.33 - -
18.01 - 19.00 4,500 9.8 18.17 - -
------- --- ------ ------- ------
942,300 8.4 $11.72 368,100 $10.99
======= === ====== ======= ======
</TABLE>
The range of exercise prices for options outstanding were $9.67 to $14.33 per
share.
The fair value of options granted during the year ended September 28, 1997
was $380,000. The Company applies Accounting Principles Board Opinion 25 and
related Interpretations in accounting for its stock option plans.
Accordingly, no compensation cost has been recognized for its fixed stock
option plans. Had compensation cost for the Company's stock option plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of FASB Statement 123, the Company's
net income and earnings per share for each of the three years in the period
ended September 28, 1997 would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net income to common shareholders (in thousands):
As reported $13,104 $1,184 $8,773
======= ====== ======
Pro forma $12,334 $ 712 $8,671
======= ====== ======
Net income per common and common equivalent share:
As reported $ 1.31 $ 0.13 $ 1.24
======= ====== ======
Pro forma $ 1.24 $ 0.08 $ 1.22
======= ====== ======
</TABLE>
Shareholder Rights Plan
The Company has a Shareholder Rights Plan, as amended by Amendment 1 to the
Rights Plan dated February 12, 1996, as amended by Amendment 2 to the Rights
Plan dated November 26, 1997 (as amended, the "Rights Plan"), under which a
preferred share purchase right is presently attached to and trades with each
outstanding share of the Company's common stock. The rights become
exercisable and transferable apart from the common stock after a person or
group other than an Exempt Person (as defined in the Rights Plan), without
the Company's consent, acquires beneficial ownership of, or the right to
obtain beneficial ownership of, 15% or more of the Company's common stock or
ten business days after a person or group announces or commences a tender
offer or exchange offer that could result in 15% ownership. Once exercisable,
each right entitles the holder to purchase one
F-16
<PAGE>
fifteen-hundredth share of Junior Participating Series A Preferred Stock at
an exercise price of $60 per share subject to adjustment to prevent
dilution. The rights have no voting power and no current dilutive effect on
earnings per common share. The rights expire on June 15, 2005 and are
redeemable at the discretion of the Board of Directors at $.01 per share.
If a person acquires 15% ownership, except in an offer approved by the
Company under the Rights Plan, then each right not owned by the acquirer or
related parties will entitle its holder to purchase, at the right's
exercise price, additional shares of common stock or common stock
equivalents. In addition, after an acquirer obtains 15% ownership, if the
Company is involved in certain mergers, business combinations, or asset
sales, each right not owned by the acquirer or related persons will entitle
its holder to purchase, at the right's exercise price, additional shares of
common stock of the other party to the transaction.
9. INCOME TAXES
The Company files a consolidated federal income tax return. Deferred income
taxes are provided to recognize the differences between the carrying amount
of assets and liabilities for financial statement purposes and the amounts
used for income tax purposes.
Components of net deferred tax liability are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Deferred tax liabilities:
Property, plant, and equipment $23,071 $16,452
Inventory 1,241 660
Other 114 1,097
------- -------
24,426 18,209
Deferred tax assets:
Restructuring and reorganization reserves 4,685 2,279
Employee benefits 7,836 1,404
Customer claims/rebates 101 1,346
Accounts receivable 230 244
Other 1,716 1,206
------- -------
14,568 6,479
------- -------
Net deferred tax liability $ 9,858 $11,730
======= =======
Net current deferred tax asset $(5,111) $(2,405)
Net noncurrent deferred tax liability 14,969 14,135
------- -------
$ 9,858 $11,730
======= =======
</TABLE>
F-17
<PAGE>
The provision for income taxes is reconciled with the federal statutory
rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -------------------
AMOUNT % AMOUNT % AMOUNT %
<S> <C> <C> <C> <C> <C> <C>
Income tax at federal statutory rate $7,788 35.0% $2,435 35.0% $5,178 35.0 %
State income taxes, net of federal
income tax benefit 549 2.5% 314 4.5% 562 3.8 %
Nondeductible amortization of
intangibles 754 3.4% 476 6.8% 304 2.1 %
Other 55 0.2% 14 0.2% (23) (0.2)%
------- ---- ------- ---- ------- -----
$9,146 41.1% $3,239 46.5% $6,021 40.7 %
======= ==== ======= ==== ======= =====
</TABLE>
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $ 9,569 $ 7,265 $ 4,287
State 1,449 811 420
Deferred (1,872) (4,837) 1,314
------- ------- -------
$ 9,146 $ 3,239 $ 6,021
======= ======= =======
</TABLE>
10. LEASE COMMITMENTS
The Company leases warehouses, office space, equipment, and vehicles under
operating leases. Rent expense during each of the last three fiscal years
was approximately $4.2 million (1997), $3.3 million (1996), and $2.6
million (1995).
F-18
<PAGE>
At September 28, 1997, future minimum rental payments under capitalized leases
and under noncancelable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
<S> <C> <C>
1998 $137 $ 3,526
1999 137 2,633
2000 1,964
2001 1,679
2002 1,202
Thereafter 2,131
-------- ------------
Total minium lease payments 274 $13,135
============
Imputed interest at 8.66% (22)
--------
Present value of minimum capitalized lease payments $252
========
</TABLE>
11. PROFIT SHARING AND PENSION PLANS
The Company has qualified profit sharing and savings plans for specified
employees. These plans are contributory defined contribution plans which
provide for employee contributions with a Company matching provision, and
for certain employees a deferred profit sharing component funded by the
Company. The Company's net contributions to the profit sharing and savings
plans for each of the last three fiscal years were approximately $0.7
million (1997), $1.5 million (1996), and $1.2 million (1995).
BSNJ has a noncontributory defined benefit pension plan covering a majority
of its salaried employees. The plan provides benefit payments using a
formula based on an employee's compensation and length of service. BSNJ
funds the plan in amounts equal to the minimum funding requirements of the
Employee Retirement Income Security Act of 1974, plus additional amounts as
BSNJ actuarial consultants advise to be appropriate and as management
approves from time to time. The Company froze this plan effective December
31, 1996.
The periodic net pension income related to continuing operations is
comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 28, 1996
(ACQUISITION)
YEAR ENDED THROUGH
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Service cost - benefits earned during the period $ 31,100 $ 42,000
Interest cost on projected benefit obligation 191,300 81,000
Actual return on assets (399,800) (183,000)
------------------- -------------------
Net pension income $(177,400) $ (60,000)
=================== ===================
</TABLE>
F-19
<PAGE>
The following table shows the plans' funded status and amounts recognized in
the balance sheet:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 28, 1996
(ACQUISITION)
YEAR ENDED THROUGH
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Actuarial present value of benefit obligations - Vested $ 2,242,800 $ 2,288,000
=========== ===========
Accumulated benefit obligation $ 2,242,800 $ 2,288,000
=========== ===========
Fair value of plan assets $ 4,911,800 $ 4,966,800
Projected benefit obligation (2,242,800) (3,256,800)
----------- -----------
Funded status 2,669,000 1,710,000
Unrecognized net gain (832,500) (290,000)
Unrecognized prior service cost 327,200
----------- -----------
Prepaid pension expense $ 2,163,700 $ 1,420,000
=========== ===========
The actuarial assumptions used were:
Discount rate 7.25% 7.75%
=========== ===========
Rate of increase in compensation levels 6.00% 6.00%
=========== ===========
Expected return on assets 9.00% 9.00%
=========== ===========
</TABLE>
Most of BSNJ's union employees are covered under multi-employer defined
benefit plans administered by the union. Total contributions charged to
expense for such plans are $0.7 million as of September 28, 1997.
In connection with the acquisition of MCC, the Company assumed three defined
benefit postretirement medical plans. These plans are noncontributory and
provide certain medical benefits after retirement to covered union employees.
In June 1997, the Company and employees belonging to one union representing
approximately 50% of the employees at MCC reached a new collective bargaining
agreement. One of the provisions of the new agreement eliminates
postretirement medical benefits provided by the Company which resulted in the
recording of a curtailment gain of approximately $5.8 million.
F-20
<PAGE>
As of September 28, 1997, in accordance with the terms of two applicable
collective bargaining agreements the Company continues to offer
postretirement medical coverage to certain union employees who retire from
employment at MCC. Net periodic postretirement medical benefit plan expense
from the period October 28, 1996 (date of acquisition) through September 28,
1997 includes the following components:
<TABLE>
<S> <C>
Service cost - benefits earned during the year $178,114
Interest cost on accumulated postretirement
medical benefit plan obligation 471,914
----------------
Net periodic postretirement medical benefit
plan expense $650,028
================
The following table sets forth the combined status of the defined benefit
postretirement medical benefit plans at September 28, 1997:
Accumulated postretirement medical benefit obligation:
Current retirees $2,937,542
Fully eligible active plan participants 1,105,936
Employees not yet eligible for retirement 2,868,667
----------------
Total accumulated postretirement medical benefit obligation 6,912,145
Net periodic postretirement medical benefit plan expense 650,028
----------------
Accrued postretirement medical benefit plan expense $7,562,173
================
The actuarial assumptions used were:
Discount rate 7.50%
=====
Medical expense trend rate 10.5% to 5.5%
================
Average retirement age 62
The 1983 Group Annuitant Mortality Table
</TABLE>
12. RELATED PARTY TRANSACTIONS
BSI was a party to a management agreement with AB Leasing and Management,
Inc. (``AB Leasing''), a company related by common ownership, whereby BSI
paid AB Leasing on an annual basis the greater of $200 thousand or 15% of
net income, as defined. Upon the completion of the IPO, the Company's
management agreement with AB Leasing was terminated. In connection with the
termination, the Company paid $1.995 million, through the issuance of
199,500 shares of common stock to AB Leasing just prior to the effectiveness
of the Offering. The Company recorded a nonrecurring, noncash, pre-tax
charge to operations of $1.995 million in connection therewith in the third
quarter of 1995. BSI expensed fees of approximately $1.08 million in fiscal
1995 for management services including strategic and financial planning. BSI
also reimbursed AB Leasing for certain expenses incurred on behalf of BSI
amounting to approximately $309 thousand in fiscal 1995.
F-21
<PAGE>
BSNJ leases its primary operating facility under an operating lease from a
partnership in which certain members of the Company's management are
partners. The lease, which is for a five-year period ending on September
30, 1999 with renewal options, carries a monthly lease payment of $52,457.
In 1997, 1996 and 1995, the Company purchased computer software and
incurred related implementation costs totaling approximately $0.6 million,
$1.2 million and $2.5 million, respectively, from a software company which
has certain directors who are also directors of the Company.
13. REORGANIZATION AND RESTRUCTURING
The acquisitions of BSNJ, BSO, and MCC have resulted in redundancy of
facilities and equipment. Management has committed to a plan to exit
certain activities of the acquired companies and integrate acquired assets
and businesses with BWAY facilities. In connection with recording the
purchases, the Company established reorganization liabilities of
approximately $3.0 million and $2.8 million during fiscal 1997 and 1996,
respectively, which were classified as other current liabilities. The
liabilities represent the direct costs expected to be incurred which have
no future economic benefit to the Company and include charges relating to
the closing of four manufacturing facilities and severance costs. The
reorganization liability includes the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Closing/abandonment of facilities $1,395 $2,046
Severance and benefit costs 612
------ ------
$1,395 $2,658
====== ======
</TABLE>
The Company has charged approximately $4.3 million against the
reorganization liability during fiscal 1997 and approximately $114 thousand
during fiscal 1996.
Also, during the fourth quarter of fiscal 1996, the Company recorded a
restructuring charge comprised of a write-down of assets to be disposed
against operations of $12.9 million. Increased volume resulting from the
acquisitions provided the opportunity for the Company to consolidate
certain of its manufacturing processes to meet increased customer demand
and improve efficiencies, which will result in the disposal of surplus
equipment and currently productive manufacturing equipment for scrap values
beginning in early fiscal 1997 and ending in fiscal 1998. When fully
implemented, the rationalization is expected on an overall basis, to result
in reduced overhead expense, and enhanced operational efficiencies.
14. CONTINGENCIES
Environmental
The Company continues to monitor and evaluate on an ongoing and regular
basis its compliance with applicable environmental laws and regulations.
Expenditures are expensed or capitalized depending on their future economic
benefit. Expenditures that relate to an existing condition caused by past
operations and that have no future economic benefit are expensed.
Liabilities for noncapital expenditures are recorded when environmental
remediation is probable and the costs can be reasonably estimated. The
Company believes that it is in compliance in all material respects with
applicable federal, state, and local environmental regulations.
F-22
<PAGE>
The Company (and, in some cases, predecessors to the Company) have, from
time to time, received requests for information or notices of potential
responsibility pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") with respect to certain waste
disposal sites utilized by former or current facilities of the Company or
its various predecessors. To the Company's knowledge, all such matters
which have not been resolved are, subject to certain limitations,
indemnified by the sellers of the relevant Company affiliates, and all such
unresolved matters have been accepted for indemnification by such sellers.
Because liability under CERCLA is retroactive, it is possible that in the
future the Company may incur liability with respect to other sites.
Environmental investigations voluntarily conducted by the Company at its
Homerville, Georgia facility in 1993 and 1994 detected certain conditions
of soil and groundwater contamination, that predated the Company's 1989
acquisition of the facility from Owens-Illinois. Such contamination is
subject to indemnification by Owens-Illinois. The Company and Owens-
Illinois have entered into a supplemental agreement affirming Owens-
Illinois's responsibility for this matter and establishing procedures for
Owens-Illinois investigation and remediation of the contamination. In 1994,
the Georgia Department of Natural Resources ("DNR") determined that further
investigation must be completed before DNR decides whether corrective
action is needed. Owens-Illinois' investigation of the contamination is
continuing. Owens-Illinois is managing the remediation activities and
paying for such work directly. Preliminary consultant estimates indicated
that the cost of cleanup could range from $1 million to $6 million,
depending on the extent of contamination. Since Owens-Illinois is
conducting the remediation work, management has no way of determining the
actual costs related to the clean-up efforts. Management does not believe
that the final resolution of this matter will have a material adverse
effect on the results of operations or financial condition of the Company,
and has not accrued a liability with respect to this matter because it
believes that a loss contingency is not probable.
The Cincinnati facility, which was acquired in the MCC Acquisition, is
listed on environmental agency lists as a site that may require
investigation for potential contamination. The listings could result in a
requirement for the Company to investigate and remediate the facility. To
date, no agency has required such action and the cost of any investigation
or remediation can not be reasonably estimated. BMFCC has agreed to
indemnify the Company, subject to certain limitations.
At the Peabody, Massachusetts facility, which was previously leased by
BSNJ, groundwater remediation is underway. The owner of the facility has
agreed to retain all liability for the remediation. In addition, the former
shareholders of Milton Can, subject to certain limitations, indemnified the
Company for liabilities associated with the contamination.
Management believes that none of these matters will have a material adverse
effect on the results of operations or financial condition of the Company
in light of both the potential indemnification obligations of others to the
Company and the Company's understanding of the underlying potential
liability.
Letters of Credit
At September 28, 1997, a bank had issued standby letters of credit on
behalf of BWAY in the aggregate amount of $1.2 million in favor of BWAY's
workers' compensation insurer.
15. CONCENTRATIONS OF CREDIT RISK
The Company sells its metal containers to a large number of customers in
numerous industry sectors. To reduce credit risk, the Company sets credit
limits and performs ongoing credit evaluations. Sales to the Company's ten
largest customers amounted to approximately 38% (1997), 39% (1996), and 43%
(1995), of the Company's sales including sales to one customer of 10%
(1997), 13% (1996), and 13% (1995).
Although the Company's exposure to credit risk associated with nonpayment
is affected by conditions with the customers' industries, the balances are
substantially current and are within terms and limits established by the
Company. Accounts receivable from one customer amounted to approximately
11% of total accounts receivable at September 29, 1996.
F-23
<PAGE>
16. QUARTERLY INFORMATION (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL YEAR 1997: Quarter QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Net sales $91,166 $100,178 $109,676 $101,130
======= ======== ======== ========
Gross profit $10,441 $ 14,560 $ 13,432 $ 13,451
======= ======== ======== ========
Net income $ 1,418 $ 3,237 $ 4,399 $ 4,050
======= ======== ======== ========
Earnings per common share:
Net income $ 0.15 $ 0.33 $ 0.44 $ 0.40
======= ======== ======== ========
FISCAL YEAR 1996:
Net sales $58,154 $ 61,768 $ 73,715 $ 89,468
======= ======== ======== ========
Gross profit $ 7,563 $ 9,985 $ 12,001 $ 11,159
======= ======== ======== ========
Income before extraordinary items $ 2,219 $ 2,788 $ 3,867 $ (5,155)
Extraordinary items (2,535)
------- -------- -------- --------
Net income $ 2,219 $ 2,788 $ 1,332 $ (5,155)
======= ======== ======== ========
Earnings per common share:
Income before extraordinary item $ 0.23 $ 0.31 $ 0.42 $ (0.52)
======= ======== ======== ========
Net income $ 0.23 $ 0.31 $ 0.15 $ (0.52)
======= ======== ======== ========
</TABLE>
F-24
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule I - . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Schedule II - . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
S-1
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 28, September 29,
1997 1996
-------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash $ 173
Investments in subsidiaries $136,562 82,899
Other assets 181 259
------------------------ -----------------------
$136,743 $83,331
======================== =======================
LIABILITIES:
Intercompany payable - BSI $ 49,205 $ 9,423
Other liabilities 2,072 1,279
------------------------ -----------------------
51,277 10,702
------------------------ -----------------------
STOCKHOLDERS' EQUITY:
Common stock 99 66
Additional paid-in capital 37,629 37,612
Retained earnings 48,673 35,569
------------------------ -----------------------
86,401 73,247
Less treasury stock, at cost (935) (618)
------------------------ -----------------------
Total stockholders' equity 85,466 72,629
------------------------ -----------------------
$136,743 $83,331
======================== =======================
</TABLE>
S-2
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
September 28, September 29, October 1,
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
Management fees charged to subsidiaries $ 1,545 $1,030 $ 359
Interest income 362 199
Other income/(expense),net 151 (830) (287)
---------------- ------------- ---------------
Income before income taxes and equity in
undistributed earnings of subsidiaries 1,696 562 271
Income tax expense 695 229 108
---------------- ------------- ---------------
Income before equity in undistributed earnings
of subsidiaries 1,001 333 163
Equity in undistributed earnings of subsidiaries 12,103 851 8,610
---------------- ------------- ---------------
Net income $13,104 $1,184 $8,773
================ ============= ===============
</TABLE>
S-3
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,104 $ 1,184 $ 8,773
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed earnings of subsidiaries (12,103) (851) (8,610)
Termination of AB Leasing contract through issuance
of common shares 1,995
Changes in assets and liabilities:
Other assets 78 (258) 498
Other liabilities 793 781
Income tax payable (910) 112
Intercompany payable 41,256 22,450 (14,051)
------------------ -------------- --------------
Net cash provided by (used in) operating activities 43,128 22,396 (11,283)
------------------ -------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (42,154) (27,617)
------------------ -------------- --------------
Net cash (used in) investing activities (42,154) (27,617)
------------------ -------------- --------------
FINANCING ACTIVITIES:
Purchase of treasury stock (1,147) (9,469) (99)
Proceeds from Initial Public Offering 24,966
Proceeds from issuance of stock before Initial Public
Offering 505
------------------ -------------- --------------
Net cash (used in) provided by financing activities (1,147) (9,469) 25,372
------------------ -------------- --------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (173) (14,690) 14,089
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 173 14,863 774
------------------ -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 0 $ 173 $ 14,863
================== ============== ==============
</TABLE>
S-4
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ 695 $ 229 $ 108
================== ================ ==============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisitions $ 14,600
================
Common stock issued under employee savings plan $ 830 $ 589
================== ================
</TABLE>
S-5
<PAGE>
SCHEDULE II - CONDENSED VALUATION AND QUALIFYING ACCOUNTS
BWAY CORPORATION AND SUBSIDIARIES
(In Thousands)
<TABLE>
<CAPTION>
Balance Additions Balance
at Charged to at
Beginning Costs and (1) End
Description of Period Expenses Deductions of Period
- ---------------------------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 1, 1995 583 (41) 156 386
Year ended September 29, 1996 386 188 184 390
Year ended September 28, 1997 390 350 160 580
</TABLE>
- --------------
(1) Deductions from the allowance for doubtful accounts represent the net
write-off of uncollectible accounts receivable.
S-6
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
================================================
Exhibit Description of Document Location of Document
No. in Sequential
Numbering System +
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation
of the Company. (3)
3.2 Amended and Restated By-laws of the Company (1)
3.3 Rights Agreement dated as of June 9, 1995
between the Company and Harris Trust and
Savings Bank, as Rights Agent (1)
3.4 Amendments to Rights Agreement dated as of
February 12, 1996 between the Company and
Harris Trust and Savings Bank, as Rights Agent (3)
3.5 Amendment No. 2 to Rights Agreement dated as
of August 19, 1997 between the Company and
Harris Trust and Savings Bank, as Rights Agent
4.1 Form of certificate representing shares of
Common Stock of the Company (2)
4.2 Credit Agreement dated June 17, 1996 by and
among BWAY Corporation, Brockway Standard,
Inc., Milton Can Company, Inc., the
additional borrowers, BT Alex.Brown
Incorporated (formerly known as Bankers Trust
Company) and NationsBank, N.A. (4)
4.3 Master Assignment and Consent Agreement and
First Amendment to Credit Agreement dated as
of August 15, 1996, and Second Amendment to
Credit Agreement dated as of October 15,
1997 between BWAY Corporation, Brockway
Standard, Inc., Milton Can Company, Inc., the
additional borrowers, BT Alex.Brown
Incorporated (formerly known as Bankers Trust
Company), and NationsBank, N.A.
4.4 Indenture dated as of April 11, 1997 among
the Company, the subsidiary guarantors named
therein and Harris Savings and Trust Company,
as trustee (6)
4.5 Forms of Series A and Series B 10 1/4% Senior
Subordinated Notes (contained in Exhibit 4.3
as Exhibit A and B thereto, respectively) (6)
4.6 Form of Guarantee (contained in Exhibit 4.3
as Exhibit F thereto) (6)
4.7 Registration Rights Agreement dated as of
April 11, 1997 among the Company, the
subsidiary guarantors named therein, BT
Alex.Brown Incorporated (formerly known as
Bankers Trust Company), Bear, Stearns & Co.
Inc., and NationsBanc Capital Markets, Inc. (6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Registrant will furnish to the
Commission, upon request, each instrument
defining the rights of holders of long-term
debt of the Registrant and its subsidiaries
where the amount of such debt does not exceed
10 percent of the total assets of the
Registrant and its subsidiaries on a
consolidated basis.
10.1 Asset Purchase Agreement dated December 19,
1988 between BS Holdings Corporation, BW
Plastics, Inc., BW-Morrow Plastics, Inc. and
Owens-Illinois Group, Inc. (1)
10.2 Registration Agreement dated as of January
30, 1989 between BS Holdings Corporation and
certain stockholders (1)
10.3 Acquisition Agreement dated as of March 4,
1993 between Ellisco Inc. and BSI (1)
10.4 Stock Purchase Agreement dated April 27, 1993
among Armstrong Industries, Inc., its
stockholders, Armstrong Containers, Inc. and (1)
BSI
10.5 Asset Purchase Agreement dated May 26, 1993
among DK Containers, Inc., Dennis Dyck,
Robert Vrhel, Mohan Patel and BSI (1)
10.6 Employment Agreement between the Company and
Warren J. Hayford, dated as of June 1, 1995 * (1)
10.7 Employment Agreement between the Company and
John T. Stirrup, dated as of June 1, 1995 * (1)
10.8 Memorandum of Agreement dated October 11,
1993 between The Folgers Company and BSI ** (1)
10.9 Contract and Lease dated September 3, 1968,
between the City of Picayune, Mississippi and
Standard Container Company (1)
10.10 Lease dated February 24, 1995 between Tab
Warehouse Fontana II and BSI (1)
10.11 Garland, Texas Industrial Net Lease dated
January 14, 1985 between MRM Associates and
Armstrong Containers, Inc. (1)
10.12 Gross Lease Agreement dated August 10, 1990
between Colonel Estates Joint Venture and BSI (1)
10.13 Lease dated February 11, 1991 between Curto
Reynolds Oelerich Inc. and Armstrong
Containers, Inc. (1)
</TABLE>
<PAGE>
10.14 Lease Agreement dated November 16, 1996
between Shelby Distribution Park and Brockway
Standard, Inc., as amended December 26, 1996.
10.15 Lease dated August 9, 1991 between DK
Containers, Inc. and Smith Barney Birtcher
Institutional Fund-I Limited Partnership and (1)
the First Amendment thereto
10.16 Lease dated September 2, 1994 between
Division Street Partners, L.P. and BSNJ (8)
10.17 Employee Stock Purchase Agreement dated March
4, 1994 among BS Holdings Corporation, Perry
Schwartz, Mid-America Group, Ltd., Warren J.
Hayford and Daniel P. Casey* (1)
10.18 Agreement, dated May 15, 1995, between BSI
and Owens-Illinois, Inc. Pursuant to (S) 9.9
(d) of the December 19, 1988 Stock Purchase (1)
Agreement
10.19 Settlement Agreement, dated June 30, 1997
between BWAY Corporation and Owens-Illinois
Group, Inc.
10.20 BWAY Corporation Amended and Restated 1995
Long-Term Incentive Plan.* (8)
10.21 Brockway Standard Holdings Corporation
Formula Plan for Non-Employee Directors* (1)
10.22 Cooperation Agreement between Ball
Corporation and BWAY Corporation, dated (3)
January 4, 1996.
10.23 Merger Agreement with Milton Can Company,
Inc., dated March 12, 1996. (3)
10.24 Amendment #1 to the Merger Agreement with
Milton Can Company, Inc., dated April 30, 1996 (3)
10.25 Asset Purchase Agreement dated April 29,
1996, between Brockway Standard, Inc., BWAY
Corporation, Van Dorn Company and Crown Cork
& Seal Company, Inc. (3)
10.26 Employment Agreement between the Company and
David P. Hayford, dated as of June 15, 1995* (4)
10.27 Employment Agreement between the Company and
James W. Milton, dated as of May 28, 1996* (4)
10.28 Amended and Restated Registration Rights
Agreement dated as of May 28, 1996, between
BWAY Corporation and certain shareholders. (4)
<PAGE>
10.29 Asset Purchase Agreement dated October 6, 1996
between Brockway Standard (New Jersey), Inc.
(formerly known as Milton Can Company, Inc.),
BWAY Corporation, Ball Metal Food Container
Corp., and Ball Corporation (5)
10.30 Amendment No. 1 to the Asset Purchase Agreement
dated October 28, 1996 between Milton Can
Company, Inc., BWAY Corporation, Ball Metal Food
Container Corp., and Ball Corporation (5)
10.31 Purchase Agreement dated as of April 8, 1997 among
the Company, the subsidiary guarantors named therein,
BT Alex. Brown Incorporated (formerly known as Bankers
Trust Company), Bear, Stearns & Co. Inc. and
NationsBanc Capital Markets, Inc. (6)
10.32 Brockway Standard (Ohio), Inc. Bargaining Unit
Savings Plan * (7)
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
____________________________
* Management contract or compensatory plan or arrangement.
+ This information appears only in the manually signed original copies of
this report.
** Confidential treatment requested.
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-91114).
(2) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending October 1, 1995 (File No. 0-26178).
(3) Incorporated by reference to the Company's Form 10-Q for the period ending
March 31, 1996 (File No. 0-26178).
(4) Incorporated by reference to the Company's Form 10-Q for the period ending
June 30, 1996 (File No. 0-26178).
(5) Incorporated by reference to the Company's Current Report on Form 8-K filed
on November 12, 1996 (File No. 0-26178).
(6) Incorporated by reference to the Company's Registration Statement on Form
S-4 (File No. 333-26013).
(7) Incorporated by reference to the Company's Registration Statement on Form
S-8 (File No. 333-39225).
(8) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending September 29, 1996 (File No. 0-26178).
<PAGE>
EXHIBIT 3.5
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
-----------------------------------
Amendment No. 2, dated as of November 26, 1997 ("Amendment No. 2"), to the
---------------
Rights Agreement, dated as of June 9, 1995, and as amended by Amendment No. 1,
dated as of February 12, 1996 ("Agreement"), between BWAY Corporation, a
---------
Delaware corporation f/k/a Brockway Standard Holdings Corporation (the
"Company"), and Harris Trust and Savings Bank, an Illinois banking corporation
-------
(the "Rights Agent"). Capitalized terms not otherwise defined herein have the
------------
meaning given to such terms in the Agreement.
RECITAL
-------
Pursuant to its authority under Section 26(a) of the Agreement, the Board
of Directors of the Company has authorized and approved an amendment to the
Agreement to decrease the amount of Common Stock GEO Capital Corporation, a
Delaware corporation, may beneficially own without becoming an Acquiring Person
and to increase the ceiling for Current Holders.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth in this Agreement, the parties hereby agree as follows:
Section 1.
A. Exempt Person. Section 1(q) of the Agreement is amended and restated
-------------
as follows:
(q) "Exempt Person" means (i) the Company, (ii) any Subsidiary of the
-------------
Company, (iii) any Current Holder, so long as such Current Holder does not
become the Beneficial Owner of 40% or more of the Common Stock then outstanding,
(iv) any Person that acquires Common Stock pursuant to an event described in
clause (ii) of the definition of Exempt Event, (v) any employee benefit plan of
the Company or of any Subsidiary of the Company, or (vi) any Person holding
Common Stock for any such employee benefit plan or for employees of the Company
or of any Subsidiary of the Company pursuant to the terms of any such employee
benefit plan.
<PAGE>
B. Purchase Price. Section 1(v) of the Agreement is amended and restated
--------------
as follows:
(v) "Purchase Price" with respect to each Right is, prior to the
--------------
occurrence of a Triggering Event $60, per one one-thousandth of a share of
Preferred Stock and shall, after the occurrence of a Triggering Event, be
subject to adjustment from time to time as provided in Sections 11 and 13, and
shall be payable in lawful money of the United States of America in cash or by
certified check or bank drafted payable to the order of the Company.
C. Adjustments to Purchase Price, Number of Shares or Number of Rights.
-------------------------------------------------------------------
Section 11(a)(ii) of the Agreement is amended and restated as follows:
(ii) Upon the first occurrence of a Triggering Event, proper provision
shall be made so that each holder of a Right, except as otherwise provided in
this Agreement, shall thereafter have the right to receive, and the Company
shall issue, upon exercise thereof at a price equal to the then-current Purchase
Price required to be paid in order to exercise a Right in accordance with terms
of this Agreement, multiplied by the number of one-thousandths of a share of
Preferred Stock or other securities for which a Right was then exercisable
(without giving the effect to such Triggering Event), in lieu of the number of
one one-thousandths of a share of Preferred Stock or other securities receivable
upon exercise of a Right prior to the occurrence of the Triggering Event, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then-current Purchase Price by the number of
one-thousandths of a share of Preferred Stock or other securities for which a
Right was then exercisable (without giving effect to such Triggering Event) and
(y) dividing that product by 50% of the Current Market Price per share of Common
Stock on the date of the occurrence of the Triggering Event (such number of
shares being referred to as the "Adjustment Shares"); provided, however, that if
-------- -------
the transaction or event that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13 of this Agreement,
then only the provisions of Section 13 of this Agreement shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii).
D. Section 11(m) shall be amended and restated as follows:
(m) The Company covenants and agrees that from and after the occurrence of
a Triggering Event, it shall not (i) consolidate with, (ii) merge with or into,
or (iii) directly or indirectly sell, lease, or otherwise transfer or dispose of
(in one transaction or series of related transactions) assets or earning power
aggregating more than 50% of the
<PAGE>
assets or earning power of the Company and its Subsidiaries taken as a whole, to
any other Person if (A) at the time of or immediately after such consolidation,
merger, sale, lease, transfer or disposition there are any rights, warrants,
securities or other instruments outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (B) prior to, simultaneously with or immediately after
such consolidation, merger, sale, lease, transfer or disposition the
stockholders (or equity holders) of the Person who constitutes, or would
constitute, the Principal Party in such transaction shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
of Associates or (C) the form or nature of organization of the Principal Party
would preclude or limit the exercisability of the Rights. The Company shall not
consummate any such consolidation, merger, sale, lease, transfer or disposition
unless prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).
E. Section 11(o) shall be amended and restated as follows:
(o) Anything in this Agreement to the contrary notwithstanding, if the
Company shall at any time prior to the Distribution Date (i) pay a dividend or
distribution on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then the number of
Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, and the number of
one one-thousandths of a share of Preferred Stock issuable in respect of, the
Rights, shall be proportionately adjusted, so that the following such event one
Right (with the number of one one-thousandths of a share proportionately
adjusted thereunder) shall thereafter be associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date. For example, if the Company effects a two-for-one stock
split at a time when each Right (if it becomes exercisable) would entitle the
holder to purchase one one-thousandth of a share of Preferred Stock for a
Purchase Price of $"Z", then following such stock split each previous Right
would be split into two current Rights and thereafter each current Right, upon
becoming exercisable, would (subject to further adjustment) entitle the holder
to purchase one two-thousandth of a share of Preferred Stock at a Purchase
Price of $"Z".
Section 2. Legend. Effective as of August 19, 1997, the legend to be
------
impressed, printed or written on, or otherwise affixed to the Common Stock
pursuant to Section 3(b) of the Agreement shall be in substantially in the
following form:
<PAGE>
This certificate also evidence and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between BWAY
Corporation and Harris Trust and Savings Bank, as Rights Agent,
dated as of June 9, 1995, as amended February 12, 1996 and November
26, 1997 (the "Rights Agreement"), the terms of which are hereby
----------------
incorporated herein by reference and a copy of which is on file at the
principal executive offices of BWAY Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. BWAY Corporation will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances,
Rights that were, are or become beneficially owned by Acquiring
Persons or their Associates or Affiliates (as such terms are defined
in the Rights Agreement) may become null and void and the holder of
any such Rights (including any subsequent holder) shall not have any
right to exercise such Rights.
Section 3. Governing Law. This Amendment No. 2, the Agreement and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the internal laws of such state applicable to
contract to be made and performed entirely within such State.
Section 4. Counterparts. This Amendment No. 2 may be executed in
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and both such counterparts shall together constitute but one and
the same instrument.
Section 5. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Amendment No. 2 are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Amendment No. 2.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
BWAY CORPORATION
By:
----------------------------
Title:
----------------------------
HARRIS TRUST AND SAVINGS BANK
By:
----------------------------
Title:
----------------------------
<PAGE>
Exhibit 4.3
MASTER ASSIGNMENT
AND CONSENT AGREEMENT AND
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS MASTER ASSIGNMENT AND CONSENT AGREEMENT AND FIRST AMENDMENT TO CREDIT
AGREEMENT, dated as of August 15, 1996 (this "Agreement"), is by and among BWAY
CORPORATION, a Delaware corporation ("BWAY"), BROCKWAY STANDARD, INC., a
Delaware corporation ("Brockway"), MILTON CAN COMPANY, INC., a Delaware
corporation ("Milton"), DAVIES CAN COMPANY, INC., a Delaware corporation
("Davies"), the Lenders parties to the Credit Agreement referred to below on the
date hereof but immediately prior to giving effect to this Agreement (the
"Existing Lenders"), BANKERS TRUST COMPANY, as Administrative Agent and
Syndication Agent, NATIONSBANK, N.A. (SOUTH), as Documentation Agent and Paying
Agent, and each of the financial institutions listed on Annex A attached hereto
(the "New Lenders").
RECITALS:
WHEREAS, BWAY, Brockway, Milton, Davies, the Agents and the Existing
Lenders are parties to that certain Credit Agreement dated as of June 17, 1996
(the "Credit Agreement");
WHEREAS, the Existing Lenders desire to assign a portion of the outstanding
Loans and Commitments to the New Lenders on the terms set forth herein in
connection with the initial syndication of the Loans and Commitments; and
WHEREAS, BWAY, Brockway, Milton, Davies, the Agents and the Existing
Lenders desire to amend the Credit Agreement as herein provided to (i) reflect
the new allocation of the Commitments and Loans among the Existing Lenders and
New Lenders and the addition of the New Lenders as Lenders under the Credit
Agreement, and (ii) reflect the addition of Harris Trust and Savings Bank and
SunTrust Bank, Atlanta as Co-Agents;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings given them in the Credit Agreement.
SECTION 2. DEEMED ASSIGNMENT AND CONSENT.
(a) Each of the Existing Lenders (collectively, the "Assignor
Lenders", and each individually, an "Assignor Lender"), severally and not
jointly, hereby sells and assigns to each of the New Lenders without
recourse and without representation or warranty (other than as expressly
provided herein), and each New Lender hereby purchases and assumes from
each Assignor Lender, that interest in and to each of such Assignor
Lender's rights and obligations under the Credit Agreement as of the date
hereof which in the aggregate represents such New Lender's pro rata share
(with respect to each such New Lender, its "Pro Rata Share") as set forth
on, and in respect of the Commitments listed on Annex B attached hereto
(calculated after giving effect to this Agreement), and such Pro Rata Share
represents
<PAGE>
all of the outstanding rights and obligations under the Credit Agreement
that are being sold and assigned to each New Lender, including, without
limitation, all rights and obligations with respect to such New Lender's
Pro Rata Share of outstanding Loans and Letters of Credit.
(b) In consideration of the assignment to each New Lender described
in Section 2(a) above, such New Lender hereby agrees to pay to the Paying
Agent, on the Effective Date (as defined below), the principal amount of
any outstanding Loans included within the New Lender's Pro Rata Share of
the Commitments listed on Annex B hereto, such payment to be made by wire
transfer of immediately available funds to the Paying Agent in accordance
with payment instructions separately provided by the Paying Agent to such
New Lender. Upon receipt of any such payment, the Paying Agent shall pay
each Assignor Lender its share of such payment. Any fees (other than
Commitment Fees and Letter of Credit Fees) payable to a New Lender in
respect of the Commitments included within such New Lender's Pro Rata Share
shall be determined and paid to such New Lender as agreed upon separately
by the applicable Assignor Lender or Assignors Lenders and such New Lender.
(c) The parties hereby agree that, upon giving effect to the
assignment and assumption described above, (i) each New Lender shall be a
party to the Credit Agreement and shall have all of the rights and
obligations under the Loan Documents, and shall be deemed to have made all
of the covenants and agreements contained in the Loan Documents (including,
without limitation, the appointment of BT and NationsBank as Agents in
accordance with Article VIII of the Credit Agreement), arising out of or
otherwise related to its Pro Rata Share of the Commitments assigned to such
New Lender hereby, and (ii) each Assignor Lender shall be absolutely
released from any of such obligations, covenants and agreements assumed or
made by any New Lender in respect of the share assigned to such New Lender
hereby.
(d) Each Assignor Lender and each New Lender hereby acknowledge and
confirm their understanding and intent that from and after the Effective
Date, the Paying Agent shall make all payments under the Credit Agreement
in respect of the assignment made hereby to such New Lender (including,
without limitation, all payments of principal and accrued but unpaid
interest, Commitment Fees and Letter of Credit Fees with respect thereto)
(i) in the case of any such interest, Commitment Fees and Letter of Credit
Fees that shall have accrued prior to the Effective Date, to the applicable
Assignor Lender, and (ii) in all other cases, the applicable New Lender.
Each Assignor Lender and each New Lender hereby agrees from time to time,
upon request of a party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such party
may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(e) No Assignor Lender shall be responsible to any New Lender for the
execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of any of the Loan Documents or for any
representations, warranties, recitals or statements
-2-
<PAGE>
made therein or made in any written or oral statements or in any financial
or other statements, instruments, reports or certificates or any other
documents furnished or made by any Assignor Lender to any New Lender or by
or on behalf of BWAY or any of its Subsidiaries to any Assignor Lender or
any New Lender in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
BWAY, the Borrowers or any other Person liable for the payment of any
Obligations, nor shall any Assignor Lender be required to ascertain or
inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the
Loan Documents or as to the use of the proceeds of the Loans or as to the
existence or possible existence or any Event of Default or Unmatured Event
of Default.
(f) Each New Lender represents and warrants that it has experience
and expertise in the making of loans such as the Loans; that it has
acquired its Pro Rata Share for its own account in the ordinary course of
business and not with a view to or for sale in connection with any
distribution of the Loans within the meaning of the Securities Act or the
Exchange Act or other federal securities laws (it being understood and
agreed that, subject to the provisions of Section 11.10 of the Credit
Agreement, the disposition of its Pro Rata Share or of any interest therein
shall at all times remain within such New Lender's exclusive control); and
that it has received, reviewed and approved a copy of the Credit Agreement
(including all Exhibits and Schedules thereto) and each of the other Loan
Documents.
(g) Each New Lender represents and warrants that it has received from
Assignor Lenders such financial information regarding BWAY and its
Subsidiaries as is available to Assignor Lenders and as such New Lender has
requested, that it has made its own independent investigation of the
financial condition and affairs of BWAY and its Subsidiaries in connection
with the assignment evidenced by this Agreement, and that it has made and
shall continue to make its own appraisal of the creditworthiness of BWAY
and its Subsidiaries. No Assignor Lender shall have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of any New Lender or to
provide any New Lender with any other credit or other information with
respect thereto, whether coming into its possession before the making of
the initial Loans or at any time or times thereafter, and no Assignor
Lender shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to any New Lender.
(h) Each Assignor Lender represents and warrants to each New Lender
that (i) the rights and obligations of such Assignor Lender assigned hereby
are not subject to any Liens created by that Assignor Lender and (ii) it is
the legal and beneficial owner of that portion of the Pro Rata Share of
such New Lender assigned by such Assignor Lender to such New Lender hereby,
free and clear of any adverse claim.
(i) The Administrative Agent hereby acknowledges that no processing
and recordation fee is payable under Section 11.10(d) of the Credit
Agreement as a result of the assignments contemplated hereby.
-3-
<PAGE>
(j) Notwithstanding anything herein to the contrary, in the event any
New Lender does not execute and deliver this Agreement to the
Administrative Agent on or prior to 5:00 P.M. (New York City time), August
15, 1996, the Administrative Agent may elect in its sole discretion to
remove such Person as a New Lender for all purposes under this Agreement,
it being understood that (i) any rights and obligations under the Credit
Agreement that would have been assigned to such Person shall be retained by
the Assignor Lenders, (ii) the Administrative Agent shall amend this
Agreement and Annex A and Annex B hereto to give effect to such removal and
retention, and (iii) the removal of any Person as a New Lender as provided
in this paragraph shall not preclude the effectiveness of this Agreement as
provided in Section 4 hereof.
(k) The Administrative Agent, the Facing Agent and the Borrowers
hereby consent to the assignments by the Assignor Lenders to the New
Lenders contemplated hereby.
SECTION 3. ADDITION OF NEW LENDERS AS LENDERS; PRO RATA SHARES AND NOTICE
ADDRESSES; AMENDMENTS TO CREDIT AGREEMENT.
(a) The Credit Agreement is hereby amended to include the New Lenders
listed on Annex A hereto as Lenders for all purposes under the Credit
Agreement and each of the other Loan Documents and the New Lenders shall
hereby become vested with all the rights, powers, privileges and duties of
a Lender under the Credit Agreement and each of the other Loan Documents.
For purposes of the Credit Agreement, the addresses of each of the New
Lenders shall be as set forth under such New Lender's name on the signature
pages hereof. Accordingly, subject to the provisions of Section 2(j)
hereof, Schedule 1.1(a) to the Credit Agreement is hereby amended by
deleting it in its entirety and substituting therefor a new Schedule 1.1(a)
in the form of Annex B attached hereto.
(b) The Credit Agreement is hereby amended by deleting the reference
to "and NATIONSBANK, N.A. (SOUTH), as Documentation Agent and Paying Agent
for the Lenders" appearing in the preamble thereto and replacing such
reference with the following:
"NATIONSBANK, N.A. (SOUTH), as Documentation Agent and Paying Agent
for the Lenders, and HARRIS TRUST AND SAVINGS BANK and SUNTRUST BANK,
ATLANTA, as Co-Agents"
(c) The Credit Agreement is hereby amended by adding a new Section
8.10 at the end of Article VIII thereof as follows:
"Section 8.10 Co-Agents. None of the Lenders referenced in the
preamble or signature pages of this Agreement as a "Co-Agent" shall
have any right, power, obligation, liability, responsibility or duty
under this Agreement or any other Loan Document other than those
applicable to all Lenders as such. Each Lender acknowledges that it
has not relied, and will not rely, on any of the Lenders so identified
as Co-Agents in deciding to enter into this
-4-
<PAGE>
Agreement or in taking or refraining from taking any action hereunder
or pursuant hereto."
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. This
Agreement shall become effective upon the date (the "Effective Date") each of
the following conditions have been satisfied:
(a) The Borrowers, the Agents, the Existing Lenders and the New
Lenders shall have executed and delivered this Agreement.
(b) The Borrowers shall have delivered to the Administrative Agent or
its counsel executed Revolving Notes payable to each Existing Lender and
New Lender giving effect to the assignments contemplated hereby, each dated
the Closing Date.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) Corporate Power and Authority; Authorization and Enforceability.
Each party to this Agreement represents and warrants (i) that it has full
power and authority to enter into this Agreement and perform its
obligations hereunder in accordance with the provisions hereof, (ii) that
this Agreement has been duly authorized, executed and delivered by such
party and (iii) that this Agreement constitutes the legal, valid and
binding obligation of such party, enforceable against such party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally and by general principles of
equity.
(b) Binding Obligation. The Borrowers represent and warrant that the
new Revolving Notes being delivered by the Borrowers pursuant to this
Agreement (i) have been duly executed and delivered by the Borrowers and
(ii) are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally and by general principles of equity.
(c) Incorporation of Representations and Warranties From Loan
Documents; Absence of Default. The Borrowers represent and warrant to each
Existing Lender and New Lender that the following statements are true and
correct:
(i) The representations and warranties contained in the Credit
Agreement and each of the other Loan Documents are and will be true,
correct and complete in all material respects on and as of the
Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such
earlier date.
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<PAGE>
(ii) No event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Agreement
that would constitute an Event of Default or an Unmatured Event of
Default.
SECTION 6. REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT.
(a) On and after the Effective Date each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of
like import, and each reference to the Credit Agreement in the Loan
Documents and all other documents (the "Ancillary Documents") delivered in
connection with the Credit Agreement shall mean and be a reference to the
Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement, the
Loan Documents and all other Ancillary Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Lenders or the Agents under the Credit Agreement,
the Loan Documents or the Ancillary Documents.
SECTION 7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 9. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes.
SECTION 10. FEES AND EXPENSES. The Borrowers hereby acknowledge that all
costs, fees and expenses as described in Section 11.4 of the Credit Agreement
incurred by the Administrative Agent and its counsel with respect to this
Agreement and the documents and transactions contemplated hereby shall be for
the account of the Borrowers.
SECTION 11. CANCELED NOTES. Reasonably promptly after the Effective Date,
each Existing Lender shall return to BWAY the Revolving Notes issued on the
Closing Date (the "Prior Notes") to such Existing Lender, marked to show their
cancellation, and, upon receipt of all of the
-6-
<PAGE>
newly executed and delivered Revolving Notes pursuant to Section 4(b) hereof and
the effectiveness of this Agreement, the Prior Notes shall be deemed null and
void.
[signature pages to follow]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
<TABLE>
<CAPTION>
BWAY CORPORATION BROCKWAY STANDARD, INC.
<S> <C>
By:_____________________________________ By:________________________________________
Name:___________________________________ Name:______________________________________
Title:__________________________________ Title:_____________________________________
MILTON CAN COMPANY, INC. DAVIES CAN COMPANY, INC.
By:_____________________________________ By:________________________________________
Name:___________________________________ Name:______________________________________
Title:__________________________________ Title:_____________________________________
BANKERS TRUST COMPANY, individually and as
Administrative Agent, Syndication Agent and
Facing Agent
By:________________________________________
Name:______________________________________
Title:_____________________________________
NATIONSBANK, N.A. (SOUTH),
individually and as Documentation Agent and
Paying Agent
By:________________________________________
Name:______________________________________
Title:_____________________________________
</TABLE>
S-1
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
individually and as Co-Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
Address:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Jeffrey C. Nicholson
Telephone: (312) 461-2736
Fax: (312) 461-2591
S-2
<PAGE>
SUNTRUST BANK, ATLANTA,
individually and as Co-Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
Address:
SunTrust Bank, Atlanta
25 Park Place
23rd Floor
Atlanta, GA 30303
Attention: Jenna M. Hale
Telephone: (404) 230-5427
Fax: (404) 588-8833
S-3
<PAGE>
CIBC INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
Address:
Canadian Imperial Bank of Commerce
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: William Humphries
Telephone: (770) 319-4906
Fax: (770) 319-4954
S-4
<PAGE>
CORESTATES BANK, N.A.
By:____________________________________
Name:_________________________________
Title:__________________________________
Address:
Corestates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19101-7618
Attention: Laura J. Zavacki
Telephone: (215) 973-8548
Fax: (215) 973-6745
S-5
<PAGE>
THE BANK OF NEW YORK
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address:
The Bank of New York
One Wall Street
New York, NY 10286
Attention: David Siegel
Telephone: (212) 635-1489
Fax: (212) 635-6434
S-6
<PAGE>
THE BANK OF NOVA SCOTIA
By:__________________________________
Name:________________________________
Title:_______________________________
Address:
The Bank of Nova Scotia
600 Peachtree Street NE
Suite 2700
Atlanta, GA 30308
Attention: James Yager
Telephone: (404) 877-1508
Fax: (404) 888-8998
S-7
<PAGE>
BANK OF TOKYO - MITSUBISHI LIMITED,
ATLANTA AGENCY
By:____________________________________
Name:_________________________________
Title:__________________________________
Address:
Bank of Tokyo - Mitsubishi Limited, Atlanta
Agency
Georgia Pacific Center
133 Peachtree Street NE
Suite 4970
Atlanta, GA 30303-1808
Attention: Gary England
Telephone: (404) 222-4205
Fax: (404) 577-1155
S-8
<PAGE>
BAYERISCHE VEREINSBANK AG,
NEW YORK BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address:
Bayerische Vereinsbank AG,
New York Branch
335 Madison Avenue - 19th Floor
New York, NY 10017
Attention: Ralf Enke
Telephone: (212) 210-0340
Fax: (212) 880-9724
S-9
<PAGE>
NATIONAL CITY BANK, KENTUCKY
By:____________________________________
Name:_________________________________
Title:__________________________________
Address:
National City Bank, Kentucky
5304 Chaversham Rd.
Norcross, GA 30092
Attention: Carrie C. Tate
Telephone: (770) 441-7838
Fax: (770) 441-1525
S-10
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:____________________________________
Name:_________________________________
Title:__________________________________
Address:
PNC Bank, National Association
249 Fifth Avenue - 2nd Floor
Pittsburgh, PA 15222-2707
Attention: Rose Crump
Telephone: (412) 762-2539
Fax: (412) 762-6484
S-11
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street
Mail Code GA 212
Atlanta, GA 30303-1757
Attention: Commercial Group
Telephone: (404) 332-1383
Fax: (404) 332-6920
S-12
<PAGE>
ANNEX A
-------
NEW LENDERS
-----------
CIBC Inc.
Corestates Bank, N.A.
Harris Trust and Savings Bank
SunTrust Bank, Atlanta
The Bank of New York
The Bank of Nova Scotia
Bank of Toyko - Mitsubishi Limited, Atlanta Agency
Bayerische Vereinsbank AG, New York Branch
National City Bank, Kentucky
PNC Bank, National Association
Wachovia Bank of Georgia, N.A.
<PAGE>
ANNEX B
-------
SCHEDULE 1.1(a)
COMMITMENT AMOUNTS
------------------
Amount of Revolving
Name of Lender Loan Commitment
- -------------- -------------------
Bankers Trust Company $ 21,000,000.00
NationsBank, N.A. (South) 21,000,000.00
CIBC Inc. 13,000,000.00
Corestates Bank, N.A. 13,000,000.00
Harris Trust and Savings Bank 13,000,000.00
SunTrust Bank, Atlanta 13,000,000.00
The Bank of New York 8,000,000.00
The Bank of Nova Scotia 8,000,000.00
Bank of Toyko - Mitsubishi Limited,
Atlanta Agency 8,000,000.00
Bayerische Vereinsbank AG, New York Branch 8,000,000.00
National City Bank, Kentucky 8,000,000.00
PNC Bank, National Association 8,000,000.00
Wachovia Bank of Georgia, N.A. 8,000,000.00
---------------
Total: $150,000,000.00
===============
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of October 15, 1997
(this "Agreement"), is by and among BWAY CORPORATION, a Delaware corporation
("BWAY"), BROCKWAY STANDARD, INC., a Delaware corporation ("Brockway"), BROCKWAY
STANDARD (NEW JERSEY), INC., a Delaware corporation (formerly named Milton Can
Company, Inc.) ("Brockway New Jersey"), MILTON CAN COMPANY, INC., a Delaware
corporation ("Milton"), BROCKWAY STANDARD (OHIO), INC., a Delaware corporation
(formerly named Davies Can Company, Inc.) ("Brockway Ohio"), the Lenders parties
to the Credit Agreement referred to below (the "Lenders"), BANKERS TRUST
COMPANY, as Administrative Agent and Syndication Agent, and NATIONSBANK, N.A.
(SOUTH), as Documentation Agent and Paying Agent.
RECITALS:
WHEREAS, BWAY, Brockway, Brockway New Jersey, Milton, Brockway Ohio, the
Agents and the Existing Lenders are parties to that certain Credit Agreement
dated as of June 17, 1996, as amended as of August 15, 1996 (as amended,
restated, supplemented or otherwise modified and in effect from time to time,
the "Credit Agreement"); and
WHEREAS, BWAY and the Borrowers have requested the Agents and the Lenders
to amend the Credit Agreement in certain respects as set forth herein and the
Agents and the Lenders are agreeable to the same, subject to the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings given them in the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is, as of
the Effective Date (as defined below), hereby amended as follows:
(a) Section 2.8(a) of the Credit Agreement is hereby amended by
deleting the table appearing at the end of the first paragraph of such Section
in its entirety and substituting therefor the following:
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Applicable Prime
Leverage Ratio Rate Margin
- --------------------------------------------------------------------------------
<S> <C>
3.00:1.00 and lower 0.00%
- --------------------------------------------------------------------------------
(greater than) 3.00:1.00; (less than or equal to) 3.50:1.00 0.125%
- --------------------------------------------------------------------------------
(greater than) 3.50:1.00; (less than or equal to) 4.00:1.00 0.50%
- --------------------------------------------------------------------------------
(greater than) 4.00:1.00; (less than or equal to) 4.25:1.00 1.00%
- --------------------------------------------------------------------------------
(greater than) 4.25:1.00 1.50%
================================================================================
</TABLE>
(b) Section 2.8(b) of the Credit Agreement is hereby amended by
deleting the table appearing at the end of the first paragraph of such Section
in its entirety and substituting therefor the following:
<TABLE>
<CAPTION>
=================================================================================
Applicable Eurodollar
Leverage Ratio Rate Margin
- ---------------------------------------------------------------------------------
<S> <C>
1.00:1.00 and lower 0.40%
- ---------------------------------------------------------------------------------
(greater than) 1.00:1.00; (less than or equal to) 1.50:1.00 0.50%
- ---------------------------------------------------------------------------------
(greater than) 1.50:1.00; (less than or equal to) 2.00:1.00 0.625%
- ---------------------------------------------------------------------------------
(greater than) 2.00:1.00; (less than or equal to) 2.50:1.00 0.75%
- ---------------------------------------------------------------------------------
(greater than) 2.50:1.00; (less than or equal to) 3.00:1.00 0.875%
- ---------------------------------------------------------------------------------
(greater than) 3.00:1.00; (less than or equal to) 3.50:1.00 1.125%
- ---------------------------------------------------------------------------------
(greater than) 3.50:1.00; (less than or equal to) 4.00:1.00 1.50%
- ---------------------------------------------------------------------------------
(greater than) 4.00:1.00; (less than or equal to) 4.25:1.00 2.00%
- ---------------------------------------------------------------------------------
(greater than) 4.25:1.00 2.50%
=================================================================================
</TABLE>
(c) Section 2.12(h) and 2.13(a) of the Credit Agreement are hereby
amended by deleting "Section 3.8" appearing in clause (A) of Section 2.12(h) and
in clause (ii) of Section 2.13(a) and substituting therefor "Section 3.9".
(d) Section 2.12(h) of the Credit Agreement is hereby further amended
by inserting "applicable for Prime Rate Loans" immediately after "Default Rate"
appearing in the penultimate sentence of such Section.
(e) Section 3.3(b) of the Credit Agreement is hereby amended by
deleting the first sentence of such Section in its entirety and substituting
therefor the following:
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<PAGE>
"So long as no Event of Default or Unmatured Event of Default exists,
the Borrowers may request at any time after the 90th day after the
Closing Date, by written notice to the Administrative Agent in the
form of Exhibit 3.3(b) hereto, that the Total Revolving Loan
Commitment be increased by $50,000,000 (the "Increase Amount"), with
such requested increase either being made for the entire Increase
Amount or in increments of $25,000,000, provided that not more than
one such request may be given in any twelve-month period."
(f) Section 3.7(a) of the Credit Agreement is hereby amended by
deleting the table appearing at the end of the first paragraph of such Section
in its entirety and substituting therefor the following:
<TABLE>
<CAPTION>
============================================================================
Applicable
Leverage Ratio Commitment Fee
- ----------------------------------------------------------------------------
<S> <C>
1.50:1.00 and lower 0.20%
- ----------------------------------------------------------------------------
(greater than) 1.50:1.00; (less than or equal to) 2.00:1.00 0.25%
- ----------------------------------------------------------------------------
(greater than) 2.00:1.00; (less than or equal to) 3.50:1.00 0.30%
- ----------------------------------------------------------------------------
(greater than) 3.50:1.00; (less than or equal to) 4.00:1.00 0.40%
- ----------------------------------------------------------------------------
(greater than) 4.00:1.00 0.50%
============================================================================
</TABLE>
(g) Section 3.9(c) of the Credit Agreement is hereby amended by
deleting "Exhibit 3.8(c)" each time appearing in such Section and substituting
therefor "Exhibit 3.9(c)".
(h) Section 5.1.3.(a) of the Credit Agreement is hereby amended by
deleting "Section 5.2.7" appearing in such Section and substituting therefor
"Section 5.2.6".
(i) Section 5.2.2(c) of the Credit Agreement is hereby amended by
deleting "$5 million" appearing in such Section and substituting therefor "$15
million".
(j) Section 5.2.3 of the Credit Agreement is hereby amended by
inserting at the end of such Section the following:
"Notwithstanding the foregoing limitations set forth in this Section
5.2.3, BWAY or any of its Subsidiaries may enter into any management
services or other similar contract with any joint venture in which
BWAY or any of its Subsidiaries has an equity ownership interest,
which contract provides for the rendering of services by BWAY or any
Subsidiary to such joint venture and for payments to be made by such
joint venture to BWAY or any of its Subsidiaries but does not provide
for any payments by BWAY or any
-3-
<PAGE>
Subsidiary to such joint venture, and is in form and substance
reasonably satisfactory to the Administrative Agent."
(k) Section 5.2.4(a) of the Credit Agreement is hereby amended by
deleting "Wholly-Owned Subsidiary of such Borrower" appearing in such Section
and substituting therefor "other equity holder on a proportionate basis".
(l) Section 5.2.4(b) of the Credit Agreement is hereby amended by
deleting "$5,000,000" appearing in such Section and substituting therefor
"$10,000,000".
(m) Section 5.2.4(c) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and substituting therefor the following:
"(c) any Borrower may pay cash dividends or make distributions on its
capital stock to BWAY;"
(n) Section 5.2.5(c) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and substituting therefor the following:
"(c) (i) BWAY may make intercompany loans and advances to any
Borrower and any Borrower may make intercompany loans and advances to
BWAY or any other Borrower, and (ii) BWAY or any Borrower may make
intercompany loans and advances to any Guarantor Subsidiary, provided
that at no time shall the aggregate outstanding principal amount of
all intercompany loans and advances made pursuant to this clause (ii)
by BWAY and the Borrowers exceed $2,000,000;"
(o) Section 5.2.5(i) of the Credit Agreement is hereby amended by
deleting "$10,000,000" appearing in such Section and substituting therefor
"$15,000,000".
(p) Section 5.2.6(e) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and substituting therefor the following:
"(e) any non-Wholly-Owned Subsidiary may merge with and into a Wholly-
Owned Subsidiary (with such Wholly-Owned Subsidiary as the survivor and
remaining a Wholly-Owned Subsidiary after such merger) and any Non-Recourse
Subsidiary may merge or consolidate with any Person (other than BWAY or any
Wholly-Owned Subsidiary) regardless of whether such Non-Recourse Subsidiary
is the survivor of such merger or consolidation."
(q) Section 5.2.8 of the Credit Agreement is hereby amended by
deleting clause (i) appearing in such Section in its entirety and substituting
therefor the following:
"(i) sales or other dispositions of inventory in the ordinary course
of business, sales or other dispositions of assets which constitute
Investments permitted
-4-
<PAGE>
under Section 5.2.5(i) and sales or other dispositions of assets of
any Non-Recourse Subsidiary,"
(r) Section 5.2.8 of the Credit Agreement is hereby further amended
by deleting clause (iii) appearing in such Section in its entirety and
substituting therefor the following:
"(iii) sales or other dispositions of assets if the aggregate book
value (at the time of disposition thereof) of all assets disposed of by
BWAY and its Subsidiaries (other than Non-Recourse Subsidiaries) subsequent
to the Closing Date plus the aggregate book value of all assets then
proposed to be sold or disposed of does not exceed 15% of Consolidated
Total Assets, provided that (A) each such sale or disposition shall be
approved by the board of directors of the Person selling or disposing of
such assets and shall be in an amount at least equal to the fair market
value thereof, and (B) an amount equal to the net proceeds of such sales
and dispositions shall be used by BWAY or any Subsidiary (other than a Non-
Recourse Subsidiary) within 12 months of such sale or disposition to
reinvest in productive assets of a kind then used or usable in the business
of BWAY or any such Subsidiary,"
(s) Section 5.2.10(b) of the Credit Agreement is hereby amended by
inserting at the end of such Section the following:
"Notwithstanding the foregoing, BWAY or any Borrower may create or
suffer to exist any non-Wholly-Owned Subsidiary which elects not to
execute and deliver a Subsidiary Guaranty (a "Non-Recourse
Subsidiary") under this clause (b) so long as (A) the aggregate amount
of all Investments (at the time of making thereof) in all such Non-
Recourse Subsidiaries does not exceed $15,000,000 (determined as
provided in Section 5.2.5(i)) and (B) all Indebtedness of such Non-
Recourse Subsidiary shall be Non-Recourse Debt and all other
liabilities of such Non-Recourse Subsidiary shall be non-recourse to
BWAY and its Subsidiaries (other than Non-Recourse Subsidiaries) and
their respective assets and properties."
(t) Section 5.3.1 of the Credit Agreement is hereby amended by
deleting "4.25" appearing in such Section and substituting therefor "4.50".
(u) Section 5.3.2 of the Credit Agreement is hereby amended by
deleting "June 30, 1997" each time such date appears under the heading "Fiscal
Quarter" appearing in such Section and substituting therefor "June 30, 1998".
(v) Section 5.3.4 of the Credit Agreement is hereby amended by
deleting "Permit" appearing in such Section and substituting therefor "Not
permit".
(w) Section 11.10(f) of the Credit Agreement is hereby amended by
deleting "Federal Reserve Lender" appearing in such Section and substituting
therefor "Federal Reserve bank".
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<PAGE>
(x) The definition of "Business Day" appearing in the Definitional
Appendix to the Credit Agreement is hereby amended by deleting "Lenders"
appearing therein and substituting therefor "banks".
(y) The definition of "Consolidated EBITDA" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by inserting ")"
immediately after "Section 5.1.1(b)" appearing therein.
(z) The definition of "Consolidated Net Income" and "Consolidated Net
Loss" appearing in the Definitional Appendix to the Credit Agreement is hereby
amended by deleting clause (v) of such Section in its entirety and substituting
therefor the following:
"(v) any non-cash restructuring charges, in an aggregate amount not to
exceed $12,860,000, which reduced Consolidated Net Income in the
fourth fiscal quarter in Fiscal Year 1996."
(aa) The definition of "Consolidated Total Assets" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by inserting "at
any date of determination," immediately following "means," appearing in such
definition.
(bb) The definition of "Eligible Assignee" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by deleting
"Lender" each time appearing therein and substituting therefor "bank".
(cc) The definition of "Eurodollar Rate" appearing in the Definitional
Appendix to the Credit Agreement is hereby amended by deleting "Lenders"
appearing therein and substituting therefor "banks".
(dd) The definition of "Federal Funds Rate" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by deleting
"Lender" and "Lenders" each time appearing therein and substituting therefor
"bank" and "banks", respectively,
(ee) The definition of "Permitted Liens" appearing in the Definitional
Appendix to the Credit Agreement is hereby amended by deleting "Section
5.2.2(b)" appearing in clause (h) of such Section and substituting therefor
"Section 5.2.2(c)".
(ff) The definition of "Sublimit Amount" appearing in the Definitional
Appendix to the Credit Agreement is hereby amended by deleting "EBIDTA"
appearing therein and substituting therefor "EBITDA".
(gg) The definition of "Subsidiary" appearing in the Definitional
Appendix to the Credit Agreement is hereby amended by inserting at the end of
the first sentence thereof but before the "." the following:
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<PAGE>
"; provided, however, that any Person in which BWAY or any of its
Subsidiaries makes an Investment pursuant to Section 5.2.5(i) (such
Person being referred to as a "Joint Venture") which would be deemed a
"Subsidiary" under the foregoing provisions of this definition shall
not be deemed to be a "Subsidiary" for any purpose of this Agreement
so long as BWAY is only entitled, directly or indirectly, to elect 50%
or less of the members of the board of directors (or other governing
body) of the Joint Venture and the assets, liabilities and results of
operations of which are not required to be consolidated with BWAY's
assets, liabilities and results of operations under generally accepted
accounting principles"
(hh) The definition of "Subsidiary Guaranties" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by deleting
"Section 5.2.12" appearing therein and substituting therefor "Section 5.2.10".
(ii) The definition of "Termination Date" appearing in the
Definitional Appendix to the Credit Agreement is hereby amended by deleting
"June 17, 2001" appearing therein and substituting therefor "June 17, 2002".
(jj) The Definitional Appendix to the Credit Agreement is hereby
further amended by inserting new definitions of "Non-Recourse Debt" and "Non-
Recourse Subsidiary" in their appropriate alphabetical order as follows:
""Non-Recourse Debt" means indebtedness or that portion of
indebtedness (i) as to which neither BWAY nor any of its Subsidiaries
(other than Non-Recourse Subsidiaries) (a) provides credit support
(including any undertaking, guaranty, agreement or instrument that
would constitute indebtedness), (b) is directly or indirectly liable,
or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against a Non-Recourse Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other
indebtedness (other than the Obligations) of BWAY or any of its
Subsidiaries (other than Non-Recourse Subsidiaries) to declare a
default on such other indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Non-Recourse Subsidiary" is defined in Section 5.2.10(b)."
(kk) Exhibit 3.3(b) to the Credit Agreement is hereby amended be
deleting "$25,000,000" appearing in paragraph 3 of such Exhibit and substituting
therefor "[$50,000,000] [$25,000,000]".
(ll) Exhibit 5.1.1(b) to the Credit Agreement is hereby amended by
deleting clause (d) appearing under the heading "Section 5.2.5 Investments" in
Schedule I to such Exhibit.
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<PAGE>
SECTION 3. AMENDMENT FEE. In consideration of the execution of this
Agreement by the Agents and the Lenders, the Borrowers hereby agree to pay each
Lender which executes this Agreement on or prior to October 10, 1997 a fee (the
"Amendment Fee") in an amount equal to such Lender's Revolving Loan Commitment
multiplied by 0.05%.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. This
Agreement shall become effective upon the date (the "Effective Date") each of
the following conditions have been satisfied:
(a) Execution and Delivery. BWAY, the Borrowers, the Agents and
each Lender shall have executed and delivered this Agreement.
(b) No Defaults. No Unmatured Event of Default or Event of Default
under the Credit Agreement (as amended hereby) shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties of BWAY and the Borrowers contained in this Agreement, the Credit
Agreement (as amended hereby) and the other Loan Documents shall be true and
correct in all material respects as of the Effective Date, with the same effect
as though made on such date, except to the extent that any such representation
or warranty expressly refers to an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such earlier date.
(d) Payment of Amendment Fee. The Borrowers shall have paid in full
to the Administrative Agent, for ratable distribution to those Lenders that have
signed this Agreement on or prior to October 15, 1997, an amount equal to the
Amendment Fee, and any other separately agreed upon fees.
(e) Deliveries. BWAY shall have duly executed and delivered to the
Agent a certificate of a Responsible Officer of BWAY dated as of the Effective
Date certifying as to the conditions precedent set forth in Sections 4(b) and
(c) of this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) BWAY and each Borrower represents and warrants (i) that it has
full power and authority to enter into this Agreement and perform its
obligations hereunder in accordance with the provisions hereof, (ii) that this
Agreement has been duly authorized, executed and delivered by such party and
(iii) that this Agreement constitutes the legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
and by general principles of equity.
(b) BWAY and each Borrower represents and warrants that the
following statements are true and correct:
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(i) The representations and warranties contained in the Credit
Agreement and each of the other Loan Documents are and will be true
and correct in all material respects on and as of the Effective Date
to the same extent as though made on and as of that date, except to
the extent such representations and warranties expressly refer to an
earlier date, in which case they were true and correct in all material
respects on and as of such earlier date.
(ii) No event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Agreement
that would constitute an Event of Default or an Unmatured Event of
Default.
(iii) The execution, delivery and performance of this Agreement
by each of BWAY and each Borrower do not and will not violate its
respective certificate or articles of incorporation or by-laws, any
law, rule, regulation, order, writ, judgment, decree or award
applicable to it or any contractual provision to which it is a party
or to which it or any of its property is subject.
(iv) No authorization or approval or other action by, and no
notice to or filing or registration with, any governmental authority
or regulatory body is required in connection with its execution,
delivery and performance of this Agreement and all agreements,
documents and instruments executed and delivered pursuant to this
Agreement.
SECTION 6. REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT.
(a) On and after the Effective Date each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference to the Credit Agreement in the Loan Documents and all
other documents (the "Ancillary Documents") delivered in connection with the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) Except as specifically amended above, the Credit Agreement, the
Loan Documents and all other Ancillary Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Lenders or the Agents under the Credit Agreement,
the Loan Documents or the Ancillary Documents.
SECTION 7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page of
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
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<PAGE>
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 9. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes.
SECTION 10. FEES AND EXPENSES. The Borrowers hereby acknowledge that all
costs, fees and expenses as described in Section 11.4 of the Credit Agreement
incurred by the Administrative Agent and its counsel with respect to this
Agreement and the documents and transactions contemplated hereby shall be for
the account of the Borrowers.
[signature pages to follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
BWAY CORPORATION BROCKWAY STANDARD, INC.
By:___________________________ By:___________________________________________
Name:_________________________ Name:_________________________________________
Title:________________________ Title:________________________________________
MILTON CAN COMPANY, INC. BROCKWAY STANDARD (OHIO), INC.
By:___________________________ By:___________________________________________
Name:_________________________ Name:_________________________________________
Title:________________________ Title:________________________________________
BROCKWAY STANDARD (NEW JERSEY), BANKERS TRUST COMPANY, individually and as
INC. Administrative Agent, Syndication Agent and
Facing Agent
By:___________________________ By:___________________________________________
Name:_________________________ Name:_________________________________________
Title:________________________ Title:________________________________________
NATIONSBANK, N.A. (SOUTH), individually and as
Documentation Agent and Paying Agent
By:___________________________________________
Name:_________________________________________
Title:________________________________________
S-1
<PAGE>
HARRIS TRUST AND SAVINGS BANK, SUNTRUST BANK, ATLANTA,
individually and as Co-Agent individually and as Co-Agent
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
CIBC INC. CORESTATES BANK, N.A.
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
BANK OF TOKYO-MITSUBISHI LIMITED, BAYERISCHE VEREINSBANK AG,
ATLANTA AGENCY NEW YORK BRANCH
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
NATIONAL CITY BANK, KENTUCKY By:
-------------------------------
By: Name:
------------------------------ -----------------------------
Name: Title:
--------------------------- ----------------------------
Title:
---------------------------
S-2
<PAGE>
PNC BANK, NATIONAL ASSOCIATION WACHOVIA BANK, N.A.
By: By:
--------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
S-3
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between SHELBY
DISTRIBUTION PARK, a Tennessee Joint Venture, hereinafter referred to as
"Landlord", and BROCKWAY STANDARD, INC., a Delaware corporation, hereinafter
referred to as "Tenant";
W I T N E S S E T H :
1. PREMISES AND TERM. In consideration of the obligation of Tenant to pay
said rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and Leases to Tenant,
and Tenant hereby accepts and Leases from Landlord certain Premises situated
within the County of Shelby, State of Tennessee, located on real property known
as 4651 Hickory Hill Road, Memphis, Tennessee 38141, said leased space being
more particularly described on floorplan attached hereto on Exhibit "A" and
incorporated herein by reference, and consisting of approximately 75,000 (but
not less than 70,000) square feet of industrial space suitable for Tenant's
proposed usage, together with continuous driveway access to public roads,
walkways, hallways, sidewalks, parking as shown on site plan attached hereto as
Exhibit "F" and incorporated herein by reference for Tenant's proposed usage and
all common areas adjacent to or serving said leased space or the building in
which said leased space is located and all rights, privileges, easements,
appurtenances and immunities belonging to or in any way pertaining to said
premises and together with any other improvements serving said premises (said
leased space, said common areas and the above-referenced improvements
hereinafter referred to as the "Premises"). The Premises are located on real
estate legally described on Exhibit "A" (the "Real Estate").
TO HAVE AND TO HOLD the same for a term commencing on the earlier of:
(i) December, 1 1996; or (ii) the date Tenant occupies the Premises for Tenant's
use herein, ("Commencement Date") and ending November, 30, 2006 ("Termination
Date"). Taking of possession by Tenant shall be deemed conclusively to establish
that said buildings and other improvements are in good and satisfactory
condition as of and when possession was taken. Tenant further acknowledges that
no representations as to the repair of the Premises, nor promises to alter,
remodel or improve the Premises have been made by Landlord, unless such are
expressly set forth in this Lease. For the purposes hereof a lease year shall be
a calendar year concluding December 31 and a partial lease year shall be from
the Commencement Date until December 31 or January 1 until the Termination Date.
2. BASE RENT.
Tenant agrees to pay to Landlord rent for the Premises, in advance,
without demand, deduction or set off, for months one (1) through sixty (60)
hereof at the rate of Twenty-One Thousand Seven Hundred and Fifty and No/100
Dollars ($21,750.00) per month, and for the months sixty-one (61) through one
hundred twenty (120) hereof base rent at the rate of Twenty-Two Thousand Three
Hundred Seventy-Five and No/100 Dollars ($22,375.00). One such monthly
installment shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each calendar
month succeeding the Commencement Date recited above during the hereby demised
term, except that the rental payment for any fractional calendar month at the
commencement or end of the lease period shall be prorated. The foregoing
notwithstanding, Tenant shall be entitled to occupy and use the Premises free of
base rent for the first three (3) full months of the term of this Lease.
3. USE. The Premises shall be used only for offices and for the purpose
of manufacturing, receiving, storing, shipping and selling (other than retail)
products, materials and merchandise made and/or distributed by Tenant and for
such other lawful purposes as may be related thereto. Tenant shall have the
right to park trucks, trailers and other vehicles in the parking areas serving
the Premises at all times during all terms of this Lease. All outside garbage
containers shall be subject to Landlord's approval, which shall not be
unreasonably withheld or delayed. Otherwise, outside storage shall be prohibited
without Landlord's consent. Landlord shall at its own cost obtain a certificate
of occupancy for Tenant's use of the Premises, and Tenant shall at its own cost
and expense obtain any and all other licenses and permits necessary for any such
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the use of the Premises, and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of nuisances caused by Tenant in or upon, or connected with, the Premises, all
at Tenant's sole expense. Tenant shall not permit any unreasonable quantities of
smoke, dust, gas, noise or vibrations or odors to emanate from the Premises, nor
take any other action which would constitute a nuisance or would unreasonably
disturb or endanger other tenants of the building in which the Premises are
situated or unreasonably interfere with the use of their respective premises.
Tenant will not permit the Premises to be used for any purpose or in any manner
(including without limitation any method of storage) which would render the
insurance thereon void or the insurance risk more hazardous or cause the State
Board of Insurance or other insurance authority to disallow any sprinkler
credits. Tenant shall abide by the rules and regulations attached hereto as
Exhibit "C" as reasonably amended from time to time by Landlord after reasonable
written notice of such charge is delivered to Tenant.
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<PAGE>
4. TAXES.
A. Landlord agrees to pay before they become delinquent Tenant's
proportionate share (as defined in 4(B) below) of all taxes, assessments (except
that Tenant shall not be liable for payment of any assessment which Landlord has
specifically requested from the applicable municipality in order to obtain
certain capital improvements to Landlord's real property) and governmental
charges of any kind and nature whatsoever (hereinafter collectively referred to
as "taxes") lawfully levied or assessed against the building and the grounds,
parking areas, driveways and alleys around the building; provided, however,
that, in the event of any assessment for which Tenant has responsibility
Landlord shall elect (or be deemed to have elected) the longest legally-
permissible term of payment thereof, and Tenant shall only be responsible for
such installments of any assessment coming due with the term of this Lease.
Landlord agrees to timely request in writing from the taxing authority a
separate property tax billing covering only the Premises; but, if the taxing
authority declines or is unable to provide a separate billing, Landlord agrees
to determine an equitable formula for prorating joint property tax billings
among Tenant and all other tenants affected by such joint billing, such formula
to be designed in a manner which does not tax Tenant for more than Tenant's fair
share of any improvements or other features of the property included in any such
joint property tax billing. Tenant agrees to reimburse Landlord upon demand for
such taxes directly related to the Premises. If in any real estate tax year
during the term hereof or any renewal or extension, taxes are levied and/or
assessed against the building and the grounds, parking areas, driveways and
alleys around the building during such tax year, Tenant shall pay to Landlord as
additional rental the amount of such taxes. In the event Tenant's proportionate
share (as defined below) of such taxes is not paid within thirty (30) days after
the date of Landlord's invoice to Tenant, the unpaid amount shall bear interest
at the then-current prime rate from the date of such invoice until payment by
Tenant.
B. In the event the Premises constitute a portion of a multiple
occupancy building, Tenant agrees to pay to Landlord, as additional rental, the
amount of Tenant's "proportionate share" of the taxes referred to in Paragraph A
above. Tenant's "proportionate share", as used in this Lease, shall mean a
fraction, the numerator of which is the square footage contained in the Premises
and the denominator of which is the total leasable square footage contained in
the development of which the Premises are a part.
C. If at any time during the term of this Lease, the present method
of taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the Premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
D. The Landlord shall have the right to employ a tax consulting firm
to attempt to assure a fair tax burden on the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand from
time to time, as additional rent, the amount of Tenant's "proportionate share"
(as defined in subparagraph 4(B) above) of the cost of such consultant up to but
not to exceed Tenant's proportionate share of any savings brought about by such
consultant in the lease year in which such services are billed.
E. Any payment to be made pursuant to this Paragraph 4 with respect
to the real estate tax year in which this Lease commences or terminates shall be
prorated.
5. LANDLORD'S REPAIRS. Landlord shall at its expense maintain only
the roof, foundation and the structural soundness of the exterior walls of the
building in which the Premises are located and all underground or other utility
lines serving the Premises in good and usable condition and repair, reasonable
wear and tear excepted. Tenant shall repair and pay for any damage caused by
the negligence of Tenant, or Tenant's employees, agents or authorized invitees,
or caused by Tenant's default hereunder (incurred after notice as hereinafter
required). Landlord shall repair and pay for any damage caused by negligence of
Landlord or Landlord's employees, agents or invitees, or caused by Landlord's
default. The term "walls" as used herein shall not include windows, glass or
plate glass, doors, special storefronts or office entries. Tenant shall
promptly give Landlord written notice of any defect or need for repairs, after
which Landlord shall have a reasonable opportunity to repair same or cure such
defect. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect. During the making of such repairs, Landlord shall take
all reasonable steps not to interfere with Tenant's operations in the Premises.
6. TENANT'S REPAIRS.
A. Tenant shall at its own cost and expense keep and maintain all
parts of the Premises (except those for which Landlord is expressly responsible
under the terms of this Lease) in good condition, promptly making all necessary
repairs, including but not limited to, windows, glass and plate
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<PAGE>
glass, doors, any special office entry, interior walls and finish work, floors
and floor covering, downspouts, gutters, the heating, ventilating and air-
conditioning systems of the Premises, dock boards, truck doors, dock bumpers,
paving, plumbing work and fixtures, termite and pest extermination, regular
removal of trash and debris directly related to the Premises. As provided in
Section 6(D) below, Landlord shall pay, but Tenant shall reimburse Landlord for
Tenant's proportionate share of the costs of regular mowing of any grass,
trimming, utilities relating to common areas, weed removal and general landscape
maintenance, keeping and repairing the parking areas, driveways and alleys,
management fees (provided that management fees shall in no event exceed four
percent (4%) of Landlord's rental income from the project in which the Premises
are located in any lease year), security, common area utilities, and maintenance
(except as noted in Paragraph 5), said expenses in the aggregate being referred
to as "Operating Costs." Tenant shall not be obligated to repair any damage
caused by fire, tornado or other casualty.
B. Tenant shall not damage any demising wall or disturb the integrity
and support provided by any demising wall and shall, at its sole cost and
expense, promptly repair any damage or injury to any demising wall caused by
Tenant or its employees, agents or authorized invitees.
C. In the event the Premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall have
the right to use the parking areas, if any, as may be designated by Landlord in
writing, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe and subject to rights of ingress and egress of other
tenants. Landlord agrees that at no time during any term of this Lease shall
there be less than the parking spaces shown on Exhibit "F" hereofavailable for
use by Tenant, its employees, agents, contractors and guests. Landlord shall
use reasonable efforts in good faith to enforce Tenant's parking rights against
any third parties.
D. Landlord reserves the right to perform the paving repair (but not
replacement) and landscape maintenance, exterior painting and common sewage line
plumbing and any other work, the cost of which are hereby called Operating Costs
and which would otherwise be Tenant's obligations under subparagraph (A) above,
and Tenant shall, in lieu of the obligations set forth under subparagraph (A)
above with respect to such items, be liable for its proportionate share, in the
use of a multiple tenancy building, (as defined in subparagraph 4(B) above) of
the Operating Cost and provided that if Tenant or any particular tenant of the
building can be clearly identified as being responsible for obstructions or
stoppage of the common sanitary sewage line, then Tenant, if Tenant is
responsible, or such other responsible tenant, shall pay the entire cost
thereof, upon demand, as additional rent; provided, however, that Tenant shall
have no obligation to pay any cost related to such obstruction or stoppage
unless Tenant has received at least three(3) business days written notice and
opportunity to begin diligently to pursue the cure thereof (or to demonstrate
that such obstruction or stoppage has not been caused by Tenant) and provided
that in an emergency situation the foregoing provision shall not be deemed to
prevent Landlord from promptly causing such obstruction or blockage to repaired.
Thereafter Tenant shall pay to Landlord monthly 1/12 of an amount of money equal
to Tenant's proportionate share of Operating Costs for the preceding lease year.
If actual Operating Costs for the preceding year exceed the amount of estimated
Operating Costs paid monthly by Tenant, as stated above, then on or before sixty
(60) days following the annual reconciliation of expenses by Landlord (which
reconciliation will be provided on Tenant's request) and the billing of such
expenses, Tenant shall pay such excess amount to Landlord. If the amount of
estimated Operating Costs paid monthly by the Tenant, as stated above, exceed
actual Operating Costs, then on or before sixty (60) days following the annual
reconciliation of expenses by Landlord, Landlord shall pay such excess amount to
Tenant or credit said amount against future base rent next payable under this
Lease.
E. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
for servicing all hot water, heating and air conditioning systems and equipment
within the Premises. The maintenance contractor and the contract must be
approved, in writing, by Landlord. The service contract must include all
services reasonably suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the Premises.
7. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord, such consent shall
not be unreasonably withheld. Tenant may, without the consent of Landlord, but
at its own cost and expense and in a good workmanlike manner erect such shelves,
bins, machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements and without overloading or
damaging such building or improvements, and in each case complying with all
applicable governmental laws, ordinances, regulations and other requirements.
All additional improvements and partitions erected by Tenant shall be and remain
the property of Tenant during the term of this Lease and Tenant shall remove all
alterations, additional, improvements and partitions erected by Tenant and
restore the Premises to their original condition, reasonable wear and tear
excepted, by the date of termination of this Lease or upon earlier vacating of
the Premises; provided, all improvements and partitions erected at Landlord's
expense shall become the property of Landlord as of the date of termination of
this Lease or upon earlier vacating of the Premises and shall be delivered upon
to the Landlord with the Premises. All shelves, bins, machinery and trade
fixtures installed by Tenant may be removed by Tenant prior to the termination
of this Lease if Tenant so elects, and shall be removed by the
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date of termination of this Lease or upon earlier vacating of the Premises; upon
any such removal Tenant shall restore the Premises to their original condition,
reasonable wear and tear excepted. All such removals and restoration shall be
accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the buildings and other improvements
situated on the Premises.
8. SIGNS. Tenant shall, within ninety (90) days of the Commencement
Date, install a sign upon the premises in accordance with Exhibit "D" attached
hereto. Landlord's approval of all sign designs is required prior to sign
manufacture and installation. Such signs shall be subject to any applicable
governmental laws, ordinances, and regulations. Tenant shall remove all such
signs by the Termination Date of this Lease. Sign installations and removals
shall be made in such manner as to avoid injury or defacement of the building
and other improvements, and Tenant shall repair any injury or defacement,
including without limitation discoloration, caused by such installation and/or
removal.
9. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the Premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the Premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this Lease. During the period that is three (3)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
for lease by Landlord.
10. UTILITIES. Landlord agrees to provide at its cost water, electricity
and telephone service connections into the Premises; but Tenant shall pay for
all water, gas, heat, light, power, telephone, sewer, sprinkler charges and
other utilities and services used on or from the Premises, together with any
taxes, penalties, surcharges or the like pertaining thereto and any maintenance
charges for utilities and shall furnish all electric light bulbs and tubes. If
any such services are not separately metered to Tenant, Tenant shall pay a
reasonable proportion as determined by Landlord of all charges jointly metered
with other Premises. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises.
11. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to assign
this Lease or to sublet the whole or any part of the Premises without the prior
written consent of Landlord, such consent not to be unreasonably withheld or
delayed. Notwithstanding any permitted assignment or subletting, Tenant shall at
all times remain directly, primarily and fully responsible and liable for the
payment of the rent and all other charges herein specified and for compliance
with all of its other obligations under the terms, provisions of this Lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
Premises or any part thereof are then assigned or sublet, Landlord, in addition
to any other remedies herein provided, or provided by law, may at its option
collect directly from such assignee or subtenant all rents becoming due to
Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
12. FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain standard fire and extended coverage
insurance covering the buildings of which the Premises are a part in an amount
not less than 90% (or such greater percentage as may be necessary to comply with
the provisions of any co-insurance clauses of the policy) of the "replacement
cost" thereof as such term is defined in any Replacement Cost Endorsement,
insuring against the perils of Fire, Lightning and Extended Coverage, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
State in which the Premises are situated for use by insurance companies admitted
in such state for the writing of such insurance on risks located within such
state. Subject to the provisions of subparagraphs 12(C), 12(D) and 12(E) below,
such insurance shall be for the sole benefit of Landlord and under its sole
control. Tenant agrees to pay to Landlord, as additional rental, the amount of
such insurance costs (or in the event the Premises constitute a portion of a
multiple occupancy building, Tenant's full proportionate share (as defined in
subparagraph 4(B) above) of such costs). Said payments shall be made to
Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph (A) with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
Lease bears to a full year.
B. If any substantial part of the Premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give prompt written
notice thereof to Landlord.
C. If the building situated upon the Premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot, in
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Landlord's reasonable estimation, be completed within one hundred twenty (120)
days after the date upon which Landlord is notified in writing by Tenant of such
damage, then this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.
D. If the building situated upon the Premises should be damaged by
any peril which rebuilding or repairs can, in Landlord's reasonable estimation,
be completed within one hundred twenty (120) days after the date upon which
Landlord is notified in writing by Tenant of such damage, this Lease shall not
terminate, and Landlord shall at its sole cost and expense thereupon diligently
and in good faith proceed to rebuild and repair such building to substantially
the condition in which it existed prior to such damage, except that Landlord
shall not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the Premises by Tenant. If the Premises are untenantable in whole or in
part following such damage, the rent payable hereunder during the period in
which they are untenantable shall be reduced by a fraction, the numerator of
which is the number of untenantable square feet and the denominator of which is
equal to the total amount of square feet of the Premises. In the event that
Landlord should fail to complete such repairs and rebuilding within ninety (90)
days after the date upon which Landlord is notified by Tenant of such damage,
Tenant shall have the right to terminate this Lease by delivering written notice
of termination to Landlord, whereupon all rights and obligations hereunder shall
cease and terminate.
E. Each of Landlord and Tenant hereby releases the other from any
loss or damage to property caused by fire or any other perils insured through or
under them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property, even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder and then only to the
extent of the insurance proceeds payable under such policies. Each of the
Landlord and Tenant agrees that it will request its insurance carriers to
include in its policies such a clause or endorsement. If extra cost shall be
charged therefor, each party shall advise the other thereof and of the amount of
the extra cost, and the other party, at its election, may pay the same, but
shall not be obligated to do so.
13. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, directly
resulting from and/or caused by the negligence or misconduct of Tenant, its
agents, servants or employees, or of any other person authorized by Tenant to
enter upon the Premises. The Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust), Landlord's agents and employees shall
be held safe and harmless from any loss, liability, claims, suits, costs,
expenses, including without limitation attorney's fees and damages, both real
and alleged, arising out of any such damage or injury; except (i) injury to
persons or damage to property the cause of which is the negligence or misconduct
of Landlord or its agents, servants or employees or of any other person
authorized by Landlord or (ii) injury or damage resulting from the failure of
Landlord to maintain or repair any part of the Premises which Landlord is
obligated to repair and maintain hereunder or any part of the building in which
the Premises are located or the land upon which the said building is located
within a reasonable time after the receipt of written notice from Tenant of
needed repairs. Tenant shall not be liable to Landlord or Landlord's employees
or agents for any injury to person or damage to property resulting from and/or
caused in part or whole by the negligence or misconduct of Landlord, its agents
or employees. Tenant shall procure and maintain throughout the term of this
Lease a policy or policies of insurance, at its sole cost and expense, insuring
both Landlord and Tenant against all claims, demands or actions arising out of
or in connection with: (I) ownership, maintenance or use of that part of the
Premises solely leased by the Tenant; (ii) Tenant's liability assumed under this
Lease, the limits of such policy or policies to be in the amount of not less
than $1,00,000 per occurrence in respect of injury to persons (including death),
and in the amount of not less than $250,000 per occurrence in respect of
property damage or destruction, including loss of use thereof. All such
policies shall be procured by Tenant from responsible insurance companies
reasonably satisfactory to Landlord. Certified copies of such policies or
certificates thereof shall be delivered to Landlord prior to the Commencement
Date of this Lease. Not less than fifteen (15) days prior to the expiration
date of any such policies, certified copies of the renewals thereof or
certificates thereof shall be delivered to Landlord. Such policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
14. CONDEMNATION.
A. If the whole or any substantial part of the Premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain,
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or by private purchase in lieu thereof and the taking would prevent or
materially interfere with the use of the Premises, in the judgment of Landlord,
for the purpose for which they are being used, this Lease shall terminate and
the rent shall be abated during the unexpired portion of this Lease, effective
when the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or quasi-
public use under any governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and this Lease is not
terminated as provided in the subparagraph above, this Lease shall not terminate
but the rent payable hereunder during the unexpired portion of this Lease shall
be reduced by a fraction, the numerator of which is the number of untenantable
square feet and the denominator of which is equal to the total amount of square
footage of the Premises.
C. In the event of any such taking or private purchase in lieu
thereof, Landlord and Tenant shall each be entitled to receive and retain such
separate awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings. However, all compensation
awarded for any such taking of all or part of the building in which the Premises
is located and the land thereunder shall be the property of Landlord.
Landlord hereby warrants to Tenant that Landlord has received no
written or oral notice of any proposed condemnation affecting the building in
which the Premises are located or any road access thereto.
15. HOLDING OVER. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this Lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than sixty (60) days advance
written notice, or by Tenant at any time upon not less than sixty (60) days
advance written notice, and all of the other terms and provisions of this Lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to 150% of the rent in effect on the Termination Date, computed on
a daily basis for each day of the hold-over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this Lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 15 shall not be construed as Landlord's consent for Tenant to hold
over.
16. QUIET ENJOYMENT. Landlord covenants that it now has, or will
acquire before Tenant takes possession of the Premises, good title to the
Premises, free and clear of all liens and encumbrances, excepting only the lien
for current taxes not yet due, such mortgage or mortgages as are permitted by
the terms of this lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such property,
and easements, restrictions and other conditions of record. Tenant, upon paying
the rental herein set forth and performing its other covenants and agreements
herein set forth, shall peaceably and quietly have, hold and enjoy the Premises
for the term hereof without hindrance or molestation from Landlord, subject to
the terms and provisions of this Lease.
17. EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this Lease:
(A) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes or operating costs
hereunder when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
following Tenant's receipt of written notice that such payment was due and
unpaid.
(B) Tenant shall become insolvent, or shall make a transfer in fraud
of creditors, or shall make an assignment for the benefit of creditors.
(C) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof, or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
(D) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant.
(E) Tenant shall desert or vacate any substantial portion of the
Premises.
(F) Tenant shall fail to comply with any term, provision or covenant
of this Lease (other than the foregoing in this Paragraph 17), and shall not
cure such failure within twenty (20) days after written notice thereof to
Tenant.
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18. REMEDIES. Upon the occurrence of any of such events of default
described in Paragraph 17 hereof, Landlord shall have the option to pursue any
one or more of the following remedies without any notice or demand whatsoever:
(A) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, by reasonable force if necessary, without being liable for
prosecution or any claim of damages therefor and Tenant agrees to pay to
Landlord within thirty (30) days following Tenant's receipt of written demand
the amount of all direct loss and damage which Landlord actually suffers by
reason of such termination, whether through inability to relet the Premises on
reasonably satisfactory terms or otherwise.
(B) Enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, by reasonable force if necessary, without being liable for prosecution
or any claim for damages therefor, and relet the Premises and receive the rent
therefor; and Tenant agrees to pay to the Landlord on demand any deficiency that
may arise by reason of such reletting. In the event Landlord is successful in
reletting the Premises at a rental in excess of that agreed to be paid by Tenant
pursuant to the terms of this lease, Landlord and Tenant each mutually agree
that Tenant shall not be entitled, under any circumstances, to such excess
rental, and Tenant does hereby specifically waive any claim to such excess
rental.
(C) Enter upon the Premises, by reasonable force if necessary, without
being liable for prosecution or any claim for damages therefor, and do whatever
Tenant is obligated to do under the terms of this Lease; and Tenant agrees to
reimburse Landlord within thirty (30) days following Tenant's receipt of written
demand for any reasonable expenses which Landlord actually incurs in thus
effecting compliance with Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any damages resulting to
the Tenant from such action, whether caused by the negligence of Landlord or
otherwise.
In the event Tenant fails to pay any installment of rent hereunder as and
when such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five percent (5%) of such installment; and the
failure to pay such amount within ten(10) days after demand therefor shall be an
event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
Landlord hereby agrees to use commercially reasonable efforts in good faith
to mitigate any such loss and damage suffered by Landlord.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. No act or thing done by the Landlord or its agents during the term
hereby granted shall be deemed a termination of this Lease or an acceptance of
the surrender of the Premises, and no agreement to terminate this Lease or
accept a surrender of said Premises shall be valid unless in writing signed by
Landlord. No waiver by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained. Landlord's acceptance of the payment
of rental or other payments hereunder after the occurrence of an event of
default shall not be construed as a waiver of such default, unless so deemed by
applicable law or unless Landlord so notified Tenant in writing. Forbearance by
Landlord to enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of such default
or of Landlord's right to enforce any such remedies with respect to such default
or any subsequent default. If, on account of any breach or default by either
party in its obligations under the terms and conditions of this Lease, it shall
become necessary or appropriate for either party to employ or consult with an
attorney concerning or to enforce or defend any of its rights or remedies
hereunder, the prevailing party in any such legal action shall be entitled to
receive from the other party any reasonable attorney's fees so incurred by the
prevailing party.
19. DELETED.
20. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the Premises or the improvements situated thereon, provided,
however, that if the mortgagee, elects to have this Lease and the interest of
Tenant hereunder superior to any interest or right of such mortgagee, trustee,
or holder, then by notice to Tenant from such mortgagee, trustee or holder, this
Lease shall be deemed superior to such lien, whether this Lease was executed
before or after said mortgage or deed of trust. Tenant shall at any time
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hereafter on demand execute any instruments, releases or other documents in form
and substance reasonably acceptable to Tenant which may be required by any
mortgagee for the purpose of subjecting and subordinating this Lease to the lien
of any such mortgage.
21. MECHANIC'S LIENS. Tenant shall have no authority, express or implied,
to create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the Premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs, and each such claim shall affect and each such
lien shall attach to, if at all, only the leasehold interest granted to Tenant
by this instrument, or materials furnished in connection with any work performed
on the Premises on which any lien is or can be validly and legally asserted a
loss, cost or expense based on or arising out of asserted claims or liens
against the leasehold estate or against the right, title and interest of the
Landlord in the Premises or under the terms of this Lease.
22. ENVIRONMENTAL. For the purpose of this paragraph the following terms
shall be defined as follows:
(A) "Environmental Law" as used in this Lease shall mean any federal,
state or local statutory law, rule, or regulation or case law pertaining to
health or protection of the environment , or environmental pollution by
Hazardous Materials (as hereinafter defined) , including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as codified at 42 U.S.C. (S)(S)9601 et seq.; the Resource
Conservation and Recovery Act of 1976, as amended, as codified at 42 U.S.C.
(S)(S)6901 et seq.; and the Superfund Amendments and Reauthorization Act of
1986, as codified at 42 U.S.C. '' U9671, et seq.
(B) "Hazardous Materials" as used in this Lease shall include,
without limitation, flammables, explosives, radioactive materials, asbestos,
polychlorinated biphenyls (PCBs), chemicals known to cause cancer or
reproductive toxicity, pollutants, contaminants, petroleum, petroleum products,
oil, and any and all hazardous or extremely hazardous or toxic substances or
wastes as those terms are defined by an applicable Environmental Law.
(C) Tenant shall not, itself, nor permit any of its Permitted Assigns
(as defined below), during the term of this Lease, generate, store, treat,
release or dispose of any Hazardous Material in, at, on, under, around and/or
------------------
about all or any portion of the Premises in violation of applicable
Environmental Law. Without limiting Tenant's covenant in the immediately
preceding sentence, Landlord acknowledges that Tenant's intended use of the
Premises involves certain Hazardous Materials which involvement shall be
consistent with Tenant's permitted use of the Premises. For purposes of this
subparagraph 22(c), "Permitted Assigns" shall be any sublessee or any assignee
as a result of a sublease or assignment from Tenant to any corporation under
common control with Tenant either as a subsidiary or parent.
At its sole cost and expense, Tenant shall comply with any and all
applicable Environmental Laws with respect to the generation, removal, storage
and discharge at the Premises by Tenant during the Lease term of any Hazardous
Materials, including government-ordered removal of any illegally discharged
Hazardous Materials, and shall keep the Premises free of any lien imposed
pursuant to such Environmental Laws as a result of Tenant's breach of its
covenants in this paragraph 22(c). In the event Tenant fails to do so, and only
after Landlord has given notice to Tenant and Tenant has reasonable opportunity
to respond and cure said breach, Landlord may (but shall not be obligated to)
(i) declare an event of default under this lease and/or (ii) , to the extent
required by applicable Environmental Laws, cause Hazardous Materials discharged
at the Premises by Tenant during the Lease term in violation of applicable
Environmental Laws to be remediated or removed and the actual and reasonable
cost of such remediation or removal shall be paid to Landlord by Tenant
immediately on demand; if Tenant fails to pay Landlord immediately upon demand
for such remediation or removal costs, such costs shall be deemed additional
rent hereunder. Tenant hereby agrees to indemnify, protect and hold Landlord
free and harmless from and against any and all damages, losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or of any nature
whatsoever (including, without limitation, third party claims and reasonable
attorneys' and experts' fees and disbursements)that Landlord may sustain as a
result of or in connection with compliance by Landlord with any applicable
Environmental Laws which compliance is necessitated by Tenant's failure to
comply with its obligations under this paragraph 22(c).
(D) If the Landlord has reasonable cause during the term of this
Lease and/or at lease termination to believe that Tenant has breached its
covenants in paragraph 22(c) hereinabove, and provides Tenant with a detailed
description of said cause, then Tenant shall provide, at Landlord's request and
sole cost and expense, an inspection or audit ("Inspection") of the Premises by
an engineering or consulting firm reasonably acceptable by both parties
indicating, to the extent relevant and appropriate, the presence or absence of
Hazardous Materials in, at, on, or under all or any portion of the Premises that
may have resulted from such alleged breach by Tenant; provided, however, that in
no event shall Landlord request Inspections more than once annually during the
Lease Term. If Tenant fails to provide any such
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Inspection within forty-five (45) days after written notice, then Landlord may
order it and Tenant shall grant to Landlord and its employees and agents access
to the Premises at all reasonable times to undertake such Inspections. However,
Landlord, its agents and employees shall have access to the Premises without
notice if, as a result of violation of applicable Environmental Law irreparable
harm to the environment, the Premises or persons is imminent. Tenant agrees to
notify Landlord in the event that any governmental agency or other entity
notifies Tenant that it intends to inspect the Premises pursuant to applicable
Environmental Law or that it may not be in compliance with any applicable
Environmental Laws.
(E) Landlord hereby represents and warrants to Tenant that, a) to
Landlord's actual knowledge other than specifically listed in that certain Level
I Environmental Site Assessment report pertaining to the Real Estate, dated
February 8, 1995, prepared for The Guardian Life Insurance Company of America by
ATEC Associates, Inc. (the "Environmental Report") the Premises and the Real
Estate (for purposes of this paragraph 22(e), the Premises and the Real Estate
are collectively referred to as the "Property"), do not on the date of this
Lease contain Hazardous Materials, and b) since the date of the Environmental
Report Landlord, its agents, employees, associates, contractors and/or
affiliates have not introduced, maintained or permitted any Hazardous Materials
in, on or about any portion of the Property Landlord covenants and agrees with
Tenant that, during the term of this Lease, Landlord will not suffer, permit,
introduce or maintain, in, on or about any portion of the Property any Hazardous
Materials which reasonably could be expected to, or does, violate any
Environmental Law, except as otherwise provided in this Lease (this covenant of
Landlord shall not extend to Hazardous Materials introduced during the term of
this Lease, at the Premises by Tenant or third parties which are not agents,
employees, contractors, invitees, representative or guests of Landlord).
Landlord covenants and agrees to indemnify, protect and hold Tenant harmless
from and against any and all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind or of any nature whatsoever
(including, without limitation, third party claims and reasonable attorneys' and
experts' fees and disbursements) which may at any time be imposed upon, incurred
by, asserted or awarded against Tenant and arising from or out of (i) any breach
of Landlord's covenants set forth in this paragraph 22(e), or (ii) any Hazardous
Materials which exist on, in, under or were or are affecting all or any portion
of the Property which are introduced by Landlord or another tenant (other than
Tenant) of the Property or third parties (provided, however, this indemnity
shall not extend to Hazardous Materials introduced, during the term of this
Lease, at the Premises by third parties (which are not agents, employees,
contractors, invitees, representatives or guest of Landlord) except for other
tenants of the Property), including, without limitation, (x) the costs of
removal or remediation of such Hazardous Materials from all or any portion of
the Property, (y) additional costs required to take necessary precautions to
protect against the release of such Hazardous Materials on, in, under or
affecting the Property, into the air or any other public domain or any
surrounding area, and (z) with respect to Section 22(e)(ii) only, any related
costs incurred to comply, in connection with all or any portion of the Property,
with Environmental Laws.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(A) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow, set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(B) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
(C) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered only upon actual receipt (or
deliberate refusal) thereof through the United States Mail, postage prepaid,
Certified or Registered Mail, or by express carrier (FedEx or UPS, with a
receipt for delivery obtained) addressed to the parties hereto at the respective
addresses set out below, or at such other address as they have theretofore
specified by written notice delivered in accordance herewith:
LANDLORD: TENANT:
SHELBY DISTRIBUTION PARK BROCKWAY STANDARD, INC.
a Tennessee Joint Venture Attn: General Counsel
Attn: Mr. Mark Whitaker, President BWAY Corporation
RFS Realty 8607 Roberts Drive, Suite 250
889 Ridge Lake Blvd., Suite 105 Atlanta, Georgia 30350
Memphis, Tennessee 38120
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If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United states for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
24. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in
this Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
After the completion of Landlord's initial improvements to the Premises,
Landlord shall have the right to assign any of its rights and obligations under
this Lease, provided the assignee thereupon assumes in writing all of Landlord's
obligations hereunder and a copy of such assumption agreement is furnished to
Tenant and provided further that Landlord and such assignee shall both be and
remain liable to Tenant under the environmental indemnities contained in Section
22(e) of this Lease. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
C. The captions inserted in this Lease are for convenience only and
in no way define, limit or otherwise describe the scope or intent of this Lease,
or any provision hereof, or in any way affect the interpretation of this Lease.
D. Tenant agrees from time to time within ten (10) business days
after written request of Landlord, to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full force and
effect, the date to which rent has been paid, the unexpired term of this Lease
and such other matters pertaining to this Lease as may be reasonably requested
by Landlord. It is understood and agreed that Tenant's obligation to furnish
such estoppel certificates in a timely fashion is a material inducement for
Landlord's execution of this Lease. Landlord agrees to execute and deliver to
Tenant a similar estoppel certificate within ten (10) business days after
Tenant's written request therefor.
E. This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes, operating costs,
insurance and all obligations concerning the condition of the Premises.
G. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
H. Because the Premises are on the open market and are presently
being shown, this Lease shall be treated as an offer with the Premises being
subject to prior Lease and such offer subject to withdrawal or nonacceptance by
Landlord or to other use of the Premises without notice, and this Lease shall
not be valid or binding unless and until accepted by Landlord and Tenant in
writing and a fully executed copy delivered to both parties hereto.
I. All references in this Lease to "the date hereof' or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
25. DELETED.
26. BROKERAGE. Tenant warrants that it has had no dealings with any
broker or agent other than Tracy Speake and Mark Whitaker, RFS Realty, LLC and
ReMax Commercial and Industrial in connection with this Lease and covenants to
pay, hold harmless and indemnify Landlord from and against
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any and all cost, expense or liability for any compensation, commissions and
charges claimed by any other broker or agent with respect to this Lease or
negotiation thereof; Landlord shall pay all commissions due to the above-named
brokers and hereby indemnifies Tenant against claims of any other brokers or
agents arising in connection with this Lease.
27. RENEWAL OPTION. Provided that Tenant is not then in default (uncured
after notice as hereinabove required) of any of the terms and/or conditions of
this Lease, Tenant shall have the option to renew its lease for one (1) five (5)
year period on all the same terms and conditions of this Lease except that the
base rent rate shall be $3.81 per square foot of space within the Premises per
year, or Twenty Three Thousand Eight Hundred Twelve and No/100 ($23,812.00) per
month under the same terms and conditions as this Lease. Tenant shall have the
right to exercise its option effective on the day following the date on which
the original term of this Lease expires, provided that irrevocable written
notice is delivered to Landlord prior to April 1, 2006. In the event that
irrevocable written notice of Tenant's renewal as described above is not
delivered to Landlord by April 1, 2006, then this renewal option shall expire
and the Tenant shall have no such option to renew.
28. LANDLORD'S TITLE TO THE PREMISES. As an inducement by Landlord to
Tenant to enter into this Lease, Landlord hereby represents and warrants to and
agrees with Tenant that there are not now nor will there be on the Commencement
Date any restrictions, easements, mortgages, liens, encumbrances or rights of
third parties, including without limitation restrictions under applicable zoning
ordinances, affecting the Premises, i) the building in which the Premises or the
Real Estate other than those specifically listed in Schedule B of Landlord's
policy of title insurance #113-00-987371 issued by Lawyers Title Insurance
Corporation under date of 3/2/95 (the "Title Policy") and ii) as of the
Commencement Date, the exceptions listed on the Title Policy and the applicable
zoning laws for the Premises do not affect or restrict Tenant's intended use of
the Premises as provided for in this Lease.
29. SPECIAL STIPULATIONS. The Special Stipulations attached hereto as
Exhibit "E" and incorporated into this Lease by reference shall govern and
control in the event of any conflict between the foregoing provisions and those
of any other exhibit to this Lease.
IN WITNESS WHEREOF, the parties hereunto have executed this Lease Agreement
on this the 15th day of November, 1996.
LANDLORD: TENANT:
SHELBY DISTRIBUTION PARK, BROCKWAY STANDARD, INC.,
a Tennessee Joint Venture a Delaware corporation
By: L. Russell By: Blair Schlossberg
Its: V.P FINANCE RFS, INC. Its: SECRETARY
By: Witness: Julia Afflick
Its:
Witness:
-11-
<PAGE>
EXHIBIT "A"
Beginning at a point in the west line of Hickory Hill Road (106-foot ROW), said
point being 594.26 feet north of the north line of Shelby Drive (117-foot ROW);
thence southwardly on a bearing of South 02 degrees 03 minutes 16 seconds West a
distance of 553.73 feet to a point of curvature; thence continuing along a curve
to the right having a radius of 40.00 feet an arc distance of 63.36 feet to a
point; thence westwardly on a bearing of North 87 degrees 11 minutes 07 seconds
West a distance of 556.36 feet to a point; thence northwardly on a bearing of
North 01 degree 42 minutes 23 seconds East a distance of 587.11 feet to a point;
thence eastwardly on a bearing of South 87 degrees 52 minutes 24 seconds East a
distance of 600.41 feet to the point of beginning.
[ATTACH FLOOR PLAN]
EXHIBIT "A"
BRCKWAY STANDARD, INC
Premises -- Approximately 75,000 sq. ft. within a 165,000 sq. ft. building
at
4561 Hickory Hill Road
Shelby County, Tennessee
[FLOOR PLAN APPEARS HERE]
-12-
<PAGE>
EXHIBIT "B"
IMPROVEMENTS TO BE PERFORMED BY TENANT
AT LANDLORD'S SOLE EXPENSE
Notwithstanding anything in this Lease or the attached Special Stipulation to
the contrary (including, without limitation, Section 7 of the Lease and Section
14(b) of the Special Stipulation), Tenant shall be entitled to make the below
stated improvements and alterations to the Premises. Landlord hereby agrees
that it shall pay Tenant four hundred ninety-seven thousand dollars
($497,000.00) within ten (10) days of complete execution of this Lease.
Office Finish:
- -------------
1. Approximately 2,100 sq. ft. of standard office finish including nine (9)
private offices, reception area, open area, breakroom and restrooms.
2. Office lighting at 75 FC.
Warehouse Finish:
- ----------------
1. Approximately 1,400 sq. ft. of standard office finish including six (6)
private offices, breakroom and restrooms.
2. Metal halide lighting (400 watt), 25 FC minimum at 36" AFF.
3. Metal halide lighting (400 watt), 70 FC minimum at 36" AFF in the 50,000
sq. ft. production area.
4. Cambridge gas-fired blowers to provide an approximate 40 degree
differential.
5. Hose stations as required by Fire Department.
6. Fire Department required smoke removal louvers and ventilation fans for six
(6) air changes per hour.
7. All dock doors to have lights, seals, bollards, pit levelers (25,000 lb.)
trailer restraints, electric doors and a canopy over the dock area.
8. 1,400 amps, 3-phase, 4 wire (tenant to contract with MLG&W for transformer
placement).
9. Paint all warehouse walls and roof deck white; columns yellow and white.
10. ECCO - HTS Floor sealer (Tenant or equivalent).
11. 300 feet of angle iron safety guard to be installed along divider wall.
12. All other improvements or alterations reasonably necessary or desirable by
Tenant that are made in connection with the work described in the
Exhibit "B".
----------
Landlord shall at its own cost obtain a certificate of occupancy for Tenant's
use of the Premises unless the applicable municipality refuses to issue such a
certificate based on Tenant i) placing equipment, machinery, supplies or
inventory into the Premises or ii) violating any law, rule or regulation of any
governmental entity having authority over the Premises.
-13-
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
The following are subject to change at the discretion of Landlord following
notice to and reasonable approval by Tenant:
1. Tenant shall not permit any unreasonable quantities of smoke, dust, gas,
heat, noise or other vibrations or odors to emanate from the Premises, nor
take any other action which would constitute a public nuisance or would
unreasonably disturb or endanger any other tenants of the building in which
the Premises are situated or unreasonably interfere with their use of their
respective premises.
2. Blocking of any of the parking drive or truck turn around area (unless
exclusively used by Tenant) is prohibited.
3. Tenant shall not permit any dogs (excepting seeing-eye dogs), cats, pets or
other animals to occupy the Premises.
4. Landlord and Tenant shall each obtain the other's prior approval of all
contractors before the commencements of any work within the Premises, such
approval not to be unreasonably withheld or delayed.
5. Tenant shall not display any signs, posters or literature of any
description without Landlord's prior written consent, such consent not to
be unreasonably withheld or delayed.
6. Tenant to properly dispose of all garbage and to store garbage in
containers acceptable to Landlord. Landlord to have the right to
reasonably and promptly approve the location of any compactors, dumpsters
or other equipment used in the disposal of trash.
-14-
<PAGE>
EXHIBIT "D"
SIGN SPECIFICATIONS
1. Non-illuminated signage shall be centered above the front entrance to the
Premises, on the facia panel of the building. Landlord agrees to meet with
Tenant, promptly following Tenant's request, to conduct a good faith
discussion and attempt to remedy Tenant's concern that the common area
exterior lighting proposed by Landlord may not be sufficient to provide
adequate illumination of the entry identification signage and driveway of
the building in which the Premises are located. Tenant agrees the cost of
any additional lighting shall be at Tenant's sole cost and expense.
2. A scaled drawing of the proposed tenant signage must be presented to
Landlord for approval prior to the manufacture and installation of the
sign. Tenant shall be solely responsible for the cost of sign design,
manufacture, and installation.
-15-
<PAGE>
EXHIBIT "E"
SPECIAL STIPULATIONS TO LEASE AGREEMENT
TO BROCKWAY STANDARD, INC., AS TENANT
3. Notwithstanding the provisions of Section 3 of this Lease, if at
any time Landlord believes that any activities of Tenant in the Premises will
cause a material adverse effect on Landlord's insurance on the Premises,
Landlord shall provide Tenant with thirty (30) days' prior notice of such belief
and Tenant's specific activity involved, and Tenant shall not be deemed in
default under this Lease as long as Tenant diligently undertakes to cure or
cease any such activity within such period.
4. No Operating Costs payable by Tenant shall include any executive
salaries, interest, payments due under note, mortgage or other security
instrument or encumbrance securing the building in which the Premises are
located or under any underlying superior lease or any expenses of a capital
nature. Tenant shall have the right to examine and audit Landlord's books and
records with regard to all Operating Costs at Tenant's request. Landlord shall
promptly reimburse Tenant in cash for any overcharge and overpayment revealed by
such audit and, if such overcharge exceeds three percent (3%) of the actual
amount of the Operating Costs which should have been charged to Tenant, Landlord
shall also promptly reimburse Tenant for the reasonable cost of Tenant's audit.
5. Notwithstanding the provisions of Section 9 of this Lease,
Landlord shall not be entitled to enter the Premises for inspection or any other
purpose without at least one (1) days' prior written notice to Tenant, except in
the event of legitimate emergency. Landlord shall not allow any such inspection
or entry to disrupt or disturb Tenant's normal conduct of its business within
the Premises.
6. In further connection with the provisions of Section 10 of this
Lease, Landlord hereby warrants to Tenant that the utility lines serving the
Premises shall supply a sufficient capacity of electricity, gas and water to
meet the needs of Tenant in the operation of its business in the Premises,
provided, Tenant does not materially increase its currently represented capacity
needs for such items.
7. Notwithstanding the provisions of Section 11 of this Lease, Tenant
shall have the right to assign its right, title and interest under this Lease or
to enter into a sublease of all or a portion of the Premises, without the prior
consent of the Landlord, if such assignment or sublease is made to a corporation
under common control with Tenant or to a subsidiary or successor to Tenant by
corporate merger or by change of corporate name, whether by transfer of a
majority interest of stock, merger or dissolution, or is made in connection with
an asset purchase to which Tenant is a party. In the event of any such
assignment or subleasing the original Tenant under this Lease shall remain
liable to Landlord under the terms of this Lease unless released in writing by
Landlord. Any such assignee shall be required to agree to assume this Lease
prior to any such assignment.
8. Notwithstanding any provisions of Section 14 of this Lease, in the
event the Premises are taken or damaged by condemnation to the extent that the
Premises are reduced in size by twenty-five percent (25%) or more, Tenant shall
have the right to terminate this Lease by written notice to Landlord. If Tenant
elects not to so terminate this Lease or if less than twenty-five percent (25%)
of the Premises are damaged, Landlord shall promptly repair and restore the
Premises at Landlord's expense to at least as good a condition as existed prior
to such damage, and all rental under this Lease shall be equitably reduced based
on both the square footage and the degree of use lost to Tenant by such
reduction in size of the Premises.
9. No default will be deemed to have occurred pursuant to subsections
(b), (c) and (d) of Section 17 of this Lease if Tenant in good faith commences
to cure any default referred to in such subsections within thirty (30) business
days after Tenant's receipt of written notice from Landlord. Notwithstanding
the provisions of subsections (e) of said Section 17 of this Lease, Tenant shall
not be deemed to have deserted or vacated the Premises unless Tenant is
otherwise in default under this Lease and permanently vacates the Premises.
10. Notwithstanding the provisions of Section 18 of this Lease,
Tenant shall be entitled to two (2) late payments of rental in each lease year
during the term of this Lease before being required to pay any late charge,
penalty or interest thereon; provided that the foregoing exception shall not
apply to any payment made more than seven (7) days after the due date thereof.
11. In connection with the provisions of Section 20 of this Lease,
Landlord hereby agrees to obtain and provide to Tenant prior to the date of
Tenant's execution of this Lease a non-disturbance agreement from the holder of
any and all mortgages or other security instruments secured by the Premises or
the building in which the Premises are located or the land upon which the said
building is located and
-16-
<PAGE>
from all lessors under any ground lease or other lease which is superior to this
Lease, under which non-disturbance agreement the holders of such mortgages or
other security instruments and the lessors under such superior leases shall
agree that, so long as Tenant complies with all the terms and conditions of this
Lease, neither a foreclosure under any such mortgage nor a termination of such
superior lease shall adversely affect Tenant's right to continue in possession
of the Premises under all the terms, conditions and provisions of this Lease.
Any such statement from the lessors under a superior lease shall also certify to
Tenant that the provisions of such superior lease are in full force and effect
without default on the part of Landlord and that the provisions of this Lease do
not create any default thereunder. Any future subordination or attornment
agreement which Tenant is requested to execute shall contain or be accompanied
by such a non-disturbance agreement from the mortgagee in favor of Tenant.
12. Landlord hereby agrees with Tenant that, at any time that
Landlord is required to or has the right to give consent or approval or that
Landlord has the right to make any judgment affecting the rights of Tenant under
this Lease or under the Rules and Regulations attached to this Lease or as
hereafter promulgated, no such approval or consent shall be unreasonably
withheld or delayed, and all such judgments required of Landlord or its agents
shall be made both reasonably and with reasonable promptness. Where any
provisions contained in the Rules and Regulations set forth on Exhibit "C" of
this Lease are in conflict with any provision of this Lease, the provisions of
this Lease shall be controlling. Where Landlord is entitled under any provision
of this Lease to make any payment on behalf of or reimbursable by Tenant,
including without limitation the payment of any expenses, costs or fees
whatsoever, all such payments, expenses costs and fees shall be reasonable in
amount and shall be contracted for and paid by Landlord in a commercially
reasonable manner.
13. If Landlord shall fail to keep or perform any of its obligations
under this Lease in respect to the making of any payment to Tenant (including,
without limitation, the payment for any improvements referred to in Exhibit "B"
hereof) or the performance by Landlord of any other obligation on its part to be
performed under this Lease, then (i) either in the event of an emergency or (ii)
if Landlord does not begin the performance of such obligation within five (5)
business days after receipt by Landlord of a written notice from Tenant
specifying such failure and thereafter diligently pursue such performance to
completion, Tenant shall have the right to (but shall not be obligated to do so)
to perform such obligation, and all reasonable and actual costs of such
performance so paid by Tenant, including all reasonable and actual necessary and
incidental costs and reasonable and actual attorneys' fees, together with
interest thereon at the then-current prime rate per annum from the date such
cost is incurred, shall be paid by Landlord to Tenant within thirty (30) days
after demand, and if not so paid by Landlord, Tenant shall have the right and
option to offset the cost of such cure against the next-arising installment(s)
of monthly rental and any other amounts due from Tenant under this Lease until
all such costs are reimbursed to Tenant. If Tenant offsets any monies and i)
Landlord contests Tenant's right to do so under this Special Stipulation 13, and
ii) prevails on the merits in any such contest, Tenant shall pay in addition to
all monies improperly offset, interest on all monies improperly offset, from the
date of offset, at the default rate provided for in this Lease.
14. Landlord and Tenant hereby agree that, anything hereinabove
provided under this Lease to the contrary notwithstanding:
(a) Any utilities provided to the Premises by Landlord, if
billable to the Premises under the terms of the Lease, shall be provided at the
same rate at which Landlord purchases the same from the utilities supplier.
(b) At Tenant's expense Tenant shall have the right, but not the
obligation, to make additional improvements to the Premises without Landlord's
consent so long as the cost of such improvements does not exceed $25,000 and so
long as such improvements do not reduce the value of the Premises and are in
compliance with all applicable codes.
** ** **
-17-
<PAGE>
EXHIBIT "F"
SITE PLAN
[SITE PLAN APPEARS HERE]
EXHIBIT F
BUILDING 6
SHELBY DISTRIBUTION PARK
HICKORY HILL @ SHELBY DRIVE
MEMPUIS, TENNESSEE
-18-
<PAGE>
STATEMENT OF TENANT: ESTOPPEL LETTER
______________, 19__
Subject: Lease, Dated , 19__, For Premises at , Memphis,Tennessee.
It is our understanding that you intend to consummate certain transactions
concerning the subject premises, and as a condition precedent thereof each of
you have required and are relying upon this certification by the undersigned.
The undersigned as Tenant under that certain Lease made and entered into
between , as Landlord, and the undersigned, as Tenant, hereby
ratifies the said Lease and acknowledges and certifies that the undersigned has
entered into occupancy of the Leased Premises described in said Lease on
_________, 1996; and it terminates as of____ ___, 2006. It is further
acknowledged and certified that said lease is in full force and effect, and, has
not since the date thereof been assigned, modified, supplemented or amended in
any way, and that the same represents the entire agreement between the parties;
that all conditions under said Lease to be performed by Landlord have been
satisfied (including payment of Tenant Allowance, if any) other than: , and
on this date there are no existing defenses or offsets which the undersigned has
against the enforcement of said Lease by Landlord other than: ; that no
rental or payment has been paid in advance other than the security deposit (if
any) stated in said Lease, and that the Floor Area of the Leased Premises is
square feet.
Very truly yours,
Co-Addressee:
-19-
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made and entered into effective as of the 28th
day of December, 1996, by and between SHELBY DISTRIBUTION PARK (herein called
"Landlord"), and BROCKWAY STANDARD, INC. (herein called "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the owner of certain real property and improvements
consisting of an approximately 165,000 square foot industrial building situated
in the County of Shelby, State of Tennessee, and more particularly described in
Exhibit "A" attached hereto (the "Property"); and
WHEREAS, Landlord and Tenant have entered into a Lease Agreement dated
November 15, 1996 (herein referred to as the "Sublease") by which Landlord has
demised approximately 75,000 square feet of the Property to Tenant (the
"Premises"); and
WHEREAS, Landlord has, effective this date, by special Warranty Deed
conveyed the Property to The Industrial Development Board of the City of Memphis
and County of Shelby, Tennessee, a Tennessee public not-for-profit corporation
(the "IDB"), and the IDB has, in turn, leased the Property back to Landlord,
pursuant to that certain Real Property Lease Agreement (the "PILOT Lease")
effective this date, by and between the IDB, as Lessor, and Landlord, as Lessee;
and
WHEREAS, Landlord and Tenant desire to enter into this Amendment to Lease
to confirm the demise of the Premises to Tenant as a sublease, subject to all of
the rents,
1
<PAGE>
terms and conditions of the PILOT Lease and to further amend the Sublease as
hereinafter set forth.
NOW, THEREFORE, the Parties hereby agree as follows:
1. Confirmation of Sublease. Landlord and Tenant hereby confirm that,
------------------------
except as amended by this instrument, the Lease Agreement (hereinafter
referred to as the "Sublease") between them dated November 15, 1996,
shall continue in full force and effect as a sublease, subject to all
terms and provisions of the PILOT Lease.
2. Amendment of Sublease. The Sublease is hereby amended by adding the
---------------------
following provisions.
3. Additional Obligations. The Sublease is hereby amended to provide
----------------------
that, in addition to the rents and obligations set forth therein, the
Tenant shall also assume all of the rents and obligations of the
Landlord in its capacity as a Lessee under the terms of the PILOT
Lease without diminishing the other rental obligations in the
Sublease, except that for so long as the PILOT lease is in effect the
Tenant shall not assume any such obligations of the Landlord in its
capacity as a Lessee under the terms of the PILOT Lease which are the
obligations of Landlord under the Sublease. Subject to the provisions
in the preceding sentence, assumed obligations shall include,
but are not limited to: (a) the payment of all Base Rent, (b) Payment
of all ad valorem taxes and payments in lieu of taxes arising after
December 1, 1996, (c) payment of all costs and expenses described in
Article VI of the PILOT Lease and required under the
2
<PAGE>
PILOT Lease to exercise the option to purchase contained in the PILOT Lease
(including the Option Price of One Thousand Dollars, and recording expenses
for a quit claim deed and reasonable attorney's fees for review of
documentation in connection with such purchase option), and (d) prompt
payment of all indemnification and reimbursement due from the Landlord to
IDB under the PILOT Lease, including but not limited to Sections 5.03,
6.01, 6.02 and 13.06 except to the extent the same are attributable solely
to the acts or omissions of the Landlord. Such assumed obligations
hereunder shall be subject to the following provisions:
(i) The PILOT Lease obligations so assumed by the Tenant shall be in the
nature of additional rent under the Sublease, payable as the same
become due under the PILOT Lease, and discharged by direct remittance
to or performance for the benefit of the IDB or paid to Landlord if
Landlord elects to make such payments. The obligations so assumed by
the Tenant shall be payable by the Tenant even if they arise prior to
the Commencement Date of the PILOT Lease or the end of any rental
abatement period contained in the Sublease.
(ii) Such assumed obligations shall not abate, notwithstanding the terms of
the Sublease with respect to Base Rent, unless (and only to the
extent) that an abatement is expressly provided under the terms of the
PILOT Lease.
3
<PAGE>
(iii) Tenant shall at no time during the term of the PILOT Lease
take any action, or omit to take any action, which would
cause the Project to not constitute a "Project" within the
meaning of Section 7-53-101 of the Tennessee Code
Annotated.
(iv) (a) That if a lease of any remaining portion of the
building in which the Premises are located becomes
part of the PILOT Program, that any of said costs
shall be allocated between Tenant and any other
tenant(s) which are part of the PILOT Program, based
on each tenant's pro rata share of the total space
subject to the PILOT Program;
(b) Tenant shall not be responsible for any fines,
penalties, interest, late charges or similar charges
resulting from Landlord's failure to make said
payments when required under the PILOT Lease so long
as Tenant has timely advanced funds for payment of
same after written request from Landlord. Tenant
shall also reimburse Landlord for, and indemnify
Landlord against, any and all liabilities, charges,
fees, costs and expenses required to be paid by
Landlord to IDB pursuant to any indemnification by
Landlord of IDB under the PILOT Lease which are the
result of the acts or omissions of Tenant.
4
<PAGE>
4. Landlord Obligations. Landlord shall be responsible for (i) through
--------------------
(iii) below: (i) Landlord shall be required to execute such documents
(with such reasonable assurances and indemnities required of the
Tenant), respond to notices and notify the Tenant, or take such other
ministerial acts as may be required to maintain the PILOT Lease
(except as provided herein), all at the Tenant's cost and expense and
Landlord shall take no action, or refrain from taking any action,
which will terminate or void the PILOT Lease unless the Tenant has so
requested or an event of default by Tenant has occurred under the
Sublease after the expiration of all notice and cure periods provided
for therein and (ii) Landlord shall take no action, or refrain from
taking any action, which will result in an Event of Default (as
defined in the PILOT Lease) under the PILOT Lease; and (iii) Landlord
shall forward to Tenant, within seven (7) business days of receipt by
Landlord, copies of all notices received by Landlord under the PILOT
Lease. Moreover, Landlord shall at all times remain, and be
responsible and fully liable for, any and all claims, damages,
expenses, liabilities and demands resulting from Landlord's gross
negligence or intentional misconduct and nothing contained in the
PILOT Lease, Sublease or this Amendment shall in any way release
Landlord from, or limit Landlord's liability for any liability
resulting from Landlord's gross negligence or intentional misconduct.
5. Indemnification. In addition to the obligations of Tenant set forth
---------------
elsewhere in this Sublease, Tenant hereby agrees to indemnify the
Landlord for
5
<PAGE>
Landlord's reasonable and actual out of pocket expenses paid by
Landlord to third party (i) for the review and execution of the PILOT
Lease and its operation including, without limitation, Landlord's own
counsel's actual and reasonable charges for the preparation of this
Amendment to this Lease, review of the PILOT Lease and review and
approval of the Landlord's role in the application and approval of
the PILOT Program for the Premises, such counsel fees not to exceed
$5,000.00, and (ii) for counsel and attorney's fees subsequent to
entry into the PILOT Lease for interpretation or enforceability (or
both) of the Tenant's and Landlord's respective obligations and rights
under this Sublease to the extent of its effects on the PILOT Lease;
Tenant not being liable for the consequences of interpretation or
enforcement of another sublease under a PILOT Program.
6. Tenant's Obligation to Monitor Option Dates. The Tenant shall
-------------------------------------------
undertake full and sole responsibility to monitor the termination date
of the PILOT Lease and shall give notice to the Landlord in a timely
fashion to allow the Landlord to take necessary steps for the exercise
of the option.
7. Either party may record a memorandum of the Lease/Sublease and the
other party will cooperate to effect such a recordable instrument.
8. Upon a termination of the PILOT Lease and Landlord's re-acquisition of
title to the property, the Sublease shall become a prime lease between
Landlord and Tenant, binding upon the parties in accordance with its
terms and that
6
<PAGE>
the parties shall execute any documents necessary to confirm the
status of the Lease.
9. At present the Property is not encumbered by a deed of trust, the lien
of a deed of trust or any other security interest.
END PAGE
7
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have each duly executed this
Amendment to Lease as of the day and year first above written.
SHELBY DISTRIBUTION PARK,
a Tennessee Joint Venture
BY:SHELBY DISTRIBUTION PARTNERS, L.P.,
A Tennessee limited partnership
By: RFS, INC., the sole general partner
By: /s/ L Russell
-------------------------------------
Vice-President
BROCKWAY STANDARD, INC.
By:_____________________________________
President
8
<PAGE>
SETTLEMENT AGREEMENT
--------------------
This Agreement (this "Agreement") dated as of June 30, 1997, is by and
between BWAY Corporation (formerly BS Holdings Corporation) ("BWAY") and
Owens-Illinois Group, Inc. ("O-I").
Recitals
--------
WHEREAS, BWAY purchased all of the issued and outstanding capital
stock of Brockway Standard, Inc., a Delaware Corporation, from O-I pursuant to a
December 19, 1988 Stock Purchase Agreement, as amended (the "Stock Purchase
Agreement"), and BWAY, BW Plastics, Inc., and BW-Morrow Plastics, Inc. purchased
certain facilities and assets from O-I pursuant to a December 19, 1988 Asset
Purchase Agreement (the "Asset Purchase Agreement"). (The Stock Purchase
Agreement and the Asset Purchase Agreement are referred to herein collectively
as the "Purchase Agreements"). Capitalized terms used herein and not otherwise
defined will have the meaning defined in the Purchase Agreements.
WHEREAS, BWAY has notified O-I of the following known claims against
O-I for preclosing environmental liabilities which BWAY contends are subject to
the defense and indemnification provisions of (SS)9.6 and 9.9 of the Purchase
Agreements: (1) Costs incurred or expensed by BWAY at the Homerville, Georgia
and Dallas, Texas (Southwest plant) facilities with respect to atmospheric
emissions of volatile organic compounds; (2) Costs incurred or expensed at the
Homerville, Georgia facility with regard to wastewater pretreatment requirements
imposed by 1983 state water quality standards and the plant's 1989 permit; (3)
Costs incurred or expensed at the Dallas, Texas (Southwest) plant to remove
underground storage tanks and impacted soils; and (4) Costs incurred or expensed
at the Farmers Branch,
<PAGE>
Texas (Thompson plant) facility to remove contaminated soil. These claims shall
hereinafter be referred to as the "Environmental Claims";
WHEREAS, BWAY has additionally notified O-I of a claim against O-I for
preclosing environmental liabilities which BWAY contends are subject to the
defense and indemnification provisions of (SS)9.6 and 9.9 of the Purchase
Agreements for defense and investigation costs incurred and further requirements
for the investigation and remediation of soil and groundwater contamination at
the Homerville, Georgia facility (the "Homerville Soil and Groundwater Claim").
To resolve the Homerville Soil and Groundwater Claim, on May 15, 1995, the
parties executed an AGREEMENT PURSUANT TO (S)9.9 OF THE DECEMBER 19, 1988 STOCK
PURCHASE AGREEMENT (the "Homerville Soil and Groundwater Agreement") further
defining their respective rights and in which O-I agreed to assume
responsibility (subject to the terms and conditions of such Agreement) with
respect to the Homerville Soil and Groundwater Claim;
WHEREAS, BWAY has additionally notified O-I of the following known
claims for liabilities which BWAY contends fall within (SS)9.4, 9.5 and 9.9 of
the Purchase Agreements: Costs incurred for the payment of medical expenses of
disabled (on the Closing Date) dependents of employees who were active on the
Closing Date. These claims shall hereinafter be referred to as the "Medical
Claims";
WHEREAS, BWAY has additionally notified O-I of the following known
claims for liabilities which BWAY contends fall within (SS)9.3 and 9.9 of the
Purchase Agreements: Costs incurred by BWAY for defense costs in connection with
a Grand Jury antitrust
2
<PAGE>
investigation of the metal container industry and certain related civil
litigation. These claims shall hereinafter be referred to as the "Antitrust
Claims";
WHEREAS, O-I has disputed BWAY's right to recover some or all of the
costs allegedly incurred with respect to the Environmental Claims, the Medical
Claims, and the Antitrust Claims;
WHEREAS, O-I additionally asserted possible claims against BWAY in
connection with O-I's payment of medical costs under (SS)9.4 or 9.5 of the
Purchase Agreements and O-I's payment of certain costs related to a Grand Jury
antitrust investigation of the metal container industry; and,
WHEREAS, without in any way amending or modifying the Homerville Soil
and Groundwater Agreement, in order to avoid the expense and the uncertainty of
litigation the parties are desirous of settling their disputes, including
without limitation those disputes concerning the Environmental Claims, Medical
Claims and Antitrust Claims, in accordance with the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the promises, releases and mutual
covenants contained herein, the parties agree as follows:
1. O-I will pay BWAY by wire transfer within five calendar days of
the execution of this Agreement by both parties the sum of One Million Two
Hundred and Fifty Thousand United States Dollars ($1,250,000.00).
3
<PAGE>
2. BWAY, its past and present affiliates, parents, subsidiaries
agents, partners, shareholders, officers, directors, employees, successors,
assigns and assignors, including but not limited to BW Plastics, Inc. and BW-
Morrow Plastics, Inc., (collectively, the "BWAY Entities"), jointly and
severally, release O-I, its past and present affiliates, parents, subsidiaries,
agents, partners, shareholders, officers, directors, employees, successors,
assigns and assignors (collectively, the "O-I Entities") from any and all
claims, demands controversies, actions, causes of action, obligations,
liabilities and damages in law or in equity for, or arising in connection with
the Environmental Claims. This release shall not apply to or in any way limit,
alter, amend, or modify the parties' respective rights and obligations with
respect to the Homerville Soil and Groundwater Claim resolved by the Homerville
Soil and Groundwater Agreement.
3. The O-I Entities, jointly and severally, and the BWAY Entities,
jointly and severally, each release the other from any and all claims, demands,
controversies, actions, causes of action, obligations, liabilities, and damages
in law or in equity for, and arising in connection with, the Medical Claims and
any other medical expenses, pension, welfare, and all other employee benefit
expenses previously paid or to be paid by O-I or BWAY Entities with respect to
any current or former employees of Brockway Standard Inc., (including its
predecessors "BSI") or their dependents, and each party hereto agrees with the
other party hereto (it being the intent and agreement that there be no third
party beneficiary of this Agreement) to continue to offer and pay for medical
expenses, pension, welfare and all other employee benefits to current and former
BSI employees and dependents thereof, to the extent that it offers or provides
such coverage or benefits to such persons as of the date of this Agreement, but
only to the extent that such persons are entitled to such coverage or benefits
from either the BWAY Entities or the O-I Entities.
4
<PAGE>
4. The BWAY Entities, jointly and severally, release the O-I
Entities, and the O-I Entities, jointly and severally release the BWAY Entities,
from any and all claims, demands, controversies, actions, causes of action,
obligations, liabilities, and damages in law or in equity for, or arising in
connection with, the Antitrust Claims.
5. The O-I Entities, jointly and severally, and the BWAY Entities,
jointly and severally, each release the other from any and all claims, demands,
controversies, actions, causes of action, obligations, liabilities, and damages
in law or in equity, known or unknown, existing from the beginning of time until
the date of this Agreement. Without in any way modifying or limiting the
specific releases set forth in paragraphs 2, 3, and 4 of this Agreement, the
general release set forth in this paragraph 5 shall not include (i) any unknown
claims covered by (S)9.3 of the Stock Purchase Agreement and/or (S)9.3 of
the Asset Purchase Agreement as both are amended by paragraph 7 of this
Agreement; (ii) any unknown claims covered by (S)9.6 of the Stock Purchase
Agreement and/or (S)9.6 of the Asset Purchase Agreement as both are amended by
paragraph 8 of this Agreement; (iii) any claims that the BWAY Entities made to
the O-I Entities prior to the date hereof under (S)9.3 of the Stock Purchase
Agreement and/or (S)9.3 of the Asset Purchase Agreement that relate to product
liability claims regarding products manufactured or sold by Brockway (or any
predecessor) at any time on or prior to the Closing Date and for which the O-I
Entities expressly assumed the defense of such claims in writing (with or
without reservation) prior to the date hereof; (iv) any actions pending in any
court as of the Closing Date for which the O-I Entities expressly assumed (with
or without reservation) the defense of such
5
<PAGE>
actions in writing (including without limitation under the Purchase Agreements)
as of the Closing Date; and (v) any claims covered under the Homerville Soil and
Groundwater Agreement.
6. The parties hereby acknowledge that they expressly waive any and
all rights that they may have under any and all statutes or laws that purport to
limit the scope of a general release, including without limitation Section 1542
of the Civil Code of the State of California, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
7. (a) The O-I Entities and the BWAY Entities agree to amend (S)9.3
of the Stock Purchase Agreement to add the underscored language:
Seller shall assume and be solely responsible for, and pay on
behalf of Purchaser, the Company and Brockway, all liabilities,
costs and expenses resulting from or relating to (a) any claims,
actions or proceedings (whichever arising) relating to any
alleged defects in the design, manufacture, or performance of or
any other product liability claim regarding products
manufactured or sold by Brockway (or any predecessor) as any time
on or prior to the Closing Date, regardless of whether any such
liability is disclosed herein or in any Schedule hereto, and (b)
any claims, actions or proceedings of any nature pending or
threatened against the Company or Brockway (or any predecessor)
at any time on or prior to the Closing Date, regardless of
whether any such liability is disclosed herein or in any Schedule
hereto.
(b) The O-I Entities and the BWAY Entities agree to amend
(S)9.3 of the Asset Purchase Agreement to add the underscored language:
6
<PAGE>
9.3 Liability for Products and Other Claims. Seller shall retain
and be solely responsible for, and Purchasers do not assume, all
liabilities, costs and expenses resulting from or relating to (a)
any claims, actions or proceedings (whenever arising) relating to
any alleged defects in the design, manufacture, or performance of
any other product liability claim regarding products manufactured
or sold by either of Seller or Brockway with respect to the
Business (or any predecessor) at any time on or prior to the
Closing Date, regardless of whether any such liability is
disclosed herein or in any Schedule hereto, and (b) any other
claims, actions or proceedings of any nature pending or
threatened against Seller or Brockway with respect to the
Business (or any predecessor) at any time on or prior to the
Closing Date, regardless of whether any such liability is
disclosed herein or in any Schedule hereto.
8. (a) Subject to the limitation set forth herein, the BWAY Entities
and the O-I Entities agree to amend the first sentence of (S)9.6 of the Stock
Purchase Agreement to add the underscored language:
Seller shall assume and be solely responsible for all
obligations, duties, claims and liabilities relating to any fact,
event or condition existing or threatened on or prior to the
Closing Date (whether or not disclosed in Schedule 6.27 hereto)
pertaining to any past or present facility or operation of
Brockway (or any of its predecessors) (including without
limitation, claims and liabilities relating to the facility
previously operated by Brockway in Fairfield, New Jersey) which
at any time interferes with or prevents continued compliances
with, or gives rise to any common law, legal or other liability
under any law or regulation but only as such law or regulation
was in effect on the Closing Date related to the manufacture,
processing, distribution, use, treatment discharge, release or
threatened release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste.
(b) Subject to the limitation set forth herein, the BWAY
Entities and the O-I Entities agree to amend the first sentence of (S)9.6 of the
Asset Purchase Agreement to add the underscored language:
7
<PAGE>
9.6 Liability for Environmental Matters. Seller shall retain and
be solely responsible for, and Purchasers shall not assume, all
obligations, duties, claims and liabilities relating to any
fact, event or condition existing or threatened on or prior to
the Closing Date (whether or not disclosed in Schedule 6.25
hereto) pertaining to any past or present facility or the
ownership or operation of the Purchased Assets or the Business by
Seller or Brockway (or any of their predecessors) including
without limitation, claims and liabilities relating to the
facility previously operated by Brockway in Fairfield, New
Jersey) which at any time interferes with or prevents continued
compliances with, or gives rise to any common law, legal or other
liability under any law or regulation but only as such law or
regulation was in effect on the Closing Date related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the omission, discharge,
release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste.
Neither these amendments nor anything else in this Settlement Agreement shall
apply to or in any way limit, alter, amend or modify the parties respective
rights and obligations with respect to the Homerville Soil and Groundwater Claim
resolved by the Homerville Soil and Groundwater Agreement.
9. The O-I Entities represent and warrant that, as of the date hereof
and after reasonable investigation, neither the O-I Entities nor their
employees, attorneys, consultants or agents, know of any facts that would give
rise to any claim under the Purchase Agreements as amended by this Agreement
other than those relating to claims previously made or claims released by this
Agreement.
10. The BWAY Entities represent and warrant that, as of the date
hereof and after reasonable investigation, neither the BWAY entities nor their
employees, attorneys,
8
<PAGE>
consultants or agents, knows of any facts that would give rise to any claim
under the Purchase Agreements as amended by this Agreement other than those
relating to claims previously made or claims released by this Agreement.
11. This Agreement was drafted jointly by counsel for O-I and BWAY.
the doctrine of contra preferentem shall not be invoked by either party in any
dispute over the interpretation of this Agreement.
12. Except as otherwise set forth herein, the Purchase Agreements and
the Homerville Soil and Groundwater Agreement are reaffirmed as binding and
enforceable agreements of the parties.
13. Neither party may assign any rights, obligations or claims under
this Agreement without the written consent of the other.
14. This Agreement shall be governed by the laws of the State of
Illinois.
15. Each signatory to this Agreement personally warrants and
represents that he or she has authority to execute this Agreement on behalf of
the party represented.
16. Each party agrees that time is often the essence in performing
the obligations set forth herein.
17. This Agreement may be executed in one or more counterparts, each
of which will constitute the valid, binding and enforceable agreement of the
signatory hereto.
9
<PAGE>
OWENS-ILLINOIS GROUP, INC. BWAY CORPORATION
By: James W. Baird By: Blair Schlossberg
---------------------- -------------------------
Title: Assistant Secretary Title: Secretary
------------------- ----------------------
Date: July 2, 1997 Date: July 2, 1997
-------------------- ----------------------
10
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
BWAY CORPORATION
----------------
Brockway Standard, Inc.
Brockway Standard (New Jersey), Inc.
Milton Can Company, Inc.
Brockway Standard (Canada), Inc.
BWAY Foreign Sales Corporation
Materials Management, Inc.
BROCKWAY STANDARD, INC.
----------------------
Armstrong Containers, Inc.
Brockway Standard (Ohio), Inc.
Plate Masters, Inc.
BROCKWAY STANDARD (NEW JERSEY), INC.
------------------------------------
Milton Metal Graphics, Inc.
Northeast Tin Plate Company
The Company and all subsidiaries of the Company
are Delaware Corporations.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BWAY
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> SEP-28-1997 SEP-28-1997
<PERIOD-START> JUN-30-1997 SEP-30-1996
<PERIOD-END> SEP-28-1997 SEP-28-1997
<CASH> 1,374 1,374
<SECURITIES> 0 0
<RECEIVABLES> 42,386 42,386
<ALLOWANCES> 580 580
<INVENTORY> 46,615 46,615
<CURRENT-ASSETS> 97,056 97,056
<PP&E> 148,713 148,713
<DEPRECIATION> 25,096 25,096
<TOTAL-ASSETS> 316,377 316,377
<CURRENT-LIABILITIES> 90,166 90,166
<BONDS> 114,381 114,381
0 0
0 0
<COMMON> 99 99
<OTHER-SE> 85,367 85,367
<TOTAL-LIABILITY-AND-EQUITY> 316,377 316,377
<SALES> 101,130 402,150
<TOTAL-REVENUES> 101,130 402,150
<CGS> 85,759 341,406
<TOTAL-COSTS> 94,225 379,900
<OTHER-EXPENSES> (715) 998
<LOSS-PROVISION> (105) 190
<INTEREST-EXPENSE> 2,849 10,649
<INCOME-PRETAX> 6,905 22,250
<INCOME-TAX> 2,855 9,146
<INCOME-CONTINUING> 4,050 13,104
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,050 13,104
<EPS-PRIMARY> 0.40 1.31
<EPS-DILUTED> 0.40 1.31
</TABLE>
