<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26178
BWAY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3624491
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S.
OR ORGANIZATION) EMPLOYER IDENTIFICATION NO.)
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
(Address of principal executive offices)
(Zip Code)
(770) 645-4800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
__________________
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
--- ---
There were 9,465,813 shares of Common Stock ($.01 par value) outstanding as of
May 1, 1998.
<PAGE>
BWAY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED
MARCH 29, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 29, 1998
and September 28, 1997 (Unaudited) 3
Consolidated Statements of Income for the three month
periods ended March 29, 1998 and
March 30, 1997 (Unaudited) 4
Consolidated Statements of Cash Flows for the three
month periods ended March 29, 1998 and March 30,
1997 (Unaudited) 5-6
Notes to Consolidated Financial Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Thousands, Except Share and per Share Data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
MARCH 29, SEPTEMBER 28,
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,469 $ 1,374
Accounts receivable, net of allowance of $658 at
March 29, 1998 and $580 at September 28, 1997 44,338 41,932
Inventories 52,962 46,615
Other current assets 3,468 1,944
Deferred tax asset 5,111 5,110
-------- --------
Total Current Assets 108,348 96,975
-------- --------
PROPERTY, PLANT AND EQUIPMENT - Net 129,513 123,617
-------- --------
OTHER ASSETS:
Intangible assets, net 85,109 87,233
Deferred financing costs, net 4,596 4,844
Other assets 3,311 3,709
-------- --------
Total Other Assets 93,016 95,786
-------- --------
$330,877 $316,378
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 44,600 $ 58,618
Accrued salaries & wages 8,361 9,745
Accrued income taxes 1,121 1,338
Other current liabilities 15,906 19,312
Current maturities of long-term debt 1,317 1,151
-------- --------
Total Current Liabilities 71,305 90,164
-------- --------
LONG-TERM DEBT 152,057 113,632
LONG-TERM LIABILITIES:
Deferred income taxes 14,969 14,969
Other long-term liabilities 10,055 12,145
-------- --------
Total Long Term Liabilities 25,024 27,114
COMMITMENTS & CONTINGENCIES -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized 5,000 shares -- --
Common stock, $.01 par value; authorized 24,000,000 shares,
Issued 9,851,002 (March 29, 1998 and September 28, 1997) 99 101
Additional paid-in capital 37,369 37,629
Retained earnings 53,654 48,673
-------- --------
91,122 86,403
Less treasury stock, at cost, 385,189 and 51,790
(March 29, 1998 and September 28, 1997) (8,631) (935)
-------- --------
Total Stockholders' Equity 82,491 85,468
-------- --------
$330,877 $316,378
======== ========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
MARCH 29, MARCH 30, MARCH 29, MARCH 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
NET SALES $101,165 $101,264 $193,279 $192,430
COSTS, EXPENSES AND OTHER:
Cost of products sold (excluding
depreciation and amortization) 83,819 84,700 160,451 162,805
Depreciation and amortization 3,358 3,207 6,885 6,659
Selling and administrative expense 5,117 5,365 9,916 10,322
Interest expense, net 3,493 2,437 6,989 4,555
Gain on curtailment of postretirement medical benefits (1,547) -- (1,547) --
Other, net 148 69 86 199
-------- -------- -------- --------
Total costs, expenses and other 94,388 95,778 182,780 184,540
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 6,777 5,486 10,499 7,890
PROVISION FOR INCOME TAXES 2,831 2,249 4,357 3,235
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 3,946 3,237 6,142 4,655
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR SYSTEMS DEVELOPMENT
COSTS B NET OF RELATED TAX BENEFIT OF $823 -- -- (1,161) --
-------- -------- -------- --------
NET INCOME $ 3,946 $ 3,237 $ 4,981 $ 4,655
======== ======== ======== ========
EARNINGS PER SHARE BEFORE CUMULATIVE ACCOUNTING CHANGE:
- -------------------------------------------------------
Basic Earnings Per Common Share $ 0.42 $ 0.33 $ 0.64 $ 0.47
======== ======== ======== ========
Weighted Average Basic Common Shares Outstanding 9,473 9,820 9,614 9,840
======== ======== ======== ========
Diluted Earnings Per Common Share $ 0.40 $ 0.33 $ 0.61 $ 0.47
======== ======== ======== ========
Weighted Average Diluted Common Shares Outstanding 9,968 9,897 10,076 9,885
======== ======== ======== ========
EARNINGS PER SHARE AFTER CUMULATIVE ACCOUNTING CHANGE:
- ------------------------------------------------------
Basic Earnings Per Common Share $ 0.42 $ 0.33 $ 0.52 $ 0.47
======== ======== ======== ========
Weighted Average Basic Common Shares Outstanding 9,473 9,820 9,614 9,840
======== ======== ======== ========
Diluted Earnings Per Common Share $ 0.40 $ 0.33 $ 0.49 $ 0.47
======== ======== ======== ========
Weighted Average Diluted Common Shares Outstanding 9,968 9,897 10,076 9,885
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Six Months Ended
----------------------------------
March 29, March 30,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 4,981 $ 4,655
Adjustments to reconcile net income to net cash provided by (used in)
Operating activities:
Depreciation 5,089 4,624
Amortization of intangibles 1,796 2,035
Amortization of deferred financing costs 367 142
Curtailment gain (1,547) --
Cumulative effect of change in accounting principle (net) 1,161 --
Provisions for doubtful accounts 78 285
(Gain) / Loss on disposition of property, plant and equipment 49 60
Changes in assets and liabilities, net of effects of business
acquisitions:
Accounts receivable (2,484) (989)
Inventories (6,347) (1,631)
Other assets (1,146) 1,930
Accounts payable (5,908) 2,499
Accrued liabilities (3,898) (4,067)
Income taxes, net 658 2,755
-------- --------
Net cash provided by (used in) operating activities (7,151) 12,298
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (17,485) (9,491)
Acquisitions, net of cash acquired -- (41,619)
Other 365 18
-------- --------
Net cash used in investing activities (17,120) (51,092)
-------- --------
FINANCING ACTIVITIES:
Net borrowings under bank credit agreement 38,100 35,229
Repayments on long-term debt (258) (117)
Increase (decrease) in unpresented bank drafts (4,368) 2,466
Net purchases of treasury stock (8,676) 434
Financing costs incurred (100) --
Other 668 --
-------- --------
Net cash provided by financing activities 25,366 38,012
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,095 (782)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,374 1,852
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,469 $ 1,070
======== ========
(Continued)
</TABLE>
5
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Six Months Ended
----------------------------------
March 29, March 30,
1998 1997
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 6,792 $ 4,079
======== ========
Income taxes $ 3,840 $ 1,894
======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Amounts owed for capital expenditures $ 650
========
Details of businesses acquired were as follows:
- -----------------------------------------------
Fair value of assets acquired $ 44,076
Liabilities assumed (1,707)
Long-term note issued (750)
--------
Net cash paid for acquisitions $ 41,619
========
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. GENERAL
The accompanying consolidated financial statements have been prepared by the
Company without audit. Certain information and footnote disclosures, including
significant accounting policies, normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The consolidated financial statements as of March 29,
1998 and for the six months ended March 29, 1998 and March 30, 1997 include all
normal recurring adjustments necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
six months ended March 29, 1998 are not necessarily indicative of the results
that may be expected for the entire year. It is suggested that these unaudited
consolidated financial statements and the accompanying notes are read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K
The Company operates on a 52/53-week fiscal year ending on the Sunday closest
to September 30 of the applicable year. The first three quarterly fiscal
periods end on the Sunday closest to December 31, March 31 or June 30 of the
applicable quarter.
Certain amounts in the previously reported financial statements have been
reclassified to conform to the current presentation.
2. 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 and are
summarized as follows:
<TABLE>
<CAPTION>
MARCH 29, MARCH 30,
1998 1997
<S> <C> <C>
Inventories at FIFO Cost:
Raw materials $ 8,277 $14,566
Work-in-process 30,897 16,339
Finished goods 14,438 16,553
------- -------
$53,612 $47,458
Reserve for LIFO (650) (46)
------- -------
$52,962 $47,412
======= =======
</TABLE>
3. EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of common
shares outstanding during each period presented, including vested and unvested
shares issued under the Company's previous management stock purchase plan and
the dilutive effect of the shares from the Current Plan (as defined below).
Weighted average basic common shares outstanding for the second quarter of
fiscal 1998 and 1997 were 9.5 million and 9.8 million, respectively. Weighted
average diluted common shares outstanding for the second quarter of fiscal 1998
and 1997 were 10.0 million and 9.9 million, respectively.
4. STOCKHOLDERS' EQUITY
Stock Option Plan
Immediately prior to the Initial Public Offering in June 1995, the Company
adopted the Brockway Standard Holdings Corporation 1995 Long-Term Incentive
Plan and the Formula Plan for Non-Employee Directors for its directors,
officers, and key employees. On August 20, 1996, the Board of Directors i)
adopted, subject to shareholders approval, the Amended and Restated 1995 Long-
Term Incentive Plan (the "Amended Plan"), which increased the aggregate number
of shares of common stock authorized for issuance from 735,000 to 1,125,000,
and reflected the change in the Company's name to BWAY Corporation and ii)
froze the Formula Plan with only 45,000 of the available 150,000 shares of
common stock being granted thereunder. The shareholders of the Company approved
the Amended Plan in February 1997. On November 17, 1997, the Board of Directors
adopted, subject to shareholders approval, the Second Amended and Restated
7
<PAGE>
1995 Long-Term Incentive Plan (the "Current Plan"), which, among other things,
increased the aggregate number of shares of common stock authorized for
issuance from 1,125,000 to 1,425,000. The shareholders approved the Current
Plan on February 27, 1998.
5. ACQUISITIONS
Ball Aerosol
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. Certain assets of MCC are now managed by BMAT,
Inc., which provides steel shearing, component manufacturing, coating and
lithography services to internal and external customers. The Company paid
approximately $41.6 million in cash for the business.
The purchase method of accounting was used to establish and record a new cost
basis for the assets acquired and liabilities assumed for the MCC Acquisition.
The operating results for MCC have been included in the Company's consolidated
financial statements since the date of acquisition.
The following pro forma results assume that the MCC Acquisition occurred at the
beginning of the fiscal year ended September 28, 1997 after giving effect to
certain pro forma adjustments, including 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>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 29, 1998 MARCH 30, 1997 MARCH 29, 1998 MARCH 30, 1997
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net sales $101,165 $101,264 $193,279 $196,756
Net income $ 3,946 $ 3,237 $ 4,981 $ 4,752
Earnings per common share:
Net income - Basic $ 0.42 $ 0.33 $ 0.52 $ 0.48
Net income - Diluted $ 0.40 $ 0.33 $ 0.49 $ 0.48
- ----------------------------------------------------------------------------------------------
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of the acquisition date, nor is it necessarily indicative of future
operating results.
6. LONG-TERM DEBT
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
on August 15, 1996 and October 15, 1997. The Credit Agreement 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 Margins") for either the
prime rate 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
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.
8
<PAGE>
During the third quarter of fiscal 1997, the Company issued $100 million of
10 1/4% Senior Subordinated Notes due 2007 , Series A. 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 completed the
registration of its 10 1/4% Senior Subordinated Notes due 2007, Series B under
the Securities Act in February 1998 and consummated its offer to exchange these
Series B notes for all outstanding Series A notes in March 1998. Interest on
these notes is paid semi-annually on April 15 and October 15. Pursuant to the
terms of a registration agreement the Company executed in connection with the
original offering of the notes, the Company paid additional interest of
$184,027 due to delays in the registration process.
At March 29, 1998, the Company was restricted in its ability to pay dividends
and make other restricted payments in an amount greater than approximately
$12.5 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.
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 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.
7. CONTINGENCIES
Environmental
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 acquisition of facilities from Van Dorn Company,
Milton Can Company, Inc. ("Milton Can"), 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
9
<PAGE>
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 Brockway Standard (New Jersey), Inc. ("BSNJ"), groundwater
remediation is underway. The owner of the facility has asserted that BSNJ bears
liability for costs associated with completing the remediation. The Company
believes that this claim is without merit and that the facility owner is liable
for remedial costs pursuant to the former lease. 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 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 11% 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.
8. ACCOUNTING CHANGE
On November 20, 1997 the FASB's Emerging Issues Task Force (EITF) issued a
consensus ruling, which affects the accounting treatment of certain information
systems and process reengineering costs. The Company is involved in a business
information systems and process reengineering project that is subject to this
pronouncement. Based on the EITF consensus, $2.0 million of the previously
capitalized costs associated with this project were expensed in the first
fiscal quarter of 1998, as a change in accounting. A one-time charge of $1.2
million after tax or $0.12 per diluted share for the cumulative effect of this
new accounting interpretation for business information systems and process
reengineering activities reduced year-to-date net earnings to $5.0 million or
$0.49 per fully diluted share.
9. CURTAILMENT OF POSTRETIREMENT MEDICAL BENEFITS
In January 1998, MCC and the United Steelworkers of America, AFL-CIO Local No.
4372, representing approximately 30% of the hourly workers at the Cincinnati,
Ohio facility, reached a new collective bargaining agreement. One of the
provisions of the new agreement substantially eliminates unvested
postretirement medical benefits provided by MCC, which resulted in the
recording of a curtailment gain of approximately $1.5 million before any income
taxes.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales during the second quarter of fiscal 1998 decreased 0.1% to $101.2
million compared to $101.3 million in the second quarter of fiscal 1997. Net
sales for the six months ended March 29, 1998 increased 0.4% to $193.3 million
compared to net sales of $192.4 million for the six months ended March 30,
1997. On a pro forma basis, after giving effect to the October 1996 sales of
the business acquired in the MCC Acquisition in late October 1996, net sales
for the six months ended March 29, 1998 decreased 1.8% from net sales of $196.8
million for the six months ended March 30, 1997. Management believes the pro
forma decrease of net sales resulted from weather related quarter-to-quarter
seasonal shifts and inventory adjustments by paint customers.
Cost of products sold (excluding depreciation and amortization) decreased 1.0%
to $83.8 million in the second quarter of fiscal 1998 from $84.7 million in the
same period of fiscal 1997. For the first six months of fiscal 1998, cost of
products sold decreased 1.5% to $160.5 million from $162.8 million in the first
six months of fiscal 1997. Cost of products sold as a percentage of net sales
decreased to 82.9% in the second quarter of fiscal 1998 from 83.6% in the
second quarter of fiscal 1997 due primarily to a more favorable pricing
environment.
Depreciation and amortization expense increased 4.7% to $3.4 million in the
quarter ended March 29, 1998 compared to $3.2 million in the quarter ended
March 30, 1997. Depreciation and amortization expenses increased 3.4% to $6.9
million for the six months ended March 29, 1998 compared to $6.7 million in the
same period of fiscal 1997. The increase is due to increased capital
expenditures in fiscal 1998. Capital expenditures are primarily for new coating
and printing technology at the Company's new materials service center division,
BMAT, Inc., and new computer software and hardware.
Selling and administrative expenses for the second quarter of fiscal 1998
decreased 4.6% to $5.1 million from $5.4 million in the second quarter of
fiscal 1997. For the six months ended March 29, 1998, selling and
administrative expenses decreased 3.9% to $9.9 million from $10. 1/4% million
in the same period of fiscal 1997. The decrease for the second quarter and the
six-month period is primarily attributable to accrual adjustments and the
timing of recognition of certain expenses including incentive compensation,
partially offset by startup costs incurred for the establishment of the new
BMAT, Inc. division, the net impact of which was approximately $.9 million in
the second quarter. The Company expects to experience higher levels of selling
and administrative expenses for the remainder of fiscal year 1998.
Interest expense increased 43.3% to $3.5 million in the second quarter of
fiscal 1998 compared to $2.4 million in the same period of fiscal 1997.
Interest expense for the six months ended March 29, 1998 increased 53.4% to
$7.0 million compared to $4.6 million for the same period of fiscal 1997. The
increase in the second quarter and the six-month period is predominantly due to
higher interest rates and increased borrowings to fund treasury stock
purchases, increased working capital and capital expenditure initiatives. In
April 1997, the Company issued $100 million of unsecured 10 1/4% senior
subordinated notes. The proceeds from the issuance were used to pay down the
outstanding balance under the Credit Agreement. The interest rate on the notes
is higher than the rate the Company was paying under the Credit Agreement.
Interest of $.3 million was capitalized for the first six months of fiscal 1998
for capital expenditures that were being prepared for service.
In January 1998, MCC and the United Steelworkers of America, AFL-CIO Local No.
4372, representing approximately 30% of the hourly workers at the MCC's
Cincinnati, Ohio facility, reached a new collective bargaining agreement. The
new agreement substantially eliminates unvested postretirement medical benefits
provided by MCC, which resulted in a curtailment gain of approximately $1.5
million before income taxes. On January 30, 1998, Brockway Standard (New
Jersey), Inc. ("BSNJ") and the International Brotherhood of Teamsters,
Chauffeurs, Warehousemen, and Helpers of America, representing approximately
89% of the hourly workers at BSNJ's Elizabeth, New Jersey facility, reached
agreement on a new three year labor agreement.
Income before cumulative effect of change in accounting increased 21.9% to $3.9
million for the second quarter of fiscal 1998 compared to $3.2 million for the
second quarter of fiscal 1997. Income before cumulative effect of change in
accounting for the six-month period increased 31.9% to $6.1 million from $4.7
million in fiscal 1997. This increase is due to the factors discussed above.
On November 20, 1997 the FASB's Emerging Issues Task Force ("EITF") issued a
consensus that affects the accounting treatment of certain information systems
and process reengineering costs. The Company is involved in a business
information systems and process reengineering project that is subject to this
consensus. Based on the EITF ruling, the
11
<PAGE>
Company expensed a portion of the previously capitalized costs associated with
this project in the first fiscal quarter of 1998 as a change in accounting
method. A one-time after-tax charge of $1.2 million, or $0.12 per diluted
share, for the cumulative effect of this new accounting interpretation for
business information systems and process reengineering activities reduced
earnings for the six months ended March 29, 1998 to $5.0 million, or $0.49 per
fully diluted share.
Diluted earnings per share were $0.40 per share for the second quarter of
fiscal 1998 compared to $0.33 per share for the same period of 1997. For the
six months ended March 29, 1998 diluted earnings per share, excluding the
effect of an accounting change, were $0.61 compared to $0.47 for the same
period of fiscal 1997. After giving effect to the $0.12 charge related to the
cumulative accounting change, diluted earnings per share were $0.49 for the
first six months of fiscal 1998. The weighted average diluted shares
outstanding were 10.1 million and 9.9 million for the respective six-month
periods.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements for operations and capital expenditures during
the quarter ending March 29, 1998 were financed through borrowings under the
Company's Credit Agreement and internally generated cash flows. At March 29,
1998, the Company had availability under the Credit Agreement to borrow an
additional $48.4 million, plus an additional $50 million if certain conditions
are met.
The Company's working capital at March 29, 1998 increased $30.2 million to
$37.0 million from $6.8 million at September 28, 1997. The increase is
primarily attributable to an increase in inventories and a decrease in accounts
payable. Work-in process inventories increased $14.5 million as a result of
lower quarterly demand which the Company believes is due to weather related
quarter-to-quarter seasonal shifts and inventory adjustments by paint
customers.
During the first six months of fiscal 1998, the Company used $7.2 million of
cash for operating activities. Operating activities for the same period of the
prior year provided $12.3 million of cash. The decrease in funds provided
during the six months ended March 29, 1998 reflect an increase in inventory and
a decrease in accounts payable and other current liabilities.
Cash used by investing activities during the first six months of fiscal 1998
amounted to $17.1 million. Investing activities for the same period of the
prior year used $51.1 million of cash. The Company used approximately $41.6
million of cash to complete the Ball Aerosol acquisition during the first
fiscal quarter of 1997. The funds were provided by borrowings under the Credit
Agreement. Capital expenditures of $17.5 million in the first six months of
fiscal 1998 represent an increase of $8.0 million from the first six months of
fiscal 1997. The Company intends to spend approximately $35.0 million during
fiscal year 1998, primarily for new coating and printing technology at the
Company's new materials service center division, BMAT, Inc., and new computer
software and hardware.
Cash provided by financing activities during the first six months of fiscal
1998 was $25.4 million compared to $38.0 million provided during the comparable
period of the prior year. The Company repurchased $8.7 million of its common
stock during the first six months of fiscal 1998 under the Company's common
stock repurchases program. Management believes that cash provided from
borrowings available under the Credit Agreement and operations 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 growth strategies and acquisition opportunities in
the North American container industry and in connection therewith may incur
additional indebtedness.
At March 29, 1998, the Company was restricted in its ability to pay dividends
and make other restricted payments in an amount greater than approximately
$12.5 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.
The Company has historically financed its operations through cash provided by
operations and by borrowings under its credit agreements. BWAY's future
principal uses of cash will be for payment of operating expenses, funding
capital investments, payment for additional acquisitions, repurchase of common
stock, and servicing debt.
The Company continues to assess its exposure to the impact of the Year 2000
issue. The Company's financial and operational systems are being reviewed and,
where required, detailed plans are being developed and implemented to identify,
correct, and test for Year 2000 compliance. The Company is also working with
its vendors to verify their Year 2000 compliance. While final cost estimates
are not complete, management does not expect these costs to have a material
adverse effect on the Company's financial position, cash flows or results of
operations. However, the Year 2000 issue may adversely affect the Company if
the Company, its suppliers or customers are unable to resolve this issue
successfully.
NOTE: THIS DOCUMENT CONTAINS "FORWARD-LOOKING STATEMENTS", WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. ALL STATEMENTS CONTAINED IN THIS DOCUMENT,
OTHER THAN HISTORICAL INFORMATION, SHOULD BE VIEWED AS "FORWARD-LOOKING
STATEMENTS". IN ADDITION, THE COMPANY AND ITS REPRESENTATIVES MAY FROM TIME TO
TIME MAKE OTHER ORAL OR WRITTEN STATEMENTS, WHICH SHOULD ALSO BE CONSIDERED
"FORWARD-LOOKING STATEMENTS". THESE STATEMENTS REPRESENT MANAGEMENT'S CURRENT
EXPECTATIONS AND BELIEFS CONCERNING FUTURE EVENTS IMPACTING THE COMPANY AND
THEREFORE INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. MANAGEMENT ACKNOWLEDGES
THAT "FORWARD-LOOKING STATEMENTS" ARE NOT GUARANTEES AND THAT ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED. A VARIETY OF FACTORS
COULD CAUSE BUSINESS CONDITIONS AND THE COMPANY'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPECTED BY THE
13
<PAGE>
COMPANY OR EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS, INCLUDING
WITHOUT LIMITATION, THE COMPANY'S ABILITY TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES AND IMPLEMENT ITS 3R STRATEGIC INITIATIVES; LABOR UNREST; CHANGES IN
PRODUCT MARKET PRICE OR MARKET DEMAND; CHANGES IN RAW MATERIAL COSTS OR
AVAILABILITY; LOSS OF BUSINESS FROM CUSTOMERS; CHANGES IN FINANCIAL MARKETS;
AND OTHER FACTORS DISCUSSED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
WHILE THE COMPANY PERIODICALLY REASSESSES MATERIAL TRENDS AND UNCERTAINTIES
AFFECTING THE COMPANY'S RESULTS OF OPERATIONS AND FINANCIAL CONDITION IN
CONNECTION WITH THE PREPARATION OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION AND CERTAIN OTHER SECTIONS
CONTAINED IN THE COMPANY'S QUARTERLY, ANNUAL OR OTHER REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, THE COMPANY DOES NOT INTEND TO REVIEW OR
REVISE ANY PARTICULAR FORWARD-LOOKING STATEMENT IN LIGHT OF FUTURE EVENTS.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual shareholders meeting on February 27, 1998. See
exhibit 22.1 for a report of the voting on the matters considered at the
meeting.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Index of Exhibits.
16
<PAGE>
SIGNATURE
Pursuant to the requirements 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
(Registrant)
Date: May 13, 1998 By: /s/ John M. Casey
--------------------
John M. Casey
Executive Vice President &
Chief Financial Officer
Form 10-Q: For the quarterly period ending March 28, 1998.
17
<PAGE>
INDEX TO EXHIBITS
- ------------------------------------------------------------------------------
LOCATION OF DOCUMENT
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------- ----------------------- --------------------
10.1 Employment Agreement between the Company and
John T. Stirrup B Amendment No. 1*
10.2 Employment agreement between the Company and
David P. Hull*
10.3 BWAY Corporation Second Amended and Restated
1995 Long-Term Incentive Plan
22.1 Certificate and Report of Inspector of
Elections for the Annual Meeting for the
Stockholders of BWAY Corporation dated
February 27, 1998.
27.1 Financial Data Schedule
* MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT.
18
<PAGE>
AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT
--------------------------------------
This is AMENDMENT NO.1, effective as of June 1, 1998, to the Employment
Agreement (the "Agreement"), dated as of June 1, 1995, between BWAY Corporation,
---------
f/k/a Brockway Standard Holdings Corporation, a Delaware corporation (the
"Company") and John T. Stirrup ("Executive"). Capitalized terms not otherwise
- -------- ---------
defined herein have the meaning given to such terms in the Agreement.
Executive and the Company desire to extend the term of the Agreement for
a year, update the Executive's Base Salary and provide for a one-year period
after the expiration of the Employment Period during which time Executive will
provide services to the Company as a consultant.
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
1. Employment. Paragraph 2 of the Agreement is hereby amended by adding
----------
the following sentence to the end thereof:
Subject to the terms and conditions set forth herein, after the expiration
of the Employment Period, the Company shall engage Executive as an
independent contractor, and not as an employee, to render Consulting
Services during the Consulting Period (each as defined below); provided
that, if the Employment Period is terminated by Executive's resignation,
death, disability or incapacity or by the Company for Cause or without
Cause, no Consulting Period shall occur and no compensation shall be due or
payable by the Company with respect thereto.
2. Duties. Paragraph 3 of the Agreement is hereby amended by deleting
------
the last sentence thereof and replacing it with the following:
During the Consulting Period, Executive shall render such consulting
services to the Company (and its Subsidiaries) in connection with the
Company's business as the Chairman of the Company from time to time
reasonably requests, which services shall include, but not be limited to,
providing advice to the Chairman and assistance to the Company (and its
Subsidiaries) regarding operational, managerial, strategic and other
matters within Executive's expertise (the "Consulting Services"). During
-------------------
the Consulting Period, Executive shall be an independent contractor and not
an employee. During the Consulting Period, Executive shall devote his best
efforts and such business time and attention as is necessary to the
performance of the Consulting Services, but Executive shall not be an
employee of the Company; it is understood that Executive shall be solely
responsible for paying in a timely fashion all applicable taxes with
respect to the compensation paid to him during such period. The Parties
agree that Executive will not have any authority to bind or act on behalf
of the
<PAGE>
Company (and its Subsidiaries) at any time during the Consulting Period
without specific advance authorization from the Chairman.
3. Base Salary; Consulting Payment. Paragraph 4(a) of the Agreement is
-------------------------------
hereby amended by replacing "$220,000" in the first sentence thereof with
"$350,000" and by adding the following to the end of paragraph (a):
Following the end of the Company's 1999 fiscal year, the Board, in
accordance with the immediately preceding sentence, may award Executive a
bonus which, if awarded, would be prorated to reflect that Executive was
not an employee during the entire fiscal year.
In consideration of Executive's Consulting Services during the Consulting
Period, so long as Executive has not breached any covenants or other
obligations hereunder, the Company shall pay Executive at the rate of
$350,000 per annum until the termination of the Consulting Period in
accordance with the terms hereof (the "Consulting Payment"). No bonus
------------------
shall be payable during the Consulting Period.
4. Benefits. Paragraph 4 is hereby amended by i) adding the words
--------
"(including the applicable gross-up on taxes for that portion of the premium
cost related to the death benefit being more than the amount of the Base
Salary)" after the words "term life insurance" in the first line of Section
4(b)(ii) of the Agreement, ii) deleting the work "twice" in the third line of
Section 4(b)(ii) of the Agreement and replacing it with the words "three times",
iii) adding to the end of Section 4 (b)(ii) the following, "Executive shall have
the option to reject the third segment of death benefit (Executive would receive
a death benefit equal to twice the amount of Base Salary) and receive from the
Company in cash the cost (including the applicable gross-up on taxes) the
Company would otherwise pay in premium for such third segment of death benefit
and iv) adding thereto a new paragraph (e) as follows:
(e) During the Consulting Period, the Company shall reimburse
Executive for (i) the premium cost of medical coverage under (S)4980(B) of
the Internal Revenue Code of 1986 (as amended), (ii) the premium cost
(including the applicable gross-up on taxes for that portion of the
premium cost related to the death benefit being more than the amount of
the Consulting Payment) of Executive's term life insurance coverage having
a death benefit equal to three times the amount of the Consulting Payment
(subject to applicable insurance policy provisions or coverage rules),
Executive shall have the option to reject the third segment of death
benefit (Executive would receive a death benefit equal to twice the amount
of Consulting Payment) and receive from the Company in cash the cost
(including the applicable gross-up on taxes) the Company would otherwise
pay in premium for such third segment of death benefit and (iii)
reasonable out-of-pocket
<PAGE>
travel and lodging expenses in accordance with the Company's policies and
requirements. However, Executive's participation in the BWAY Corporation
Profit Sharing and Savings Plan shall end upon the termination of the
Employment Period. Executive shall receive no other payments, benefits or
reimbursements during the Consulting Period other than the Consulting
Payment and those expressly stated in this Paragraph 4 (e).
5. Term. Paragraph 5 of the Agreement is hereby amended by deleting "the
----
third anniversary of the Employment Date" from paragraph (a) thereof and
replacing it with "June 1, 1999", by adding the following to the end of
paragraph (a) and by replacing the first sentence of paragraph (b) with the
language set forth below:
If the Employment Period is not terminated by the Executive's resignation,
death, disability or incapacity or by the Company for Cause or without
Cause, then, upon the expiration of the Employment Period, the Company
shall engage Executive as a Consultant to perform Consulting Services from
June 2, 1999 until June 1, 2000 (the "Consulting Period"); provided that
(i) the Consulting Period shall terminate prior to such date upon
Executive's resignation, death or permanent disability or incapacity (as
determined by the Board in its good faith judgment) and (ii) the
Consulting Period may be terminated by the Company at any time for Cause.
If the Consulting Period terminates because of (i) or (ii) above, the
Consulting Payment shall also terminate as of such date. Notwithstanding
anything in the immediately preceding sentence to the contrary, upon the
termination of the Consulting Period due to permanent disability or
incapacity (as determined by the Board in its good faith judgment) of
Executive, Executive shall continue to receive the Consulting Payment,
reduced by the amount Executive receives with respect to any disability
policy.
(b) If the Employment Period is terminated by the Company without
Cause prior to June 1, 1999, subject to the limitations set forth below,
Executive shall be entitled to continue to receive his Base Salary, Target
Bonus (if any) and health, disability and life insurance benefits
hereunder until the second anniversary of the termination date; provided
that during the first year after the Company terminates the Employment
Period without Cause, Executive shall provide Consulting Services when, as
and if requested by the Chairman or the Company for no additional
consideration; and provided further that Executive does not breach in any
material respect any term of this Agreement, including without limitation
the provisions of paragraphs 7, 8 or 9 herein.
<PAGE>
6. Confidential Information; Inventions and Patents. Paragraph 7 of the
------------------------------------------------
Agreement is hereby amended by inserting after "Employment Period" the
following: "Consulting Period". Paragraph 8 of the Agreement is hereby amended
by inserting after "Employment Period" the following: "or Consulting Period".
7. Non-Compete, Non-Solicitation. Paragraph 9 of the Agreement is hereby
-----------------------------
amended by deleting the definition of "Noncompete Period" and replacing it with
the following:
The "Noncompete Period" is the Employment Period, the Consulting Period and
thereafter until the later of (i) the first anniversary of the date on
which the Employment Period terminates or is terminated by either party
hereto for any reason, (ii) the first anniversary of the date on which the
Consulting Period terminates or is terminated by either party hereto for
any reason or (iii) the date on which Executive receives the final payment
from the Company pursuant to paragraph 5(b) hereof.
8. Executive Representations. Executive hereby remakes the
-------------------------
representations set forth in paragraph 11 of the Agreement, except that all
references to "the Agreement" therein shall be deemed to be references to the
Agreement as amended by the Amendment No.1.
9. Notices. Paragraph 13 of the Agreement is hereby amended by deleting
-------
the addresses set forth therein and replacing those addresses with the
following:
If to the Company: with a copy to:
- ----------------- --------------
BWAY Corporation Kirkland & Ellis
8607 Roberts Drive, Suite 250 200 East Randolph Drive
Atlanta, GA 30350 Chicago, IL 60601
Telephone: 770/645-4800 Telephone: 312/861-2000
Telecopy: 770/587-0186 Telecopy: 312/861-2200
Attn: Chairman Attn: William S. Kirsch, P.C.
Copy: General Counsel and Secretary
If to Executive: with a copy to:
- --------------- --------------
John T. Stirrup
7490 Brandonshire Road
Dunwoody, GA 30350
Telephone: 770/396-0162
<PAGE>
10. Effect; Entire Agreement. Except as amended by this Amendment No.1,
------------------------
the Agreement remains in full force and effect. The Agreement and this Amendment
No.1 constitute the entire agreement between Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, that may have related in any way to the subject matter hereof.
11. Previous Option Grant. Executive has 11,667 options previously
---------------------
granted by the Company that are scheduled to vest on November 17, 2000. The
Company will recommend to the Compensation Committee that these options vest, i)
provided Executive complies with the terms of the Agreement as amended hereby,
and ii) subject to the terms and conditions of a) Executive's November 17, 1997
grant of 29,839 non-qualified options, b) Executive's November 17, 1997 grant of
5,161 incentive stock options and c) the Amended and Restated 1995 Long-Term
Incentive Plan, on June 1, 2000.
* * * * *
IN WITNESS WHEREOF, the Parties have executed this Amendment No.1 as of
the date first written above.
BWAY CORPORATION
By /s/ Warren J. Hayford
------------------------
Warren J. Hayford
Its Chairman & Chief Executive Officer
EXECUTIVE
/s/ John T. Stirrup
----------------------------
JOHN T. STIRRUP
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of October 6, 1997, between BWAY
Corporation, a Delaware corporation (the "Company") and David P. Hull
-------
("Executive"). The Company and Executive are referred to collectively herein as
- -----------
the "Parties" and individually as a "Party".
------- -----
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof (the "Employment
Date") and ending as provided in Section 4 (the "Employment Period").
-----------------
2. Position and Duties. During the Employment Period, Executive
-------------------
shall be Executive Vice President of the Company and President of the Company's
Brockway Standard, Inc. ("BSI") subsidiary and shall render such administrative
and other executive services to the Company and its Subsidiaries as the
Company's board of directors (the "Board") or its Chief Operating Officer may
-----
from time to time direct. Executive shall devote his best efforts and his full
business time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the business and affairs
of the Company and its Subsidiaries. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner. Executive shall report to the Chief
Operating Officer of the Company. For purposes of this Agreement,
"Subsidiaries" shall mean any corporation of which the securities having a
------------
majority of the voting power in electing directors are, at the time of
determination, owned by the Company, directly or through one or more
Subsidiaries.
3. Base Salary, Bonus and Benefits.
-------------------------------
(a) During the Employment Period, Executive's base salary shall be
$200,000 per annum or such higher rate as the Board designates from time to time
(the "Base Salary"). The Base Salary shall be payable in regular installments
-----------
in accordance with the Company's general payroll practices. The Board shall
review Executive's performance in April, 1999, and at the end of each eighteen
month period thereafter during the Employment Period. Based on such review, the
Board may, in its sole discretion, increase or decrease the Base Salary (but not
below $200,000). Following the end of each fiscal year during the Employment
Period, the Board may award the Executive a bonus for such year based on
Executive's performance, the amount of which will be determined by the Board in
its sole judgment. Executive's "target" under the Company's Management
Incentive Plan shall be forty percent (40%) of Base Salary with a maximum of
sixty percent (60%) of Base Salary. Executive shall receive a "sign-on" bonus
of $16,666.67 from the Company.
(b) In addition to the Base Salary and any bonuses payable to
Executive pursuant to Section 3(a), during the Employment Period Executive shall
be entitled to participate in the Company's 1995 Amended and Restated Long-Term
Incentive Plan (the "Plan") and all of the Company's other employee benefit
programs for which senior executive employees of the Company are generally
eligible, and Executive shall be entitled to (4) weeks of paid vacation
each year. Executive shall be recommended, one time, to be granted 10,000
options to purchase the Company's Common Stock pursuant to the Plan. The option
price and vesting period shall be determined by
-1-
<PAGE>
the Board in accordance with the Plan. Executive shall be entitled to the
Company's full relocation package. Executive shall have the option of the
Company purchasing his home in Wilmington, North Carolina, pursuant to the
Company's policies. The Company will "gross-up" the non-deductible relocation
expenses in an effort to minimize the impact of any income taxes related to
reimbursement of Executive's relocation expenses with the intent of making
Executive whole.
(c) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
4. Term.
----
(a) Unless renewed by the mutual agreement of the Company and
Executive, the Employment Period shall end on the third anniversary of the
Employment Date; provided that (i) the Employment Period shall terminate prior
to such date upon Executive's resignation, death or permanent disability or
incapacity (as determined by the Board in its good faith judgment) and (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause (as defined below) or without Cause. If either party hereto does
not desire to extend the Employment Period beyond the third anniversary of the
Employment Date, then such party shall provide the other written notice thereof
at least six (6) months prior to the third anniversary of the Employment Date.
(b) If the Employment Period is terminated by the Company without
Cause prior to the third anniversary of the Employment Date, subject to the
limitations set forth below, Executive shall be entitled to receive his Base
Salary and health, disability and life insurance benefits until the later of the
third anniversary of the Employment Date or the first anniversary of the date of
such termination, so long as Executive has not breached in any material respects
the provisions of Sections 5, 6, 7 and 11(a) hereof. The amounts payable
pursuant to this Section 4(b) shall be reduced by the amount of any compensation
Executive receives with respect to any other employment during the period in
which the Company is making such payments to Executive or, in the event the
Employment Period is terminated as a result of Executive's permanent disability
or incapacity, by the amount Executive receives with respect to any Company
disability policy. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. Executive has no obligation to seek employment
during the period that he is receiving compensation pursuant to this Section
4(b).
(c) If the Employment Period is terminated by the Company for Cause or
is terminated pursuant to clause 4 (a) (i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) accruing after the termination of the Employment Period shall cease
upon such termination, except for benefits required by law.
(e) Notwithstanding anything in Section 4(c) to the contrary, the
Company shall be deemed to have terminated the Employment Period without Cause
in the event that (i) Executive resigns as a result of a material breach of this
Agreement by the Company which is not cured by the
-2-
<PAGE>
Company within 30 days after Executive delivers written notice of such breach to
the Chief Operating Officer and General Counsel or (ii) the Company terminates
the Employment Period as a result of the permanent disability or incapacity of
Executive pursuant to 4(a) (i) above. After a Change in Control, if the Company
terminates the Employment Period for any reason, such termination shall be
deemed to be a termination by the Company without Cause.
(f) "Cause" shall mean (i) a material breach of this Agreement by
-----
Executive, (ii) the conviction of the Executive by a court of competent
jurisdiction of a felony or a crime involving moral turpitude, (iii) conduct
which, if known to the general public, would likely bring the Company or any of
its Subsidiaries into substantial public disgrace or disrepute, (iv) substantial
and repeated failure to perform duties as reasonably directed by the Board or
the Chief Operating Officer or (v) gross negligence or willful misconduct with
respect to the Company or any of its Subsidiaries. "Change in Control" shall
-----------------
occur upon (x) the acquisition by any person or group of persons (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act")), other
------------
than the Chairman of the Board on the date hereof and his affiliates and
associates, of more than thirty five percent (35%) of the Company's Common Stock
or (y) the election of a majority of directors to the Board that were not
recommended to the stockholders by the Board.
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him while employed by the Company
concerning the business or affairs of the Company or any Subsidiary
("Confidential Information") are the property of the Company or such Subsidiary.
- --------------------------
Therefore, Executive agrees that he shall not disclose to any unauthorized
person or use for his own account any Confidential Information without the prior
written consent of the Chief Operating Officer, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions to act.
Nothing herein shall prevent Executive from making (i) any disclosure that is
required by applicable law or the order of a court of competent jurisdiction, or
(ii) any disclosure, in good faith, to properly fulfill Executive's duties under
this Agreement. Executive shall deliver to the Company at the termination of
the Employment Period, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product or the business of the Company or any Subsidiary which
he may then possess or have under his control.
6. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or any of its Subsidiaries' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by Executive while employed by the Company ("Work Product")
------------
belong to the Company or such Subsidiary. Executive shall promptly disclose
such Work Product to the Chief Operating Officer and perform all actions
reasonably requested by the Chief Operating Officer (whether during or after the
Employment Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
7. Non-Compete, Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the Company's and it Subsidiaries'
trade secrets and with
-3-
<PAGE>
other Confidential Information concerning the Company and the Subsidiaries and
that his services will be of special, unique and extraordinary value to the
Company and the Subsidiaries. Therefore, Executive agrees that, during the
Employment Period and during the period that Executive is receiving compensation
pursuant to Section 4(b) (but in no event for a period of less than twelve
months after the termination of the Employment Period) (the "Noncompete
----------
Period"), he shall not directly or indirectly own, manage, control, participate
- ------
in, consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Subsidiaries as such
businesses exist or are in process on the date of the termination of Executive's
employment, within any geographical area in which the Company or its
Subsidiaries engage in such businesses. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire any person who was an employee of the Company or any
Subsidiary at any time during the Employment Period, or (iii) induce or attempt
to induce any customer, supplier, licensee or other business relation of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any
Subsidiary.
8. Enforcement. If, at the time of enforcement of Section 5, 6 or 7,
-----------
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the Parties agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area. Because Executive's services are unique and
because Executive has access to Confidential Information and Work Product, the
Parties agree that money damages would be an inadequate remedy for any breach of
this Agreement. Therefore, in the event of a breach or threatened breach of
this Agreement, the Company or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security).
9. Executive Representations. Executive hereby represents and
-------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
10. Indemnification of Executive. The Company shall indemnify and
----------------------------
hold harmless Executive from all losses and claims incurred in connection with
any actions taken by Executive in his capacity as an officer of the Company in
accordance with, and to the fullest extent permitted under, Delaware General
Corporation Law as in effect from time to time.
-4-
<PAGE>
11. Investment.
----------
(a) Executive hereby agrees, subject to all applicable laws and
policies, to invest $200,000 (the Company will reimburse Executive for his
actual, customary and reasonable costs incurred in this investment) in the
Company's Common Stock within thirty (30) days of closing on the sale of the
Executive's home in Wilmington, North Carolina (the "Investment") and keep the
Investment invested in the Company's Common Stock for the entire Employment
Period.
(b) In the event i) there is a Change in Control of the Company, ii)
Executive is terminated by the Company for reasons other than Cause, or iii)
Executive dies, within three (3) years from the date hereof Executive or
Executive's heirs shall have the option, subject to compliance with all
applicable laws and policies, of "putting" to the Company the $200,000 worth of
purchased shares of the Company's Common Stock by giving the Company notice of
the exercise of such put option within ten (10) days of the occurrence of one of
the events mentioned above. If Executive's heirs properly exercise such "put"
option, the Company, subject to compliance with all applicable laws and
policies, shall pay for such shares within ten (10) days of the notice of
exercise.
In the event I) or ii) in this Section 11(b) occurs during the
Employment Period, the Company shall reimburse Executive for his actual,
customary and reasonable costs incurred in relocating his dependant family back
to Wilmington, North Carolina from Atlanta, Georgia.
12. General Provisions.
------------------
(a) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given when delivered
personally to the recipient, telecopied to the intended recipient at the
telecopy number set forth therefor below, or sent to the recipient by reputable
express courier service (charges prepaid) and addressed to the intended
recipient as set forth below:
If to the Company:
- -----------------
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
Telephone: 770/645-4800
Attention: General Counsel
If to Executive:
- ---------------
David P. Hull After March 6, 1998:
8705 Fazio 560 Millsbee Lane
Wilmington, NC 28405 Roswell, Georgia 30075
Telephone: Telephone:
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
-5-
<PAGE>
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(b) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
(d) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company and their respective successors, heirs, executors,
administrators and assigns; provided that the rights and obligations of
Executive under this Agreement shall not be assignable without the prior written
consent of the Company.
(f) Choice of Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Georgia without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Georgia or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Georgia.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Executive.
(h) Survival. Sections 5, 6, 7, 8 and 11 (b) shall survive and
--------
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
BWAY CORPORATION
By /s/ John T. Stirrup
--------------------------------------
John T. Stirrup
Its Chief Operating Officer & President
--------------------------------------
EXECUTIVE
/s/ David P. Hull
--------------------------------------
David P. Hull
-6-
<PAGE>
BWAY CORPORATION
SECOND AMENDED AND RESTATED
1995 LONG-TERM INCENTIVE PLAN
-----------------------------
Recitals
--------
This second amendment amends and restates the Amended and Restated 1995
Long-Term Incentive Plan established in June of 1995 and amended in August of
1996 to (a) increase the aggregate number of shares of common stock that may be
issued under this Plan to 1,425,000 shares and (b) to allow, with the consent of
the Committee, participants to more freely transfer certain options granted
under this Plan under certain circumstances.
1. Purpose.
-------
This plan shall be known as the BWAY Corporation Second Amended and
Restated 1995 Long-Term Incentive Plan (the "Plan"). The purpose of the Plan
shall be to promote the long-term growth and profitability of BWAY Corporation
(the "Company") and its subsidiaries by (i) providing certain directors,
officers, employees and consultants of the Company and its subsidiaries with
incentives to maximize stockholder value and otherwise contribute to the success
of the Company and (ii) enabling the Company to attract, retain and reward the
best available persons for positions of substantial responsibility. Grants of
incentive or nonqualified stock options, stock appreciation rights ("SARs") in
tandem with options, restricted stock, performance awards, or any combination of
the foregoing may be made under the Plan.
2. Definitions.
-----------
(a) "Board of Directors" and "Board" mean the board of directors of BWAY
------------------ -----
Corporation.
(b) "Cause" means the occurrence of one of the following events:
-----
(i) Conviction of a felony or any crime or offense lesser than a
felony involving the property of the Company or a subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury to the
Company or a subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform or substantial disregard of duties
properly assigned, as determined by the Company.
(c) "Change in Control" means the occurrence of one of the following
-----------------
events:
(i) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), other than an Exempt Person, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
<PAGE>
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in all or a portion of the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets,
other than a sale to an Exempt Person.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means the compensation committee of the Board. The
---------
membership of the Committee shall be constituted so as to comply at all times
with the applicable requirements of Rule 16b-3 under the Exchange Act and
Section 162(m) of the Code.
(f) "Competition" is deemed to occur if a person whose employment with the
-----------
Company or its subsidiaries has terminated obtains a position as a full time or
part-time employee of, as a member of the board of directors of, or as a
consultant or advisor with or to, or acquires an ownership interest in excess of
5% of, a corporation, partnership, firm or other entity that engages in any of
the businesses of the Company or any subsidiary with which the person was
involved in a management role at any time during his or her last five years of
employment with the Company or any subsidiary.
(g) "Covered Employee" means an individual defined in Code Section
----------------
162(m)(3), as amended from time to time.
(h) "Disability" means a permanent and total disability as defined in the
----------
Company's Long-Term Disability Plan or as otherwise approved by the Committee.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(j) "Exempt Person" means (i) the Chairman of the Company on the effective
-------------
date of this Plan, (ii) any person who owns 15% or more of the outstanding
shares of Common Stock on the effective date of this Plan, (iii) any person (or
group of related persons) that becomes the owner of 15% or more of the
outstanding shares of Common Stock as a result of a gift or bequest from a
person included in (i) or (ii) above, (iv) any person, entity or group under the
control of any party included in clause (i), (ii) or (iii), and (v) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company.
<PAGE>
(k) "Fair Market Value", on any date, means (i) if the Common Stock is
-----------------
listed on a securities exchange or is traded over the New York Stock Exchange
("NYSE"), the closing sales price on such exchange or over such system on the
immediately preceding date on which sales were reported, or (ii) if the Common
Stock is not listed on a securities exchange or traded over the NYSE, the mean
between the bid and offered prices as quoted by NYSE for the immediately
preceding date on which sales were reported, provided that if it is determined
that the fair market value is not properly reflected by such NYSE quotations,
Fair Market Value will be determined by such other method as the Committee
determines in good faith to be reasonable.
(l) "Incentive Stock Option" means an option conforming to the requirements
----------------------
of Section 422 of the Code.
(m) "Non-Employee Director" has the meaning given to such term in Rule
---------------------
16b-3 under the Exchange Act.
(n) "Nonqualified Stock Option" means any stock option other than an
-------------------------
Incentive Stock Option.
(o) "Retirement" means retirement as defined under the Company's Pension
----------
Plan or termination of one's employment on retirement with the approval of the
Committee.
(p) "Subsidiary" means a corporation or other entity of which outstanding
----------
shares or ownership interest representing 50% or more of the combined voting
power of such corporation or other entity are owned directly or indirectly by
the Company.
3. Administration.
--------------
The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee shall be authorized to (i) select persons to
participate in the Plan, (ii) determine the form and substance of grants made
under the Plan to each participant, and the conditions and restrictions, if any,
subject to which such grants will be made, (iii) interpret the Plan and (iv)
adopt, amend, or rescind such rules and regulations for carrying out the Plan as
it may deem appropriate. Decisions of the Committee on all matters relating to
the Plan shall be in the Committee's sole discretion and shall be conclusive and
binding on all parties. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal and state laws and rules and regulations promulgated
pursuant thereto.
<PAGE>
4. Shares Available for the Plan; Limitations on Awards.
----------------------------------------------------
Subject to adjustments as provided in Section 16, an aggregate of 1,425,000
shares of Common Stock, par value $.01 per share, of the Company (hereinafter
the "Shares") may be issued pursuant to the Plan; provided, however, that not
more than 10% of such shares may be issued in the form of restricted stock.
Such Shares may be in whole or in part authorized and unissued, or shares which
have been reacquired by the Company and held as treasury shares. If any grant
under the Plan expires or terminates unexercised, becomes unexercisable or is
forfeited as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan unless, in the case of
options granted under the Plan, related SARs are exercised.
5. Participation.
-------------
Participation in the Plan shall be limited to those directors (including
Non-Employee Directors), officers, employees and consultants of the Company and
its Subsidiaries selected by the Committee. Nothing in the Plan or in any grant
thereunder shall confer any right on an employee to continue in the employ of
the Company or shall interfere in any way with the right of the Company to
terminate an employee at any time.
Incentive Stock Options or Nonqualified Stock Options, SARs in tandem with
options, restricted stock awards, performance awards, or any combination
thereof, may be granted to such persons and for such number of Shares as the
Committee shall determine (such individuals to whom grants are made being
sometimes herein called "optionees" or "grantees" as the case may be). A grant
of any type made hereunder in any one year to an eligible participant shall
neither guarantee nor preclude a further grant of that or any other type to such
person in that year or subsequent years.
6. Incentive and Nonqualified Options.
----------------------------------
The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof.
In any one calendar year, the Committee shall not grant to any one participant,
options to purchase a number of shares of Common Stock in excess of 375,000.
The options granted shall take such form as the Committee shall determine,
subject to the following terms and conditions.
(a) Price. The price per Share deliverable upon the exercise of each option
-----
("exercise price") shall be established by the Committee, except that the
exercise price may not be less than 100% of the Fair Market Value of the Shares
at the date of grant. In the case of the grant of any Incentive Stock Option to
an employee who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries, such price per Share, if required by the Code, shall not be less
that 110% of the Fair Market Value of the Shares at the date of grant.
(b) Payment. Options may be exercised in whole or in part, upon payment of
-------
the exercise price of the Shares to be acquired. Payment shall be made in cash
(including check, bank draft or money order) or, in the discretion of the
Committee, (i) in cash and/or shares of Common Stock and/or by delivery of the
optionee's promissory note (if
<PAGE>
in accordance with policies approved by the Committee), or (ii) by special
arrangement through a broker selected by the Committee. The fair market value of
shares of Common Stock tendered on exercise of options shall be the Fair Market
Value as of such date.
(c) Withholding Tax. Unless otherwise determined by the Committee, a
---------------
participant may elect to deliver shares of Common Stock (or have the company
withhold shares acquired upon exercise of the option) to satisfy in whole or in
part, the amount the Company is required to withhold for taxes in connection
with the exercise of an option. Such election must be made on or before the date
the amount of tax to be withheld is determined. Once made, the election shall be
irrevocable. The fair market value of the shares to be withheld or delivered
will be the Fair Market Value as of the date the amount of tax to be withheld is
determined.
(d) Terms of Options. The term during which each option may be exercised
----------------
shall be determined by the Committee, but, except as otherwise provided herein,
in no event shall an option be exercisable in whole or in part more than ten
years from the date it is granted; and, in the case of the grant of an Incentive
Stock Option to an employee who at the time of the grant owns more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, in no event shall such option be exercisable, if required by
the Code, more than five years from the date of the grant. All rights to
purchase shares pursuant to an option shall, unless sooner terminated, expire at
the date designated by the Committee. The Committee shall determine the date on
which each option shall become exercisable and may provide that an option shall
become exercisable in installments. The shares constituting each installment may
be purchased in whole or in part at any time after such installment becomes
exercisable, subject to such minimum exercise requirements as are designated by
the Committee. Prior to the exercise of the option and delivery of the Shares
represented thereby, the optionee shall have no right to any dividends or be
entitled to any voting rights on any Shares covered by outstanding options.
(e) Limitations on Grants. If required by the Code, the aggregate Fair
---------------------
Market Value (determined as of the grant date) of Shares for which an Incentive
Stock Option is exercisable for the first time during any calendar year may not
exceed $100,000.
(f) Termination of Employment; Change in Control.
--------------------------------------------
(i) If a participant ceases to be a director, officer, employee or
consultant of the Company or any Subsidiary due to death or Disability, all of
the participant's options, and SARs shall become fully vested and exercisable
and shall remain so for a period of one year from the date of such termination,
but in no event after the expiration date of the option. Notwithstanding the
foregoing, if the Disability giving rise to the termination of employment is not
within the meaning of Section 422(e)(3) of the Code, Incentive Stock Options not
exercised by such participant within 90 days after the date of termination of
employment will cease to qualify as Incentive Stock Options and will be treated
as Nonqualified Stock Options under the Plan if required to be so treated under
the Code.
<PAGE>
(ii) If a participant ceases to be a director, officer, employee or
consultant of the Company or a Subsidiary upon the occurrence of his or her
Retirement, (A) each of his or her options and SARs that was exercisable on the
date of Retirement shall remain exercisable for, and shall otherwise terminate
at the end of, a period of up to five years after the date of Retirement (as
specified in the option agreement), but in no event after the expiration date of
the option; provided that the participant does not engage in Competition during
such five-year period unless he or she receives written consent to do so from
the Board or the Committee, and (B) all of the participant's options and SARs
that were not exercisable on the date of Retirement shall be forfeited
immediately upon such cessation. Notwithstanding the foregoing, Incentive Stock
Options not exercised by such participant within 90 days after Retirement will
cease to qualify as Incentive Stock Options and will be treated as Nonqualified
Stock Options under the Plan if required to be so treated under the Code.
(iii) If a participant ceases to be a director, officer, employee or
consultant of the Company or a Subsidiary due to Cause, all of his or her
options and SARs shall be forfeited immediately upon such cessation.
(iv) Unless otherwise determined by the Committee, if a participant
ceases to be a director, officer, employee or consultant of the Company or
a Subsidiary for any reason other than death, Disability, Retirement or
Cause, (A) each of his or her options and SARs that was exercisable on the
date of termination shall remain exercisable for, and shall otherwise
terminate at the end of, a period of 90 days after the date of such
termination, but in no event after the expiration date of the option;
provided that participant does not engage in Competition during such 90-day
period unless he or she receives written consent to do so from the Board or
the Committee, and (B) all of the participant's options and SARs that were
not exercisable on the date of such termination shall be forfeited.
(v) If there is a Change in Control of the Company, all of the
participant's options and SARs shall become fully vested and exercisable.
7. Stock Appreciation Rights.
-------------------------
The Committee shall have the authority to grant SARs under this Plan to any
optionee, either at the time of grant of an option or, in the case of a
Nonqualified Stock Option, thereafter by amendment to the option. The exercise
of an option shall result in an immediate forfeiture of its related SAR to the
extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of its related option to the extent the SAR is exercised.
SARs shall be subject to such other terms and conditions as the Committee may
specify. An SAR shall expire at the same time as the related option expires and
shall be transferable only when, and under the same conditions as, the related
option is transferable.
SARs shall be exercisable only when, to the extent and on the conditions
that the related option is exercisable. No SAR may be exercised unless the Fair
Market Value of a share of Common Stock of the Company on the date of exercise
exceeds the exercise price of the option to which the SAR corresponds.
<PAGE>
Upon the exercise of an SAR, the optionee shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock of the Company on the date of exercise and the
exercise price of the option to which the SAR is related multiplied by the
number of Shares as to which the SAR is exercised. The Committee shall decide
whether such distribution shall be in cash, in shares, or in a combination
thereof.
All SARs will be exercised automatically on the last day prior to the
expiration date of the related option, so long as the Fair Market Value of a
share of the Company's Common Stock on that date exceeds the exercise price of
the related option.
8. Restricted Stock.
----------------
The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least one year), and the time or times at which such restrictions shall lapse
with respect to all or a specified number of Shares that are part of the grant.
The participant will be required to deposit Shares with the Company during
any period of restriction thereon and to execute a blank stock power therefor.
Except as otherwise provided by the Committee, during such period of restriction
the participant shall have all of the rights of a holder of Common Stock,
including but not limited to the rights to receive dividends (or amounts
equivalent to dividends) and to vote.
Except as otherwise provided by the Committee, on termination of a
grantee's status as a director, officer, employee or consultant due to death,
Disability or Retirement with the consent of the Company during any period of
restriction all restrictions on Shares granted to such grantee shall lapse. On
such termination of a grantee for any other reason, all restricted stock granted
to such grantee on which the restrictions have not lapsed shall be forfeited to
the Company. If there is a Change in Control of the Company, all restrictions on
outstanding shares of restricted stock shall lapse as of the date of the Change
in Control.
9. Performance Awards.
------------------
Performance awards may be granted on a contingent basis to participants at
any time and from time to time as determined by the Committee. The Committee
shall have complete discretion in determining the size and composition of
performance awards so granted to a participant and the appropriate period over
which performance is to be measured ("performance cycle"). Performance awards
may include (i) specific dollar-value target awards (ii) performance units, the
value of each such unit being determined by the Committee at the time of
issuance, and/or (iii) performance Shares, the value of each such Share being
equal to the Fair Market Value of a share of the Company's Common Stock.
<PAGE>
The Committee shall determine the portion of each performance award that
is earned by a participant on the basis of the Company's performance over the
performance cycle in relation to the performance goals for such cycle.
Performance Awards may be paid out in Shares, cash, or a combination of both, as
the Committee may determine, and shall have such other terms and conditions as
determined by the Committee and reflected in the award agreement.
In the event of a Change in Control, all performance cycles shall
terminate and a participant shall be entitled to the greater of (i) the portion
of the performance award that the participant would have earned based on actual
performance through the Change in Control; or (ii) the target award amount,
assuming all performance goals had been met but not exceeded.
10. Performance Goals.
-----------------
The Committee may determine that any award granted pursuant to this Plan to
a participant (including, but not limited to, participants who are Covered
Employees) shall be determined solely on the basis of (a) the achievement by the
Company or Subsidiary of a specified target return on equity or return on
assets, (b) the Company's or Subsidiary's stock price, (c) the achievement by a
business unit of the Company or Subsidiary of a specified target net income or
earnings per share, or (d) any combination of the goals set forth in (a) through
(c) above. Furthermore, the Committee reserves the right for any reason to
reduce (but not increase) any award, notwithstanding the achievement of a
specified goal. If an award is made on such basis, the Committee shall
establish goals prior to the beginning of the period for which such performance
goal relates (or such later date as may be permitted under Code Section 162
(m)). Any payment of an award granted with performance goals shall be
conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were satisfied.
11. Withholding Taxes.
-----------------
The Company may require, as a condition to any grant or exercise under the
Plan or to the delivery of certificates for Shares issued hereunder, that the
grantee pay to the Company, in cash, any federal, state or local taxes of any
kind required by law to be withheld with respect to any grant or any delivery of
Shares. The Company, to the extent permitted or required by law, shall have the
right to deduct from any payment of any kind (including salary or bonus)
otherwise due to a grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any grant or to the delivery of
Shares under the Plan, or to retain or sell without notice a sufficient number
of the Shares to be issued to such grantee to cover any such taxes.
12. Written Agreement; Vesting.
--------------------------
Each employee to whom a grant is made under the Plan shall enter into a
written agreement with the Company that shall contain such provisions, including
without limitation vesting requirements, consistent with the provisions of the
Plan, as may be approved by the Committee.
<PAGE>
13. Transferability.
---------------
Except as set forth in the next sentence of this Section 12, and unless
the agreement pursuant to which a grant is made provides otherwise, an option,
tandem SAR, performance award, or restricted stock granted under the Plan shall
not be transferable by a grantee other than by operation of a death beneficiary
designation made by the employee in accordance with rules established by the
Committee, by will or the applicable laws of descent and distribution and shall
be exercisable during the grantee's lifetime only by him or her or his or her
guardian or legal representative if the grantee is legally incompetent.
Notwithstanding the foregoing, the Committee shall have the power and authority
to provide, as a term of any Nonqualified Stock Option granted under the Plan,
that such Nonqualified Stock Option may be transferred without consideration by
the optionee to a member or members of his or her immediate family (i.e., a
child, children, grandchild, grandchildren or spouse) and/or to a trust or
trusts for the benefit of an immediate family member or family members.
14. Listing and Registration.
------------------------
If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award, or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in whole or in part, no such performance award paid out and no Shares issued
unless such listing, registration or qualification is effected free of any
conditions not acceptable to the Committee.
15. Transfer of Employee.
--------------------
Transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, and from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military or sick leave or such other
leave of absence which is considered by the Committee as continuing intact the
employment relationship.
16. Adjustments.
-----------
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants made under the
Plan, and in the exercise price of outstanding options. In the event of any
merger, consolidation or other reorganization in which the Company is not the
surviving or continuing corporation or in which a Change in Control is to occur,
all of the Company's obligations regarding options, SARs performance awards, and
restricted stock that were granted hereunder and that are outstanding on the
date of such event shall, on such terms as may be approved by the Committee
prior to such event, be assumed by the surviving or continuing corporation or
canceled in exchange for property (including cash).
<PAGE>
17. Termination and Modification of the Plan.
----------------------------------------
With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Plan without stockholder approval;
provided, however, that the Committee may condition any amendment or
modification on the approval of stockholders of the Company if such approval is
necessary or deemed advisable with respect to tax, securities or other
applicable laws, policies or regulations.
18. Amendment or Substitution of Awards under the Plan.
--------------------------------------------------
The terms of any outstanding award under the Plan may be amended from time
to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder); provided that no such amendment shall
adversely affect in a material manner any right of a participant under the award
without his written consent, unless the Committee determines in its discretion
that there have occurred or are about to occur significant changes in the
participant's position, duties or responsibilities, or significant changes in
economic, legislative, regulatory, tax, accounting or cost/benefit conditions
which are determined by the Committee in its discretion to have or to be
expected to have a substantial effect on the performance of the Company, or any
subsidiary, affiliate, division or department thereof, on the Plan or on any
award under the Plan. Notwithstanding the above, the Committee may not reduce
the exercise price of an outstanding option. The Committee may, in its
discretion, permit holders of awards under the Plan to surrender outstanding
awards in order to exercise or realize rights under other awards, or in exchange
for the grant of new awards, or require holders of awards to surrender
outstanding awards as a condition precedent to the grant of new awards under the
Plan.
19. Commencement Date; Termination Date.
-----------------------------------
The Board and the stockholders initially approved the Plan as of June,
1995. On August 20, 1996, the Board approved an amendment and restatement of the
Plan. The stockholders approved this amendment and restatement of the Plan in
February 1997. On November 17, 1997, the Board approved a second amendment and
restatement of the Plan. Unless previously terminated upon the adoption of a
resolution of the Board terminating the Plan, the Plan shall terminate at the
close of business on May 31, 2005. No termination of the Plan shall materially
and adversely affect any of the rights or obligations of any person, without his
consent, under any grant of options or other incentives theretofore granted
under the Plan.
<PAGE>
BWAY CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTION
-----------------------------------------------
The undersigned, the duly appointed Inspector of Election at the Annual
Meeting of Stockholders (the "Annual Meeting") of BWAY Corporation, a Delaware
corporation (the "Company"), held on February 27, 1998, pursuant to Section 231
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY
that the following is an accurate report of the votes of the stockholders of the
Company at the Annual Meeting:
(1) The number of shares of Common Stock of the Company issued and
outstanding and entitled to vote on matters submitted at the Annual Meeting to
the holders of Common Stock was 9,485,905.
(2) There were present at the Annual Meeting, in person or by proxy,
holders of 8,579,900 shares of Common Stock, which is 90.4% of the total number
of shares of Common Stock outstanding and entitled to vote at the Annual Meeting
and which constituted a quorum for purposes of voting on each of the matters
submitted to the stockholders for their vote.
(3) I tabulated the votes with respect to the election of directors, and
Warren J. Hayford received 8,545,801 votes, Thomas A. Donahoe received 8,545,051
votes and Alexander P. Dyer received 8,545,051 votes.
(4) Each of Warren J. Hayford, Thomas A. Donahoe and Alexander P. Dyer
received a plurality of the votes cast by the holders of the Common Stock and I
<PAGE>
hereby declare and certify to the Secretary of the Company that each of Warren
J. Hayford, Thomas A. Donahoe and Alexander P. Dyer has been duly elected as a
director of the Company.
(5) I tabulated the votes with respect to the resolution regarding approval
of the second amendment and restatement of the BWAY Corporation 1995 Long-Term
Incentive Plan and such proposal received the number of votes set forth below:
Number of Votes
---------------
For 7,156,882
Against 1,398,364
Abstain 24,654
Since a majority of the outstanding shares of the Common Stock were voted for
adoption, I hereby declare and certify to the Secretary of the Company that such
resolution has been adopted by the stockholders of the Company.
(6) I tabulated the votes with respect to the resolution regarding
ratification of the appointment of Deloitte & Touche LLP as independent public
accountants for the fiscal year ending September 27, 1998 and such proposal
received the number of votes set forth below:
Number of Votes
---------------
For 8,547,484
Against 2,325
Abstain 30,091
Since a majority of the votes cast by the holders of the Common Stock present
and voting at the meeting were votes for approval, I hereby declare and certify
to the Secretary of the Company that such resolution has been approved by the
stockholders of the Company.
* * * * *
<PAGE>
IN WITNESS WHEREOF, I have executed this certificate the 27th day of February,
1998.
By: /s/ Susan M. Shadel
-------------------------------
Print: Susan M. Shadel
on behalf of Harris Trust and
Savings Bank
<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 6-MOS
<FISCAL-YEAR-END> SEP-27-1998 SEP-27-1998
<PERIOD-START> DEC-28-1997 SEP-28-1997
<PERIOD-END> MAR-28-1998 MAR-28-1998
<CASH> 2,469 2,469
<SECURITIES> 0 0
<RECEIVABLES> 44,996 44,996
<ALLOWANCES> 658 658
<INVENTORY> 52,962 52,962
<CURRENT-ASSETS> 108,348 108,348
<PP&E> 159,588 159,588
<DEPRECIATION> 30,075 30,075
<TOTAL-ASSETS> 330,877 330,877
<CURRENT-LIABILITIES> 71,305 71,305
<BONDS> 152,057 152,057
99 99
0 0
<COMMON> 0 0
<OTHER-SE> 82,392 82,392
<TOTAL-LIABILITY-AND-EQUITY> 330,877 330,877
<SALES> 101,165 193,279
<TOTAL-REVENUES> 101,165 193,279
<CGS> 83,819 160,451
<TOTAL-COSTS> 94,388 182,780
<OTHER-EXPENSES> 148 86
<LOSS-PROVISION> (50) 78
<INTEREST-EXPENSE> 3,493 6,989
<INCOME-PRETAX> 6,777 10,499
<INCOME-TAX> 2,831 4,357
<INCOME-CONTINUING> 3,946 6,142
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (1,161)
<NET-INCOME> 3,946 4,981
<EPS-PRIMARY> .42 .52
<EPS-DILUTED> .40 .49
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