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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended October 3, 1999
or
[ ] Transition Report pursuant to section 13 or 15 (d) of
The Securities Exchange Act of 1934
for the transition period from __________to _________.
Commission File Number 0-26178
BWAY Corporation
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-3624491
(I.R.S. Employer Identification No.)
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
(Address of principal executive offices, including zip code)
770-645-4800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $0.01 per share, registered on the New York Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
---------------- ---------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (x)
As of November 30, 1999, the aggregate market value of the voting stock held by
non-affiliates of BWAY Corporation was approximately $35,819,470.
As of November 30, 1999, there were 9,309,024 shares of BWAY Corporation's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of BWAY Corporation's Proxy Statement to be mailed to
stockholders on or about January 15, 2000 for the Annual Meeting of Stockholders
to be held on February 25, 2000 are incorporated in Part III hereof by
reference.
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BWAY CORPORATION
TABLE OF CONTENTS
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Page
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PART I
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings and Regulatory Matters 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 18
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 19
PART III
Item 10. Directors and Executive Officers of the Registrant 19
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners and Management 19
Item 13. Certain Relationships and Related Transactions 19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 19
ii
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BWAY CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED OCTOBER 3, 1999
PART I
Item 1. Business
--------
General
BWAY Corporation ("BWAY") is a holding company whose significant subsidiaries,
Brockway Standard, Inc. ("BSI"), Milton Can Company, Inc. ("MCC") and BMAT, Inc.
("BMAT"), (collectively the "Company") are leading developers, manufacturers,
and marketers of steel containers for the general line category of the North
American container industry. The Company also provides related material center
services (coating, lithography, and metal shearing) for its internal purposes
and also external customers. On November 9, 1998 the Company acquired
substantially all of the assets of United States Can Company's ("U.S. Can")
metal services operations, making the Company a leading provider of material
center services. The references in this report to market positions or market
share are based on information derived from annual reports, trade publications
and management estimates which the Company believes to be reliable.
In January 1989, BWAY and BSI were formed to purchase the metal container
business of Owens-Illinois Corporation ("Owens-Illinois"). In June 1995, BWAY
(formerly known as Brockway Standard Holdings Corporation) completed an initial
public offering ("Initial Public Offering") of its common stock, par value $.01
per share (the "Common Stock"). The Company operates on a 52/53-week fiscal year
ending on the Sunday closest to September 30 of the applicable year. For
simplicity of presentation, the Company has presented year-ends as September 30
and all other periods as the nearest month end, with the exception of pages F1 -
F28.
Metal containers are currently utilized for three product categories:
beverage, food and general line (which includes containers for such products as
aerosol, paint and varnish, and automotive products). Management estimates,
based on industry data published by the Can Manufacturers Institute and the
United States Bureau of Statistics, that 1998 industry shipments totaled
approximately 103 billion units to the beverage category, 32 billion units to
the food category and 4 billion units to the general line category. Although the
general line category constitutes approximately 3% of the unit volume of metal
containers, management estimates that it represents approximately 10% of the
metal can industry revenues. Few companies compete in all three product
categories, and most of the companies which produce beverage and food cans do
not compete in the general line product categories.
The Company's principal products include a wide variety of steel cans and
pails used for packaging paint and related products, lubricants, cleaners, roof
and driveway sealants, food (principally coffee, vegetable oil and vegetable
shortening) and household and personal care aerosol products. The Company also
manufactures steel ammunition boxes and provides material center services. The
Company's products are typically coated on the inside to customer specifications
based on intended use and are either decorated on the outside to customer
specifications or sold undecorated. The Company markets its products primarily
in North America. The Company's sales to customers located outside of the
United States were less than 5 percent for both fiscal 1998 and fiscal 1999.
Sales are made either by the Company's direct sales force, third party
distributors or sales agents. Sales growth has been accomplished primarily
through acquisitions in the general line and material center services categories
and to a lesser extent, expanded market penetration in the sales of existing
products and new product development.
Acquisitions
The Company completed two strategic acquisitions during fiscal 1996, one
strategic acquisition during fiscal 1997 and one strategic acquisition during
fiscal 1999.
The operating results for the following acquisitions have been included in the
Company's consolidated financial
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statements since the dates of acquisition.
Milton Can - On May 28, 1996, a subsidiary of BWAY ("BSNJ") acquired all of
the outstanding stock of Milton Can Company, Inc. ("Milton Can") (the "BSNJ
Acquisition"). This acquisition provided geographic expansion for the Company
into the northeast United States, enabling the Company to provide expanded
coverage for many of its products and to many of its customers. The acquired
business had revenues of approximately $55 million for the year ended December
31, 1995, and operated three facilities. The Company paid the shareholders of
Milton Can approximately $29 million in approximately equal portions of cash and
BWAY stock, and the Company assumed approximately $12.3 million of debt of the
acquired company, which was retired by the Company at the time of acquisition.
The transaction was accounted for using the purchase method of accounting.
Subsequent to the acquisition, as part of the Company's 3R strategic initiatives
to rationalize, re-engineer and re-capitalize, the Company closed one facility
and announced plans to close a second facility in fiscal 1999, acquired in the
BSNJ Acquisition. The Elizabeth, New Jersey (Northeast Tinplate) facility was
closed in the second quarter of fiscal 1999.
Davies Can - On June 17, 1996, a subsidiary of BWAY ("BSO") acquired
substantially all of the assets of the Davies Can division of the Van Dorn
Company, a wholly-owned subsidiary of Crown Cork & Seal Company, Inc. (the "BSO
Acquisition"). This acquisition provided geographic expansion for the Company
into the northeast and midwest United States, enabling the Company to provide
expanded coverage for many of its products and to many of its customers. The
acquired business had revenues of approximately $55 million for the year ended
December 31, 1995, and operated three facilities. The Company paid
approximately $42 million in cash for the assets. The transaction was
accounted for using the purchase method of accounting. Subsequent to the
acquisition, as part of the Company's 3R strategic initiatives, the Company
closed two of the facilities acquired in the BSO Acquisition.
Ball Aerosol - On October 28, 1996, the Company acquired substantially all of
the assets related to the metal aerosol can business from Ball Metal Food
Container Corporation, a wholly owned subsidiary of Ball Corporation (the "Ball
Aerosol Acquisition"). The assets consist of a facility in Cincinnati which
includes a material center and substantially all the assets used in connection
with the marketing, distribution, selling, manufacturing, designing, and
engineering of metal aerosol cans. The Company paid approximately $42.4 million
for the acquired business. The purchase method of accounting was used to
establish and record a new cost basis for the assets acquired and liabilities
assumed. The excess of the aggregate purchase price over the aggregate fair
market value of net identifiable assets acquired was approximately $23 million.
U.S. Can Metal Services Operations - On November 9, 1998, the Company
acquired substantially all of the assets and assumed certain of the liabilities
of the United States Can Company's metal services operations (the "U.S. Can
Acquisition"). The purchase price was approximately $27.7 million in cash after
adjustments for working capital. The acquisition included three operating plants
and one non-operating plant. The acquired facilities operated two different
businesses, coating and lithography, which is part of the Company's core
business, and tinplate metal services which is not a business of the Company.
The purchase method of accounting was used to establish and record a new cost
basis for the assets acquired and liabilities assumed and an allocation of the
purchase price was finalized at October 3, 1999. The operating results for the
acquired business have been included in the Company's consolidated financial
statements since the date of acquisition except for the tinplate services
business, which was sold as described below. As of October 3, 1999, the excess
aggregate purchase price over the aggregate fair market value of net
identifiable assets acquired was $10.8 million and is being amortized over 40
years.
On November 17, 1998, the Company signed a binding letter of intent to sell
the acquired tinplate services business. Anticipating the sale of the tinplate
metal services business, the Company closed the Brookfield, Ohio location in
March 1999 and closed the Chicago Metal operations in September 1999. The
tinplate services business primarily purchases, processes, and sells nonprime
steel to third party customers. The Company finalized the sale of the tinplate
services business to Arbon Steel and Service Company in the fourth quarter of
fiscal 1999. The Company excluded from results of operations tinplate metal
services business losses of $4.4 million, including interest expense of $0.7
million, for the year ended October 3, 1999.
Management has committed to a plan to exit certain activities of the acquired
facilities and integrate acquired assets and businesses with BWAY facilities.
In connection with the recording of the purchase, the Company established a
reorganization liability of approximately $11 million. The reorganization
liability includes $1.8 million in severance, $5.5 million in facility closing
costs, and $3.7 million in equipment demolition costs. The
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reorganization liability represents the direct incremental costs expected to be
incurred, which have no future economic benefit to the Company.
During fiscal 1999, the Company has charged $0.4 million in severance, $2.9
million in facility closing costs and $1.5 million in demolition costs. In
connection with the plant closures, the plan called for the termination of 308
employees. The Company has one remaining facility, the Chicago Service
Division, scheduled to close in the fourth quarter of fiscal 2000.
The operating results for the acquisitions have been included in the Company's
consolidated financial statements since the dates of acquisition.
Products and Markets
The Company participates in the container market and related material center
services business and currently holds leading positions in the sale of most of
its general line products, other than aerosol cans, and holds a strong position
in the sale of coffee and vegetable oil cans. The Company does not sell beverage
containers. The Company also manufactures steel ammunition boxes. On November
9, 1998, the Company acquired substantially all of the assets of U.S. Can's
metal services operations, making the Company a leading provider of material
center services.
The following table sets forth the percentage of net sales of the Company
contributed by the product lines indicated for fiscal 1999, 1998 and 1997. The
Company's sales distribution by product line has been affected to some extent by
the recent acquisitions.
Percentage of the Company's Net Sales
- -------------------------------------
Year Ended September 30,
-----------------------
Product 1999 1998 1997
------- ---- ---- ----
General Line Containers 70% 80% 84%
Food Cans 11% 13% 13%
Material Center Services 16% 2% 0%
Ammunition Boxes 3% 5% 3%
---- ---- ----
Total 100% 100% 100%
General Line Products
The primary uses for the Company's containers are for paint and related
products, lubricants, cleaners, roof and driveway sealants, charcoal lighter
fluid, household and personal care products. Specific products include round
cans with rings and plugs (typical paint cans), oblong or ''F'' style cans
(typical paint thinner cans), specialty cans (typical PVC or rubber cement cans,
brake fluid and other automotive after-market products cans and an assortment of
other specialty containers), and pails. The Company produces a full line of
these products to serve the specific requirements of a wide range of customers.
The Company's products are typically coated on the inside to customer
specifications based on intended use, and are either decorated on the outside to
customer specifications or sold undecorated. Most of the Company's products are
manufactured in facilities that are strategically located to allow the Company
to deliver product to customer filling locations for such products within a one
day transit time.
Paint Cans. The Company produces round paint cans in sizes ranging from one-
quarter pint to one gallon, with one-gallon paint cans representing the majority
of all paint can sales.
Oblong or "F" Style Cans. Oblong or "F" style cans are typically used for
packaging paint thinners, lacquer thinners, turpentine, deglossers and similar
paint related products, charcoal lighter fluid, waterproofing products, and
vegetable oil. The Company produces oblong cans in sizes ranging from three
ounces to one imperial gallon.
Specialty Cans. Utility cans include small screw top cans, which typically
have an applicator, or brush attached to a screw cap and is used for PVC pipe
cleaner, PVC cement and rubber cement. Cone top cans are typically used for
packaging specialty oils and automotive after-market products including brake
fluid, gasoline additives and
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radiator flushes. The Company also produces various specialty containers.
Aerosol Cans. Aerosol cans are typically used for packaging various
household and industrial products, including paint and related products,
personal care products, lubricants and insecticides. The Company produces a
variety of sizes, which are generally decorated to customer specifications.
Pails. Pails are typically used for packaging paint and related products,
roof and driveway sealants, marine coatings, vegetable oil, and water repellent.
Pails may be either ''closed head'' for easy pouring products, or ''open head''
for more viscous products, with a lid which is crimped on after filling. The
Company manufactures steel pails in sizes ranging from 2.5 to 7 gallons.
Food Products/Coffee Cans
The Company produces cans for coffee and vegetable oil, with coffee accounting
for the majority of sales. The Company produces coffee cans in sizes commonly
referred to as 1 pound, 2 pound and 3 pound, and various smaller specialty
coffee can sizes and shapes. Coffee cans are generally sold to nationally known
coffee processing and marketing companies. The Company does not sell sanitary
food cans in which soups, stews, vegetables, pie fillings and other foods are
actually cooked in the can.
Materials Center Services
The Company provides materials center services for its can assembly facilities
and third party customers. To enhance its offering of materials center services,
the Company has made significant capital investments in state-of-the-art
lithography and coating equipment.
Ammunition Boxes
The Company manufactures a variety of ammunition boxes. These containers
provide a hermetic seal, are coated with a corrosion-resistant finish and are
used to package small arms ammunitions and other ordnance products. The Company
sells ammunition boxes to the U.S. Department of Defense as well as to major
domestic and foreign producers of ordnance.
Customers
The Company sells its products to a large number of customers in numerous
industry sectors. Sales to the Company's ten largest customers accounted for
approximately 42% of sales in fiscal 1999. During fiscal 1999, sales to any
specific customer did not equal or exceed 10% of sales during the period.
Raw Materials
The Company's principal raw materials consist of tinplate, blackplate and cold
rolled steel, various coatings, inks and compounds. Steel products represent the
largest component of raw material costs. Essentially all of the Company's
products are manufactured from tinplate steel, except for pails and ammunition
boxes, which are manufactured from blackplate and cold rolled steel.
Various domestic and foreign steel producers supply the Company with tinplate
steel. Procurement from suppliers depends on the suppliers' product offering,
product quality, service and price. Because a significant number of reliable
suppliers produce the steel used in the Company's process, management believes
that it would be able to obtain adequate replacement supplies in the market
should one of the current suppliers discontinue supplying the Company. The
Company has historically worked with other companies to lower the overall cost
of its steel purchases. The Company intends to pursue alternative strategies to
lower raw material cost in fiscal 2000. During fiscal 1999, the Company
increased its purchases of tinplate and cold rolled products from foreign
sources, a practice the Company expects to continue during fiscal 2000. Tinplate
consumers typically negotiate late in the calendar year for the next calendar
year on terms of volumes and price. Terms agreed to have historically held
through the following year, but there is no assurance that this practice will
remain unchanged in the future.
Steel prices have historically been adjusted as of January 1 of a calendar
year. Most tinplate, blackplate and cold rolled steel products have announced
price increases for January 1, 2000.
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In addition to steel products, the Company purchases various coatings, inks,
and compounds used in the manufacturing process. Based on ready availability of
these materials in the past and the number of current manufacturers, management
does not anticipate any shortages or supply problems in the future.
Seasonality
Sales of certain of the Company's products are to some extent seasonal, with
sales levels generally higher in the second half of the Company's fiscal year.
Environmental, Health and Safety Matters
The Company is subject to a broad range of federal, state and local
environmental and workplace health and safety requirements, including those
governing discharges to air and water, the handling and disposal of solid and
hazardous wastes, and the remediation of contamination associated with the
releases of hazardous substances. The Company believes that it is in
substantial compliance with all material environmental, health and safety
requirements. In the course of its operations, the Company handles hazardous
substances. As is the case with any industrial operation, if a release of
hazardous substances occurs on or from the Company's facilities or at offsite
waste disposal sites, the Company may be required to remedy such release. There
were no material capital expenditures relating to environmental compliance in
fiscal 1999, and, other than certain expenses at the Company's Homerville,
Georgia facility discussed below, none are expected for fiscal 2000.
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 management believes predated the
Company's 1989 acquisition of the facility from Owens-Illinois. Such pre-1989
contamination is subject to indemnification by Owens-Illinois. The Company and
Owens-Illinois have entered into supplemental agreements establishing procedures
for 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. On
August 25, 1999, DNR signed a consent order that had been submitted by the
Company and Owens-Illinois. The consent order establishes a schedule for
completing such investigation and remediation (all but a small portion of such
investigation and remediation to be completed and funded by Owens-Illinois).
In addition, at Homerville, the Company entered into a consent order with DNR
on April 22, 1999, related to certain industrial wastewater and cooling water
discharges that exceeded allowable limits. The Company anticipates capital
expenditures in the neighborhood of $200,000 in fiscal 2000 to comply with the
consent order. Management does not believe that the final resolution of either
matter at Homerville will have a material adverse effect on the results of
operations or financial condition of the Company.
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.
Competition
The markets for the Company's products are competitive and the Company faces
competition from a number of sources in most of its product lines. Competition
is based primarily on price, quality, service, and, to a lesser extent, product
innovation. The Company believes that its low cost of production and high
quality products, the geographic location of the Company facilities which
provide national coverage for most products to most customers, and its
commitment to strong customer relationships enable it to compete effectively.
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Manufacturers of steel containers have historically faced competition from
other materials, primarily plastic, glass, and aluminum. Steel containers offer
a number of significant advantages over alternative materials, including fire
safety (critical in many products packaged in paint, oblong and specialty cans),
the capacity for vacuum packaging (important to coffee producers) and ability to
contain aggressive products (primarily certain solvent-based products).
Employees
As of October 3, 1999, the Company employed approximately 1,693 hourly
employees and 483 salaried employees. Of the 1,693 hourly employees, 1,029 are
non-union and the remaining 664 are covered by eight separate collective
bargaining agreements. During fiscal 1999, in connection with the US Can
Acquisition, certain subsidiaries of the Company added 80 salaried employees and
308 hourly employees. Of the 308 hourly employees approximately 270 are covered
by collective bargaining agreements with either the Graphic Communications
Workers International Union or the United Steelworkers of America.
During the second quarter of fiscal 1999, the Company ceased operations at the
Brookfield, Ohio facility following the U.S. Can Acquisition. This closing
resulted in the elimination of approximately 32 hourly positions and 14 salaried
positions at this facility.
On August 3, 1999, the Company reached an agreement with the International
Brotherhood of Teamsters, Local 714 at its Franklin Park (Chicago), Illinois
facility affecting approximately 60 employees at this facility. The contract is
retroactive to June 8, 1999 and is effective through March 3, 2003. The Company
also negotiated extensions of its agreement with Local 458-3M of the Graphic
Communication Workers International Union through October 31, 1999, affecting
approximately 15 employees at this facility. On November 22, 1999, the Company
implemented its last, best, and final offer for a new collective bargaining
agreement, and since then the Union has been working under the implemented
terms. On November 24, 1999, the Union filed an administrative action with the
National Labor Relations Board challenging the lawfulness of the Company's
implementation of its last, best, and final offer. The Company and the Union
continue to meet in an effort to reach a collective bargaining agreement.
On August 11, 1999, the Company reached an agreement with United Steelworkers
of America, Local 3911-11 with respect to the discontinuance of the Chicago
Metal operations, effective September 30, 1999, at the Company's Chicago Service
Division facility in Chicago, Illinois. The discontinued operations resulted in
the elimination of approximately 56 hourly positions and 22 salaried positions
at this facility. Subsequent to fiscal 1999, the Company negotiated an
agreement with the Graphics Communications Workers International Union, Local
458-3M concerning the discontinuance of the Chicago Litho operations at the
Company's Chicago Service Division facility, which is scheduled for closing in
the fourth quarter of fiscal 2000.
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Item 2. Properties
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The following table sets forth certain information with respect to the
Company's headquarters and significant manufacturing plants as of November 30,
1999.
<TABLE>
<CAPTION>
General Approximate
Location Character Square Footage Type of Interest
- -------- --------- -------------- ----------------
<S> <C> <C> <C>
Alsip, Illinois (1) Manufacturing 102,000 Owned
Atlanta, Georgia (Headquarters) Office 24,000 Leased
Brookfield, Ohio (1) Manufacturing 130,000 Leased
Chicago, Illinois (Kilbourn) Manufacturing 141,000 Owned
Chicago, Illinois (Chicago Service) (1) Manufacturing 271,000 Owned
Cincinnati, Ohio Manufacturing 467,000 Leased
Dallas, Texas (Thompson) Manufacturing 110,000 Owned
Dallas, Texas (Southwestern) Manufacturing 88,000 Owned
Elizabeth, New Jersey Manufacturing 157,000 Leased
Elizabeth, New Jersey (Northeast Tinplate) Manufacturing 42,000 Leased
Fontana, California Manufacturing 72,000 Leased
Franklin Park, Illinois Manufacturing 115,000 Leased
Garland, Texas Manufacturing 108,000 Leased
Homerville, Georgia Manufacturing 395,000 Owned
Memphis, Tennessee Manufacturing 75,000 Leased
Picayune, Mississippi Manufacturing 60,000 Leased
Trenton, New Jersey (1) Manufacturing 105,000 Leased
York, Pennsylvania Manufacturing 97,000 Owned
</TABLE>
(1) On November 9, 1998 the Company acquired substantially all of the assets of
U.S. Can Company's metal services operations. These properties were added
as a result of that acquisition.
In June 1998, management approved a restructuring plan to close three
facilities as part of the Company's rationalization initiatives. The facility
in Solon, Ohio was closed during the fourth quarter of fiscal 1998 and sold
during the second quarter of fiscal 1999. The Elizabeth, New Jersey (Northeast
Tinplate) facility was closed during the second quarter of fiscal 1999 and
subleased for the remainder of the lease term. The Dallas, Texas (Thompson)
facility is scheduled to close during the second quarter of fiscal 2000. The
Company is actively marketing the Thompson facility for sale.
Subsequent to the U.S. Can Acquisition in November 1998, the Company announced
its plan to close the acquired Brookfield, Ohio facility. The Brookfield, Ohio
plant was closed during the second quarter of fiscal 1999 and the Company is
actively seeking to sublease that facility. The Company also announced plans to
close the Chicago Metal and Chicago Litho operations at the Chicago Service
Division facility in Chicago, Illinois, also acquired in the U.S. Can
Acquisition, and is currently evaluating disposition alternatives. A third
acquired facility located in Alsip, Illinois, which was not operating at the
time of acquisition, is also being evaluated for disposition.
On August 20, 1999, the Company sold and leased back its Cincinnati, Ohio
manufacturing facility. The sales price was $10.4 million. After deducting
closing costs of $0.6 million, the Company recorded a deferred gain on the sale
of $2.3 million, which will be amortized over the life of the lease. The
amortization of the deferred gain recorded in earnings for the year ending
October 3, 1999 was $13 thousand. The lease term is 20 years with annual lease
payments of approximately $1.1 million. The lease has two 5-year renewal terms
that run consecutively after the basic term. The lease is accounted for as an
operating lease for financial reporting purposes.
The Company believes its properties are generally in good condition, well
maintained and suitable for their intended use.
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Item 3. Legal Proceedings
-----------------
The Company is involved in certain proceedings relating to environmental
matters as described under Item 1. "Business - Environmental, Health and Safety
Matters."
The Company is also involved in legal proceedings from time to time in the
ordinary course of its business. There are no such currently pending
proceedings, which are expected to have a material adverse effect on the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted during the fourth quarter of fiscal 1999 to a vote
of security holders of the Company through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
----------------------------------------------------------------------
As of December 3, 1999, there were 87 holders of record of the Common Stock.
Because BWAY is a holding company, its ability to pay dividends is substantially
dependent upon the receipt of dividends or other payments from its subsidiaries.
The Company's Credit Agreement dated June 17, 1996, as amended (the "Credit
Agreement"), among BWAY and certain subsidiaries, BT Alex.Brown (formerly
Bankers Trust Company) and Bank of America (formerly NationsBank, N.A.) and
various other lenders, restricts the ability of BWAY and its subsidiaries to pay
dividends or make other restricted payments in an amount greater than $8.7
million, and places certain restrictions on the Company with regard to incurring
additional indebtedness, other than certain specified indebtedness. In
addition, the Company's Indenture dated April 11, 1997 (the "Indenture") also
restricts the ability of BWAY and its subsidiaries to pay dividends or make
other payments, and places certain restrictions on the Company with regard to
incurring additional indebtedness, other than certain specified indebtedness.
Any future determination to pay dividends will be made by the Board of Directors
in light of the Company's earnings, financial position, capital requirements,
credit agreements, indentures, business strategies and such other factors as the
Board of Directors deems relevant at such time. The Company has not otherwise
paid any cash distributions or other dividends on the Common Stock and presently
intends to retain its earnings to finance the development of its business for
the foreseeable future.
The Company repurchased $1.0 million of its common stock during fiscal 1999
under the Company's common stock repurchase program.
The Company's Common Stock was traded on the Nasdaq National Market under the
symbol "BWAY" through November 19, 1996. Since November 20, 1996, the Company's
common stock has been traded on the New York Stock Exchange under the symbol
"BY". The table below sets forth the high and low sales price information for
the Common Stock for each quarter of fiscal 1998 and fiscal 1999.
On August 19, 1997 the Company's Board of Directors declared a three-for-two
stock split of the Company's Common Stock effected in the form of a stock
dividend which was paid on September 22, 1997 to stockholders of record on
September 2, 1997. All price information set forth below has been adjusted to
reflect the stock dividend.
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<TABLE>
<CAPTION>
Fiscal Quarter High Low
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<S> <C> <C>
First quarter, 1998 $25.63 $18.75
Second quarter, 1998 $26.25 $20.13
Third quarter, 1998 $26.94 $19.00
Fourth quarter, 1998 $23.13 $12.38
First quarter, 1999 $18.31 $11.50
Second quarter, 1999 $16.00 $10.88
Third quarter, 1999 $15.88 $11.38
Fourth quarter, 1999 $13.69 $ 8.50
</TABLE>
Item 6. Selected Financial Data
-----------------------
The selected historical consolidated financial data as of and for each of the
years in the five years ended September 30, 1999 have been derived from the
audited consolidated financial statements of the Company. The results of
operations include the results of acquisitions described under "Business--
Acquisitions" contained in Item 1 of this report and have been included in the
Company's consolidated financial statements from the date of the respective
acquisitions. The selected consolidated financial data is qualified by, and
should be read in conjunction with, ''Management's Discussion and Analysis of
Financial Condition and Results of Operations'' contained in Item 7 of this
report and with the Company's consolidated financial statements and the related
notes thereto included in Item 8 of this report.
9
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, (1)
------------------------------------------------------------
1999 (2) 1998 1997 (3) 1996 (4) 1995
-------- -------- -------- -------- --------
Income Statement Data:
<S> <C> <C> <C> <C> <C>
NET SALES $467,099 $401,089 $402,150 $283,105 $247,480
-------- -------- -------- -------- --------
COSTS, EXPENSES AND OTHER
Cost of products sold (excluding depreciation
and amortization) 404,492 336,588 341,406 236,741 208,091
Depreciation and amortization 17,246 13,465 13,024 7,425 5,940
Selling and administrative expense 19,678 22,748 19,651 14,589 10,335
Restructuring and impairment Charge (5) (6) 11,532 12,860
Interest expense, net 14,733 13,021 10,649 4,872 5,211
Gain on curtailment of postretirement benefits (1,861) (5,828)
AB Leasing fees, expenses and termination (7) 3,384
Other, net 33 127 998 (340) (275)
-------- -------- -------- -------- --------
Total costs, expenses, and other 456,182 395,620 379,900 276,147 232,686
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 10,917 5,469 22,250 6,958 14,794
Provision for income taxes 5,290 2,789 9,146 3,239 6,021
-------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING 5,627 2,680 13,104 3,719 8,773
-------- -------- -------- -------- --------
Extraordinary loss resulting from the extinguishment
of debt, net of tax benefit of $1,683 (8) (2,535)
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 5,627 2,680 13,104 1,184 8,773
-------- -------- -------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR
SYSTEMS DEVELOPMENT COSTS -
Net of related tax benefit of $823 (9) (1,161)
-------- -------- -------- -------- --------
NET INCOME $ 5,627 $ 1,519 $ 13,104 $ 1,184 $ 8,773
======== ======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE DATA:
Income before extraordinary item and accounting change $ 0.60 $ 0.28 $ 1.33 $ 0.40 $ 1.24
Extraordinary item (0.27)
Cumulative effect of change in accounting (0.12)
-------- -------- -------- -------- --------
Net income $ 0.60 $ 0.16 $ 1.33 $ 0.13 $ 1.24
======== ======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE DATA:
Income before extraordinary item and accounting change $ 0.60 $ 0.27 $ 1.31 $ 0.40 $ 1.23
Extraordinary item (0.27)
Cumulative effect of change in accounting (0.12)
-------- -------- -------- -------- --------
Net Income $ 0.60 $ 0.15 $ 1.31 $ 0.13 $ 1.23
======== ======== ======== ======== ========
WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING 9,323 9,527 9,817 9,373 7,097
======== ======== ======== ======== ========
WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING 9,453 9,959 9,983 9,407 7,104
======== ======== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, (1)
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 14,146 $ 737 $ 6,890 $ 22,280 $ 38,811
Property, plant and equipment, net 144,716 133,960 123,617 94,800 67,668
Total assets 362,023 313,711 316,377 245,133 167,958
Long-term debt (including current 146,500 122,272 115,532 95,198 50,218
Maturities)
Stockholders' equity 82,053 77,188 85,466 72,629 65,837
</TABLE>
(1) The Company operates on a 52/53-week fiscal year ending on the Sunday
closest to September 30 of the applicable year. For simplicity of
presentation, the Company has presented year-ends as September 30.
(2) The results of operations for the year ending September 30, 1999 include
the results from the November 9, 1998 acquisition of substantially all of
the assets of the material center service business of U.S. Can Company.
(3) The results of operations for the year ending September 30, 1997 include
the results from the October 28, 1996 acquisition of substantially all of
the assets of the aerosol can business of Ball Metal Food Container
Corporation.
(4) The results of operations for the year ending September 30, 1996 include
the results from the following acquisitions: On May 28, 1996, BWAY acquired
all of the stock of Milton Can Company. On June 17, 1996, BSI acquired
substantially all of the assets of the Davies Can Division of the Van Dorn
Company.
(5) During the fourth quarter of fiscal 1996, the Company recorded a
restructuring and impairment charge related to the write-off of fixed
assets due to the consolidation of manufacturing processes related to the
fiscal 1996 acquisitions.
(6) During the third quarter of fiscal 1998, the Company recorded a
restructuring and impairment charge related to the closure of three plants,
the elimination of an internal transportation department and the write-off
of equipment at several operating locations which were impaired due
primarily to changes in manufacturing processes. See Note 13 of the Notes
to Consolidated Financial Statements set forth in Item 8.
(7) The Company was party to a management agreement (the ''Management
Agreement'') with AB Leasing and Management, Inc. (''AB Leasing'') whereby
the Company paid to AB Leasing an annual fee (the ''AB Leasing Fee'') based
upon a formula, plus reimbursement for expenses. The Company and AB Leasing
terminated the Management Agreement upon the consummation of the Initial
Public Offering. Pursuant to the termination agreement the Company issued
199,500 shares of Common Stock to AB Leasing prior to the effectiveness of
the Initial Public Offering. The Company recorded a non-recurring, non-
cash, pre-tax charge to operations of $1,995,000 in connection therewith in
the period in which such shares were issued.
(8) The Company recorded an extraordinary loss related to the prepayment of the
$50 million principal amount of 8.35% Senior Secured Notes during the third
quarter of fiscal 1996.
(9) On November 20, 1997 the FASB's Emerging Issues Task Force (EITF) issued a
consensus on 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 1998
year-to-date net earnings.
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes thereto included elsewhere
in Item 8 of this report.
General
Industry
The Company currently derives substantially all of its revenues from the sale
of steel containers manufactured at the Company's plants and related material
center services. The packaging market in which the Company competes is
generally mature and stable. Management believes that companies that have
managed sustained growth in these markets have typically accomplished this
growth primarily through acquisitions. Industry consolidation has occurred
during recent years.
Sales Growth
The Company's net sales have grown from approximately $402.2 million in fiscal
1997 to approximately $467.1 million in fiscal 1999, primarily as a result of
the U.S. Can Acquisition during this period. The U.S. Can Acquisition has
strengthened and expanded the Company's position in key product and geographic
markets and, through consolidation, have enabled the Company to achieve
operating synergies.
Raw Materials
The largest component of cost of sales is tinplate steel, which is currently
supplied by large, national manufacturers and, to a lesser extent, foreign
manufacturers. Tinplate prices have historically been negotiated once per year,
with changes effective January 1, and have typically remained stable for the
subsequent one-year period. The Company has historically worked with other
companies to lower the overall cost of its steel purchases. The Company intends
to pursue alternative strategies to lower raw material cost in fiscal 2000.
During fiscal 1999, the Company increased its purchases of tinplate and cold
rolled products from foreign sources, a practice the Company expects to
continue during fiscal 2000. Tinplate consumers typically negotiate late in the
year for the next calendar year on terms of volumes and price. Terms agreed to
have historically held through the following year, but there is no assurance
that this practice will remain unchanged in the future.
Steel prices have historically been adjusted as of January 1 of a calendar
year. Most tinplate, blackplate and cold rolled steel producers have announced
price increases effective January 1, 2000. The Company has historically
arranged for raw material price increases which are lower than those publicly
announced by its suppliers, although there can be no assurances that this
practice will continue.
Gross Profit Margins
Continuous advances in manufacturing productivity and cost reduction have been
critical to the industry and the Company's ability to improve gross profit
margins. The Company's objective is to improve margins by maximizing synergies
through employment of the Company's 3R strategic initiative to Rationalize,
Reengineer and Recapitalize acquired businesses and by capital investments. The
Company's gross profit margin as a percentage of net sales declined to 13.4% in
fiscal 1999 from 16.1% in fiscal 1998. The decline resulted primarily from
sales associated with the U.S. Can Acquisition where gross profit margins as a
percentage of net sales has historically been lower than the Company's existing
businesses, costs associated with the Company's rationalization initiatives and
costs associated with capital project implementations.
12
<PAGE>
Results of Operations
Year ended September 30, 1999 (fiscal 1999) compared to year ended September 30,
1998 (fiscal 1998).
Net Sales. Net sales for fiscal 1999 were $467.1 million, an increase of $66.0
million or 16.5% from $401.1 million in fiscal 1998. The increase in net
sales was primarily attributable to the fiscal 1999 U.S. Can Acquisition. The
Company's net sales for fiscal 1999, excluding the effect of the U.S. Can
Acquisition, declined approximately 2.5% from fiscal 1998.
Cost of Products Sold. Cost of products sold (excluding depreciation and
amortization) in fiscal 1999 was $404.5 million, an increase of $67.9 million,
or 20.2%, from $336.6 million in fiscal 1998. The increase is primarily
attributable to increased sales from the U.S. Can Acquisition, start-up costs of
new equipment and plant rationalization costs. Cost of products sold as a
percent of sales increased to 86.6% in fiscal 1999 from 83.9% in fiscal 1998.
The increase is primarily attributable to the incremental sales from the U.S.
Can Acquisition where cost of products sold as a percent of sales has
historically been higher than the Company's existing operations, to start-up
costs for new equipment (particularly within the Company's material center
business) and to costs associated with the Company's rationalization initiatives
at can assembly operations, primarily in the Northeast and Southwest. The
rationalization process for the Company's Northeast and Southwest facilities is
progressing at a slower rate than initially planned. Ongoing delays in
construction, equipment relocations and the hiring and training of new employees
has contributed to the increase in costs and is expected to continue through the
first half of fiscal 2000. The Company is focused on rationalizing these
facilities in the most cost effective manner possible; however, the
aforementioned delays coupled with production startup and efficiencies have
hampered this process. These additional costs more than offset realized savings
resulting from the Company's purchasing initiatives.
Income before Income Taxes, Extraordinary Item and Cumulative Effect of Change
in Accounting. Income before income taxes, extraordinary item and cumulative
effect of change in accounting for fiscal 1999 was $10.9 million, an increase of
$5.4 million, from $5.5 million in fiscal 1998, when the Company recorded a
restructuring charge of $11.5 million. Fiscal 1999 income before income taxes,
extraordinary items and cumulative effect of change in accounting decreased by
$6.1 million from fiscal 1998, excluding the effect of the fiscal 1998
restructuring charge. This decrease resulted primarily from higher costs of
products sold (lower gross margins) as described above, higher interest expense,
and higher depreciation and amortization, partially offset by lower selling and
administrative expenses. Additionally, the Company recognized in fiscal 1998 a
$1.9 million gain on curtailment of postretirement benefits. Depreciation and
amortization increased from $13.5 million in fiscal 1998 to $17.2 million in
fiscal 1999 due the U.S. Can Acquisition and as a result of capital spending.
Selling and administrative expense of $19.7 million for fiscal 1999 decreased
from $22.7 million in fiscal 1998. Interest expense, net, increased to $14.7
million in fiscal 1999 from $13.0 million in fiscal 1998 primarily due to
increased borrowings under the Company's credit agreement to finance the U.S.
Can Acquisition and fund the Company's capital expenditure program. (See
Liquidity and Capital Resources).
Net Income. Net Income for fiscal 1999 was $5.6 million, an increase of $4.1
million from fiscal 1998. The change results from the factors discussed above.
Year ended September 30, 1998 (fiscal 1998) compared to year ended September 30,
1997 (fiscal 1997).
Net Sales. Net sales for fiscal 1998 were $401.1 million, a decrease of $1.1
million or 0.3% from $402.2 million in fiscal 1997. The Company's sales were
adversely affected during fiscal 1998 by a generally weaker paint and related
products season.
Cost of Products Sold. Cost of products sold (excluding depreciation and
amortization) in fiscal 1998 was $336.6 million, a decrease of $4.8 million, or
1.4%, from $341.4 million in fiscal 1997. The decrease is primarily
attributable to lower unit volume combined with lower operating costs. Cost of
products sold as a percent of net sales decreased to 83.9% in fiscal 1998 from
84.9% in fiscal 1997. The decrease is primarily attributable to the Company's
strategic initiative to lower operating costs and improve margins, and from a
more favorable pricing
13
<PAGE>
environment. Although certain employee termination costs in connection with
plant rationalizations, administrative workforce reductions, and other plant
exit costs associated with acquisitions were accrued for through purchase
accounting adjustments, the Company incurred during fiscal 1997 and fiscal 1998
other non-recurring costs which, in accordance with current accounting
pronouncements, were charged against operating income.
Restructuring and Impairment Charge. In June 1998, the Company recorded a
restructuring and impairment charge related to the closure of three plants, the
elimination of an internal transportation department and the write-off of
equipment at several operating locations which were impaired due primarily to
changes in manufacturing processes. The 1998 restructuring and impairment
charge totaled $11.5 million and consisted of the following: $7.8 million
related to the closure of the plants and transportation department and $3.7
million related to other asset impairments. The $7.8 million related to the
plant and transportation department closures includes $2.1 million for severance
costs, $2.2 million for other facility closure costs and $3.5 million for asset
impairments related to the plant shut-downs.
Income before Income Taxes, Extraordinary Item and Cumulative Effect of Change
in Accounting. Income before income taxes, extraordinary items and cumulative
effect of change in accounting for fiscal 1998 was $5.5 million, a decrease of
$16.8 million, or 75%, from $22.3 million in fiscal 1997, due primarily to the
Company recording a restructuring charge of $11.5 million (before taxes).
Depreciation and amortization increased from $13.0 million in fiscal 1997 to
$13.5 million in fiscal 1998 as a result of increased capital spending. Selling
and administrative expense of $19.7 million for fiscal 1997 increased $3.1
million in fiscal 1998, primarily due to building corporate infrastructure to
support acquisitions and continued execution of growth plans. Interest expense,
net, increased to $13.0 million in fiscal 1998 from $10.6 million in fiscal 1997
due to interest on borrowings for ongoing working capital and a higher effective
interest rate associated with the Company's issuance in the third quarter of
fiscal 1997 of $100 million of unsecured senior subordinated notes (see
Liquidity and Capital Resources).
Net Income. Net Income for fiscal 1998 was $1.5 million, a decrease of $11.6
million from fiscal 1997. The decline resulted from the factors mentioned
above.
Seasonality
Sales of certain of the Company's products are to some extent seasonal, with
sales levels generally higher in the second half of the Company's fiscal year.
Liquidity and Capital Resources
On November 2, 1998 the Company and its lenders executed an amendment to the
Company's Credit Agreement, which modified certain restrictive financial
covenants and provided greater flexibility with respect to certain investments
in joint ventures. Additionally, the Company exercised its option to increase
the available borrowing limit to $125 million. As part of the November 2, 1998
amendment, the lenders waived the Company's financial covenant violation
(interest coverage ratio) for the quarter ended September 27, 1998. The Credit
Agreement currently provides that the Company and its subsidiaries can borrow up
to $125 million, and gives the Company an option to increase its borrowing limit
by an additional $25 million, provided certain conditions are met. Interest
rates under the Credit Agreement are based on rate margins ("Rate Margin") for
either the prime rate as announced by Bank of America (formerly NationsBank,
N.A.) from time to time or LIBOR plus an applicable rate spread, at the option
of the Company. The applicable rate margin is determined on a quarterly basis
by a review of the Company's leverage ratio. 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 financial 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 Credit Agreement expires June 17, 2002.
Subsequent to fiscal 1999 year end, the Company and its lenders executed an
amendment to the Company's credit agreement which modifies the interest coverage
ratio. The Company is in compliance with all of the Credit Agreement covenants
at fiscal 1999 year end.
During the third quarter of fiscal 1997, the Company issued $100 million of 10
1/4% Senior Subordinated Notes due 2007. The notes have an interest rate of
101/4%, payable semi-annually on April 15 and October 15. Net proceeds of
approximately $96 million from the issuance of the notes were used to reduce
borrowings on the
14
<PAGE>
Company's Credit Agreement. The Company completed the registration of its 101/4%
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.
During fiscal 1999, net cash provided by operating activities was $24.5
million which was comprised primarily of net income ($5.6 million), depreciation
and amortization ($17.3 million) and deferred income taxes ($7.1 million).
Changes in assets and liabilities reduced net cash provided by operating
activities by $6.1 million.
During fiscal 1998, net cash provided by operating activities was $25.6
million which was comprised primarily of net income ($1.5 million), depreciation
and amortization ($13.5 million), and a restructuring and impairment charge
($11.5 million). Changes in assets and liabilities reduced net cash provided by
operating activities by $1.9 million.
During fiscal 1999, the Company used $46.5 million for investing activities.
The Company made $33.2 million of capital expenditures primarily for equipment
to improve manufacturing processes, new coating and lithography equipment to
support growth, and hardware and software to address the Year 2000 issue and
improve administrative and manufacturing systems. The Company used $27.7
million for the U.S. Can Acquisition.
During fiscal 1998, the Company used $32.9 million for investing activities.
The Company made $33.8 million of capital expenditures primarily for equipment
to improve manufacturing processes, new coating and lithography equipment to
support growth, and hardware and software to address the Year 2000 issue and
improve administrative and manufacturing systems.
During fiscal 1999, net cash provided by financing activities was $20.4
million. Net borrowings under the Company's Credit Agreement were $24.9
million. Net purchases of treasury stock were $.8 million. Additionally,
unpresented bank drafts increased $2.9 million.
During fiscal 1998, net cash provided by financing activities was $8.2
million. Net borrowings under the Company's Credit Agreement were $8.1 million.
The Company purchased $11.1 million of treasury stock during fiscal 1998, and
issued $1.0 million of treasury stock for options exercised. Additionally,
unpresented bank drafts increased $11.6 million.
Cash and cash equivalents were $2.3 million at the beginning of fiscal 1999,
and were $.7 million at the end of fiscal 1999.
Cash and cash equivalents were $1.4 million at the beginning of fiscal 1998,
and were $2.3 million at the end of fiscal 1998.
At October 3, 1999, the Company was restricted in its ability to pay dividends
and make other restricted payments in an amount greater than approximately $8.7
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.
Management believes that cash provided from operations, borrowings available
under the Credit Agreement, and borrowings under the Indenture will provide it
with sufficient liquidity to meet its operating needs and continue the Company's
capital expenditure initiatives for the next twelve months.
Impact of the Year 2000 Issue
The Year 2000 issue is the result of potential problems with computer systems
or any equipment with computer chips that use dates where the date has been
stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock or
date-recording mechanism that utilize date sensitive software using only two
digits to represent the year may recognize a date using 00 as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing significant disruption of operations, including among
other things a temporary inability to process transactions, send invoices, or
engage in similar activities. The Year 2000 issue can arise at any point in the
Company's supply, manufacturing, processing, distribution and financial chains.
Any disruptions in the above stated
15
<PAGE>
chains of the Company could have a material adverse affect on the Company's
financial condition and results of operations.
The Company determined that it would be required to replace or modify
significant portions of its business application software so that its computer
systems would properly utilize dates beyond December 31, 1999. The Company
presently believes that with conversions to new systems and modifications to
existing software the Year 2000 issue can be mitigated with regard to the
Company's material business application software. However, if such
modifications and conversions are not made, or are not timely, the Year 2000
issue could have a material adverse impact on the operations of the Company.
During 1998, the Company initiated the implementation of Enterprise Resource
Planning (ERP) software to replace the Company's core business applications,
which support sales and customer service, manufacturing, distribution, and
finance and accounting. The ERP software was selected to add functionality and
efficiency in the business processes of the Company in the normal course of
upgrading its systems to address its business needs. In addition, the Company
established a Year 2000 Steering Committee in May 1998 to analyze and assess the
remainder of its business not addressed by the ERP software. The Steering
Committee has executive officers of the Company as its members. The Steering
Committee is responsible for the formulation of the Company's Year 2000 project.
The scope of the Steering Committee's responsibilities covers all material
computer systems, computer and network hardware, production process controllers,
office equipment, access control, maintenance machinery, telephone systems,
products it sells, critical vendors and customers.
The Steering Committee identified those IT systems that were considered
mission critical to the business. Of the identified mission critical systems,
the Company is currently instituting remediation through a global ERP software
implementation. All other systems are presently being replaced or upgraded to
adequately address the Year 2000 issue. Approximately 99% of the mission
critical systems have been remediated as of December 1, 1999. The Company
anticipates that the remaining mission critical implementations, along with
other non-compliant systems will be completed by December 31, 1999. Critical
systems have been tested on an ongoing basis during the second half of calendar
1999 to ensure Year 2000 Compliance.
During 1999, the Company has performed a comprehensive review and evaluation
of embedded systems within its manufacturing facilities. This evaluation is
ongoing and is intended to inventory and evaluate embedded systems and their
Year 2000 compliance and associated risk. Upgrades and replacements have been
performed as needed and incurred as a part of normal maintenance programs.
Associated costs were not significant. The Company cannot fully eliminate the
potential impact on all embedded system non-compliance; however, at present the
overall risk appears to be low.
The Company has communicated with all of its significant suppliers and large
customers to determine the extent to which the Company is vulnerable to those
third parties' failure to remediate their own Year 2000 issues. The Company can
give no guarantee that the systems of other companies on which the Company's
systems rely will be converted on time or that a failure to convert by another
company or a conversion that is incompatible with the Company's systems would
not have a material adverse effect on the Company.
The Company is currently utilizing, and will continue to utilize, internal and
external resources to implement, reprogram or replace, and test software and
related assets affected by the Year 2000 issue. The Company completed the
majority of its efforts in this area by the end of fiscal 1999, leaving adequate
time to assess and correct any significant issues that may materialize. As of
the end of fiscal 1999, the Company has incurred approximately $22 million for
ERP system upgrades and replacements related to the Year 2000 project. The
total remaining cost of the ERP system and the Year 2000 project is estimated at
$3 - 5 million and is being funded through operating cash flows. Of the total
project cost, approximately $23 - 25 million is attributable to the purchase and
implementation of the new hardware and software, which will be capitalized. The
remainder will be expensed as incurred and is not expected to have a material
effect on the results of operations during any quarterly or annual reporting
period.
16
<PAGE>
The Company's Year 2000 Steering Committee has developed contingency plans
intended to mitigate the possible disruptions that may result from the Year 2000
issue. The company's contingency plans include the use of alternative suppliers
and other appropriate measures necessary to operate its factories. The Company
has made reasonable efforts to ensure key suppliers and customers have
instituted some measure of readiness and has requested and received written
response from each. In key operating areas, the Company has conducted meetings
with suppliers to review Year 2000 plans and contingency options. Based on the
Company's evaluation of supplier readiness, the Company does not believe stock
piling of raw materials or increases in inventory levels is necessary. Internal
contingency plans provide the necessary readiness to address most supply chain,
manufacturing and delivery interruptions. The Company has instituted a formal
communication network to handle all internal and external communications during
January 2000. This network will provide on-call internal and external support
to effect timely remediation of Year 2000 issues. The contingency plans and
the related cost estimates will be revised as additional information becomes
available or additional needs arise.
The Company believes that the most reasonable and likely worst-case scenario
for the Company with respect to the Year 2000 issue is the failure of a critical
vendor, including but not limited to a utility or steel supplier, to provide
required goods and/or services after December 31, 1999. Such a failure could
result in temporary production outages and lost sales and profits. The Company
believes that because of the geographic dispersion of its operations, it is
unlikely an isolated third-party failure would have a material adverse effect on
the Company's results of operations, financial condition, or cash flow. The
Company also believes that the formulation of its contingency plans should
provide reasonable measures to reduce the severity and length of any possible
disruptions and losses. However, because the Company's Year 2000 issue
compliance is dependent upon key third party readiness, there can be no
assurance that the Company's Year 2000 issue compliance efforts will preclude a
Year 2000 issue or a series of issues outside its direct control from adversely
affecting its results of operations, financial condition, or cash flow. In
addition, although not anticipated, any failure by the Company to correct
critical internal computer systems before Year 2000 could also have such an
adverse effect.
The discussion of the Company's efforts, and management's expectations and
estimates, concerning the Year 2000 issue contain forward-looking statements.
The costs of the project and the timetable in which the Company plans to
complete the Year 2000 compliance requirements are based on management's
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
these plans. In addition, there can be no assurances that there will be no
adverse impact on the Company's relationships with its customers, vendors, or
other persons internal to the Company's operations. Specific factors that might
cause such material differences include, but are not limited to, unanticipated
problems identified in the ongoing Year 2000 issue compliance review, costs for
contingency plans, the availability and cost of internal and external resources
to implement, reprogram, and replace and test the Company's software and other
Year 2000 issue sensitive assets, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Environmental Matters
For information regarding environmental matters, see Item 1. "Business -
Environmental, Health and Safety Matters."
Effect of Inflation
Historically, the Company has generally been able to recover increased costs
of raw materials through price increases for the Company's products, although
there can be no assurances that this practice will continue. This ability,
together with cost reductions achieved through line rationalization and
productivity improvements, has mitigated the impact of inflation on the
Company's results of operations. Management currently believes that inflation
will not have a material adverse impact on the Company.
17
<PAGE>
Recent Accounting Pronouncements
In fiscal 1999, the Company adopted the provisions of SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information". This statement
requires public companies to report financial and descriptive information about
their reportable operating segments. The Company determined that it has a
single reportable segment.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities" This statement, effective for the Company's quarter
beginning October 2, 2000, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. The statement requires the Company
to recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The Company has not
completed the process of evaluating the impact that will result from adopting
SFAS 133. The Company is therefore unable to discuss the impact that adoption
of SFAS 133 will have on its financial position and results of operations when
the standard is adopted.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A variety of factors could cause business conditions and the
Company's actual results to differ materially from those expected by the Company
or expressed in the Company's forward-looking statements. These factors include
without limitation, timing and cost of plant start-up and closure, the Company's
ability to successfully integrate acquired businesses and implement its 3R
strategic initiatives; labor unrest; changes in market price or market demand;
changes in raw material costs or availability; loss of business from customers;
unanticipated expenses; changes in financial markets; potential equipment
malfunctions; the Company's ability to identify and remedy Year 2000 issues; the
timing and costs of plant start-up and closures and the other factors discussed
in the Company's filings with the Securities and Exchange Commission.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The Company's Credit Agreement permits the Company to borrow up to $150
million provided certain conditions and restrictive financial covenants are met.
Borrowings under the Credit Agreement bear interest at either the prime rate or
LIBOR plus an applicable spread percentage at the option of the Company. The
interest rate spread over LIBOR is determined each quarter based on the ratio of
EBITDA to total debt. At October 3, 1999 the applicable spread was 1.5%. At
October 3, 1999, the Company had borrowings under the Credit Agreement of $46.5
million that were subject to interest rate risk. Each 1.0% increase in interest
rates would impact pretax earnings by $0.5 million at the $46.5 million debt
level of October 3, 1999.
18
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
See the attached Consolidated Financial Statements pages F-1 through F-28.
Item 9. Changes in and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
- --------------------
Inapplicable.
PART III
Item 10. Directors and Executive Officers
--------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be filed
with the Commission.
Item 11. Executive Compensation
----------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be filed
with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be filed
with the Commission.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be filed
with the Commission.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
The following documents are filed as a part of this report:
(a) (1) The Consolidated Financial Statements included in Item 8 hereof
and set forth on pages F-1 through F-28.
(2) The Financial Statement Schedules listed in the Index to the
Financial Statement Schedules.
(3) The exhibits listed in the Index to Exhibits.
(b) Reports on Form 8 - K.
The Company did not file any Reports on Form 8 - K during the fourth quarter
of fiscal 1999.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BWAY CORPORATION
By /s/ Warren J. Hayford
-------------------------------------------------
Warren J. Hayford
Chairman of the Board and Chief Executive Officer
Date: December 17, 1999
--------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities indicated on December 16, 1999.
<TABLE>
<CAPTION>
Signatures Title
- ---------- -----
<S> <C>
/s/ Warren J. Hayford Chairman of the Board, Chief Executive Officer and Director
- ------------------------------------ (Principal Executive Officer)
Warren J. Hayford
/s/ John T. Stirrup President, Chief Operating Officer and Director
- ------------------------------------
John T. Stirrup
/s/ James W. Milton Executive Vice President and Director
- ------------------------------------
James W. Milton
/s/ John M. Casey Executive Vice President and Chief Financial Officer
- ------------------------------------ (Principal Financial Officer)
John M. Casey
/s/ Kevin C. Kern Vice President and Corporate Controller
- ------------------------------------ (Principal Accounting Officer)
Kevin C. Kern
/s/ Jean-Pierre Ergas Non-executive Vice Chairman and Director
- ------------------------------------
Jean-Pierre Ergas
/s/ Thomas A. Donahoe Director
- ------------------------------------
Thomas A. Donahoe
/s/ Alexander P. Dyer Director
- ------------------------------------
Alexander P. Dyer
/s/ John E. Jones Director
- ------------------------------------
John E. Jones
/s/ John W. Puth Director
- ------------------------------------
John W. Puth
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of BWAY Corporation:
We have audited the accompanying consolidated balance sheets of BWAY Corporation
and subsidiaries (the "Company") as of October 3, 1999 and September 27, 1998
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended October 3, 1999.
Our audits also included the financial statement schedules listed in the Index
to the financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of October 3, 1999
and September 27, 1998 and the results of its operations and its cash flows for
each of the three years in the period ended October 3, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects,
the information set forth therein.
Atlanta, Georgia
November 24, 1999
F-1
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
October 3, September 27,
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 696 $ 2,303
Accounts receivable, net of allowance for doubtful accounts
of $506 and $533 52,868 35,574
Inventories, net 49,031 39,723
Current income taxes receivable 3,598 2,387
Deferred tax asset 4,612 4,251
Assets held for sale 4,818 5,377
Other current assets 2,803 1,712
-------- --------
Total current assets 118,426 91,327
PROPERTY, PLANT, AND EQUIPMENT - Net 144,716 133,960
OTHER ASSETS:
Goodwill, net of accumulated amortization of $9,852 and $7,514 79,366 70,234
Intangible assets, net 10,774 12,045
Deferred financing costs, net of accumulated amortization
of $1,995 and $1,247 3,727 4,298
Other assets 5,014 1,847
-------- --------
Total other assets 98,881 88,424
-------- --------
$362,023 $313,711
======== ========
</TABLE>
F-2
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
October 3, September 27,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 65,377 $ 57,095
Accrued salaries and wages 9,104 9,740
Accrued interest 5,171 4,798
Accrued rebates 8,753 5,959
Current maturities of long-term debt 672
Other current liabilities 15,875 12,326
-------- --------
Total current liabilities 104,280 90,590
LONG-TERM DEBT 146,500 121,600
LONG-TERM LIABILITIES:
Deferred income taxes 17,667 15,118
Other 11,523 9,215
-------- --------
Total long-term liabilities 29,190 24,333
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized 5,000,000 shares
Common stock, $.01 par value; authorized 24,000,000 shares,
issued 9,851,002 shares 99 99
Additional paid-in capital 37,202 37,395
Retained earnings 55,819 50,192
-------- --------
93,120 87,686
Less treasury stock, at cost, 541,978 and 490,384 shares 11,067 10,498
-------- --------
Total stockholders' equity 82,053 77,188
-------- --------
$362,023 $313,711
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Year Ended
---------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
NET SALES $ 467,099 $ 401,089 $ 402,150
COSTS, EXPENSES, AND OTHER:
Cost of products sold (excluding depreciation and amortization) 404,492 336,588 341,406
Depreciation and amortization 17,246 13,465 13,024
Selling and administrative expense 19,678 22,748 19,651
Restructuring and impairment charge 11,532
Interest expense, net 14,733 13,021 10,649
Gain on curtailment of postretirement benefits (1,861) (5,828)
Other, net 33 127 998
---------- ---------- ----------
Total costs, expenses, and other 456,182 395,620 379,900
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING 10,917 5,469 22,250
PROVISION FOR INCOME TAXES 5,290 2,789 9,146
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 5,627 2,680 13,104
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR SYSTEMS DEVELOPMENT COSTS - Net of related tax
benefit of $823 (1,161)
---------- ---------- ----------
NET INCOME $ 5,627 $ 1,519 $ 13,104
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE:
Income before cumulative effect of change in accounting $ 0.60 $ 0.28 $ 1.33
Cumulative effect of change in accounting (0.12)
---------- ---------- ----------
Net income $ 0.60 $ 0.16 $ 1.33
========== ========== ==========
DILUTED EARNINGS PER COMMON SHARE:
Income before cumulative effect of change in accounting $ 0.60 $ 0.27 $ 1.31
Cumulative effect of change in accounting (0.12)
---------- ---------- ----------
Net income $ 0.60 $ 0.15 $ 1.31
========== ========== ==========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING 9,322,738 9,527,120 9,817,323
========== ========== ==========
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING 9,452,757 9,958,537 9,982,574
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Shares
------------------- Additional
Common Treasury Common Paid-In Retained Treasury
Stock Stock Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - September 29, 1996 6,565 (33) $ 66 $ 37,612 $ 35,569 $ (618) $72,629
Net income 13,104 13,104
Issuance of common stock for 3-for-2 stock split 3,283 (17) 33 (33)
Issuance of treasury stock under employee
savings plan 43 830 830
Purchase of treasury stock, net (45) (1,147) (1,147)
Stock options exercised 3 50 50
----- ---- ----- -------- -------- -------- -------
BALANCE - September 28, 1997 9,851 (52) 99 37,629 48,673 (935) 85,466
Net income 1,519 1,519
Purchase of treasury stock, net (507) (11,117) (11,117)
Issuance of treasury stock for stock options exercised 69 (505) 1,554 1,049
Tax benefit of stock options exercised 271 271
----- ---- ----- -------- -------- -------- -------
BALANCE - September 27, 1998 9,851 (490) 99 37,395 50,192 (10,498) 77,188
Net income 5,627 5,627
Purchase of treasury stock, net (56) (156) (662) (818)
Issuance of treasury stock for stock options exercised 4 (37) 93 56
----- ---- ----- -------- -------- -------- -------
BALANCE - October 3, 1999 9,851 (542) $ 99 $ 37,202 $ 55,819 $(11,067) $ 82,053
===== ==== ===== ======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended
--------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,627 $ 1,519 $ 13,104
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 13,355 9,880 8,860
Amortization of goodwill and other intangibles 3,891 3,585 4,164
Amortization of deferred financing costs 748 706 458
Gain on curtailment of postretirement benefits (1,861) (5,828)
Cumulative effect of change in accounting principle (net) 1,161
Provision for doubtful accounts (27) (47) 190
Restructuring and impairment charge 11,532
Loss (gain) on disposition of property, plant, and equipment (103) (23) 1,397
Deferred income taxes 7,094 1,009 2,996
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable (5,484) 6,279 2,953
Inventories (5,098) 6,892 (1,088)
Other assets (1,553) 2,569 1,268
Accounts payable 8,041 (9,051) 13,539
Accrued liabilities (826) (5,958) 249
Income taxes, net (1,213) (2,631) 2,851
-------- -------- --------
Net cash provided by operating activities 24,452 25,561 45,113
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (27,892) 463 (41,619)
Capital expenditures (33,230) (33,826) (22,961)
Proceeds from disposition of property, plant, and equipment 14,626 484
Other 302
-------- -------- --------
Net cash used in investing activities (46,495) (32,879) (64,278)
(Continued)
</TABLE>
F-6
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year Ended
-------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net borrowings (repayments) under bank revolving credit agreement $ 24,900 $ 8,100 $(80,293)
Proceeds from issuance of Notes 100,000
Repayments on long-term debt (672) (1,181) (165)
Increase (decrease) in unpresented bank drafts (2,853) 11,556 4,208
Purchases of treasury stock, net (818) (11,117) (1,147)
Financing costs incurred (177) (160) (3,966)
Issuance of treasury stock for options exercised 56 1,049 50
-------- -------- --------
Net cash provided by financing activities 20,436 8,247 18,687
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,607) 929 (478)
CASH AND CASH EQUIVALENTS:
Beginning of year 2,303 1,374 1,852
-------- -------- --------
End of year $ 696 $ 2,303 $ 1,374
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (refunded) during the year for:
Interest $ 14,961 $ 13,981 $ 5,666
======== ======== ========
Income taxes $ (591) $ 4,412 $ 4,774
======== ======== ========
Details of businesses acquired were as follows:
Fair value of assets acquired $ 47,861 $ $ 61,259
Liabilities assumed (19,969) (18,890)
Long-term note issued (750)
Working capital adjustments 463
-------- -------- --------
Net cash paid for acquisitions $ 27,892 $ 463 $ 41,619
======== ======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Amounts owed for capital expenditures $ 929 $ 2,393 $ 4,140
======== ======== ========
Note receivable from sale of assets $ 2,440
========
Common stock issued under employee savings plan $ 830
========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
BWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 3, 1999 AND SEPTEMBER 27, 1998 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
OCTOBER 3, 1999
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Operations - BWAY Corporation ("BWAY") is a holding company whose
subsidiaries, Brockway Standard, Inc., Milton Can Company, Inc., Brockway
Standard (New Jersey), Inc., BMAT, Inc., and Brockway Standard (Canada), Inc.
(collectively the "Company") manufacture and distribute metal containers and
provide materials center services in the United States and Canada.
Principles of Consolidation - The consolidated financial statements of the
Company include the accounts of BWAY and its wholly owned subsidiaries. All
material intercompany balances and transactions have been eliminated in
consolidation.
Fiscal Year - The Company operates on a 52/53-week fiscal year ending on the
Sunday closest to September 30 of the applicable year.
Common Stock - On September 22, 1997, the Company increased the number of
shares of common stock outstanding through a 3-for-2 stock split, effected in
the form of a common stock dividend on the Company's issued and outstanding
shares. Accordingly, per share and share data have been adjusted to give
retroactive effect to the stock split for all periods presented.
Cash and Cash Equivalents - For purposes of the presentation of the
consolidated statements of cash flows, the Company considers all highly
liquid investments purchased with original maturities of three months or less
to be cash equivalents.
Inventories - Inventories are carried at the lower of cost or market, with
cost determined under the last-in, first-out (LIFO) method of inventory
valuation.
Property, Plant, and Equipment - Property, plant, and equipment is recorded
at cost. Depreciation is provided over the estimated useful lives of the
assets on a straight-line basis for financial reporting purposes.
Expenditures for major renewals and replacements are capitalized.
Expenditures for maintenance and repairs are charged to income as incurred.
When property items are retired or otherwise disposed of, amounts applicable
to such units are removed from the related asset and accumulated depreciation
accounts and any resulting gain or loss is credited or charged to income.
Useful lives are as follows:
Buildings and improvements 10-30 years
Machinery and equipment 5-15 years
Furniture and fixtures 5-7 years
Computer systems 1-7 years
F-8
<PAGE>
Interest is capitalized in connection with the installation of major
machinery and equipment acquisitions. The capitalized interest is recorded
as part of the cost of the asset to which it relates and is amortized over
the asset's estimated useful life. In fiscal 1999,1998, and 1997, $0.6
million, $1.5 million, and $.3 million of interest cost was capitalized,
respectively.
Computer Information Systems - Costs directly associated with the initial
purchase, development, and implementation of computer information systems are
capitalized and included in property, plant, and equipment. Such costs are
amortized on a straight-line basis over the expected useful life of the
systems, principally five to seven years. Ongoing maintenance costs of
computer information systems are expensed as incurred.
Intangible Assets - Intangible assets consist of identifiable intangibles
(trademarks, customer lists, and covenants not-to-compete) and goodwill.
Identifiable intangibles are amortized over the term of the agreement (5 to 7
years) or estimated useful life (2 to 17 years). Goodwill is amortized on a
straight-line basis over the estimated useful life (20 to 40 years).
Deferred Financing Costs - Deferred financing costs are being amortized over
the term of the related loan agreement using the straight-line method, which
approximates the effective yield method.
Revenue Recognition - The Company recognizes revenue at the time the product
is shipped to the customer.
Accrued Rebates - The Company enters into contractual agreements for rebates
on certain products with its customers. As sales occur, a provision for
rebates is recorded as a reduction to arrive at net sales and is accrued on
the balance sheet.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for
Income Taxes." SFAS 109 requires, among other things, the use of the
liability method of computing deferred income taxes. Under the liability
method, the effect of changes in corporate tax rates on deferred income taxes
is recognized currently as an adjustment to income tax expense. The
liability method also requires that deferred tax assets or liabilities be
recorded based on the difference between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of - The
Company reviews for impairment, on a quarterly basis, long-lived assets and
certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of any asset may not be reasonable based on
estimates of future undiscounted cash flows. In the event of an impairment,
the asset is written down to its fair market value. Impairment of goodwill
and write-down, if any, is measured based on estimates of future undiscounted
cash flows including interest charges. Assets to be disposed of are recorded
at the lower of net book value or fair market value less cost to sell at the
date management commits to a plan of disposal and are classified as Assets
Held for Sale on the Consolidated Balance Sheet.
Disclosures About Fair Value of Financial Instruments - A summary of the fair
value of the Company's financial instruments and the methods and significant
assumptions used to estimate those values is as follows:
Short-term Financial Instruments - The fair value of short-term financial
instruments, including cash and cash equivalents, trade accounts receivable
and payable, certain accrued liabilities, and current
F-9
<PAGE>
maturities of long-term debt approximates their carrying amounts in the
financial statements due to the short maturity of such instruments.
Long-Term Debt - The fair value of the variable rate Credit Agreement
borrowings approximates the carrying amount since the currently effective
rates reflect market rates. The fair value of publicly traded fixed rate
subordinated notes payable is based on the quoted market price.
Accounting Change - On November 20, 1997, the Financial Accounting Standards
Board's ("FASB") Emerging Issues Task Force ("EITF") issued a consensus on
the accounting treatment of certain information systems and process
reengineering costs. The Company was involved in a business information
systems and process reengineering project that was 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.
Accounting for Stock Options - The Company adopted SFAS 123, "Accounting for
Stock-Based Compensation," as of September 28, 1997. As permitted under the
statement, the Company has continued to account for stock-based compensation
under the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees." Compensation cost
for employees' and directors' stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant
over the exercise price amount an employee or director must pay to acquire
the stock.
Earnings Per Common Share - Earnings per common share are based on the
weighted average number of common shares and common stock equivalents
outstanding during each year 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 amended plan. Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options.
Segments - In fiscal 1999, the Company adopted the provisions of SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information. This
statement requires public companies to report financial and descriptive
information about their reportable operating segments. The Company
determined that it has a single reportable segment.
New Accounting Pronouncement - In June 1998, the FASB issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement, effective for the Company's quarter beginning October 2, 2000,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. The statement requires the Company to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The Company has not completed the process
of evaluating the impact that will result from adopting SFAS 133. The
Company is therefore unable to discuss the impact that adoption of SFAS 133
will have on its financial position and results of operations when the
standard is adopted.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-10
<PAGE>
2. ACQUISITIONS
Ball Aerosol - On October 28, 1996, the Company acquired substantially all of
the assets related to the metal aerosol can business from Ball Metal Food
Container Corporation, a wholly owned subsidiary of Ball Corporation. The
assets consist of a facility in Cincinnati which includes a material center
and substantially all the assets used in connection with the marketing,
distribution, selling, manufacturing, designing, and engineering of metal
aerosol cans. The Company paid approximately $42.4 million for the acquired
business. The purchase method of accounting was used to establish and record
a new cost basis for the assets acquired and liabilities assumed. The excess
of the aggregate purchase price over the aggregate fair market value of net
identifiable assets acquired was approximately $23 million.
U. S. Can Metal Services Operations - On November 9, 1998, the Company
acquired substantially all of the assets and assumed certain of the
liabilities of the United States Can Company's metal services operations
("U.S. Can Metal Services"). The purchase price was approximately $27.7
million in cash after adjustments for working capital. The acquisition
included three operating plants and one non-operating plant. The acquired
facilities operated two different businesses, coating and lithography which
is part of the Company's core business, and tinplate metal services which is
not a business of the Company. On November 17, 1998, the Company signed a
binding letter of intent to sell the tinplate services business. Anticipating
the sale of the tinplate metal services business, the Company closed the
Brookfield, Ohio location in March, 1999 and closed the Chicago Metal
location in September, 1999
The purchase method of accounting was used to establish and record a new cost
basis for the assets acquired and liabilities assumed, and an allocation of
the purchase price was finalized at October 3, 1999. The operating results
for U.S. Can Metal Services have been included in the Company's consolidated
financial statements since the date of acquisition except for the tinplate
services business which was sold as described below. As of October 3, 1999,
the excess aggregate purchase price over the aggregate fair market value of
net identifiable assets acquired was $10.8 million and is being amortized
over 40 years.
The Company completed the sale of the tinplate services business in the
fourth quarter of fiscal 1999. In connection with the sale, the Company
received a note receivable recorded at $2.4 million. No gain was recognized.
The tinplate services business primarily purchased, processed and sold
nonprime steel to third party customers. The Company excluded tinplate metal
services business losses of $4.4 million, including interest expense of $0.7
million, from results of operations for the year ended October 3, 1999.
Management committed to a plan to exit certain activities of the acquired
facilities and integrate acquired assets and businesses with BWAY facilities.
In connection with the recording of the purchase, the Company established a
reorganization liability of approximately $11 million. The reorganization
liability includes $1.8 million in severance, $5.5 million in facility
closing costs, and $3.7 million in equipment demolition costs. The
reorganization liability represents the direct incremental costs expected to
be incurred, which have no future economic benefit to the Company.
During fiscal 1999, the Company has charged $0.4 million in severance, $2.9
million in facility closing costs and $1.5 million in demolition costs. In
connection with the plant closures, the plan called for the termination of
308 employees. As of October 3, 1999, 191 employees have been terminated.
The Company has one remaining facility scheduled to close in the fourth
quarter of fiscal 2000.
F-11
<PAGE>
The reorganization liability, which is included in other current liabilities,
at October 3, 1999 includes the following (in thousands):
Facility closure costs $2.6
Severance and benefits costs 1.3
Demolition costs 2.3
----
$6.2
====
The operating results for the U. S. Can Metal Services and Ball Aerosol
acquisitions have been included in the Company's consolidated financial
statements since the dates of acquisition.
The following unaudited pro forma results assume the acquisitions of U.S. Can
Metal Services, excluding tinplate services, and Ball Aerosol occurred at the
beginning of the fiscal year ended October 3, 1999 and September 28, 1997,
after giving affect to certain pro forma adjustments. The adjustments were
made to reflect the goodwill amortization cost in excess of the net assets
acquired, increased interest expense, and the estimated related income tax
effects
(In thousands, except per share amounts)
Year Ended
---------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
(U. S. Can Metal
Services) (Ball Aerosol)
Net sales $476,149 $401,089 $406,476
Net income 5,374 1,519 13,202
Basic earnings per common share 0.58 0.16 1.34
Diluted earnings per common share 0.57 0.15 1.32
The unaudited pro forma financial information is not necessarily indicative
of the operating results that would have occurred had the acquisitions been
consummated as of the beginning of the period presented, nor is it
necessarily indicative of future operating results.
3. INVENTORIES
Inventories consist of the following (in thousands):
October 3, September 27,
1999 1998
Inventories at FIFO cost:
Raw materials $ 7,950 $ 6,555
Work-in-progress 30,543 22,695
Finished goods 10,538 10,696
------- -------
49,031 39,946
LIFO reserve 546 (223)
Market reserve (546)
------- -------
Inventories, net $49,031 $39,723
======= =======
F-12
<PAGE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following (in thousands):
October 3, September 27,
1999 1998
Land $ 1,649 $ 2,979
Building and improvements 12,631 16,202
Machinery and equipment 131,283 107,041
Furniture, fixtures, and information technology 26,114 11,022
Construction-in-progress 17,041 30,259
-------- --------
188,718 167,503
Less accumulated depreciation (44,002) (33,543)
-------- --------
Property, plant, and equipment - net $144,716 $133,960
======== ========
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
October 3, September 27,
1999 1998
Customer lists $ 7,753 $ 7,486
Tradename 4,704 4,704
Noncompete agreements 4,509 4,494
------- -------
16,966 16,684
Less accumulated amortization (6,192) (4,639)
------- -------
Intangible assets, net $10,774 $12,045
======= =======
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Included in accounts payable and accrued salaries and wages at October 3,
1999 and September 27, 1998 are bank drafts issued and outstanding for which
no rights of offset exist to cash and cash equivalents, as follows (in
thousands):
October 3, September 27,
1999 1998
Bank drafts issued and outstanding included in:
Accounts payable $20,464 $22,027
Accrued salaries and wages 1,136 2,426
------- -------
Bank drafts $21,600 $24,453
======= =======
F-13
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
October 3, September 27,
1999 1998
<S> <C> <C>
Senior Subordinated Notes $100,000 $100,000
Credit Agreement 46,500 21,600
Other borrowings 672
-------- --------
146,500 122,272
Less current maturities of long-term debt 672
-------- --------
Long-term debt $146,500 $121,600
======== ========
</TABLE>
Senior Subordinated Notes
On April 11, 1997, the Company received the net proceeds of approximately $96
million from a private placement of $100 million 10 1/4% Senior Subordinated
Notes due 2007 (the "Notes").
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 of each year, commencing on October 15, 1997. The Notes are
general unsecured senior subordinated obligations of the Company and are
effectively subordinated to all secured indebtedness, as defined, of the
Company to the extent of the value of the assets securing any such
indebtedness. The Notes are redeemable, in whole or in part, at the option
of the Company, on or after April 15, 2002 at the prices specified in the
Notes (105.125% on April 15, 2002 declining annually to 100% on April 15,
2005). In addition, until April 15, 2000, the Company may, at its option,
redeem up to 33 1/3% of the aggregate principal amount of the Notes
originally issued at a redemption price equal to 110 1/4% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption,
with the net cash proceeds of one or more public or private sales of common
stock of the Company, subject to certain provisions of the indenture. Upon
the occurrence of a Change in Control, as defined in the Notes, the Company
will be required to make an offer to repurchase the Notes at 101% of the
principal amount plus accrued and unpaid interest to the date of repurchase.
The Notes contain certain restrictive covenants, including limitations on
asset sales, additional indebtedness, and mergers. Under the Notes'
convenants, the Company is restricted in its ability to pay shareholder
dividends and other restricted payments in an amount greater than $8.7
million at October 3, 1999.
During fiscal 1998, the Company filed a registration statement and exchanged
the Notes for the Company's 10 1/4% Senior Subordinated Notes due 2007,
Series B (the "Exchange Notes"). BWAY is a holding company with no
independent operations, although it incurs expenses on behalf of its
operating subsidiaries. BWAY has no significant assets other than the common
stock of its subsidiaries. The Exchange 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.
F-14
<PAGE>
Credit Agreement
In October 1997, the Company amended its Credit Agreement with Deutsche Bank
(formerly Bankers Trust Company) and Bank of America (formerly NationsBank,
N.A.) (the "Credit Agreement"). The amendment lowered the borrowing limit
from $150 million to $100 million. The amendment provides the Company with
lower interest rate margins and greater flexibility with regard to
investments in acquisitions, joint ventures and other subsidiaries. The
amendment also provides the Company with a second option to increase the
borrowing limit by another $25 million for a maximum borrowing limit of $150
million, provided certain conditions are met and provided that only one $25
million increase occur in any twelve-month period. The amendment also
extends the expiration of the Credit Agreement one year to June 17, 2002.
On November 2, 1998, the Company and its lenders executed another amendment
to the Credit Agreement which modified certain restrictive covenants and
provided greater flexibility with respect to investments in joint ventures.
Additionally, the Company exercised its option to increase the available
borrowing limit to $125 million from $100 million. The Credit Agreement
currently allows the Company to borrow up to $125 million or $150 million if
certain conditions are met. The interest rates under the Credit Agreement
are based on rate margins for either prime rate as announced by Bank of
America from time to time ("Prime") or LIBOR plus an applicable rate spread,
at the option of the Company. The applicable rate margin is determined on a
quarterly basis by a review of the Company's leverage ratio. The Company's
borrowing rate is 7.2% at October 3, 1999, and 7.0% atSeptember 27, 1998.
Loans under the Credit Agreement are unsecured and can be prepaid at the
option of the Company without premium or penalty. The Credit Agreement is
subject to certain restrictive covenants, including covenants which require
the Company to maintain a certain minimum level of net worth and a maximum
ratio for leverage indebtedness. Under this agreement, BWAY is restricted in
its ability to pay shareholder dividends and other restricted payments in an
amount greater than approximately $8.7 million at October 3, 1999 and to
incur additional indebtedness. The Company's subsidiaries are restricted in
their ability to transfer funds to the Company, except for funds to be used
to effect approved acquisitions, pay dividends, reimburse the Company for
operating and other expenditures made on behalf of the subsidiaries and repay
permitted intercompany indebtedness.
Scheduled maturities of long-term debt as of October 3, 1999 are as follows
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year
<S> <C>
2002 $ 46,500
Thereafter 100,000
--------
$146,500
========
</TABLE>
The fair value of long-term debt at October 3, 1999 and September 27, 1998
was estimated at $148.1 million and $126.6 million, respectively.
F-15
<PAGE>
8. STOCKHOLDERS' EQUITY
Earnings Per Share - The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations for
income before the cumulative effect of change in accounting:
<TABLE>
<CAPTION>
(In thousands, except share and per share amounts)
Year Ended
-------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
Numerator for Basic and Diluted Earnings per Share:
Income before Cumulative Effect of
Change in Accounting $ 5,627 $ 2,680 $ 13,104
========== ========== ==========
Denominator:
Denominator for basic earnings per share for
income available to common stockholders 9,322,738 9,527,120 9,817,323
Effect of Dilutive Stock Options 130,019 431,417 165,251
---------- ---------- ----------
Denominator for diluted earnings per share for
income available to common stockholders 9,452,757 9,958,537 9,982,574
========== ========== ==========
Earnings per Common Share:
Basic $ 0.60 $ 0.28 $ 1.33
========== ========== ==========
Diluted $ 0.60 $ 0.27 $ 1.31
========== ========== ==========
</TABLE>
Stock Option Plans
In June 1995, the Company adopted the Company's 1995 Long-Term Incentive Plan
and the Formula Plan for Non-Employee Directors (the "Formula Plan") for
certain directors, officers, employees, and consultants of the Company and
its subsidiaries. In February 1997, the Company i) adopted the Amended and
Restated 1995 Long-Term Incentive Plan which increased the aggregate number
of shares of common stock authorized for issuance thereunder from 735,000 to
1,125,000, and ii) froze the Formula Plan with only 45,000 of the available
150,000 shares of common stock being granted thereunder. In February 1998,
the Company adopted the Second Amended and Restated 1995 Long-Term Incentive
Plan (the "Amended Plan") which further increased the aggregate number of
shares of common stock authorized for issuance thereunder from 1,125,000 to
1,425,000. In February 1998, the Company adopted the third amendment and
restatement of the Amended Plan (as so amended and restated, the "Current
Plan") which further increased the aggregate number of shares of common stock
authorized for issuance thereunder from 1,425,000 to 1,825,000.The options
generally become exercisable in installments of 33% per year on each of the
first through third anniversaries of the grant. The Current Plan will
terminate on May 31, 2005 unless sooner terminated by the Board. Termination
of the Current Plan will not affect grants made prior to termination. The
Current Plan authorizes grants of stock options to participants from time to
time as determined by the Management Resources, Nominating and Compensation
Committee of the Board. Options granted under the Current Plan may be
incentive stock options as described in Section 422 of the Internal Revenue
Code, non-qualified stock options, or a combination thereof.
F-16
<PAGE>
As of October 3, 1999, September 27, 1998, and September 28, 1997, the fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: expected dividends of 0.0%, expected volatility 52.33% in 1999,
37.67% in 1998, and 30% in 1997, risk-free interest of 6.58%, and expected
lives of 6.0 years.
A summary of the status of the Company's two stock option plans as of October
3, 1999 and changes during fiscal 1997, 1998, and 1999 is presented below:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Fixed Options Shares Price
<S> <C> <C>
Outstanding at September 29, 1996 892,800 $11.52
Granted 66,300 14.06
Forfeited (12,600) 12.67
Exercised (4,200) 11.87
----------
Outstanding at September 28, 1997 942,300 11.72
Granted 332,900 20.48
Forfeited (14,800) 19.26
Exercised (69,400) 12.16
----------
Outstanding at September 27, 1998 1,191,000 14.05
Granted 448,274 14.77
Forfeited (36,752) 20.68
Exercised (4,500) 12.67
----------
Outstanding at October 3, 1999 1,598,022 14.07
==========
Exercisable at September 28, 1997 368,100 10.99
==========
Exercisable at September 27, 1998 592,500 11.37
==========
Exercisable at October 3, 1999 883,155 12.70
==========
Weighted average grant date fair value of options granted
during the year ended October 3, 1999 $ 8.51
==========
Weighted average grant date fair value of options granted
during the year ended September 27, 1998 $ 13.08
==========
Weighted average grant date fair value of options granted
during the year ended September 28, 1997 $ 6.15
==========
</TABLE>
F-17
<PAGE>
The following table summarizes information about stock options outstanding at
October 3, 1999:
<TABLE>
<CAPTION>
Weighted
Number Average Weighted Number
Outstanding at Remaining Average Exercisable at
Range of October 3, Contractual Exercise October 3,
Exercise Prices 1999 Life Price 1999
<S> <C> <C> <C> <C>
$9.25 - 10.00 263,011 5.8 $ 9.67 259,344
10.01 - 11.00 48,000 5.9 10.68 39,900
11.01 - 12.00 26,700 7.0 11.67 2,100
12.01 - 13.00 653,856 7.5 12.59 429,456
13.01 - 14.00 14,042 9.5 13.26
14.01 - 15.00 57,000 7.8 14.35 33,000
16.01 - 17.00 233,072 9.1 16.50
18.01 - 19.00 42,000 7.9 18.17 28,000
19.01 - 20.00 215,100 7.2 19.38 72,376
21.01 - 22.00 15,900 8.4 21.38 5,301
26.01 - 26.50 29,341 6.9 26.50 13,678
--------- --- ------ -------
1,598,022 7.4 $14.07 883,155
========= === ====== =======
</TABLE>
The fair value of options granted during the years ended October 3, 1999,
September 27, 1998, and September 28, 1997 was $3.8 million, $4.4 million,
and $.4 million, respectively. The Company applies Accounting Principles
Board Opinion 25 and related Interpretations in accounting for its stock
option plans. Accordingly, no compensation cost has been recognized for its
fixed stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of FASB Statement 123,
the Company's net income and earnings per share for each of the three years
in the period ended October 3, 1999 would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income (loss) to common shareholders (in thousands):
As reported $5,627 $1,519 $13,104
====== ====== =======
Pro forma $3,006 $ (289) $12,316
====== ====== =======
Net income per common and common equivalent share:
Basic earnings per common share:
As reported $ 0.60 $ 0.16 $ 1.33
====== ====== =======
Pro forma $ 0.32 $(0.03) $ 1.25
====== ====== =======
Diluted earnings per common share:
As reported $ 0.60 $ 0.15 $ 1.31
====== ====== =======
Pro forma $ 0.32 $(0.03) $ 1.23
====== ====== =======
</TABLE>
F-18
<PAGE>
Shareholder Rights Plan
The Company has a Shareholder Rights Plan, amended through November 26, 1997
(the "Rights Plan"), under which a preferred share purchase right is
presently attached to and trades with each outstanding share of the Company's
common stock. The rights become exercisable and transferable apart from the
common stock after a person or group other than an Exempt Person (as defined
in the Rights Plan), without the Company's consent, acquires beneficial
ownership of, or the right to obtain beneficial ownership of, 15% or more of
the Company's common stock or ten business days after a person or group
announces or commences a tender offer or exchange offer that could result in
15% ownership. Once exercisable, each right entitles the holder to purchase
one fifteen-hundredth share of Junior Participating Series A Preferred Stock
at an exercise price of $60 per share subject to adjustment to prevent
dilution. The rights have no voting power and no current dilutive effect on
earnings per common share. The rights expire on June 15, 2005 and are
redeemable at the discretion of the Board of Directors at $.01 per share.
If a person acquires 15% ownership, except in an offer approved by the
Company under the Rights Plan, then each right not owned by the acquirer or
related parties will entitle its holder to purchase, at the right's exercise
price, additional shares of common stock or common stock equivalents. In
addition, after an acquirer obtains 15% ownership, if the Company is involved
in certain mergers, business combinations, or asset sales, each right not
owned by the acquirer or related persons will entitle its holder to purchase,
at the right's exercise price, additional shares of common stock of the other
party to the transaction.
9. INCOME TAXES
The Company files a consolidated federal income tax return. Deferred income
taxes are provided to recognize the differences between the carrying amount
of assets and liabilities for financial statement purposes and the amounts
used for income tax purposes.
F-19
<PAGE>
Components of net deferred tax liability are as follows (in thousands):
<TABLE>
<CAPTION>
October 3, September 27,
1999 1998
<S> <C> <C>
Deferred tax liabilities:
Property, plant, and equipment $24,561 $20,243
Inventory 1,249
Intangible assets 1,372 802
Other 626 657
------- -------
27,808 21,702
Deferred tax assets:
Restructuring reserves 4,369 3,327
Employee benefits 6,005 4,732
Customer claims/rebates 1,854 891
Inventory 475
Accounts receivable 221 186
Other 2,304 1,224
------- -------
14,753 10,835
------- -------
Net deferred tax liability $13,055 $10,867
======= =======
Net current deferred tax asset $(4,612) $(4,251)
Net noncurrent deferred tax liability 17,667 15,118
------- -------
$13,055 $10,867
======= =======
</TABLE>
The provision for income taxes is reconciled with the federal statutory rate
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- -----------------
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Income tax at federal statutory rate $3,821 35.0% $1,914 35.0% $7,788 35.0%
State income taxes, net of federal
income tax benefit 382 3.5% 275 5.0% 549 2.5%
Nondeductible amortization of
intangibles 734 6.7% 600 11.0% 754 3.4%
Other 353 3.2% 55 0.2%
------ ---- ------ ---- ------ ----
$5,290 48.4% $2,789 51.0% $9,146 41.1%
====== ==== ====== ==== ====== ====
</TABLE>
F-20
<PAGE>
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $(1,640) $1,473 $ 9,569
State (164) 307 1,449
Deferred 7,094 1,009 (1,872)
------- ------ -------
$ 5,290 $2,789 $ 9,146
======= ====== =======
</TABLE>
As of October 3, 1999, the Company has recognized deferred tax benefits of
$1.1 million related to alternative minimum tax carryforwards which have no
expiration date.
10. LEASE COMMITMENTS
The Company leases warehouses, office space, equipment, and vehicles under
operating leases. Rent expense during each of the last three fiscal years
was approximately $4.5 million (1999), $3.4 million (1998), and $4.2 million
(1997).
On August 20, 1999, the Company sold and leased back its Cincinnati
manufacturing facility. The sales price was $10.4 million. After deducting
closing costs of $0.6 million, the Company recorded a deferred gain on the
sale of $2.3 million which will be amortized over the life of the lease. The
amortization of the deferred gain recorded in earnings for the year ending
October 3, 1999 was $13,000. The lease term is 20 years with annual lease
payments of approximately $1.1 million. The lease has two 5 year renewal
terms that run consecutively after the basic term. The lease is accounted for
as an operating lease for financial reporting purposes.
At October 3, 1999, future minimum rental payments under noncancelable
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Operating
Fiscal Year Leases
<S> <C>
2000 $ 5,339
2001 4,822
2002 4,187
2003 3,127
2004 2,929
Thereafter 18,289
-------
Total minimum lease payments $38,693
=======
</TABLE>
F-21
<PAGE>
11. PROFIT SHARING AND PENSION PLANS
The Company has qualified profit sharing and savings plans for specified
employees. These plans are contributory defined contribution plans which
provide for employee contributions with a Company matching provision, and
for certain employees a deferred profit sharing component funded by the
Company. The Company's net contributions to the profit sharing and savings
plans for each of the last three fiscal years were approximately $1.3
million (1999), $.9 million (1998), and $.7 million (1997).
BSNJ has a noncontributory defined benefit pension plan covering a majority
of its salaried employees. The plan provides benefit payments using a
formula based on an employee's compensation and length of service. BSNJ
funds the plan in amounts equal to the minimum funding requirements of the
Employee Retirement Income Security Act of 1974, plus additional amounts as
BSNJ actuarial consultants advise to be appropriate and as management
approves from time to time. The Company froze this plan effective December
31, 1996. On January 1, 1998, the Company amended the plan to cover
substantially all nonunion employees. The plan provides for a contribution
of 4% of each participant's wages. Participant account balances earn
interest at 6% per annum.
Effective July 31, 1998, the Company amended the plan to terminate the plan
on that date. All participants became fully vested in their accounts on July
31, 1998. On July 29, 1999 the Company received approval to distribute the
assets in the plan to the participants. Substantially all assets were
distributed in November, 1999.
The periodic net expense (income) is comprised of the following:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ $2,294,900 $ 31,100
Interest cost on projected benefit obligation 307,500 284,100 191,300
Actual return on assets (158,400) (261,400) (399,800)
Net amortization and deferral (301,200) (135,000)
--------- ---------- ---------
Net pension expense (income) $(152,100) $2,182,600 $(177,400)
========= ========== =========
</TABLE>
F-22
<PAGE>
The following table shows the plan's funded status and amounts recognized in
the balance sheet:
<TABLE>
<CAPTION>
Year Ended
---------------------------
October 3, September 27,
1999 1998
<S> <C> <C>
Actuarial present value of benefit obligations - Vested $ 3,754,200 $ 4,439,100
=========== ===========
Accumulated benefit obligation $ 3,754,200 $ 4,439,100
=========== ===========
Fair value of plan assets $ 4,357,700 $ 5,077,100
Projected benefit obligation (3,754,200) (4,439,100)
----------- -----------
Funded status 603,500 638,000
Unrecognized net gain (470,300) (656,900)
Unrecognized prior service cost
Prepaid (accrued) pension expense $ 133,200 $ (18,900)
=========== ===========
The actuarial assumptions used were:
Discount rate 7.75% 7.00%
=========== ===========
Rate of increase in compensation levels 0.00% 0.00%
=========== ===========
Expected return on assets 9.00% 9.00%
=========== ===========
</TABLE>
Most of BSNJ's union employees are covered under multi-employer defined
benefit plans administered by the union. Total contributions charged to
expense for such plans are $.3 million for the year ended October 3, 1999,
$.4 million for the year ended September 27, 1998, and $.7 million for the
year ended September 28, 1997.
In connection with the acquisition of MCC, the Company assumed three defined
benefit postretirement medical plans. These plans are noncontributory and
provide certain medical benefits after retirement to covered union employees.
In June 1997, the Company and employees belonging to one union representing
approximately 50% of the employees at MCC reached a new collective bargaining
agreement. One of the provisions of the new agreement eliminates
postretirement medical benefits provided by the Company which resulted in the
recording of a curtailment gain of approximately $5.8 million.
In fiscal 1998, the Company reached new collective bargaining agreements with
unions representing approximately 34% of the hourly employees at the
Cincinnati, Ohio facility. The provisions of the new agreements
substantially eliminate unvested postretirement medical benefits provided by
the Company which resulted in the recording of curtailment gains of
approximately $1.9 million.
F-23
<PAGE>
As of October 3, 1999, in accordance with the terms of two applicable
collective bargaining agreements, the Company continues to offer
postretirement medical coverage to certain union employees who retire from
employment at MCC.
<TABLE>
<CAPTION>
Year Ended
----------------------------
October 3, September 27,
1999 1998
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 5,899,329 7,562,173
Service cost 29,319 29,319
Interest cost 392,493 412,028
Actuarial gain (948,165) 95,074
Curtailment gain (1,860,771)
Benefits paid (207,870) (338,494)
---------------------------
Benefit obligation at end of year $ 5,165,106 $ 5,899,329
===========================
Change in plan assets
Fair value of plan assets at beginning of year - -
Actual return on plan assets - -
Employer contribution 207,870 338,494
Benefits paid (207,870) (338,494)
---------------------------
Fair value of plan assets at end of year $ - $ -
===========================
Funded status (5,165,106) (5,899,329)
Unrecognized net actuarial loss (853,091) 95,074
---------------------------
Prepaid (accrued) benefit cost $(6,018,197) $(5,804,255)
===========================
Weighted-average assumptions as of year end
Discount rate 7.50% 6.75%
===========================
</TABLE>
For measurement purposes, a 10% annual rate of increase in the post 65 per
capita cost of covered health care benefits and a 8.5% annual rate of
increase in the pre 65 per capita cost of covered health care benefits were
assumed for 1999 and 1998. The rates were assumed to decrease by .5% per
year to 5% and remain at that level thereafter.
F-24
<PAGE>
<TABLE>
<CAPTION>
Year Ended
-------------------------
October 3, September 27,
1999 1998
<S> <C> <C>
Components of net periodic benefit cost
Service cost on benefits earned $ 29,319 29,319
Interest cost on accumulated postretirement benefit obligation 392,493 412,028
-----------------------
Net periodic benefit cost 421,812 441,347
Curtailment gain - (1,860,771)
-----------------------
Net effect charged to results from continuing operations $421,812 $(1,419,424)
=======================
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trends would have the following effects:
<TABLE>
<CAPTION>
Year Ended
--------------------------
October 3, September 27,
1999 1998
<S> <C> <C>
One-Percentage Point Increase:
Effect of Total Service and Interest Cost Components $ 56,215 $ 62,974
Effect on postretirement benefit obligation 645,576 880,047
One-Percentage Point Decrease:
Effect of Total Service and Interest Cost Components (32,313) (51,175)
Effect on postretirement benefit obligation (534,802) (715,705)
</TABLE>
12. RELATED PARTY TRANSACTIONS
BSNJ leases its primary operating facility under an operating lease from a
partnership in which certain members of the Company's management are
partners. The lease, which is for a five-year period ended September 30,
1999 with renewal options and carried a monthly lease payment of $52,547.
The Company exercised the first five year option through September 30, 2004
with a monthly lease payment of $56,391 beginning in fiscal year 2000.
13. RESTRUCTURING AND IMPAIRMENT CHARGE
On June 3, 1998, the Board of Directors approved a restructuring plan to
improve operating efficiencies. The plan involves the rationalization of
three existing facilities, the shift of related production to other
facilities, and the elimination of an internal transportation department.
The facilities closed in fiscal 1999 were Solon (Ohio) and Northeast Tin
Plate (New Jersey). The facility scheduled for closure in fiscal 2000 is
Farmer's Branch (Texas).
The 1998 restructuring and impairment charge totaled $11.5 million and
consisted of the following: $7.8 million related to the closure
F-25
<PAGE>
of the plants and transportation department and $3.7 million related to
other asset impairments. The $7.8 million related to the plant and
transportation department closure includes $2.1 million for severance costs,
$2.2 million for other facility closure costs and $3.5 million for asset
impairments related to the plant shut-downs.
During fiscal 1998, the Company charged the restructuring reserve
approximately $1.7 million for severance benefits, $6.6 million for other
asset impairments and $.5 million for facility closing costs. In conjunction
with the plant closures, the plan called for the termination of 234
employees. As of October 3, 1999, 210 employees have been terminated. During
fiscal 1999, the Company charged $.3 million in severance and $1.9 million
in facility closing costs. The remaining balance in the 1998 restructuring
liability is $.5 million at October 3, 1999.
In connection with the fiscal 1999 acquisition of U.S. Can Metal Services,
the Company provided a reserve for costs to exit the tinplate services
business. See Note 2.
14. ASSETS HELD FOR SALE
In connection with the closure of the plants in 1998 and 1999, $3.4 million
of real property is held for sale at October 3, 1999. This property includes
$.6 million of land and $2.8 million of buildings. Additionally, the Company
holds $1.4 million in equipment for sale at October 3, 1999.
During the second quarter of fiscal 1999, the company sold the Solon, Ohio
facility for $4.5 million resulting in a net gain of $.2 million.
At September 27, 1998, $5.4 million of real property is held for sale. This
property included land of $.8 million and buildings of $4.6 million.
In connection with the fiscal 1999 acquisition of U.S. Can Metal Services,
the Company provided a reserve for costs to exit the tinplate services
business. See Note 2.
15. CONTINGENCIES
Environmental
The Company continues to monitor and evaluate on an ongoing and regular
basis its compliance with applicable environmental laws and regulations.
Liabilities for noncapital expenditures are recorded when environmental
remediation is probable and the costs can be reasonably estimated. The
Company believes that it is in substantial compliance with all material
federal, state, and local environmental requirements.
The Company (and, in some cases, predecessors to the Company) has, from time
to time, received requests for information or notices of potential
responsibility pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") with respect to certain waste
disposal sites utilized by former or current facilities of the Company or
its various predecessors. To the Company's knowledge, all such matters which
have not been resolved are, subject to certain limitations, indemnified by
the sellers of the relevant Company affiliates, and all such unresolved
matters have been accepted for indemnification by such sellers. Because
liability under CERCLA is retroactive, it is possible that in the future the
Company may incur liability with respect to other sites.
F-26
<PAGE>
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 management believes predated the
Company's 1989 acquisition of the facility from Owens-Illinois. Such pre-
1989 contamination is subject to indemnification by Owens-Illinois. The
Company and Owens-Illinois have entered into supplemental agreements
establishing procedures for 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. On August 25, 1999, DNR signed a
consent order that had been submitted by the Company and Owens-Illinois. The
consent order establishes a schedule for completing such investigation and
remediation by Owens-Illinois. Separately, the Company entered into a
consent order with DNR on April 22, 1999, related to certain industrial
wastewater and cooling water discharges that exceeded allowable limits. The
Company anticipates capital expenditures of approximately $200,000 in fiscal
2000 to comply with the consent order. Management believes that none of
these matters will have a material adverse effect on the results of
operations or financial condition of the Company in light of both the
potential indemnification obligations of others to the Company and the
Company's understanding of the underlying potential liability.
Letters of Credit
At October 3, 1999, a bank had issued standby letters of credit on behalf of
BWAY in the aggregate amount of $1.3 million in favor of BWAY's workers'
compensation insurer.
16. CUSTOMERS
The Company sells its metal containers to a large number of customers in
numerous industry sectors. To reduce credit risk, the Company sets credit
limits and performs ongoing credit evaluations. Sales to the Company's ten
largest customers amounted to approximately 42% (1999), 36% (1998), and 38%
(1997) of the Company's sales including sales to one customer of 8.5%
(1999), 9.5% (1998), and 10% (1997).
Although the Company's exposure to credit risk associated with nonpayment is
affected by conditions with the customers' industries, the balances are
substantially current and are within terms and limits established by the
Company.
The Company sells its products and services primarily in North America. In
fiscal 1999, 1998, and 1997, the Company's sales to customers located
outside the United States were less than five percent of total net sales.
The following is a summary of revenue for the Company's products and
services:
Year Ended
-----------------------------------------
October 3, September 27, September 28,
1999 1998 1997
General line containers $326,970 $320,871 $337,806
Food cans 51,380 52,142 52,280
Material center services 74,736 8,022
Ammunition boxes 14,013 20,054 12,064
-------- -------- --------
$467,099 $401,089 $402,150
======== ======== ========
F-27
<PAGE>
17. QUARTERLY INFORMATION (UNAUDITED) (In thousands, except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal Year 1999: Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $104,986 $121,536 $123,109 $117,468
======== ======== ======== ========
Gross profit (exclusive of depreciation
and amortization) $ 15,685 $ 19,032 $ 16,252 $ 11,638
======== ======== ======== ========
Net income (loss) $ 1,407 $ 3,284 $ 1,876 $ (940)
======== ======== ======== ========
Basic earnings (loss) per common share $ 0.15 $ 0.35 $ 0.20 $ (0.10)
======== ======== ======== ========
Diluted earnings (loss) per common share $ 0.15 $ 0.35 $ 0.20 $ (0.10)
======== ======== ======== ========
Fiscal Year 1998:
Net sales $ 92,114 $101,165 $107,010 $100,800
======== ======== ======== ========
Gross profit (exclusive of depreciation
and amortization) $ 15,482 $ 17,346 $ 19,314 $ 12,359
======== ======== ======== ========
Net income (loss) $ 1,035 $ 3,946 $ (4,026) $ 564
======== ======== ======== ========
Basic earnings (loss) per common share $ 0.11 $ 0.42 $ (0.42) $ 0.05
======== ======== ======== ========
Diluted earnings (loss) per common share $ 0.10 $ 0.40 $ (0.40) $ 0.05
======== ======== ======== ========
</TABLE>
F-28
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule I - Condensed Financial Statements of BWAY Corporation. . S-2
Schedule II - Condensed Valuation and Qualifying Accounts BWAY
Corporation And Subsidiaries . . . . . . . . . . . S-6
S-1
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
ASSETS: October 3, September 27,
1999 1998
------------------------ -----------------------
<S> <C> <C>
Investments in subsidiaries $199,813 $157,137
Property, Plant and Equipment -
net 20,430 3,571
Intercompany receivable 35,304
Other assets 13,239 1,217
------------------------ -----------------------
$233,482 $197,229
======================== =======================
LIABILITIES:
Intercompany payable $ 9,517
Other liabilities 41,912 $ 20,041
Long Term Debt 100,000 100,000
------------------------ -----------------------
151,429 120,041
------------------------ -----------------------
STOCKHOLDERS' EQUITY:
Common stock 99 99
Additional paid-in capital 37,202 37,395
Retained earnings 55,819 50,192
------------------------ -----------------------
93,120 87,686
Less treasury stock, at cost (11,067) (10,498)
------------------------ -----------------------
Total stockholders' equity 82,053 77,188
$233,482 $197,229
======================== =======================
</TABLE>
S-2
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
October 3, September September 28,
1999 1998 1997
---------------- ------------- -----------------
<S> <C> <C> <C>
Management fees charged to subsidiaries $ 0 $ 3,427 $ 1,545
Interest expense,net (11,160) (10,250) (5,125)
Other income/(expense),net (6,890) (17,745) 151
---------------- ------------- -----------------
Income before income taxes and equity in
undistributed earnings of subsidiaries (18,050) (24,568) (3,429)
Income tax (expense)/benefit (8,747) (12,530) 695
---------------- ------------- -----------------
Income before equity in undistributed earnings
of subsidiaries (9,303) (12,038) (4,124)
Equity in undistributed earnings of subsidiaries 14,930 14,718 17,228
Cumulative effect of change in accounting for
systems development costs - net of related tax
benefit of $823 (1,161)
---------------- ------------- -----------------
Net income $ 5,627 $ 1,519 $13,104
================ ============= =================
</TABLE>
S-3
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL STATEMENTS OF
BWAY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------
October 3, September 27, September 28,
1999 1998 1997
----------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,627 $ 1,519 $ 13,104
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed earnings of
subsidiaries (14,930) (14,718) (17,228)
Changes in assets and liabilities:
Other assets (4,542) (1,037) 78
Other liabilities 16,095 17,969 793
Income tax receivable (1,211)
Intercompany payable 44,816 9,634 46,381
---------------- --------------- ---------------
Net cash provided by operating activities 45,855 13,367 43,128
---------------- --------------- ---------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (27,746) (3,570) (42,154)
Capital Expenditures (16,859)
---------------- --------------- ---------------
Net cash used in investing activities (44,605) (3,570) (42,154)
---------------- --------------- ---------------
FINANCING ACTIVITIES:
Purchase of treasury stock (818) (9,563) (1,147)
Other 56 (234)
---------------- --------------- ---------------
Net cash used in financing activities (762) (9,797) (1,147)
---------------- --------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 488 0 (173)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 0 0 173
---------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 488 $ 0 $ 0
================ =============== ===============
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Year Ended
-----------------------------------------------------
October 3, September 28 September 28,
1999 1998 1997
----------------- ------------- ---------------
<S> <C> <C> <C>
Cash paid (received) during the year for:
Income taxes $(9,724) $ 4,765 $ 695
----------------- ------------- ---------------
Interest $11,033 $10,250 $5,125
----------------- ------------- ---------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued under employee savings plan $ 830
===============
</TABLE>
S-5
<PAGE>
SCHEDULE II - CONDENSED VALUATION AND QUALIFYING ACCOUNTS
BWAY CORPORATION AND SUBSIDIARIES
(In Thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
- --------------------------------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 28, 1997 $390 $350 $160(1) $580
Year ended September 27, 1998 580 33 80(1) 533
Year ended October 3, 1999 533 (3) 24(1) 506
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
- --------------------------------------- -------------- --------------- ---------------- --------------
Restructuring Reserve:
Year ended September 28, 1997 0 0
Year ended September 27, 1998 0 11,532 8,822 2,710
Year ended October 3, 1999 2,710 154 2,394 470
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
- --------------------------------------- -------------- --------------- ---------------- --------------
Reorganization Reserve:
Year ended September 28, 1997 4,781 4,600 6,293 3,088
Year ended September 27, 1998 3,088 1,184 1,904
Year ended October 3, 1999 1,904 11,037 6,524 6,417
____________
(1) Deductions from the allowance for doubtful accounts represent the net write-off of uncollectable accounts
receivable.
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
------------------------------------------------
Exhibit Description of Document
No.
<S> <C> <C>
3.1 Amended and Restated Certificate of
Incorporation of the Company. (3)
3.2 Amended and Restated By-laws of the Company (1)
3.3 Rights Agreement dated as of June 9, 1995
between the Company and Harris Trust and
Savings Bank, as Rights Agent (1)
3.4 Amendments to Rights Agreement dated as of
February 12, 1996 between the Company and
Harris Trust and Savings Bank, as Rights Agent (3)
3.5 Amendment No. 2 to Rights Agreement dated as
of August 19, 1997 between the Company and
Harris Trust and Savings Bank, as Rights Agent (9)
3.6 Amendment No.2 to Rights Agreement, dated as
of November 26, 1997, between the Company and
Harris Trust and Savings Bank. (9)
4.1 Form of certificate representing shares of
Common Stock of the Company (2)
4.2 Credit Agreement dated June 17, 1996 by and
among BWAY Corporation, Brockway Standard,
Inc., Milton Can Company, Inc., the
additional borrowers, BT Alex.Brown
Incorporated (formerly known as Bankers Trust
Company) and NationsBank, N.A. (4)
4.3 Third Amendment To Credit Agreement dated
November 2, 1998 among BWAY Corporation, its
subsidiaries, Bankers Trust Company and
NationsBank, N.A. (14)
4.4 Master Assignment and Consent Agreement and
First Amendment to Credit Agreement dated as
of August 15, 1996, and Second Amendment to
Credit Agreement dated as of October 15, 1997
between BWAY Corporation, Brockway Standard,
Inc., Milton Can Company, Inc., the
additional borrowers, BT Alex.Brown
Incorporated (formerly known as Bankers Trust (11)
Company), and NationsBank, N.A.
4.5 Indenture dated as of April 11, 1997 among
the Company, the subsidiary guarantors named
therein and Harris Savings and Trust Company,
as trustee (6)
4.6 Forms of Series A and Series B 101/4% Senior
Subordinated Notes (contained in Exhibit 4.3
as Exhibit A and B thereto, respectively) (6)
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.7 Form of Guarantee (contained in Exhibit 4.3
as Exhibit F thereto) (6)
4.8 Registration Rights Agreement dated as of
April 11, 1997 among the Company, the
subsidiary guarantors named therein, BT
Alex.Brown Incorporated (formerly known as
Bankers Trust Company), Bear, Stearns & Co. (6)
Inc., and NationsBanc Capital Markets, Inc.
4.9 Fourth Amendment To Credit Agreement dated
December 16, 1999 among BWAY Corporation, its
subsidiaries, BT Alex.Brown Incorporated
(formerly known as Bankers Trust Company) and
Bank of America (formerly known as
NationsBank, N.A.) (14)
The Registrant will furnish to the
Commission, upon request, each instrument
defining the rights of holders of long-term
debt of the Registrant and its subsidiaries
where the amount of such debt does not exceed
10 percent of the total assets of the
Registrant and its subsidiaries on a
consolidated basis.
10.1 Asset Purchase Agreement dated December 19,
1988 between BS Holdings Corporation, BW
Plastics, Inc., BW-Morrow Plastics, Inc. and
Owens-Illinois Group, Inc. (1)
10.2 Registration Agreement dated as of January
30, 1989 between BS Holdings Corporation and
certain stockholders (1)
10.3 Acquisition Agreement dated as of March 4,
1993 between Ellisco Inc. and BSI (1)
10.4 Stock Purchase Agreement dated April 27, 1993
among Armstrong Industries, Inc., its
stockholders, Armstrong Containers, Inc. and (1)
BSI
10.5 Asset Purchase Agreement dated May 26, 1993
among DK Containers, Inc., Dennis Dyck,
Robert Vrhel, Mohan Patel and BSI (1)
10.6 Employment Agreement between the Company and
Warren J. Hayford, dated as of June 1, 1995 * (1)
10.7 Employment Agreement between the Company and
John T. Stirrup, dated as of June 1, 1995 * (1)
10.8 Memorandum of Agreement dated October 11,
1993 between The Folgers Company and BSI ** (1)
10.9 Contract and Lease dated September 3, 1968,
between the City of Picayune, Mississippi and
Standard Container Company (1)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.10 Lease dated February 24, 1995 between Tab
Warehouse Fontana II and BSI (1)
10.11 Garland, Texas Industrial Net Lease dated
January 14, 1985 between MRM Associates and
Armstrong Containers, Inc. (1)
10.12 Gross Lease Agreement dated August 10, 1990
between Colonel Estates Joint Venture and BSI (1)
10.13 Lease dated February 11, 1991 between Curto
Reynolds Oelerich Inc. and Armstrong
Containers, Inc. (1)
10.14 Lease Agreement dated November 16, 1996
between Shelby Distribution Park and Brockway
Standard, Inc., as amended December 26, 1996. (11)
10.15 Lease dated August 9, 1991 between DK
Containers, Inc. and Smith Barney Birtcher
Institutional Fund-I Limited Partnership and (1)
the First Amendment thereto
10.16 Lease dated September 2, 1994 between
Division Street Partners, L.P. and BSNJ (8)
10.17 Employee Stock Purchase Agreement dated March
4, 1994 among BS Holdings Corporation, Perry
Schwartz, Mid-America Group, Ltd., Warren J.
Hayford and Daniel P. Casey * (1)
10.18 Agreement, dated May 15, 1995, between BSI
and Owens-Illinois, Inc. Pursuant to (S) 9.9
(d) of the December 19, 1988 Stock Purchase
Agreement (1)
10.19 Settlement Agreement, dated June 30, 1997
between BWAY Corporation and Owens-Illinois (11)
Group, Inc.
10.20 Brockway Standard Holdings Corporation
Formula Plan for Non-Employee Directors * (1)
10.21 Cooperation Agreement between Ball
Corporation and BWAY Corporation, dated
January 4, 1996. (3)
10.22 Merger Agreement with Milton Can Company,
Inc., dated March 12, 1996. (3)
10.23 Amendment #1 to the Merger Agreement with
Milton Can Company, Inc., dated April 30, 1996 (3)
10.24 Asset Purchase Agreement dated April 29,
1996, between Brockway Standard, Inc., BWAY
Corporation, Van Dorn Company and Crown Cork
& Seal Company, Inc. (3)
10.25 Employment Agreement between the Company and
David P. Hayford, dated as of June 15, 1995 * (4)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.26 Employment Agreement between the Company and
James W. Milton, dated as of May 28, 1996 * (4)
10.27 Amended and Restated Registration Rights
Agreement dated as of May 28, 1996, between
BWAY Corporation and certain shareholders. (4)
10.28 Asset Purchase Agreement dated October 6,
1996, between Brockway Standard (New Jersey),
Inc. (formerly known as Milton Can Company,
Inc.), BWAY Corporation, Ball Metal Food
Container Corp., and Ball Corporation (5)
10.29 Amendment No. 1 to the Asset Purchase
Agreement dated October 28, 1996 between
Milton Can Company, Inc., BWAY Corporation,
Ball Metal Food Container Corp., and Ball (5)
Corporation
10.30 Purchase Agreement dated as of April 8, 1997
among the Company, the subsidiary guarantors
named therein, BT Alex. Brown Incorporated
(formerly known as Bankers Trust Company),
Bear, Stearns & Co. Inc. and NationsBanc (6)
Capital Markets, Inc.
10.31 Brockway Standard (Ohio), Inc. Bargaining
Unit Savings Plan * (7)
10.32 Employment Agreement between the Company and
John M. Casey * (9)
10.33 Employment Agreement between the Company and
John T. Stirrup B Amendment No. 1 * (10)
10.34 Employment Agreement between the Company and
David P. Hull * (10)
10.35 BWAY Corporation Second Amended and Restated
1995 Long-Term Incentive Plan (10)
10.36 Asset Purchase Agreement between BMAT, Inc.
and the United States Can Company dated
November 9, 1998. (12)
10.37 Employment Agreement between the Company and
John T. Stirrup - Amendment No. 2* (13)
10.38 Employment Agreement and Options Agreement
between the Company and Warren J. Hayford -
Omnibus Amendment* (14)
10.39 Employment Agreement between the Company and
Jean-Pierre M. Ergas, dated as of January 1, (14)
2000*
10.40 BWAY Corporation Third Amended and Restated
1995 Long-Term Incentive Plan (14)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.41 Lease Agreement dated August 20, 1999 between
CRICBW Anderson Trust and Milton Can Company (14)
10.42 Lease Agreement dated September 15, 1999
between Division Street Partners, L.P. and (14)
BSNJ
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
</TABLE>
____________________________
* Management contract or compensatory plan or arrangement.
** Confidential treatment requested.
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-91114).
(2) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending October 1, 1995
(File No. 0-26178).
(3) Incorporated by reference to the Company's Form 10-Q for the period ending
March 31, 1996
(File No. 0-26178).
(4) Incorporated by reference to the Company's Form 10-Q for the period ending
June 30, 1996 (File No. 0-26178).
(5) Incorporated by reference to the Company's Current Report on Form 8-K filed
on November 12, 1996 (File No. 0-26178).
(6) Incorporated by reference to the Company's Registration Statement on
Form S-4 (File No. 333-26013).
(7) Incorporated by reference to the Company's Registration Statement on
Form S-8 (File No. 333-39225).
(8) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending September 29, 1996 (File No. 0-26178).
(9) Incorporated by reference to the Company's Form 10-Q for the period ending
December 28, 1997 (File No. 0-26178).
(10) Incorporated by reference to the Company's Form 10-Q for the period ending
March 29, 1998 (File No. 0-26178).
(11) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending September 28, 1997 (File No. 0-26178).
(12) Incorporated by reference to the Company's Current Report on Form 8-K filed
on November 9, 1998 (File No. 0-26178).
(13) Incorporated by reference to the Company's Form 10-Q for the period ending
July 4, 1999 (File No. 0-26178).
(14) Incorporated by reference to the Company's Form 10-K for the fiscal year
ending October 3, 1999 (File No. 0-26178).
5
<PAGE>
EXHIBIT 4.9
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 16, 1999
(this "Agreement"), is by and among BWAY CORPORATION, a Delaware corporation
---------
("BWAY"), BROCKWAY STANDARD, INC., a Delaware corporation ("Brockway"), BROCKWAY
---- --------
STANDARD (NEW JERSEY), INC., a Delaware corporation (formerly named Milton Can
Company, Inc.) ("Brockway New Jersey"), MILTON CAN COMPANY, INC., a Delaware
-------------------
corporation ("Milton"), BMAT, INC., a Delaware corporation ("BMAT"), CHICAGO
------ ----
SERVICE DIVISION, INC., a Delaware corporation ("CSD"), CHICAGO METAL
---
DECORATING, INC., a Delaware corporation ("CMD"), BROOKFIELD SERVICE DIVISION,
---
INC., a Delaware corporation ("BSD"), TRENTON METAL DECORATING, INC., a Delaware
---
corporation ("TMD"), the Lenders parties to the Credit Agreement referred to
---
below (the "Lenders"), BANKERS TRUST COMPANY, as Administrative Agent and
-------
Syndication Agent, and BANK OF AMERICA, N.A. (formerly NationsBank, N.A.),
successor to NATIONSBANK, N.A. (SOUTH), as Documentation Agent and Paying Agent.
RECITALS:
WHEREAS, BWAY, Brockway, Brockway New Jersey, Milton, BMAT, CSD, CMD, BSD,
TMD, the Agents and the Existing Lenders are parties to that certain Credit
Agreement dated as of June 17, 1996, as amended by the Master Assignment and
Consent Agreement and First Amendment to Credit Agreement dated as of August 15,
1996, the Second Amendment to Credit Agreement dated as of October 15, 1997 and
the Third Amendment to Credit Agreement dated as of November 2, 1998 (as
amended, restated, supplemented or otherwise modified and in effect from time to
time, the "Credit Agreement"); and
----------------
WHEREAS, BWAY and the Borrowers have requested the Agents and the Lenders
to amend the Credit Agreement in certain respects as set forth herein and the
Agents and the Lenders are agreeable to the same, subject to the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, all
-------------
capitalized terms used herein shall have the meanings given them in the Credit
Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is, as of
------------------------------
the Effective Date (as defined below), hereby amended as follows:
(a) Section 5.3.2 of the Credit Agreement is hereby amended by
-------------
deleting the table appearing at the end of the first paragraph of such Section
in its entirety and substituting therefor the following:
<PAGE>
<TABLE>
<CAPTION>
Interest
"Fiscal Quarter Coverage Ratio
-------------- --------------
<S> <C>
Fiscal Quarters ending on or prior to June 30, 1998 2.75:1.00
Fiscal Quarters ending on September 27, 1998 through June 30, 1999 2.50:1.00
Fiscal Quarter ending on September 30, 1999 2.75:1.00
Fiscal Quarters ending on December 31, 1999 through June 30, 2000 2.25:1.00
All Fiscal Quarters ending after June 30, 2000 2.75:1.00"
</TABLE>
SECTION 3. AMENDMENT FEE. In consideration of the execution of this
-------------
Agreement by the Agents and the Lenders, the Borrowers hereby agree to pay each
Lender which executes this Agreement on or prior to December 16, 1999 a fee (the
"Amendment Fee") in an amount equal to such Lender's Revolving Loan Commitment
-------------
multiplied by 0.25%.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. This
--------------------------------------------------
Agreement shall become effective upon the date (the "Effective Date") each of
--------------
the following conditions have been satisfied:
(a) Execution and Delivery. BWAY, the Borrowers, the Agents and the
----------------------
Required Lenders shall have executed and delivered this Agreement.
(b) No Defaults. No Unmatured Event of Default or Event of Default
-----------
under the Credit Agreement (as amended hereby) shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and warranties
------------------------------
of BWAY and the Borrowers contained in this Agreement, the Credit Agreement (as
amended hereby) and the other Loan Documents shall be true and correct in all
material respects as of the Effective Date, with the same effect as though made
on such date, except to the extent that any such representation or warranty
expressly refers to an earlier date, in which case such representation or
warranty shall be true and correct in all material respects as of such earlier
date.
(d) Payment of Amendment Fee. The Borrowers shall have paid in full
------------------------
to the Administrative Agent, for ratable distribution to those Lenders that have
signed this Agreement on or prior to December 16, 1999, an amount equal to the
Amendment Fee, and any other separately agreed upon fees.
2
<PAGE>
(e) Reaffirmation of Guaranty. Each Guarantor Subsidiary shall have
-------------------------
executed and delivered a Reaffiramation of Guaranty in the form attached hereto
as Exhibit A.
---------
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) BWAY and each Borrower represents and warrants (i) that it has
full power and authority to enter into this Agreement and perform its
obligations hereunder in accordance with the provisions hereof, (ii) that this
Agreement has been duly authorized, executed and delivered by such party and
(iii) that this Agreement constitutes the legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
and by general principles of equity.
(b) BWAY and each Borrower represents and warrants that the following
statements are true and correct:
(i) The representations and warranties contained in the Credit
Agreement and each of the other Loan Documents are and will be true
and correct in all material respects on and as of the Effective Date
to the same extent as though made on and as of that date, except to
the extent such representations and warranties expressly refer to an
earlier date, in which case they were true and correct in all material
respects on and as of such earlier date.
(ii) No event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Agreement
that would constitute an Event of Default or an Unmatured Event of
Default.
(iii) The execution, delivery and performance of this Agreement
by each of BWAY and each Borrower do not and will not violate its
respective certificate or articles of incorporation or by-laws, any
law, rule, regulation, order, writ, judgment, decree or award
applicable to it or any contractual provision to which it is a party
or to which it or any of its property is subject.
(iv) No authorization or approval or other action by, and no
notice to or filing or registration with, any governmental authority
or regulatory body is required in connection with its execution,
delivery and performance of this Agreement and all agreements,
documents and instruments executed and delivered pursuant to this
Agreement.
SECTION 6. REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT.
------------------------------------------------
(a) On and after the Effective Date each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference to the Credit Agreement in the Loan Documents and all
other documents (the "Ancillary Documents") delivered in connection with the
-------------------
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended hereby.
3
<PAGE>
(b) Except as specifically amended above, the Credit Agreement, the
Loan Documents and all other Ancillary Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Lenders or the Agents under the Credit Agreement, the
Loan Documents or the Ancillary Documents.
SECTION 7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
-------------------------
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page of
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 9. HEADINGS. Section headings in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes.
SECTION 10. FEES AND EXPENSES. The Borrowers hereby acknowledge that all
-----------------
costs, fees and expenses as described in Section 11.4 of the Credit Agreement
------------
incurred by the Administrative Agent and its counsel with respect to this
Agreement and the documents and transactions contemplated hereby shall be for
the account of the Borrowers.
[signature pages to follow]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
BWAY CORPORATION BROCKWAY STANDARD, INC.
By:________________________________ By:________________________________
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
MILTON CAN COMPANY, INC. BMAT, INC.
By:________________________________ By:_______________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
BROCKWAY STANDARD (NEW JERSEY), INC. CHICAGO SERVICE DIVISION, INC.
By:________________________________ By:_______________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
CHICAGO METAL DECORATING, INC. BROOKFIELD SERVICE DIVISION, INC.
By:________________________________ By:_______________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
TRENTON METAL DECORATING, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Fourth Amendment to Credit Agreement
<PAGE>
BANKERS TRUST COMPANY,
individually and as Administrative Agent,
Syndication Agent and Facing Agent
By:___________________________________
Name:_________________________________
Title:________________________________
Fourth Amendment to Credit Agreement
<PAGE>
BANK OF AMERICA, N.A. (formerly NationsBank,
N.A.), successor to NATIONSBANK, N.A.
(SOUTH), individually and as Documentation
Agent and Paying Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
individually and as Co-Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
FIRST UNION, formerly
CORESTATES BANK, N.A.
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
THE BANK OF NOVA SCOTIA
By:___________________________________
Name:_________________________________
Title:________________________________
Fourth Amendment to Credit Agreement
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
WACHOVIA BANK, N.A.
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
NATIONAL CITY BANK, KENTUCKY
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
SUNTRUST BANK, ATLANTA,
individually and as Co-Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
THE BANK OF NEW YORK
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
BANK OF TOKYO-MITSUBISHI LIMITED, ATLANTA
AGENCY
By:____________________________________
Name:__________________________________
Title:_________________________________
Fourth Amendment to Credit Agreement
<PAGE>
EXHIBIT A
REAFFIRMATION OF GUARANTY
-------------------------
Each of the undersigned acknowledges receipt of the Credit Agreement
dated as of June 17, 1996, as amended by the Master Assignment and Consent
Agreement and First Amendment to Credit Agreement dated as of August 15, 1996,
the Second Amendment to Credit Agreement dated as of October 15, 1997, the Third
Amendment to Credit Agreement dated as of November 2, 1998 and the Fourth
Amendment to Credit Agreement dated as of December 16, 1999 (as so amended, the
"Credit Agreement"), by and among BWAY Corporation, a Delaware corporation,
----------------
Brockway Standard Inc., a Delaware corporation, Brockway Standard (New Jersey),
Inc., a Delaware corporation, Milton Can Company, Inc., a Delaware corporation,
BMAT, Inc., a Delaware corporation, Chicago Service Division, Inc., a Delaware
corporation, Chicago Metal Decorating, Inc., a Delaware corporation, Brookfield
Service Division, Inc., a Delaware corporation, Trenton Metal Decorating, Inc.,
a Delaware corporation, Bankers Trust Company, as Administrative Agent and
Syndication Agent, Bank of America, N.A. (formerly NationsBank, N.A.), successor
to NationsBank, N.A. (South), as Documentation Agent and Paying Agent, and the
financial institutions party thereto as lenders, and each of the undersigned
consents to the Credit Agreement (as so amended) and each of the amendments,
consents and waivers referenced therein, and hereby reaffirms its obligations
under the Subsidiary Guaranty (as such term is defined in the Credit Agreement)
executed by the undersigned.
Dated as of December 16, 1999
ARMSTRONG CONTAINERS, INC. MILTON METAL GRAPHICS, INC.
By:________________________________ By:________________________________
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
NORTHEAST TINPLATE COMPANY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Fourth Amendment to Credit Agreement
<PAGE>
EXHIBIT 10.38
OMNIBUS AMENDMENT TO
WARREN HAYFORD'S
EMPLOYMENT AGREEMENT
AND
OPTION AGREEMENTS
This OMNIBUS AMENDMENT TO WARREN HAYFORD'S EMPLOYMENT AGREEMENT AND OPTION
AGREEMENTS, dated as of November 23, 1999 (this "Amendment"), is entered into by
and between Warren J. Hayford (the "Executive") and BWAY Corporation, a Delaware
corporation (the "Company"). The Company and the Executive are referred to
collectively herein as the "Parties" and individually as a "Party."
WHEREAS, the Executive and the Company are parties to an Employment
Agreement, dated as of June 1, 1995 (the "Employment Agreement");
WHEREAS, the Company granted to the Executive as of May 17, 1997, pursuant
to the Company's Amended and Restated 1995 Long-Term Incentive Plan (as further
amended and restated, the "Plan"), options to acquire 37,500 shares (as adjusted
to reflect a 3-for-2 stock split) of the common stock of the Company (the "May
1997 Options");
WHEREAS, the Company granted to the Executive as of August 19, 1997,
pursuant to the Plan, options to acquire 37,500 shares (as adjusted to reflect a
3-for-2 stock split) of the common stock of the Company (the "August 1997
Options");
WHEREAS, the Company granted to the Executive as of November 16, 1998,
pursuant to the Plan, options to acquire 36,667 shares of the common stock of
the Company (the "November 1998 Options" and, together with the May 1997 Options
and the August 1997 Options, the "Options"); and
WHEREAS, the Company and the Executive desire to amend the Employment
Agreement and the Options, effective as of the date hereof, in anticipation of
the Executive's planned retirement as Chief Executive Officer of the Company on
December 31, 1999.
NOW, THEREFORE, 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. Position, Duties and Place of Employment. Paragraph 2 of the
----------------------------------------
Employment Agreement is hereby amended by adding the following:
"Upon Executive's December 31, 1999 retirement as Chief Executive Officer
and an employee of the Company and continuing for so long as Executive is a
member of the Board, Executive shall have the title of Vice-Chairman of the
Board."
<PAGE>
2. Base Salary, Bonus and Benefits. Paragraph 3(a) of the Employment
-------------------------------
Agreement is hereby amended by adding the following:
"Notwithstanding the immediately preceding sentence, and in light of
Executive's December 31, 1999 retirement as Chief Executive Officer and an
employee, the Board may, following the end of the Company's fiscal year
2000, award Executive a bonus equal to 25% of the bonus Executive would
otherwise have received pursuant to the immediately preceding sentence had
Executive served as Chief Executive Officer of the Company for the entire
fiscal year 2000 if, as determined by the board in its sole judgment,
Executive has met the goals and objectives approved by the Board for such
year."
3. Term. Paragraphs 4(a) through 4(e) of the Employment Agreement are
----
hereby replaced by the following:
"(a) The Employment Period shall end on December 31, 1999.
(b) Executive shall be entitled to receive his Base Salary through
December 31, 1999. Except as provided in paragraph 3(a) and paragraph 5,
all of Executive's rights to participate in any of the Company's employee
benefit programs or receive bonuses hereunder shall cease on December 31,
1999, except for benefits required by law."
4. Supplemental Retirement Benefit. Paragraphs 5(a) through 5(d) of the
-------------------------------
Employment Agreement are hereby replaced by the following:
"(a) Eligibility. The Executive shall be entitled to receive a monthly
-----------
supplemental retirement benefit for services rendered to the Company, the
amount of which shall be determined in accordance with this paragraph 5.
(b) Amount. The amount of the monthly supplemental retirement benefit
------
payable to the Executive shall be equal to $13,125, which is an amount
equal to 1/12th of 35% of Executive's Base Salary of $450,000 in effect on
December 31, 1999, and the Executive's "Retirement Date" shall be
December 31, 1999.
(c) Commencement and Duration. Payment of the Executive's monthly
-------------------------
supplemental retirement benefit shall commence as of the first day of the
calendar month that begins coincident with or immediately after the date on
which the Executive attains age 74. Monthly payments shall continue to be
made to the Executive as of the first day of each subsequent month, with
the last payment to be made for the month during which Executive's death
occurs."
5. Executive Representations. Executive hereby remakes the
-------------------------
representations set forth in paragraph 11 of the Employment Agreement, except
that all references to "the Agreement" therein shall be deemed to be references
to the Agreement as amended hereby.
2
<PAGE>
6. Option Vesting After Termination of Employment. Paragraph 2(b)(ii)
----------------------------------------------
of each of the Options is hereby replaced by the following:
"(ii) If the Optionee retires from employment with the Company and does
not continue to serve as a director of the Company after such retirement,
the Optionee's NQOs shall be vested and fully exercisable with respect to
that portion of the Optionee's NQOs that were exercisable on the date of
the Optionee's retirement (subject to the terms of the Plan) for a period
of up to five years after the date of such retirement but in no event after
the expiration of the NQO; provided the Optionee does not engage in
Competition (as defined in the Plan) during such five year period unless he
or she receives written consent to do so from the board of directors of the
Company or the Committee. Any portion of the Optionee's NQOs that were not
exercisable on the date of such retirement shall expire and be forfeited."
Paragraph 2(b) of each of the Options is hereby further amended by adding the
following new subparagraph (iv) thereto:
"(iv) If the Optionee retires from employment with the Company and
continues to serve as a director of the Company after such retirement, the
Optionee's NQOs shall continue to vest as set forth in the second sentence
of this option grant; provided the Optionee does not engage in Competition
(as defined in the Plan) during such vesting period unless he or she
receives written consent to do so from the board of directors of the
Company or the Committee. If, after the Optionee's retirement from
employment with the Company, the Optionee ceases, at any time, to serve as
a director of the Company, the Optionee's NQOs shall be vested and fully
exercisable with respect to that portion of the Optionee's NQOs that were
exercisable on the date the Optionee first ceased to serve as a director
(subject to the terms of the Plan) for a period of up to five years after
the date of such cessation but in no event after the expiration of the NQO;
provided the Optionee does not engage in Competition (as defined in the
Plan) during such five year period unless he or she receives written
consent to do so from the board of directors of the Company or the
Committee. Any portion of the Optionee's NQOs that were not exercisable on
the date the Optionee first ceased to serve as a director shall expire and
be forfeited."
7. Effect; Entire Agreement. Except as amended by this Amendment, the
------------------------
Employment Agreement and each of the Options remain in full force and effect.
The Employment Agreement, each of the Options, and this Amendment constitute the
entire agreements between the 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.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Omnibus Amendment to
Warren Hayford's Employment Agreement and Option Agreements as of the date first
written above.
BWAY CORPORATION
By: /s/ Blair Schlossberg
---------------------
Its: VP & General Counsel
---------------------
EXECUTIVE
/s/ Warren J. Hayford
--------------------------
Warren J. Hayford
4
<PAGE>
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 1, 2000, between BWAY Corporation, a
Delaware corporation (the "Company"), and Jean-Pierre M. Ergas ("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
-------------------
Chief Executive Officer of the Company and shall render such administrative and
other executive services to the Company and its Subsidiaries as the Company's
board of directors (the "Board") may from time to time direct. Executive shall
-----
report directly to the Board and not to any other officer of the Company. During
the Employment Period, the Company shall nominate, and use best efforts to
re-elect, Executive to serve as a member of the Board and as Chairman of the
Board. 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 and except for non-executive directorships currently
held by Executive as reflected in the Company's Fiscal Year 1998 Proxy Statement
or approved by the Board) 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's principal place of employment shall be at the Company's or
its Subsidiaries' offices in Winnetka, Illinois, and Executive will not be
required to move his principal place of employment more than 25 miles from
Chicago without prior written consent. 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 of more
Subsidiaries.
3. Base Salary, Bonus and Benefits.
-------------------------------
(a) During the Employment Period, Executive's base salary shall be $450,000
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 January 2002 and at the end of each twenty-four
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 $450,000). 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
- 1 -
<PAGE>
determined by the Board in its sole judgment. Executive's "target" under the
Company's Officer Incentive Plan shall be fifty percent (50%) of Base Salary
with a maximum of one-hundred percent (100%) of Base Salary. For fiscal year
2000, Executive shall receive a bonus under the Officer Incentive Plan equal to
one-hundred percent (100%) of his Base Salary allocable to the portion of fiscal
year 2000 during which Executive was employed. For fiscal year 2001, Executive's
bonus under the Officer Incentive Plan for the first quarter of fiscal year 2001
shall be 100% of Executive's Base Salary allocable to such first quarter and
Executive's bonus for the remaining three quarters of fiscal year 2001 shall be
as provided for above based on Executive's performance in an amount determined
by the Board in its sole judgment.
(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 Third 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 four (4) weeks of paid
vacation each year. With regard to the Company's periodic grant of options to
officers and key personnel, Executive shall be recommended to the Board to
receive a minimum of 36,667 options for each year during the Employment Period
commencing in fiscal year 2001. The Board will review Executive's performance
each year during the Employment Period prior to the periodic grant of options
and, in its discretion, may grant Executive additional options if Executive's
performance warrants the grant of additional options.
(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. In addition, the Company shall reimburse Executive for Executive's
wife purchasing and utilizing five (5) round trip business class tickets to
France for each year during the Employment Period.
4. Term.
----
(a) 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 before or after
such date for Cause (as defined below) or without Cause. Notwithstanding
anything in this Section 4(a) to the contrary, the Employment Period shall
continue after the third anniversary of the Employment Date on a year to year
basis unless either party hereto provides the other six (6) month's prior
written notice of its desire to terminate this Agreement.
(b) If the Employment Period is terminated (or deemed terminated under
Section 4(e) hereof) 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 plus (to the extent not otherwise
paid) his maximum bonus (100% of Base Salary) in respect of fiscal year
- 2 -
<PAGE>
2000 and his "target" bonuses in respect of fiscal year 2001 and 2002 (or if his
target bonuses have not yet been set for either of such fiscal years, an amount
equal to 50% of his Base Salary at the date of termination in lieu of the
"target" bonus for either such fiscal year), and health, disability and life
insurance benefits, payable until the later of the third anniversary of the
Employment Date or the second anniversary of the date of such termination, so
long as Executive has not breached in any material respects the provisions of
Sections 5, 6 and 7 hereof. In any event, the aggregate payments to Executive on
termination (or deemed termination) of the Employment Period by the Company
without Cause shall not be less than the sum of his annual Base Salary at the
rate in effect at the date of termination, his "target" bonus for the fiscal
year in question at the date of termination and one year's health, disability
and life insurance benefits. 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) Except as provided in Section 4(b), 11 (to the extent due and payable
by the Company pursuant to the terms hereof) and 12 (to the extent due and
payable by the Company pursuant to the terms hereof), 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 United States 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 is no longer Chief Executive Officer or is asked to
report other than directly to the Board, (ii) Executive resigns as a result of
any other material breach of this Agreement by the Company which is not cured by
the Company within 30 days after Executive delivers written notice of such
breach to the Board and General Counsel, (iii) the Company terminates the
Employment Period as a result of the permanent disability or incapacity of
Executive pursuant to 4(a) (i) above, or (iv) the shareholders of the Company
fail to elect (or remove) Executive as a member of the Board during the
Employment Period or the Board fails to elect (or removes) Executive as Chairman
of the Board during the Employment Period. 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
- 3 -
<PAGE>
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 (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 Warren J. Hayford
------------
and his affiliates and associates, of more than thirty-five percent (35%) of the
Company's Common Stock, (y) the election of a majority of directors to the Board
that were not recommended to the stockholders by the Board, or (z) the sale of a
majority of the assets of the Company and its Subsidiaries taken as a whole not
approved or agreed to by Executive.
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 Board, 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 (including,
but not limited to, in connection with treasury and investor relations
functions). 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 Board and perform all actions reasonably requested by the
Board (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 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
eighteen
- 4 -
<PAGE>
months after the termination of the Employment Period, whether or not Executive
is receiving compensation pursuant to Section 4(b) (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 or
plan to 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 management or professional level
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 such employee thereof, (ii) hire any person
who was such 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 or director of the
Company or any of its Subsidiaries in accordance with, and to the fullest extent
permitted under, Delaware General Corporation Law as in effect from time to
time.
- 5 -
<PAGE>
11. Supplemental Retirement Benefit
-------------------------------
(a) Eligibility. If the Executive's employment by the Company terminates
-----------
after the first anniversary of the Employment Date for any reason other than for
Cause (the effective date of such termination hereinafter referred to as the
Executive's "Retirement Date") and Executive fully complies with Sections 7(a)
---------------
and 7(b) hereof, the Executive shall be entitled to receive a monthly
supplemental retirement benefit for services rendered to the Company, the amount
of which shall be determined in accordance with this Section 11.
(b) Amount. The amount of the monthly supplemental retirement benefit
------
payable to the Executive shall be equal to the sum obtained by multiplying one
hundred fifteen and 74/100 dollars ($115.74) by the number of months of the
Employment Period up to a maximum of four thousand one hundred sixty-six and
67/100 dollars ($4,166.67) (the "Monthly Retirement Payment").
--------------------------
(c) Commencement and Duration. Payment of the Executive's monthly
-------------------------
supplemental retirement benefit shall commence as of the first day of the
calendar month that begins coincident with or immediately after the date on
which the Executive attains the age of 65. Monthly payments shall continue to be
made to the Executive as of the first day of each subsequent month, with the
last payment to be made for the month during which the Executive's death occurs.
12. Surviving Spouse Benefit
------------------------
(a) Eligibility. In the event the Executive's current spouse survives the
-----------
Executive (the "Surviving Spouse"), she shall be entitled to receive a monthly
----------------
death benefit as described in this Section 12.
(b) Amount. The amount of the monthly death benefit payable to the
------
Surviving Spouse shall be equal to fifty percent (50%) of the Monthly Retirement
Payment that the Executive was receiving (if any) at the time of his death under
Section 11.
(c) Commencement and Duration. Payment of the Surviving Spouse's monthly
-------------------------
death benefit shall commence as of the first day of the calendar month that
begins immediately after Executive's date of death. Monthly payments shall
continue to be made to the Surviving Spouse as of the first day of each
subsequent month, with the last payment to be made for the month during which
the Surviving Spouse's death occurs.
13. 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:
- 6 -
<PAGE>
If to the Company:
- -----------------
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
Telephone: 770/645-4829
Attention: General Counsel
If to Executive:
- ---------------
Mr. Jean-Pierre Ergas
1100 N. Lake Shore Drive, Apartment 34-B
Chicago, IL 60611
Telephone: 312/649-9460
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,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(b) Legal and Accounting Fees. The Company shall pay or reimburse Executive
-------------------------
for all of Executive's reasonable and actual legal and accounting fees and
disbursements in connection with the negotiation and preparation of this
Agreement.
(c) 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.
(d) 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.
(e) 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.
(f) 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
- 7 -
<PAGE>
obligations of Executive under this Agreement shall not be assignable without
the prior written consent of the Company.
(g) 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 Illinois without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(h) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Executive.
(i) Survival. Sections 5, 6, 7, 8, 10, 11, 12 and 13 shall survive
--------
and continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
(j) Arbitration. Executive shall execute the Company's form
-----------
arbitration agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
BWAY CORPORATION
By /s/ Warren J. Hayford
-----------------------------------
Its Chairman
----------------------------------
J. P. ERGAS
-------------------------------------
Executive
Sept. 09, 1999
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<PAGE>
EXHIBIT 10.40
BWAY CORPORATION
THIRD AMENDED AND RESTATED
1995 LONG-TERM INCENTIVE PLAN
-----------------------------
Recitals
--------
This third amendment amends and restates the Amended and Restated 1995
Long-Term Incentive Plan established in June 1995 and amended in August 1996 and
November 1997 to increase the aggregate number of shares of common stock that
may be issued under this Plan to 1,825,000 shares.
1. Purpose.
-------
This plan shall be known as the BWAY Corporation Third 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.
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<PAGE>
(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
(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
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<PAGE>
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) "Disability" means a permanent and total disability as defined in the
----------
Company's Long-Term Disability Plan or as otherwise approved by the Committee.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(i) "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.
(j) "Fair Market Value" of a share of Common Stock of the Company means,
-----------------
with respect to the date in question, the officially-quoted closing selling
price of the stock on the Nasdaq National Market (the "Market") or if the Common
Stock is not listed or quoted in the Market, the Fair Market Value shall be the
fair value of the Common Stock determined in good faith by the Board; provided,
however, that when shares received upon exercise of an option are immediately
sold in the open market, the net sale price received may be used to determine
the Fair Market Value of any shares used to pay the exercise price or
withholding taxes and to compute the withholding taxes.
(k) "Incentive Stock Option" means an option conforming to the requirements
----------------------
of Section 422 of the Code.
(l) "Non-Employee Director" has the meaning given to such term in Rule
---------------------
16b-3 under the Exchange Act.
(m) "Nonqualified Stock Option" means any stock option other than an
-------------------------
Incentive Stock Option.
-3-
<PAGE>
(n) "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.
(o) "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. The Committee shall
consist of at least two Non-Employee Directors. 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.
4. Shares Available for the Plan.
------------------------------
Subject to adjustments as provided in Section 15, an aggregate of 1,825,000
shares of Common Stock, par value $.01 per share, of the Company (hereinafter
the "Shares") may be issued pursuant to the Plan. 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.
Without limiting the generality of the foregoing provisions of this Section
4 or the generality of the provisions of Sections 3, 6 or 17 or any other
section of this Plan, the Committee may, at any time or from time to time, and
on such terms and conditions (that are consistent
-4-
<PAGE>
with and not in contravention of the other provisions of this Plan) as the
Committee may, in its sole discretion, determine, enter into agreements (or take
other actions with respect to the options) for new options containing terms
(including exercise prices) more (or less) favorable than the outstanding
options.
5. Participation.
-------------
Participation in the Plan shall be limited to those directors (including
Non-Employee Directors) and 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 employee shall neither
guarantee nor preclude a further grant of that or any other type to such
employee 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 in the
case of the grant of any Incentive Stock Option, the exercise price may not be
less than 100% of the Fair Market Value of the Shares at the close of the market
on the day next preceding grant of the option unless otherwise permitted by
Section 422 of the Code. In the case of the grant of any Incentive Stock Option
to an employee who, at the time of the grant, owns
-5-
<PAGE>
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
close of the market on the day next preceding grant of the option.
(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 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 of such shares as of the close of the
market on the day next preceding exercise of the option.
(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 close of the market on the day next
preceding 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 in the case of a
Nonqualified Stock Option, more than ten years and one day from the date it is
granted or, in the case of an Incentive Stock Option, 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
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<PAGE>
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. Unless otherwise provided herein or in the
terms of the related grant, an optionee may exercise an option only if he or she
is, and has been continuously since the date the option was granted, a director,
officer or employee of the Company or a Subsidiary. 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 or employee 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 termination
of employment, 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.
(ii) If a participant ceases to be a director, officer or employee 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, 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.
-7-
<PAGE>
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 or employee 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 an employee 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 termination of employment, 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 thereafter by amendment to
an 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
-8-
<PAGE>
exceeds the exercise price of the option to which the SAR corresponds.
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 a Change in Control or on
termination of a grantee's employment 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 termination of a
grantee's employment for any other reason, all restricted stock granted to such
grantee on which the restrictions have not lapsed shall be forfeited to the
Company.
-9-
<PAGE>
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.
The value of each performance award may be fixed or it may be permitted to
fluctuate based on a performance factor (e.g., return on equity) selected by the
Committee.
The Committee shall establish performance goals and objectives for each
performance cycle on the basis of such criteria and objectives as the Committee
may select from time to time. During any performance cycle, the Committee shall
have the authority to adjust the performance goals and objectives for such cycle
for such reasons as it deems equitable.
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. The
earned portion of a performance award may be paid out in Shares, cash, or a
combination of both, as the Committee may determine.
A participant must be an employee of the Company at the end of the
performance cycle in order to be entitled to payment of a performance award
issued in respect of such cycle; provided, however, that, except as otherwise
determined by the Committee, if a participant ceases to be an employee of the
Company upon the occurrence of his or her death, Retirement, or Disability prior
to the end of the performance cycle, the participant shall earn a proportionate
portion of the performance award based upon the elapsed portion of the
performance cycle and the Company's performance over that portion of such cycle.
In the event of a Change in Control, a participant shall earn no less than
the portion of the performance award that the participant would have earned if
the performance
-10-
<PAGE>
cycle(s) had terminated as of the date of the Change in Control.
10. 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, provided
that the Company shall not sell any such Shares if such sale would be considered
a sale by such grantee for purposes of Section 16 of the Exchange Act that is
not exempt from matching thereunder.
11. 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. Unless the Committee determines
otherwise, no grant under this Plan may be exercised within six months of the
date such grant is made.
-11-
<PAGE>
12. 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 an employee 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 employee's lifetime only by him
or her or his or her guardian or legal representative if the employee is legally
incompetent. Notwithstanding the foregoing, except to the extent that it would
cause the Plan to fail to meet the conditions required to be met under Rule 16b-
3 under the Exchange Act, 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
Non-Employee Director or the optionee, as applicable, 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.
13. 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.
14. 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.
-12-
<PAGE>
15. 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).
16. Termination and Modification of the Plan.
----------------------------------------
The Board of Directors, without further approval of the stockholders, may
modify or terminate the Plan, except that no modification shall become effective
without prior approval of the stockholders of the Company if stockholder
approval would be required for continued compliance with the performance-based
compensation exception of Section 162(m) of the Code.
-13-
<PAGE>
17. 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. However, 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.
The Committee may amend or modify the grant of any outstanding option,
tandem SAR, performance award, or restricted stock in any manner to the extent
that the Committee would have had the authority to make such grant as so
modified or amended, including without limitation to change the date or dates as
of which (i) an option or SAR becomes exercisable, (ii) a performance award is
to be determined or paid, or (iii) restrictions on Shares are to be removed. No
modification may be made that would materially adversely affect any grant
previously made under the Plan without the approval of the grantee. The
Committee shall be authorized to make minor or administrative modifications to
the Plan as well as modifications to the Plan that may be dictated by
requirements of federal or state laws applicable to the Company or that may be
authorized or made desirable by such laws.
-14-
<PAGE>
18. Commencement Date; Termination Date.
-----------------------------------
The Board and the stockholders initially approved the Plan as of June,
1995. In August 1996, the Board approved an amendment and restatement of the
Plan, which the stockholders approved in February 1997. In November 1997, the
Board approved a second amendment and restatement of the Plan, which the
stockholders approved in February 1998. In November 1998, the Board approved a
third 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.
-15-
<PAGE>
STOCK OPTION PLAN PROPOSAL
Term
The Plan will terminate on May 31, 2005 unless sooner terminated by the
Board. Termination of the Plan will not affect grants made prior to termination,
but no grants will be made after termination.
Administration
The Plan is administered by the Committee. Subject to the terms of the
Plan, the Committee has authority to (i) select employees to participate in the
Plan, (ii) determine the form of grants and the conditions and restrictions, if
any, subject to which grants will be made and become payable under the Plan,
(iii) construe and interpret the Plan, and (iv) adopt, amend or rescind such
rules and regulations and make such other determinations for carrying out the
Plan, as the Committee deems necessary or appropriate.
Eligibility
Directors, officers, employees and consultants of the Company and its
subsidiaries selected by the Committee may participate in the Plan. Selection
for participation with respect to one form of award under the Plan does not
automatically result in selection for participation with respect to other forms
of awards under the Plan unless such result is specified by the Committee or by
the terms of the Plan.
-16-
<PAGE>
EXHIBIT 10.41
LEASE AGREEMENT
between
CRICBW ANDERSON TRUST,
a Delaware business trust,
as Lessor
and
MILTON CAN COMPANY, INC.,
a Delaware corporation,
as Lessee
Dated as of
August 20, 1999
<PAGE>
TABLE OF CONTENTS
1. Demise; Title: Condition ................................................ 1
------------------------
2. Term .................................................................... 2
----
3. Rent .................................................................... 2
----
4. Use ..................................................................... 3
---
5. Net Lease: Nonterminability ............................................. 4
---------------------------
6. Taxes and Other Charges; Law and Agreements ............................. 6
-------------------------------------------
7. Liens; Subordinations ................................................... 8
---------------------
8. Indemnification; Fees and Expenses ..................................... 10
----------------------------------
9. Environmental Matters .................................................. 11
---------------------
10. Maintenance and Repair; Additions ...................................... 16
---------------------------------
11. Trade Fixtures ......................................................... 19
--------------
12. Condemnation and Casualty .............................................. 20
-------------------------
13. Insurance .............................................................. 23
---------
14. Financial Statements; Certificates ..................................... 27
----------------------------------
15. Purchase Procedure ..................................................... 28
------------------
16. Quiet Enjoyment ........................................................ 29
---------------
17. Survival ............................................................... 29
--------
18. Subletting; Assignment ................................................. 29
----------------------
19. Advances by Lessor ..................................................... 30
------------------
20. Conditional Limitations - Events of De Fault and Remedies .............. 30
---------------------------------------------------------
21. Granting of Easements, Etc. ............................................ 34
---------------------------
i
<PAGE>
22. Intentionally Omitted/Not Applicable ................................... 34
------------------------------------
23. Rent Reset ............................................................. 34
----------
24. Notices ................................................................ 38
-------
25. Estoppel Certificates .................................................. 39
---------------------
26. No Merger .............................................................. 39
---------
27. Surrender .............................................................. 39
---------
28. Separability ........................................................... 40
------------
29. Signs; Showing ......................................................... 40
--------------
30. Waiver of Trial by Jury ................................................ 40
-----------------------
31. Recording .............................................................. 40
---------
32. Miscellaneous .......................................................... 40
-------------
33. Additional Provisions Relating to Leased Property ...................... 41
-------------------------------------------------
APPENDIX I Definitions
SCHEDULE A Description of Leased Property
SCHEDULE B Lease Data
SCHEDULE C Termination Values; Reinvestment Premium
SCHEDULE D Permitted Encumbrances
SCHEDULE E Trade Fixtures
SCHEDULE F Subordination, Non-Disturbance and Attornment Agreement
SCHEDULE G Estoppel Letter
SCHEDULE H Market Rent
SCHEDULE I Scheduled Capital Improvements
ii
<PAGE>
THIS LEASE, dated as of the date specified in Item 1 of Schedule B (as amended
from time to time, this Lease), is made between the Lessor specified in Item 2
of Schedule B (Lessor), as lessor, having an office at the address set forth in
Item 3 of Schedule B, and the Lessee specified in Item 3 of Schedule B (herein,
together with any entity succeeding thereto by consolidation, merger or
acquisition of its assets substantially as an entirety, called Lessee), having
an address at the address set forth in Item 3 of Schedule B, both parties
intending to be legally bound.
Capitalized terms not otherwise defined when they first appear are defined in
Appendix I
1. Demise Title Condition. Lessor hereby leases to Lessee, and Lessee hereby
----------------------
leases from Lessor, subject to the terms hereof, all of Lessor's right, title
and interest in (i) the parcel of land (the Land) described in Schedule A
hereto, (ii) all buildings and improvements now or hereafter existing on the
Land and fixtures appurtenant thereto (the Improvements) and (iii) all
easements, rights and appurtenances thereto (the Land, Improvements and all such
easements, rights and appurtenances, collectively called the Leased Property).
The parties acknowledge that the Leased Property was acquired by Lessor from an
affiliate of Lessee immediately prior hereto. The Leased Property is leased in
its present condition without representation or warranty by Lessor. Lessee has
examined the Leased Property and Lessor's title thereto, and has found the same
to be satisfactory for all purposes.
LESSOR HAS NOT MADE AN INSPECTION OF THE LEASED PROPERTY AND MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR
USE FOR A PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS TO QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN; AND ALL RISKS INCIDENTAL TO THE LEASED
PROPERTY SHALL BE BORNE BY LESSEE. LESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT TO ANY DEFECT OR DEFICIENCY OF ANY NATURE IN THE LEASED
PROPERTY OR ANY PORTION THEREOF, WHETHER PATENT OR LATENT, AND LESSOR SHALL NOT
HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY DIRECT OR INDIRECT DAMAGE TO
PERSONS OR PROPERTY RESULTING THEREFROM OR FOR LESSEE'S LOSS OF USE OF THE
LEASED PROPERTY OR ANY PORTION THEREOF OR ANY INTERRUPTION IN LESSEE'S BUSINESS
CAUSED BY LESSEE'S INABILITY TO USE THE LEASED PROPERTY OR ANY PORTION THEREOF
FOR ANY REASON WHATSOEVER EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS
LEASE. LESSOR ACKNOWLEDGES RECEIPT OF THE PROPERTY CONDITION SURVEY. THE
PROVISIONS OF THIS PARAGRAPH
<PAGE>
HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION BY
LESSOR OF, AND LESSOR DOES HEREBY DISCLAIM, ANY AND ALL WARRANTIES BY LESSOR,
EXPRESS OR IMPLIED WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF,
WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR OTHERWISE
2. Term
----
(a) Subject to the provisions hereof, Lessee shall have and hold the
Leased Property for a term (the Basic Term) which shall, begin on the
commencement date specified in Item 4 of Schedule B (the Commencement Date) and
end at midnight on the basic term expiration date set forth in Item 5 of
Schedule B (the Basic Term Expiration Date) unless sooner terminated or extended
as hereinafter expressly provided.
(b) So long as no Event of Default shall have occurred and be continuing
on the last day of the then current Term, Lessee may elect to extend and renew
the Term for five (5) additional terms, the first such additional term to be ten
(10) years and the second through fifth such additional terms to be five (5)
years each (Renewal Terms). Each such election shall be exercised by Lessee not
less than the later of (x) 30 days after Lessor delivers to Lessee a "Reminder
Notice" (hereafter defined) and (y) 270 days prior to the expiration of the then
current Term, by written notice to Lessor, which notice shall include the name
and address of Lessee's designated appraiser for determination of the fair
market rent in accordance with Schedule H of this Lease. A Reminder Notice shall
be a notice from Lessor to Lessee, delivered no sooner than 450 days prior to
the expiration of the then current term, advising Lessee of its next renewal
right hereunder. Either party, upon request of the other, will execute and
acknowledge, in form suitable for recording, an instrument confirming any such
extension. Time shall be of the essence with respect to the giving of notice by
Lessee of its election to extend any Term.
3. Rent
----
(a) During the Term, Lessee shall pay the rent provided in Item 7 of
Schedule B (Basic Rent) to Lessor (or to such other party as Lessor may from
time to time specify in writing) by check, at such place, within the continental
United States, as Lessor may from time to time designate to Lessee in writing.
Basic Rent shall be payable by Lessee in installments in the amounts set forth
in Item 7 of Schedule B and (except for the first payment of Basic Rent which
shall be due and payable on the date of commencement of the Basic Term) shall be
due and payable on the dates specified in item 7 of Schedule B (Installment
Payment Dates) and shall constitute Basic Rent for the periods specified in said
item 7. If any Installment Payment Date
-2-
<PAGE>
falls on a day which is not a Business Day, Basic Rent shall be due and payable
on the immediately following Business Day.
(b) All amounts which Lessee is required to pay or discharge pursuant to
this Lease in addition to Basic Rent (including, without limitation, amounts
payable as the purchase price for the Leased Property pursuant to Articles 9 and
12, and any amounts payable pursuant to Article 12, 19 or 23 hereof or as
liquidated damages pursuant to Article 20) together with every penalty, overdue
interest and cost which may be added for nonpayment or late payment thereof,
shall constitute additional rent hereunder (Additional Rent). In the event of
any failure by Lessee to pay or discharge any Additional Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or otherwise in
the case of nonpayment of Basic Rent. Lessee shall, unless otherwise requested
by Lessor, pay Additional Rent directly to the Person entitled thereto. Lessee
also covenants to pay to Lessor on demand as Additional Rent, interest at a rate
(the Overdue Rate), calculated on the basis of a 360-day year of twelve equal
months, equal to the greater of (i) twelve percent (12%) per annum or (ii) four
percent (4%) per annum over the prime rate reported from time to time in the
Money Rates Section of The Wall Street Journal, or if not included in such
publication, The New York Times, or if not included in such publication the
average prime rate published from time to time in another business newspaper, or
business section of a newspaper, of national standing chosen by Lessor, but in
no event greater than the maximum rate not prohibited by applicable law, on (i)
all overdue installments of Basic Rent from the due date thereof until paid in
full, (ii) all overdue amounts of Additional Rent, arising out of obligations
which Lessor shall have paid on behalf of Lessee pursuant hereto from the date
of such payment by Lessor until paid in full and (iii) each other sum required
to be paid by Lessee hereunder which is overdue, including without limitation,
amounts payable as the purchase price for the Leased Property pursuant to
Articles 9 and 23, and any amounts payable pursuant to Article 12, 19 or 23 or
as liquidated damages pursuant to Article 20, from the date such sum was due
until the date received by the Person entitled thereto. Lessee also covenants to
pay to Lessor on demand as Additional Rent, a late fee equal to 5% of any Basic
Rent or Additional Rent which has not been paid within 10 days after the same is
due. In the event any Basic Rent or Additional Rent is collected by or through
an attorney, as Additional Rent, Lessee agrees to pay all costs of collection,
including, but not limited to, attorney's fees, and to reimburse Lessor for any
costs of collection, including without limitation, attorney's fees, incurred by
Lessor's Mortgagee.
4. Use. Lessee may use the Leased Property for any lawful purpose in its
---
current primary business operations (the "Original Uses") and for any other
lawful use provided such other lawful use (i) does not have a material, adverse
impact on the value of the Leased Property, (ii) is consistent with the business
uses of other properties located in the same general area as the Leased
Property, and (iii) does not result in, or increase the likelihood of, a
material decline in the value of the Leased
-3-
<PAGE>
Property or materially increase the risk of loss to Lessor (such as by
increasing the potential exposure to hazardous substances or by adversely
affecting the ability of the owner to use the Leased Property for the Original
Uses due to the potential loss of then existing "grandfathered" zoning status).
Lessee may not cease operation at the Leased Property unless (i) no Event of
Default exists hereunder and Lessee satisfies the Credit Rating Test (defined in
Article 12(c), and (ii) such cessation will not adversely affect the right of
the owner of the Leased Property under existing state or zoning laws concerning
the discontinuance of non-conforming uses or structures to (A) rebuild the
Improvement in the event of a casualty to substantially the same condition as
they existed prior to any such casualty and (B) conduct the same use, in the
event of a casualty at the Leased Property as conducted by Lessee prior to
cessation of its operations. Such cessation of operations will not affect the
insurance coverage required to be maintained hereunder, which Lessee agrees to
maintain in full force and effect:
5. Net Lease; Nonterminability.
---------------------------
(a) This Lease is an absolutely "net lease" and Lessee shall pay all Basic
Rent and Additional Rent without notice, demand, counterclaim, set-off,
deduction, or defense, and without abatement, suspension, deferment, diminution
or reduction, free from any charges, assessments, impositions, expenses or
deductions of any and every kind or nature whatsoever. All costs, expenses and
obligations of every kind and nature whatsoever relating to the Leased Property
and the appurtenances thereto and the use and occupancy thereof by Lessee or
anyone claiming by, through or under Lessee as lessee hereunder which may arise
or become due during or with respect to the Term shall be paid by Lessee. Lessee
assumes the sole responsibility for the condition, use, operation, maintenance
and management of the Leased Property and Lessor shall have no responsibility in
respect thereof and shall have no liability for damage to the property of Lessee
or any sublessee of Lessee or anyone claiming by, through or under Lessee for
any reason whatsoever, unless such damage is caused by the negligence or
intentional wrongful acts of Lessor or Lessor's agents, contractors, invitees or
employees.
(b) Without limiting the generality of the foregoing, during the Term of
this Lease, Lessee shall perform all of the obligations of the sublessor under
any subleases affecting all or any part of the Leased Property which Lessee may
hereinafter enter into as sublessor to the extent that Lessee's failure to
perform such obligations could result in the occurrence of an Event of Default
under this Lease. Lessee acknowledges and agrees that its obligations hereunder,
including, without limitation, its obligations to pay Basic Rent and Additional
Rent, shall be unconditional and irrevocable under any and all circumstances
and shall not be subject to cancellation, termination, modification or
repudiation by Lessee except as expressly set forth in paragraph (h) of Article
9, paragraph (C) of Article 12 and paragraph (e) of Article 23 with respect to
the termination of this Lease. Except as expressly provided in
-4-
<PAGE>
paragraph (h) of Article 9, paragraph (c) of Article 12 or paragraph (e) of
Article 23, this Lease shall not terminate, nor shall Lessee have any right to
terminate this Lease, and Lessee shall perform all obligations hereunder,
including the payment of all Basic Rent and Additional Rent, without notice,
demand, counterclaim, set-off, deduction, defense or recoupment, and without
abatement, suspension, deferment, diminution or reduction for any reason,
including, without limitation, any past, present or future claims which Lessee
may have against the Lessor, its mortgagee, their respective successors and
assigns or any other Person for any reason whatsoever; any defect in the Leased
Property or any portion thereof, or in the title, condition, design,
construction, durability or fitness for a particular use thereof; any damage to
or destruction or loss of all or part of the Leased Property; any restriction,
deprivation (including eviction) or prevention of, or any interference with or
interruption of, any use or occupancy of the Leased Property (whether due to any
defect in or failure of Lessor's title to the Leased Property, any lien or
otherwise, except for liens directly caused by Lessor without Lessee's consent
and which are not otherwise the responsibility of Lessee under the express terms
hereof); any condemnation, requisition or other taking or sale of the use,
occupancy or title to the Leased Property; any action, omission or breach on the
part of Lessor under this Lease or under any other agreement between Lessor and
Lessee, or any other indebtedness or liability, howsoever and whenever arising,
of Lessor, any assignee of Lessor, or Lessee to any other Person, or by reason
of insolvency, bankruptcy or similar proceedings by or against Lessor, or any
assignee of Lessor, or Lessee; the inadequacy or inaccuracy of the description
of the Leased Property or the failure to demise and let to Lessee the property
intended to be leased hereby; Lessee's acquisition of ownership of the Leased
Property (as to any obligation arising prior to or incident to such acquisition
and any obligation intended to survive such acquisition including, without
limitation, the payment of the full purchase price in strict accordance with the
terms hereof); any sale or other disposition of the Leased Property; the
impossibility or illegality of performance by Lessor or Lessee or both; the
failure of Lessor to deliver possession of the Leased Property; any action of
any court, administrative agency or other governmental authority; or any other
cause, whether similar or dissimilar to the foregoing, any present or future law
notwithstanding; it being the intention of the parties hereto that all Basic
Rent and Additional Rent payable by Lessee hereunder shall continue to be
payable in all events and in the manner and at the times herein provided,
without notice or demand, unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Lease.
(c) Lessee will remain obligated under this Lease in accordance with its
terms, and will not take any action to terminate (except as expressly provided
in Articles 9, 12 and 23 of this Lease), rescind or avoid this Lease for any
reason, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting Lessor, or any assignee of Lessor, or
any action with respect to this Lease which may be taken by any receiver,
trustee or liquidator, or
-5-
<PAGE>
any assignee of Lessor or by any court in any such proceeding. Lessee waives all
rights at any time conferred by statute or otherwise to quit, terminate or
surrender this Lease or the Leased Property or to any abatement, reduction,
deferment or set-off of any Basic Rent, Additional Rent or other sum payable
hereunder, or for damage, loss or expense suffered by Lessee on account of any
cause referred to in this Article 5 or otherwise.
(d) Lessor and Lessee agree that this Lease is an operating lease and does
not represent a financing arrangement Each party shall reflect the transaction
represented hereby in all applicable books, records and reports (including
income tax filings) in a manner consistent with "operating lease" treatment
rather than "financing" treatment
6. Taxes and Other Charges: Law and Agreements.
-------------------------------------------
(a) Lessee shall pay and discharge, on or before the last day upon which
the same may be paid without interest or penalty, all taxes, including any tax
based upon or measured by gross rentals or receipts from the Leased Property,
assessments, levies, fees, water and sewer rents, utility charges, maintenance
charges and other governmental and similar charges, and all other liens or
charges whatsoever which may be or become a lien against the Leased Property
(excluding any Mortgages or other liens created by, through or under Lessor
without Lessee's consent and which are not otherwise the responsibility of
Lessee under the express terms hereof), general and special, ordinary or
extraordinary, and whether or not the same shall have been within the express
contemplation of the parties hereto, and any interest and penalties thereon,
which are levied or assessed or are otherwise due during the Term (collectively,
Taxes and Impositions) against (i) Lessor and which relate to Lessor's ownership
of the Leased Property, the use, occupancy, operation or possession of the
Leased Property or any part thereof or the transactions contemplated by this
Lease, including, if applicable, (a) state franchise or doing business taxes or
the like, but only those relating to or resulting solely from Lessor's ownership
of the Leased Property and not any other property or any other activity of
Lessor, and (b) transfer taxes relating solely to the sale of the Leased
Property to or from Lessee or its affiliates or in connection with Lessor's or
Lessor's Mortgagee's exercise of remedies after an Event of Default, (ii) the
Leased Property or this Lease or the interest of Lessee or Lessor therein, (iii)
Basic Rent or Additional Rent or other sums payable by Lessee hereunder, (iv)
the use, occupancy, construction, repair or rebuilding of the Leased Property or
any portion thereof, or (v) gross receipts from the Leased Property. If any tax
and assessment levied or assessed against the Leased Property may legally be
paid in installments, Lessee shall have the option to pay such tax or assessment
in installments; provided, however, that upon the termination of the Term Lessee
shall pay any such tax or assessment which it has been paying in installments in
full, on or prior to such termination date. Nothing in this Lease shall require
payment by Lessee of any franchise, estate, inheritance, succession, transfer
(other
-6-
<PAGE>
than as set forth above), net income or profits taxes of Lessor (other than any
gross receipts or similar taxes imposed or levied upon, assessed against or
measured by the Basic Rent, Additional Rent or any other sums payable by Lessee
hereunder or levied upon or assessed against the Leased Property), any taxes
imposed by any state or local government on, or measured by, the net income of
Lessor, unless any such tax is in lieu of or a substitute for any other tax or
assessment upon or with respect to the Leased Property, in which case such tax
would be payable by Lessee hereunder. Lessee shall furnish Lessor and Lessor's
Mortgagee with receipts (or if receipts are not available, with copies of
cancelled checks evidencing payment with receipts to follow promptly after they
become available) showing payment of Taxes and Impositions prior to the
applicable delinquency date therefor. Except with respect to taxes or
assessments paid by Lessee in installments as set forth above, taxes,
assessments, fees, water and sewer rents and other governmental charges which
are payable by Lessee shall be apportioned between Lessor and Lessee as of the
date on which this Lease terminates.
Lessee shall establish and maintain the Tax and Insurance Reserve Fund at
the times required by and pursuant to the terms of Article 13.
(b) Lessee shall pay all charges for utility, communication and other
services to the extent rendered or used during the Term on or about the Leased
Property, whether or not payment therefor shall become due after the Term.
(C) At Lessee's cost and expense, Lessee shall perform and comply with all
laws, rules, orders, ordinances, regulations and requirements now or hereafter
enacted or promulgated, of every government and municipality and of any agency
thereof having jurisdiction over the Leased Property, and with all restrictions
under any reciprocal easement agreement, development agreement or similar
agreement, relating to the Leased Property, or the improvements thereon, or the
facilities or equipment thereon or therein, or the streets, sidewalks, vaults,
vault spaces, curbs and gutters adjoining the Leased Property, or the
appurtenances to the Leased Property, or the franchises and privileges connected
therewith, whether or not such shall now exist or shall hereafter be enacted or
promulgated, and whether or not such are within the present contemplation of
Lessor or Lessee (collectively, Legal Requirements), whether or not such Legal
Requirements shall necessitate structural changes, improvements, interference
with use and enjoyment of the Leased Property, replacements or repairs,
extraordinary as well as ordinary. Lessee shall, at Lessee's cost and expense,
perform and comply with the terms of any easement granted or released pursuant
to Article 21. Lessee shall, at its expense, comply with all provisions of
insurance policies required pursuant to Article 13, and with the provisions of
all contracts, agreements, instruments and restrictions affecting the Leased
Property or any part thereof or its ownership, occupancy, use, operation or
possession. Lessor will not enter into any contracts affecting the Leased
Property with which Lessee is bound to comply, without Lessee's consent, not to
be
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<PAGE>
unreasonably withheld. Lessee shall comply with the terms of and perform its
obligations under any consent of Lessee to any assignment of this Lease to
Lessor's Mortgagee. This subsection shall not apply to Lessee's compliance with
laws relating to Environmental Laws, which are exclusively addressed by Article
9 hereof.
(d) Notwithstanding the provisions of this Article 6 and Article 7, if no
default or Event of Default shall have occurred and be continuing, Lessee shall
have the right to contest, in good faith and at its expense, by appropriate
legal proceedings (including through abatement proceedings), any Taxes or
Impositions, and/or any Legal Requirement affecting the Leased Property, and to
postpone payment of or compliance with the same during the pendency of such
contest, provided that (i) the commencement and continuation of such proceedings
shall suspend the collection thereof from, and suspend the enforcement thereof
against, Lessor and the Leased Property, (ii) no, part of the Leased Property
nor any Basic Rent or Additional Rent shall be interfered with or shall be in
danger of being sold, forfeited, attached or lost, (iii) Lessee shall promptly
and diligently prosecute such contest to a final settlement or conclusion, (iv)
there shall be no risk of the imposition of civil or criminal liability or
penalty on Lessor or Lessor's Mortgagee for failure to comply therewith, (v)
Lessee shall satisfy any Legal Requirements, including, if required, that the
Taxes and Impositions be paid in full before being contested, (vi) Lessee shall
have set aside adequate reserves (which Lessor may at its option require to be
placed in escrow with a Depository), for the payment of Taxes and Impositions,
together with all interests and penalties, and (vii) Lessee shall have furnished
Lessor such security as may be required in the proceeding to insure the payment
of any Taxes and Impositions, together with all interest and penalties thereon.
Lessee shall pay any and all judgments, decrees and costs (including all
attorneys' fees and expenses) in connection with any such contest and shall,
promptly after the final determination of such contest, fully pay and discharge
the amounts which shall be levied, assessed, charged or imposed or be determined
to be payable therein or in connection therewith, together with all penalties,
fines, interest, costs and expenses thereof or in connection therewith, and
perform all acts the performance of which shall be ordered or decreed as a
result thereof. Lessor shall cooperate in good faith with Lessee with respect to
any such contest, at Lessee's sole cost and expense, and provided such
cooperation shall not create any risk of liability to Lessor, its trustees or
beneficiaries.
7. Liens; Subordinations
---------------------
(a) Lessee represents and warrants that on the date of delivery of this
Lease, fee simple title in the Leased Property was vested in Lessor subject only
to Permitted Encumbrances. Subject to the provisions of paragraph (d) of Article
6, Lessee will promptly, but in any event no later than 30 days after its Actual
Knowledge of the filing thereof but in any event prior to the enforcement of the
same, at its own expense remove and discharge of record, by bond or otherwise,
any charge, lien, security interest or encumbrance upon the Leased Property,
upon any
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<PAGE>
Basic Rent, or upon any Additional Rent which arises for any reason (except for
liens arising out of the act or omission of Lessor without the consent of
Lessee), including all liens which arise out of Lessee's possession, use,
operation and occupancy of the Leased Property, but not including any Permitted
Encumbrances. Nothing contained in this Lease shall be construed as constituting
the consent or request of Lessor, express or implied, to or for the performance
by any contractor, laborer, materialman, or vendor of any labor or services or
for the furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof. Notice is
hereby given that Lessor will not be liable for any labor, services or materials
furnished or to be furnished to Lessee, or to anyone holding an interest in the
Leased Property or any part thereof through or under Lessee, and that no
mechanic's or other liens for any such labor, services or materials shall attach
to or affect the interest of Lessor in and to the Leased Property. If Lessee
shall fail to discharge any charge, lien, security interest or encumbrance
within the time period permitted by this Lease, Lessor may discharge the same by
payment or bond or both, and Lessee will repay to Lessor, upon demand, any and
all amounts paid therefor, or by reason of any liability on such bond, and also
any and all reasonable incidental expenses, including reasonable attorneys'
fees, incurred by Lessor in connection therewith together with interest on all
such amounts calculated at the Overdue Rate.
(b) This Lease shall be subject and subordinate to all present and future
mortgages (Mortgages) on the fee interest in the Leased Property and to all
advances made upon the security thereof, provided that the holder of the
Mortgage shall execute and deliver to Lessee an agreement (SNDA Agreement), in
form substantially similar to Schedule F hereto, providing that such holder will
recognize this Lease and not disturb Lessee's possession of the Leased Property
in the event of foreclosure if no Event of Default is then in existence; and
concurrently therewith Lessee shall execute and deliver an estoppel certificate
in form substantially similar to Schedule G hereto. Lessee agrees, upon receipt
of such SNDA Agreement, to execute such further reasonable instrument(s) as may
be necessary to subordinate this Lease to the lien of any such Mortgage, and
also to execute such instrument(s) recognizing the assignment of this Lease or
the Basic Rent, Additional Rent, and other sums payable by Lessee hereunder to
the holder of any such Mortgage. The term "Mortgage" shall include deeds of
trust or any other similar lien documents.
(C) Lessee agrees to attorn, from time to time, to the holder of each
Mortgage and/or the holder of such subsequent mortgage, or any purchaser of the
Leased Property, for the remainder of the Term, provided that such holder or
such purchaser, shall then be entitled to possession of the Leased Property
subject to the provisions of this Lease. The provisions of this subsection shall
inure to the benefit of such holder or such purchaser, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
foreclosure of the Mortgage (in which event the parties shall execute a new
lease for the remainder of the Term on the same terms set forth herein), shall
be self-operative upon any such demand, and no further
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<PAGE>
instrument shall be required to give effect to said provisions. Each such party,
however, upon demand of the other, hereby agrees to execute, from time to time,
instruments in confirmation of the foregoing provisions hereof, reasonably
satisfactory to the requesting party acknowledging such subordination, non-
disturbance and attornment as are provided herein and setting forth the terms
and conditions of its tenancy.
B. Indemnification; Fees and Expenses.
----------------------------------
(a) Lessee shall protect, defend and indemnify Lessor, Lessor's Mortgagee,
the successors and assigns of either, the beneficial owners of any of the
foregoing and the trustees, beneficiaries, partners, shareholders, officers,
directors, agents or employees of Lessor, Lessor's Mortgagee or any such
successor or assign or beneficial owner (each an Indemnified Party and
collectively, the Indemnified Parties), against and hold the Indemnified Parties
harmless from all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), claims, demands or judgments of any
nature (a) arising or alleged to arise from or in connection with the condition,
use, operation, maintenance, subletting and management of the Leased Property,
(b) relating to the Leased Property and the appurtenances thereto and the use
and occupancy thereof by Lessee or anyone claiming by, through or under Lessee
or (c) arising or alleged to arise from or in connection with any of the
following events: (i) any injury to, or death of, any person or any damage to or
loss of property on or adjacent to the Leased Property or growing out of or
directly or indirectly connected with, ownership, use, nonuse, occupancy,
operation, possession, condition, construction, repair or rebuilding of the
Leased Property or adjoining property, sidewalks, streets or ways or resulting,
from the condition of any thereof; (ii) any claims by third parties resulting
from any violation or alleged violation by Lessee of (A) any provision of this
Lease, or (B) any Legal Requirement, or (C) any other lease or agreement
relating to the Leased Property, or (D) any contract or agreement to which
Lessee is a party or any restriction, law, ordinance or regulation, affecting
the Leased Property or the ownership, use, nonuse, occupancy, condition,
operation, possession, construction, repair or rebuilding thereof or of
adjoining property, sidewalks, streets or ways; (iii) any contest permitted by
Article 6; or (iv) Lessee's failure to pay in accordance with the terms and
provisions hereof any item of Additional Rent or other sums payable by Lessee
hereunder. Lessee shall not be liable in any case to any Indemnified Party for
any liabilities, obligations, claims, damages, penalties, causes of action,
costs or expenses to the extent that they result from the gross negligence or
willful misconduct of such Indemnified Party. If Lessor, Lessor's Mortgagee, or
any agent of Lessor or Lessor's Mortgagee, or any other Indemnified Party, shall
be made a party to any such litigation commenced against Lessee, and if Lessee,
at its expense, shall fail to provide Lessor or Lessor's Mortgagee or its agent
or other Indemnified Party with counsel reasonably acceptable to such party,
Lessee shall pay all costs and reasonable attorney's fees and expenses
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<PAGE>
incurred or paid by Lessor or Lessor's Mortgagee or its agent or other
Indemnified Party in connection with such litigation.
(b) The representations, warranties and obligations of Lessee, and the
rights and remedies of each Indemnified Party under this Article 8, are in
addition to and not in limitation of any other representations, warranties,
obligations, rights and remedies provided in this Lease or otherwise at law or
in equity, and shall survive the expiration or termination of this Lease.
(c) This Article 8 shall not affect the respective rights, obligations and
remedies of the parties with respect to Environmental Laws or Hazardous
Substances, which are governed exclusively by Article 9 hereof.
9. Environmental Matters.
----------------------
(a) Lessee represents and warrants and covenants to the Indemnified Parties
that
(i) at all times during the Term of this Lease, (x) the Leased
Property, Lessee, all sublessees and any assignees of Lessee, and all other
parties claiming by, through, or under Lessee, shall comply with all
applicable Environmental Laws; (y) Lessee, all sublessees and any assignees of
Lessee, and all other parties claiming by, through, or under Lessee, shall have
obtained all permits, licenses, and any other authorizations required to conduct
its or their operations at the Leased Property that are required under all
applicable Environmental Laws and Lessee, all sublessees and any assignees of
Lessee, and all other parties claiming by, through, or under Lessee, shall be in
compliance with the same; and (z) to the extent required by applicable
Environmental Laws, Lessee shall remove and dispose of any Hazardous Substances
present on the Leased Property not in compliance with applicable Environmental
Laws;
(ii) except as disclosed in the Environmental Site Assessment: the
Leased Property is in compliance in all material respects with applicable
Environmental Laws; no Hazardous Substances are or have been discharged,
generated, treated, disposed of, or stored on, incorporated in or removed or
transported from the Leased Property except in compliance in all material
respects with applicable Environmental Laws or as disclosed in the Environmental
Site Assessment. Except as disclosed in the Environmental Site Assessment: no
material notices, complaints or orders of violation or non-compliance of any
nature whatsoever regarding alleged violations of, or strict liability under,
Environmental Laws have been issued to Lessee or, to the best of its knowledge,
to any Person regarding the Leased Property, and Lessee has no Actual Knowledge
that any material federal, state or local governmental environmental
investigation nor any material legal action by a private party is pending or
threatened, in each case with
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<PAGE>
regard to the Leased Property or any use thereof or any alleged material
violation of Environmental Laws with regard to the Leased Property; no liens
have been placed upon the Leased Property in connection with any actual or
alleged liability under any Environmental Laws;
(iii) except as disclosed in the Environmental Site Assessment: the
Leased Property has not been used by Lessee or, to the best of Lessee's
knowledge, by any other Person and will not be used during the Term of this
Lease to generate, manufacture, refine, produce or process any Hazardous
Substance or to store, handle, treat, dispose, transfer or transport any
Hazardous Substance other than normal and lawful uses of such Hazardous
Substances in compliance in all material respects with Environmental Laws which
activities have not had and will not have any material adverse effect upon the
Leased Property;
(iv) except as set forth in the Environmental Site Assessment no
pits, lagoons, ponds, or other surface impoundments, above ground tanks or other
containment structures have been or will be constructed, operated or maintained
in or on the Leased Property in violation in any material respect of applicable
Environmental Laws and no underground storage tanks exist or will be
constructed, operated or maintained in or on the Leased Property except in
compliance in all material respects with Environmental Laws; to the best of
Lessee's knowledge, there is presently no asbestos nor asbestos-containing
material (except commercially produced product in non-friable bonded form in
floor, ceiling or wall materials which is in good condition, the presence of
which complies with all Environmental Laws; Lessee shall deliver to Lessor
within sixty (60) days from the date hereof, and thereafter implement a written
asbestos-containing material operations and maintenance plan for any such
identified or presumed asbestos-containing materials, which addresses 29 C.F.R.
1910 et seq. (the "Asbestos 0 & M Plan") such written plan to be in form and
-- ---
content reasonably acceptable to Lessor and Lessor's Mortgagee) nor any
PCB-containing equipment, including PCB-containing transformers, located in, on,
at or under the Leased Property nor will any of the foregoing be located in, on,
at or under the Leased Property at any time during the Term of this Lease;
(v) except as set forth in the Environmental Site Assessment: other
than lawful quantities in connection with Lessee's use of the Leased Property in
compliance in all material respects with Environmental Laws, to Lessee's Actual
Knowledge the Leased Property is free of Hazardous Substances at, in, on, over
or under the Leased Property, regardless of the source of any such Hazardous
Substances; and
(vi) to Lessee's Actual Knowledge, the Environmental Site Assessment
is true, correct and complete, and contains no misstatement of fact or omission
of any fact which would make the statements contained therein untrue, incomplete
or misleading in any material respect.
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<PAGE>
(b) Promptly upon obtaining Actual Knowledge thereof, Lessee shall give
to Lessor notice of the occurrence of any of the following, in each case
relating to the Leased Property or the use, occupancy or operation thereof in
respect of any Environmental Law: (i) the failure of the Leased Property,
Lessee, any sublessee or assignee of Lessee or invitee of Lessee, or any other
party claiming by, through, or under Lessee, to comply therewith in any manner
whatsoever; (ii) the issuance to Lessee, or any sublessee of any portion of the
Leased Property or any assignee of Lessee, or any other party claiming by,
through, or under Lessee, of any notice, complaint or order of violation or
non-compliance therewith of any nature whatsoever; (iii) any notice of a pending
or threatened investigation thereunder; (iv) any notice from any governmental
agency requiring any corrective action with respect to the Leased Property
thereunder; or (v) any notice or other communication with respect to a pending
or threatened governmental or private party action relating to violation
thereof.
(c) At any time (i) if Lessor receives notice that an adverse change in
the environmental condition of the Leased Property has occurred or that an
adverse environmental condition with respect to the Leased Property has been
discovered, Lessor shall give notice thereof to Lessee, and if Lessee shall not
(A) diligently connanence to cure such condition, to the extent necessary to
meet Legal Requirements to comply fully with applicable Environmental Laws, or
to prevent a material diminution in the fair market value of the Leased Property
related to the environmental condition, within 30 days after receipt of such
notice (or such shorter period as may be required by law or in the event of an
emergency), provided that if such cure cannot be completed with diligence within
such 30 day period, and so long as Lessee is performing such cure with
reasonable diligence, the time period within which such cure may be completed
shall be extended for such period as may be reasonably necessary to complete
such cure with diligence, provided the same shall be subject to Lessor's
approval and is consistent with the requirements of applicable law, and (B)
thereafter diligently prosecute to completion such cure, or (ii) in any event
after an Event of Default has occurred and is continuing hereunder or if Lessor
or Lessor's Mortgagee has reasonable cause to believe that Lessor is in default
or has permitted a default hereunder or that there has been a material adverse
change in the environmental condition of the Leased Property, Lessor may cause
to be performed or direct Lessee to cause to be performed an environmental audit
or site assessment of the Leased Property and the then uses thereof reasonable
in scope under the circumstances, and may take such actions as it may deem
necessary to cure such condition or to cause the Leased Property to comply with
any Environmental Laws. Notwithstanding the foregoing, Lessor may not exercise
its rights under clause (ii) above more than once in any twelve month period,
unless an Event of Default has occurred during such period, in which event such
limitation shall not be applicable. Such environmental audit or site assessment
shall be performed by an engineer qualified by law and experience to perform the
same and satisfactory to Lessor and Lessor's Mortgagee, shall include a review
of the uses of the Leased Property and
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<PAGE>
compliance of the same with all Environmental Laws, and shall include an
estimate of the cost to cure any breach or default in Lessee's covenants
hereunder. All costs and expenses incurred by Lessor or Lessor's Mortgagee in
connection with such environmental audit or assessment and any remediation
required shall be paid by Lessee upon demand and shall bear interest after 30
days after demand therefor at the Overdue Rate. Such audit or assessment shall
be addressed to Lessor and Lessor's Mortgagee and shall provide expressly that
they can rely on its findings. Except as required by law, the results of such
audit or assessment shall not be disclosed to third parties by Lessor or
Lessor's Mortgagee without the prior written consent of Lessee.
(d) Subject to the provisions of paragraph (d) of Article 6 hereof, in the
event of a violation of or the discovery of a violation of any Environmental Law
by Lessee, any sublessee of any portion of the Leased Property, any assignee of
Lessee or any invitee of Lessee, or any other Person claiming by, through, or
under Lessee, or resulting from Lessee's failure to comply with this Article 9,
Lessee shall promptly perform all remedial actions to clean up, contain, or
remove any Hazardous Substances on, under or in the Leased Property in
accordance with, and as required by, applicable Environmental Laws and otherwise
to cure any such violation of any Environmental Law, all at Lessee's sole cost
and expense. Lessee shall determine the nature and scope of all such required
remedial actions within 30 days after obtaining Actual Knowledge of any such
violation and shall complete all such actions within 120 days following the date
that the nature and scope of such required remedial actions are identified,
provided that if such remedial actions cannot be completed with diligence within
such 120 day period, and so long as Lessee is performing such remedial actions
with due diligence, the time within which such remedial actions may be completed
shall be extended for such period as may be reasonably necessary to complete
such remedial action with diligence, provided the same shall be subject to
Lessor's approval and consistent with the requirements of applicable law. If, as
a result of any such violation, a lien attaches to the Leased Property that
takes priority over the lien of the Mortgage, Lessee shall promptly, and in any
event within 10 days after the attachment of any such lien, discharge or contest
such lien in accordance with Article 6(d) and post a bond or deposit an
irrevocable letter of credit with Lessor's Mortgagee, in either event
satisfactory in form and substance and with a surety or obligor satisfactory to
Lessor's Mortgagee and in an amount sufficient to discharge such lien.
Reference is made to those certain agreements and indemnities made by Ball
Metal Food Container Corp. and Ball Corporation (collectively, "Ball") to Lessee
with respect to environmental matters affecting the Leased Property pursuant to
a certain Asset Purchase Agreement dated October 6, 1996 between Lessee and Ball
(the "Ball Environmental Indemnities"). Lessee agrees that it will not knowingly
waive or terminate any material right under the Ball Environmental Indemnities
without Lessor's consent, that it will give notice to Lessor of all claims and
demands made by
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<PAGE>
Lessee under the Ball Environmental Indemnities (whether or not they relate to
the Leased Property or to other property covered thereby), and will keep Lessor
reasonably informed of the status of any remediation or investigation of
hazardous materials made by Ball, Lessee or any affiliate of Lessee with respect
to the Leased Property or any other property adjacent to or in the vicinity of
the Leased Property, and will provide to Lessor copies of all reports, test
results and other material non-privileged written documentation in its
possession or control from time to time relating to any such remediation or
investigation.
Lessee agrees to implement a routine monitoring program as recommended
by the Environmental Site Assessment and promptly to provide all results, data,
reports and work product from such program to Lessor.
(e) Lessee agrees to indemnify, defend and hold harmless each Indemnified
Party from and against any and all losses which may be suffered or incurred by,
or asserted against such Indemnified Party to the extent arising directly or
indirectly out of, (i) the use, storage, transportation, disposal, treatment,
release, threatened release, discharge, emission, generation or presence of any
Hazardous Substances at, from, on, over, under or in the Leased Property
occurring before or during the Term of the Lease, regardless of whether a claim
is brought or loss suffered or incurred before, during or after the Term of this
Lease and regardless of the source of any such Hazardous Substances, or (ii) any
default in. the performance of any obligation under this Article 9 or any
violation of any Environmental Law with respect to the Leased Property or by
Lessee or any Person claiming by, through or under Lessee, or resulting from
Lessee's failure to comply with this Article 9, except to the extent any such
losses arise out of the gross negligence or willful misconduct of Lessor. Lessee
agrees to execute and to cause Guarantor to execute and deliver to Lessor's
Mortgagee such separate instrument of indemnity with respect to environmental
matters as Lessor's Mortgagee may reasonably require (the "Mortgagee
Indemnity"), provided that in the event of any conflict in the terms, conditions
or enforcement of the indemnification provided for in this Section 9(e) and the
Mortgagee Indemnity, the terms, conditions and enforcement of the Mortgagee
Indemnity shall take precedence.
(f) The obligations and liabilities of Lessee with respect to each
Indemnified Party, actual or contingent, under this Article 9 and relating to
the period through the end of the Term, whether arising before or after the
Term, shall survive such termination of this Lease or the abandonment of the
Leased Property by Lessee and repayment of the Notes, or any acquisition or
disposition of the Leased Property, whether pursuant to subparagraph (h), below,
or otherwise, except with respect to events and circumstances resulting solely
from the acts of any Person other than Lessee, any Affiliate of Lessee, or any
Person claiming by or through Lessee or any such Affiliate and occurring after
the foreclosure of the lien of the Mortgage and the sale of the Leased Property
pursuant to such foreclosure.
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<PAGE>
(g) In the event that Lessee is in default of any obligation under this
Article 9, such default occurs on or before September 15, 2011, and Lessor
reasonably believes that the cost to cure such default will exceed $3,000,000
then, in addition to and not in limitation of, all other rights of Lessor
hereunder and without regard to whether such default constitutes an Event of
Default, Lessor may by written notice to Lessee (an Article 9 Notice) require
Lessee to purchase the Leased Property in the manner and under the terms of
Article 15. If Lessor requires Lessee to purchase the Leased Property pursuant
to this Article, then Lessee shall purchase the Leased Property on an
Installment Payment Date specified by Lessor not less than 30 nor more than 90
days after the giving of the Article 9 Notice for a purchase price equal to the
Termination Value as of the date of such purchase plus the Reinvestment Premium.
(h) Lessee shall use commercially reasonable efforts to comply with all of
the obligations of the insured (other than the obligation to pay premiums, which
shall be the responsibility of Lessor) arising under that certain insurance
obtained by Lessor from United Capitol Insurance Company, and any renewals or
replacements thereof, for the mutual benefit of Lessor and Lessor's Mortgagee,
during the entire term of this Lease.
The Environmental Insurance Policy shall contain such provisions as
Lessor deems necessary or desirable to protect its interest and shall be
satisfactory in form and substance to Lessor.
In the event that, during the twelve months prior to the last year
that the Environmental Insurance Policy remains in effect, there is an
"Environmental Contamination Discovery," as that term is defined in the
Environmental Insurance Policy, Lessor may at its option purchase an "Extended
Reporting Option;' as that term is defined in the Environmental Insurance
Policy, and the obligations of Lessee arising under this Section 9(i) shall
apply to such Extended Reporting Option. In the event the terms within quotes in
this paragraph are not defined in the Environmental Insurance Policy, then they
shall have the meaning commonly used in the industry.
10. Maintenance and Repair; Additions.
---------------------------------
(a) Lessee will, at its cost and expense, keep and maintain the Leased
Property, including all buildings, and any altered, rebuilt, additional or
substituted buildings, and other improvements, in the same condition as on the
date of this Lease, ordinary wear and tear excepted, and (except as otherwise
provided in paragraph (c) of Article 12) will make all structural and
non-structural, and ordinary and extraordinary changes, repairs and
replacements, foreseen or unforeseen, which may be required, whether or not
caused by its act or omission, to be made upon or in connection with the
improvements to the Leased Property in order to keep the same in such condition,
including taking action necessary to maintain the Leased Property
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in compliance with Legal Requirements (other than Environmental Laws, which are
solely governed by Article 9 hereof.) Without limiting the foregoing, Lessee
acknowledges and agrees that its obligation as aforesaid shall include the roof
replacement and asphalt paving described in the Property Condition Survey.
Lessee shall keep the Leased Property orderly and free and clear of rubbish.
Lessor shall not be required to maintain, alter, repair, rebuild or replace any
improvements on the Leased Property or to maintain the Leased Property, and
Lessee expressly waives the right to make repairs at the expense of Lessor
pursuant to any law at any time in effect. Lessor shall have no obligation to
incur any expense of any kind or character in connection with the management,
operation or maintenance of the Leased Property during the Term of the Lease.
Lessee shall use and operate the Leased Property or cause it to be used and
operated only by personnel authorized by Lessee and Lessee shall use reasonable
precautions to prevent loss or damage to the Leased Property from fire and
other hazards.
(b) If any Improvements shall encroach upon any property, street or right-
of-way adjoining or adjacent to the Leased Property, or shall violate any
restrictive covenant affecting the Leased Property or any part thereof, or shall
impair the rights of others under or obstruct any easement or right-of-way to
which the Leased Property is subject (excluding, however, covenants, easements
or rights-of-way granted by Lessor after commencement of the Term without the
consent of Lessee), then, promptly after the written request of Lessor or any
Person affected by any such encroachment, violation, impairment or obstruction,
Lessee shall, at its expense, either (i) obtain effective waivers or settlements
of all claims, liabilities and damages resulting from each such encroachment,
violation, impairment or obstruction or (ii) make such changes in the
Improvements and take such other action as shall be necessary to remove such
encroachments or obstructions and to end such violations or impairments,
including, if necessary, the alteration or removal of any Improvement. Any such
alteration or removal shall be made to the same extent as if such alteration or
removal were an alteration under the provisions of paragraphs (c) or (d) of this
Article 10 and there shall be no abatement of rent by reason of such alteration
or removal.
(c) Lessee shall have the right to make non-structural alterations,
modifications or improvements to the Improvements and the Land and to make any
alterations, additions, modifications or improvements to the Leased Property
whether or not structurally integrated with the existing Improvements, the cost
of which in any instance is $250,000 or less (a Minor Addition) without Lessor's
consent; provided, however, that prior to commencing any addition having a
potential cost exceeding $250,000, Lessee shall have delivered to Lessor and
Lessor's Mortgagee (A) a certificate of a structural engineer licensed in the
state in which the Leased Property is located and (B) a certificate of an
officer of Lessee certifying that such Minor Addition, if constructed in
accordance with the proposed plans and specifications, copies of which shall be
delivered to Lessor and Lessor's Mortgagee, will not
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adversely affect the structural integrity of the Improvements or materially
impair the utility, fair market value, useful life or operation of the Leased
Property and will conform with the character and quality of the existing
Improvements and all Legal Requirements (including, without limitation, the
Americans with Disabilities Act), provided that no such Certificate under clause
(A) above shall be required for any addition which does not involve the
preparation of plans and specifications. All Minor Additions will be constructed
in a good and workmanlike manner using a quality of material and workmanship at
least as good as to the original work or installation of the Improvements and in
compliance with all applicable Legal Requirements and will be completed in a
commercially reasonable time period. Each Minor Addition shall be made at the
sole cost and expense of Lessee, may not be encumbered by Lessee and (other than
Trade Fixtures) shall become the property of Lessor and subject to this Lease,
provided that Lessee may remove any Minor Addition which is non-structural,
provided Lessee repairs any damage resulting from such removal. No Minor
Addition or other alteration or addition which does not satisfy all of the
foregoing requirements of this subparagraph (c) shall be made without Lessor's
written consent, which will not be unreasonably withheld, conditioned or
delayed.
Lessee agrees to complete the repairs, replacements and improvements to the
Leased Property described on Schedule I (the "Scheduled Capital Improvements")
in accordance with the provisions of this Article 10 no later than one year from
the date hereof, except that the parking lot resurface work identified in
Schedule I (the "Immediate Repair Work") shall be completed no later than six
(6) months from the date hereof, and the roof repair work identified in Schedule
I shall be completed no later than eighteen (18) months from the date hereof
Lessee represents and warrants to Lessor that the estimated cost to complete
such Scheduled Capital Improvements is as set forth on Schedule I.
Lessor and Lessee acknowledge that, without limiting Lessor's other rights
hereunder, in the event that the Immediate Repair Work is not completed within
six (6) months from the date hereof, Lessee shall immediately deposit with
Lessor an amount (the "Escrow Funds") equal to the lesser of (A) Fifty-Five
Thousand Dollars ($55,000.00) or (B) one hundred twenty-five percent (125%) of
the cost to complete the Immediate Repair Work as determined in writing by EMG,
such determination to be made at Lessee's sole cost and expense. Lessor shall
cause the Escrow Funds to be released to Lessee upon satisfaction of the
Completion Conditions (hereafter defined) with respect to the Immediate Repair
Work.
Lessee agrees to provide no later than the date by when each Scheduled
C4pital Improvement is to be completed the following:
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(i) an affidavit from Lessee certifying that the Lessee has
completed the Scheduled Capital Improvement and that all costs in connection
therewith have been paid, together with copies of receipts for paid invoices.
(ii) copies of building permits, certificates of occupancy or other
certificates issued by governmental authorities, if any, in connection with the
work performed.
(iii) a letter from the entity which prepared the Property Condition
Survey, addressed to Lessor and Lessor's Mortgagee, confirming that the
applicable Scheduled Capital Improvements have been completed in a good and
workmanlike manner.
The delivery of the items described in clauses (i) through (iii) above
shall, with respect to each particular Scheduled Capital Improvement, constitute
satisfaction of the "Completion Conditions."
Lessor and Lessee agree that, notwithstanding anything to the contrary set
forth in this Lease, the Scheduled Capital Improvements may be completed without
Lessee being required to comply with clauses (A) and (B) of the first sentence
of Section 10(C) hereof.
(d) All work done in accordance with this Article 10 shall comply with the
requirements of all insurance policies required to be maintained by Lessee
hereunder.
11. Trade Fixtures. Lessor acknowledges and agrees that all personal property,
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trade fixtures, machinery and equipment, including the items of trade fixtures,
machinery and equipment described in Schedule E (but specifically excluding
Improvements, electrical, plumbing, HVAC and other building systems and other
replacements of fixtures, machinery and equipment which are the property of
Lessor) hereto are and shall remain the property of Lessee (Trade Fixtures) and
be treated as "trade fixtures" for the purposes of this Lease and Lessee shall
remove the same from the Leased Property at any time prior to the termination of
this Lease, and Lessee shall repair any damage to the Leased Property resulting
from such removal. Lessee may, at its own cost and expense, install or place or
reinstall or replace upon or remove from the Leased Property any such Trade
Fixtures. Any such Trade Fixtures shall not become the property of Lessor.
Replacements of fixtures, machinery and equipment which are property of the
Lessor shall be of at least equal quality to the replaced fixtures, machinery
and equipment as of the Commencement Date, reasonable wear and tear excepted.
Lessor agrees, at Lessee's expense, to confirm that it has no interest in, and
to waive any right to place a lien against, any Trade Fixtures.
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12. Condemnation and Casualty.
-------------------------
(a) Lessee hereby assumes all risk of loss, damage or destruction, whether
(i) by fire or hazard or casualty, or the theft of all or any portion of the
Leased Property (a Casualty) or (ii) by taking, condemnation, seizure,
confiscation or requisition of use or title of all or any portion of the Leased
Property by any governmental body or authority or any Person legally vested with
such powers (a Taking; a Taking and a Casualty are each sometimes referred to as
a Destruction). Lessee hereby assigns to Lessor any award or insurance or other
payment to which Lessee may become entitled by reason of its interest in the
Leased Property (other than any award or insurance or other payment made to
Lessee specifically made for interruption of business, moving expenses or Trade
Fixtures; hereinafter referred to as Lessee's Loss), if the Leased Property, or
any portion thereof, is damaged, destroyed, lost or taken in a Taking or a
Casualty. If a Destruction with respect to the Leased Property occurs, the
Lessee shall give Lessor and Lessor's Mortgagee prompt written notice thereof,
and describe in reasonable detail in each case the circumstances of the Taking
or Casualty and the damage to or loss of the Leased Property. So long as no
Event of Default has occurred and is continuing, and provided Lessee satisfies
the Credit Rating Test and the Restoration Test (defined in Section 12(c)
hereof) Lessee shall at its cost and expense, in the name and on behalf of the
Lessor, Lessee, Lessor's Mortgagee or otherwise, appear in any such proceeding
or other action, negotiate, accept and prosecute any claim for any award,
compensation, insurance proceeds or other payment on account of any such
Casualty or Taking and, subject to paragraph (b) below, cause each such award,
compensation, insurance proceeds or other payment to be paid to Lessor's
Mortgagee, if any, and otherwise, to Lessor. Lessee shall use commercially
reasonable efforts to achieve the maximum award or other recoveries obtainable
under the circumstances. Any negotiated awards, settlement or recoveries shall
be subject to Lessor's and Lessor's Mortgagee's prior written approval. Lessor
may appear in any such proceeding or other action in a manner consistent with
the foregoing and if an Event of Default then exists hereunder, the reasonable
costs and expenses of any such appearance shall be borne by Lessee and payable
to Lessor as Additional Rent. Lessee shall promptly inform Lessor of all
settlement offers. If an Event of Default has occurred and is continuing, or if
Lessee does not satisfy the Credit Rating Test or the Restoration Test, Lessor's
Mortgagee (or if there be none, Lessor) shall have the right at Lessee's cost to
negotiate, adjust and settle awards, settlements and recoveries without Lessee's
approval.
(b) If there shall be a Destruction affecting the Leased Property or any
part thereof, then Lessee shall give prompt written notice of such Destruction
to Lessor and Lessor's Mortgagee, including a description thereof in reasonable
detail. Thereafter, Lessee shall, at Lessee's own cost and expense, proceed with
diligence and promptness (i) to carry out any work necessary to make the Leased
Property safe and secure, and (ii) to restore, repair, replace, rebuild and/or
improve the Leased
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Property in order to restore the Leased Property, as nearly as practicable, to a
condition not less than the condition required to be maintained hereunder
immediately prior to such Destruction. All construction work shall be undertaken
and completed in the same manner as if the same were a Minor Addition, but
subject to the reasonable requirements of Lessor's Mortgagee as provided for in
clause (ii) below, including, without limitation, review and approval of plans
and specifications to confirm consistency with the requirements of the Lease.
The foregoing obligations of Lessee so to restore, repair, replace and/or
rebuild the Leased Property shall not be applicable (but the foregoing
obligations of Lessee to make the Leased Property safe and secure shall be
applicable) if Lessor terminates the Lease pursuant to paragraph (c).
Basic Rent and Additional Rent shall not abate hereunder by reason of any
Destruction affecting the Leased Property, and this Lease shall continue in full
force and effect and Lessee shall continue to perform and fulfill all of
Lessee's obligations, covenants and agreements hereunder notwithstanding such
Destruction.
The Net Award (as defined in Appendix I) shall be applied to effect compliance
with Lessee's obligations hereunder. If the Net Award is less than the estimated
cost of restoring or rebuilding the Improvements to the condition required in
this paragraph (b) (as reasonably determined by Lessor at Lessee's expense),
then, unless such estimated cost is less than the Restoration Threshold Amount,
Lessee shall deposit the amount by which such estimated cost exceeds the Net
Award with the Depositary (as defined below) or shall post an equivalent bond or
other security reasonably satisfactory in form and substance to Lessor and
Lessor's Mortgagee issued by a surety, bank or other Person satisfactory to
Lessor and Lessor's Mortgagee, whereupon such deposit or bonded amount shall be
part of the Net Award for purposes of paragraph (b) of this Article 12. If the
Net Award does not exceed $25,000 (the Restoration Threshold Amount, provided
that so long as no Event of Default has occurred and is continuing and Lessee
satisfies the Credit Rating Test, the Restoration Threshold Amount shall. be
$500,000) then the Net Award shall be promptly paid to Lessee to be applied to
the repair and rebuilding required by this paragraph (b). If the Net Award
exceeds the Restoration Threshold Amount then:
(i) the full amount thereof shall be paid to a depositary (the Depositary).
The Depositary shall be (a) Lessor's Mortgagee or its servicer, or (b) a bank or
trust company selected by Lessor and approved by Lessor's Mortgagee, and
reasonably satisfactory to Lessee, and which has an issuer credit rating
(hereafter, "credit rating") from S&P or Moody's (or any successor to either
entity) of "A" or "A2", respectively, or better. The Depositary shall have no
affirmative obligation to prosecute a determination of the amount of, or to
effect the collection of, any insurance proceeds or condemnation award or
awards. Moneys so received by the Depositary shall be held by the Depositary in
trust separately for the uses and purposes provided in this Lease. To the extent
not available to be paid from the Net
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Award, fees and expenses payable to the Depositary shall be paid by Lessee as
Additional Rent.
(ii) Payments of the Net Award for the actual costs and expenses
incurred by Lessee in connection with such repair and rebuilding shall be made
to Lessee by the Depositary after written notice to the Depositary, with a copy
to Lessor, setting forth in reasonable detail all of such costs and expenses
actually incurred by Lessee, provided that draws shall be made no more
frequently than on a monthly basis. Lessee shall comply with the reasonable
requirements of Lessor's Mortgagee, if any, with respect to the distribution of
any Net Award by the Depositary, including without limitation that Lessor's
Mortgagee shall have received applicable lien waivers, architect's certificates
and title insurance endorsements, and that no Event of Default shall have
occurred and be continuing hereunder.
(c) Notwithstanding the foregoing, if there is any Destruction and either
(i) at the time of such Destruction, Guarantor has a credit rating from S&P of
"BB-" or better and, if the Credit Rating is BB- a watch position of neutral
or better (the "Credit Rating Test"), and the value of the Leased Property
immediately following such Destruction is less than 50% of its value immediately
prior to such Destruction, or (ii) at the time of such Destruction or at any
time thereafter until the Leased Property is restored pursuant to this Article
12, there shall be an Event of Default or any monetary default shall exist
(Lessee having no rights to an abatement or reduction of Basic Rent, Additional
Rent or other sums due hereunder), or (iii) Lessee fails to deliver to Lessor
within six months of the Destruction an architect's certificate satisfactory to
Lessor that restoration of the Leased Property is capable of being completed
with reasonable diligence by the Outside Restoration Date and such failure
continues for 20 days after Lessee's Actual knowledge or such failure, or (iv)
Lessor fails to complete such restoration by the Outside Restoration Date
(clauses (iii) and (iv) being referred to as the "Restoration Test") then, at
the option of Lessor, upon notice from Lessor of any such event which makes
specific reference to this Article 12(c) and the invocation of the offer
provisions hereinafter provided for, Lessor may require Lessee to make and
Lessee shall be deemed to have made an offer to purchase the Leased Property in
the manner and under the terms of Article 15 on the Installment Payment Date
first occurring thirty (30) days after Lessor's acceptance of such offer for a
purchase price equal to the Termination Value as of the date of purchase plus
the Reinvestment Premium, less in all events the Net Award actually received by
Lessor or Lessor's Mortgagee (and Lessor shall assign to Lessee any other Net
Award.) Lessor shall have sixty (60) days after such offer to accept or reject
it, and if it fails to act, it shall be deemed to have accepted such offer. No
rejection of such offer shall be effective unless consented to by Lessor's
Mortgagee. If Lessor rejects such offer, this Lease shall terminate on the
Installment Payment Date first occurring thirty (30) days after such rejection,
and the entire Net Award shall be retained by Lessor.
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For purposes hereof, the "Outside Restoration Date" shall mean 18 months
after the Destruction, subject to extension by Lessor of not more than 90 days
to the extent that restoration is delayed due to acts of God, unavailability of
materials, strike, or further Destruction.
(d) Notwithstanding any other provision to the contrary contained in this
Article 12, in the event of a temporary condemnation, this Lease shall remain in
full force and effect (including without limitation the obligation of Lessee to
continue to pay Basic Rent and Additional Rent) and the Lessee shall be
obligated to continue to pay Basic Rent and Additional Rent and Lessee shall be
entitled to the Net Award allowable to such temporary condemnation; except that
any portion of the Net Award allocable to the time period after the expiration
or termination of the Term shall be paid to Lessor.
13. Insurance.
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(a) Lessee shall, at its cost and expense, maintain or cause to be
maintained valid and enforceable insurance of the following character and shall
cause to be delivered to Lessor and Lessor's Mortgagee annual certificates of
the insurers as to such coverage and shall comply with the requirements of this
Article 13 (Insurance Requirements):
(i) "all risks" property insurance covering the Leased Property and
all replacements and additions thereto, and all building materials and other
property which constitute part of the Leased Property in a manner consistent
with insurance maintained by Lessee on properties similar to the Leased Property
and in any event in amounts not less than the actual replacement cost of the
Leased Property less Land and other uninsurable items, subject to an agreed
value endorsement (to be updated annually), together with a replacement cost
endorsement and an endorsement providing for law and ordinance coverage, all of
such insurance to have a deductible not greater than $25,000.
(ii) public liability insurance covering legal liability on an
"occurrence" basis against claims for bodily injury, death or property damage,
occurring on, in or about the Leased Property and the adjoining land, streets,
sidewalks or ways occurring as a result of construction and use and occupancy of
facilities located on the Leased Property or as a result of the construction
thereof or the use of products or materials manufactured, processed, constructed
or sold, or services rendered, on the Leased Property, in the minimum amount of
$5,000,000 (or such higher amount as Lessor may reasonably require from time to
time) with respect to any one occurrence, accident or disaster or incidence of
negligence and with a maximum deductible reasonably acceptable to Lessor.
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(iii) Worker's compensation insurance (or other similar insurance or self
insurance program permitted and in compliance with the laws of the state in
which the Leased Property is located) covering all Persons employed in
connection with any work done on or about the Leased Property with respect to
which claims for death or bodily injury could be asserted against Lessor, Lessee
or the Leased Property, complying with the laws of the state in which the Leased
Property is located.
(iv) if any portion of the Leased Property is located in an area
designated by the Federal Emergency Management Association as having special
flood hazards, flood insurance in the maximum available amount under the Flood
Disaster Protection Act of 1973 and otherwise meeting the requirements of the
Federal Insurance Administration.
(v) business interruption insurance in amounts sufficient to compensate
Lessor for all Basic Rent, Additional Rent or other income hereunder during a
period not less than twelve (12) months, the amount of such coverage to be
adjusted annually to reflect the Basic Rent, Additional Rent and other income
payable during the succeeding twelve (12) month period.
(vi) Such other insurance, in such amounts, against such risks, and with
such other provisions as is customarily and generally maintained by operators of
similar properties, including insurance against loss or damage from explosion of
steam boilers, air conditioning equipment, high pressure piping, machinery and
equipment, pressure vessels or similar apparatus.
Such insurance shall be written by insurance companies with a general
policyholder's service rating of not less than "A" and a financial rating of not
less than "XI" as rated in the most currently available Best's Insurance
Reports, and with claims paying ability rating from S&P and Moody's of "A" (or
"AA" with respect to policies described under subparagraph v) or better and
which are legally qualified to issue such insurance in the state where the
Leased Property is located, and otherwise satisfactory to Lessor.
Insurance certificates evidencing the coverage required above shall be deposited
with the Lessor by Lessee on the date hereof and thereafter no less frequently
than annually. With respect to the policies described under subparagraphs (i)
(ii), (iv), (v) and, if applicable, (vi), the Lessee also shall deliver
insurance certificates evidencing the coverage required under said subparagraphs
to the Lessor's Mortgagee, naming the Lessor's Mortgagee as the certificate
holder. The form and substance of such certificates shall be satisfactory to
Lessor and Lessor's Mortgagee and shall be issued by the insurer.
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All policies of property insurance provided for herein shall name the Lessor as
loss payee and Lessor's Mortgagee as loss payee, mortgagee and additional
insured, as its interest may appear, and all liability policies shall name the
Lessor and the Lessor's Mortgagee as additional insured, as their interests may
appear and the policies required under subparagraphs (i), (iv), and (v) above
shall identify the Lessor as the owner of the Leased Property. In addition, all
policies of insurance required under this Lease shall contain a standard
mortgagee clause form endorsement naming the Lessor's Mortgagee as loss payee,
mortgagee and additional insured; and any provisions in such insurance for risk
retention by Lessee shall be subject to the reasonable approval of Lessor and
Lessor's Mortgagee. All policies required under this Article 13 shall provide
that (i) the insurance evidenced thereby shall not be canceled or materially
modified without at least thirty (30) days' prior written notice from the
insurance carrier to the Lessor and the Lessor's Mortgagee, and (ii) no claims
shall be paid thereunder without ten (10) days' advance written notice to the
Lessor and the Lessor's Mortgagee. Furthermore, the Lessee shall be required to
deliver certificates of all insurance required under this Article 13 at least
thirty (30) days prior to the earlier of the expiration of the existing
insurance period or the due date for all premiums for the renewal of such
policies. All insurance policies and endorsements shall be for a term of not
less than one year and shall be fully prepaid and nonassessable. The Lessee
shall not obtain any separate or additional insurance which is contributing in
the event of loss unless the Lessor and the Lessor's Mortgagee are each insured
thereunder (as their interests may appear) and the policies therefor are
satisfactory to the Lessor and the Lessor's Mortgagee.
(b) Any Net Award arising out of a Destruction remaining after Lessee has
repaired and/or improved the Leased Property pursuant to paragraph (b) of
Article 12 shall be paid to Lessor.
(c) Every insurance policy maintained pursuant to this Lease shall (i)
provide that the issuer waives all rights of subrogation against Lessor, any
successor to Lessor's interests in the Leased Property and Lessor's Mortgagee;
and (ii) provide that 30 days' advance written notice of cancellation, material
modification, termination or lapse of coverage shall be given to Lessor and
Lessor's Mortgagee and that such insurance, as to the interest of Lessor and
Lessor's Mortgagee, shall not be invalidated by any foreclosure or any other
proceedings relating to the Leased Property, nor by any change in the title
ownership of the Leased Property, nor by use or occupation of the Leased
Property for purposes more hazardous than are permitted by such policy; and
(iii) be primary and without right or provision of contribution as to any other
insurance carried by Lessor or any other interested party; and (iv) in the event
any insuring company is not domiciled within the United States of America,
include a United States Service of Suit clause (providing any actions against
the insurer by the named insured or Lessor are conducted within the jurisdiction
of the United States of America). So long as each policy of insurance
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complies with clause (i) above, Lessor and Lessee each waive all rights of
subrogation against the other, to the extent of applicable insurance coverage.
(d) Lessee shall comply with all of the terms and Conditions of each
insurance policy maintained pursuant to the terms of this Lease.
(e) If at any time an Event of Default has occurred and is continuing and
Lessor has not terminated this Lease as set forth in Article 20, or if at any
time the credit rating assigned to Lessee by S&P is "B" or less, (and if such
credit rating is raised from "B" to a higher level, until the next time real
estate taxes are payable with respect to the Leased Property), Lessee shall on
demand pay to Lessor or Lessor's Mortgagee on the same day of each month that
Basic Rent is due hereunder a monthly payment in such amount as Lessor or
Lessor's Mortgagee reasonably determines to be necessary to create and maintain
a reserve fund from which to pay before they become due all Taxes and
Impositions, and all premiums on insurance required to be maintained by Lessee
pursuant to Article 13 hereof (the "Tax and Insurance Reserve Fund"). All such
sums shall be held by Lessor or Lessor's Mortgagee free of trust and without
interest to Lessee, and may be commingled with other funds. Any excess reserve
shall be credited against subsequent reserve payments required hereunder, and
any deficiency shall be paid by Lessee upon demand, but in no event later than
five (5) days before the date when such Taxes and Impositions and insurance
premiums shall become delinquent. To the extent that adequate funds for Taxes
and Impositions have been paid to create a reserve fund, Lessor shall, on not
less than 15 days' written request of Lessee, cause the same to be applied to
Taxes and Impositions payable by Lessee hereunder.
Any unapplied portion of the Tax and Insurance Reserve Fund shall be
returned to Lessee within thirty (30) days after the expiration of the Term or
termination of this Lease, provided there exists no breach of any undertaking of
Lessee, it being agreed that this provision shall survive termination of this
Lease. Upon the occurrence of any Event of Default by Lessee hereunder, Lessee
agrees that Lessor may apply all or any portion of the Tax and Insurance Reserve
Fund to any obligation of Lessee hereunder. If all or any portion of the Tax and
Insurance Reserve Fund is applied to any obligation of Lessee hereunder, Lessee
shall immediately upon request of Lessor restore the Tax and Insurance Reserve
Fund to its original amount. Lessee shall not have the right to call upon Lessor
to apply all or any portion of the Tax and Insurance Reserve Fund to cure any
default or fulfill, any obligation of Lessee hereunder, but such use shall be
solely in the discretion of Lessor. Upon any conveyance of the Leased Property
by Lessor, the Tax and Insurance Reserve Fund shall be delivered by Lessor to
Lessor's transferee, and upon such delivery, Lessee releases Lessor herein
named of any and all liability with respect to the fund, its application and
return, and Lessee agrees to look solely to such transferee with respect
thereto. The provisions of the previous sentence shall also apply to subsequent
transferees.
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14. Financial Statements; Certificates. Lessee will cause to be delivered to
----------------------------------
Lessor and Lessor's Mortgagee the following financial statements of Guarantor.
(i) as soon as practicable, copies of all such financial
statements, proxy statements, notices, other communications, and reports as
Guarantor shall send to its shareholders and other information generally made
available to banks and other lenders (exclusive of proprietary information);
(ii) for any period that Guarantor is a public company, as soon as
practicable, copies of all regular, current or periodic reports (including
reports on Form 10-K, Form 8-K and Form 10-Q) which Guarantor is or may be
required to file with the Securities and Exchange Commission or any governmental
body or agency succeeding to the functions of the Securities and Exchange
Commission; and
(iii) if Guarantor shall no longer be a public company required to
file such reports with the Securities and Exchange Commission then within 120
days after the end of each fiscal year, and within 60 days after the end of any
other fiscal quarter, a consolidated statement of earnings, and a consolidated
statement of changes in financial position, a consolidated statement of
stockholders' equity, and a consolidated balance sheet of Guarantor as at the
end of each such year or fiscal quarter, setting forth in each case in
comparative form the corresponding consolidated figures from the preceding
annual audit or corresponding fiscal quarter in the prior fiscal year, as
appropriate, all in reasonable detail and satisfactory in scope to Lessor and
Lessor's Mortgagee, and certified to Guarantor as to the annual consolidated
statements by independent public accountants of recognized national standing
selected by Guarantor, whose certificate shall be based upon an examination
conducted in accordance with generally accepted auditing standards and the
application of such tests as said accountants deem necessary under the
circumstances; and
Concurrently with the delivery of annual financial statements pursuant hereto,
Lessee will cause to be delivered to Lessor and Lessor's Mortgagee a certificate
by an Executive Officer of Lessee detailing capital improvements made to the
Leased Property during the prior calendar year and a projection of such matters
for the next calendar year. In addition, Lessee agrees and agrees to cause
Guarantor upon prior written request to meet with Lessor and Lessor's Mortgagee
during normal business hours at mutually convenient times, from time to time, to
discuss this Lease and such information about Lessee's and Guarantor's business
and financial condition requested by Lessor.
Lessor shall have the right to share any information delivered to the Lessor
pursuant to this Section 14, or otherwise with Lessor's Mortgagee, potential
mortgagees, rating agencies, servicers, potential purchasers of the Leased
Property or a beneficial interest
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therein and all other parties having a legitimate business purpose for reviewing
the same.
15. Purchase Procedure.
------------------
(a) In the event of the purchase of Lessor's interest in the Leased
Property by Lessee pursuant to any provision of this Lease, the terms and
conditions of this Article 15 shall apply.
(b) On the dosing date fixed for the purchase of Lessor's interest in the
Leased Property.
(i) Lessee shall pay to Lessor, or as Lessor directs, in lawful
money of the United States-in-immediately available funds, at Lessor's address
hereinabove stated or at any other place in the United States which Lessor may
designate, an amount equal to the purchase price described in such provision;
(ii) Lessor shall execute and deliver to Lessee a limited warranty
deed, sufficient to convey insurable title to the Leased Property, and an
assignment and such other instrument or instruments as may be appropriate and
customary in accordance with prevailing local conveyancing practices which shall
transfer all of Lessor's interest in the Leased Property, including, without
limitation, a bill of sale to the extent applicable, in each case free and clear
of any Mortgage or liens (except the liens described in (C) below), but subject
to (A) any encumbrances existing on the first day of the Term, (B) Permitted
Encumbrances (other than any Mortgage and any assignments of this Lease), (C)
all liens, encumbrances, charges, exceptions and restrictions attaching to the
Leased Property after the beginning of the Term (other than those created or
caused by or through Lessor without the consent of Lessee, and other than any
Mortgage and any assignments of this Lease), and (D) all Legal Requirements;
(iii) Lessee shall pay all reasonable charges incident to such
transfer or the termination of the Lease which are incurred by Lessor, Lessor's
Mortgagee or Lessee, including but not limited to all transfer taxes, conveyance
fees, recording fees, escrow fees, title insurance premiums and federal, state
and local taxes (except for any net income or profit taxes of Lessor or Lessor's
Mortgagee) and reasonable attorneys' fees and expenses of Lessor's counsel and
counsel to Lessor's Mortgagee;
(iv) Lessee shall pay to Lessor all Basic Rent, Additional Rent and
other sums payable by Lessee under this Lease, due and payable through the date
Lessee purchases Lessor's interest in the Leased Property; and
(v) Lessor's transfer of its ownership in the Leased Property shall
be on an as-is basis, without any representation or warranty, either express or
implied,
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as to the design, condition, quality, capacity, merchantability, habitability,
durability, suitability or fitness of the Leased Property for any particular
purpose, or any other matter concerning the Leased Property or any portion
thereof.
16. Quiet Enjoyment. So long as no Event of Default under this Lease shall have
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occurred and be continuing, Lessor covenants that Lessee shall and may at all
times peaceably and quietly have, hold and enjoy the Leased Property during the
Term of this Lease. Notwithstanding the preceding sentence, (a) Lessor may
exercise its rights and remedies under Article 20 and (b) Lessor, Lessor's
Mortgagee, or their agents may enter upon and inspect the Leased Property,
during normal business hours after 24-hours' written notice. So long as no Event
of Default exists hereunder, a representative of Lessee shall be permitted to be
present during the entry and inspection set forth in clause (b). Any failure by
Lessor to comply with the foregoing warranty shall not give Lessee any right to
cancel or terminate this Lease, or to abate, reduce or make deduction from or
off-set against any Basic Rent, as hereinafter defined, or Additional Rent or
other sum payable under this Lease, or to fail to perform or observe any other
covenant, agreement or obligation hereunder or to recover any damages against
Lessor resulting therefrom. Subject to the foregoing sentence, Lessee shall have
the right to obtain injunctive or other relief against Lessor for breach of
the aforesaid covenant of peaceful and quiet possession and enjoyment of the
Leased Property.
17. Survival. In the event of the termination of this Lease as herein provided,
--------
the obligations and liabilities of Lessee, actual or contingent, under this
Lease which arose at or prior to such termination shall survive such
termination.
18. Subletting; Assignment.
----------------------
(a) Lessee may sublet the Leased Property or any portion thereof, or
assign its interest in this Lease, provided that.
(i) No Event of Default under this Lease has occurred and is
continuing on the date of such sublease or assignment; and
(ii) Each sublease or assignment shall expressly be made subject to
the provisions hereof.
(b) No such sublease or assignment shall affect or reduce any obligations
of Lessee or any Guarantor, or the rights of Lessor hereunder, and all
obligations of Lessee hereunder shall continue in full effect as the obligations
of a principal and not of a guarantor or surety, as though no subletting or
assignment had been made.
(c) Lessee shall, at least 10 days prior to the execution of any such
sublease or assignment, deliver to Lessor a certificate of an Executive Officer
stating the uses
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permitted under such sublease or assignment, and within 10 days after such
execution, a conformed copy thereof and of any short form lease or memorandum of
lease which has been prepared for recording purposes.
(d) Neither this Lease nor the Term of this Lease shall be mortgaged by
Lessee, nor shall Lessee mortgage or pledge the interest of Lessee in and to any
sublease of the Leased Property or any portion thereof or the rental payable
thereunder. Any such mortgage or pledge, and any sublease or assignment not
permitted by this Article 18, shall be void.
(e) Lessee shall pay as Additional Rent to Lessor on demand all
reasonable costs and expenses of Lessor and Lessor's Mortgagee (including
attorneys' fees) in reviewing or executing any instrument pursuant to this
Article 18.
19. Advances by Lessor. If Lessee shall fail to make or perform any payment or
------------------
act required by this Lease, then, upon ten (10) Business Days' notice to Lessee
(or upon shorter notice or no notice, to the extent necessary to meet an
emergency or a governmental limitation), Lessor may at its option make such
payment or perform such act for the account of Lessee, and Lessor shall not
thereby be deemed to have waived any default or released Lessee from any
obligation hereunder. Amounts so paid by Lessor and all incidental costs and
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with such payment or performance shall constitute Additional Rent and
shall be paid by Lessee to Lessor on demand.
20. Conditional Limitations - Events of Default and Remedies.
--------------------------------------------------------
(a) Any of the following occurrences or acts shall constitute an "Event
of Default" under this Lease:
(i) if Lessee shall (A) default in making payment of any
installment of Basic Rent for more than 5 days following notice from Lessor of
such default, (B) fail to timely pay any Taxes and Impositions pursuant to
Article 6, (C) fail to keep in full force and effect the casualty or general
liability insurance coverage required to be maintained by Lessee hereunder (D)
default in its obligation to purchase the Leased Property when required to do so
by any provision of this Lease or (E) default in making any payment of
Additional Rent and such default shall continue for seven (7) days after notice
from Lessor of such default; or
(ii) if Lessee shall default in the performance of any other
covenant, agreement or obligation on the part of Lessee to be performed under
this Lease and such default shall continue for a period of 30 days after Actual
Knowledge thereof; provided, however, that in the case of a default which can
with reasonable diligence be remedied by Lessee, but not within a period of 30
days, if Lessee shall commence within such period of 30 days to remedy the
default and thereafter shall prosecute
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the remedying of such default with all reasonable diligence, the period of time
after obtaining such Actual Knowledge of default within which to remedy the
default shall be extended for such period not to exceed an additional 330 days
as may be reasonable to remedy the same with all reasonable diligence; or
(iii) if Lessee or any guarantor of Lessee's obligations under the
Lease (Guarantor) shall file a petition of bankruptcy or for reorganization or
for an arrangement pursuant to the Bankruptcy Code, or shall be adjudicated as
bankrupt or become insolvent or shall make an assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall be dissolved, or shall suspend payment of its
obligations, or shall take any corporate action in furtherance of any of the
foregoing; or
(iv) if a petition or answer shall be filed proposing the
adjudication of Lessee or any Guarantor as bankrupt, or its reorganization
pursuant to the Bankruptcy Code, and (A) Lessee shall consent to the filing
thereof, or (B) such petition or answer shall not be discharged or denied within
60 days after the filing thereof; or
(v) if a receiver, trustee or liquidator (or other similar
official) shall be appointed for or take possession or charge of Lessee, or
Lessee's estate or interest in the Leased Property, and shall not be discharged
within 60 days thereafter, or if Lessee shall consent to or acquiesce in such
appointment; or
(vi) if the Leased Property shall have been left unattended,
unsecured and without maintenance; or
(vii) if any Guarantor shall default under the terms of any guaranty
of this Lease beyond applicable grace or cure periods, if any.
(viii) if Lessee shall fail to satisfy the Completion Conditions with
respect to the Scheduled Capital Improvements within the applicable time periods
provided for in Section 10(c); or
(ix) if Lessee or any person conveying title to the Leased Property
to Lessor or any Guarantor has made a material misrepresentation under this
Lease or any Guaranty or any certificate or writing tendered in connection with
the execution and delivery of this Lease; or
(x) Lessee or Guarantor fails to comply with the provisions of any
agreement of indemnification made hereunder or in connection with this Lease and
such failure continues for ten (10) days after notice; or
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(xi) Lessee fails to cure any violation of any Legal Requirement
within 30 days of Actual Knowledge thereof, or such shorter period of time as
may be provided for in any cure letter, demand, order or similar document from
any governmental agency received by Lessee (the "Required Cure Date"), subject
to extension of the Required Cure Date if Lessee diligently contests any such
Legal Requirement in accordance with Article 6(d) hereof, so long as any
security required by said Article is posted prior to the Required Cure Date; or
(xii) Lessee fails to deliver to Lessor the Asbestos O & M Plan by
the time required by Section 9(a)(iv) hereof, or fails to complete any Scheduled
Capital Improvements by the time required by Section 10(c) hereof, or fails, and
such failure is not cured within five (5) days following notice from Lessor, to
timely make an escrow payment required by Section 10(c) hereof.
(b) This Lease and the term and estate hereby granted are subject to the
limitation that whenever an Event of Default shall have occurred and be
continuing, Lessor may, at Lessor's option, elect to (i) re-enter the Leased
Property, without notice, and remove all Persons and property therefrom, either
by summary proceedings or by any suitable action or proceeding at law, or
otherwise, without being liable to indictment, prosecution or damages therefor,
and may have, hold and enjoy the Leased Property, together with the
appurtenances thereto and the improvements thereon; and/or (ii) terminate this
Lease at any time by giving notice in writing to Lessee, electing to terminate
this Lease and specifying the date of termination, and the Term of this Lease
shall expire by limitation at midnight on the date specified in such notice as
fully and completely as if said date were the date originally fixed for the
expiration of the Term, and Lessee shall thereupon quit and peacefully surrender
the Leased Property to Lessor, without any payment therefor by Lessor.
(c) In case of any such re-entry, termination and/or dispossession as
provided in the immediately preceding paragraph, (i) the Basic Rent and
Additional Rent shall become due thereupon and be paid up to the time of such
re-entry, dispossession and/or termination, together with such expenses,
including reasonable attorneys' fees, as Lessor shall incur in connection with
such re-entry, termination and/or dispossession; and (ii) Lessor may in good
faith relet the Leased Property or any part thereof (but shall be under no
obligation to do so, except to the extent required by law) for its sole account
without any duty to account therefor to Lessee, either in the name of Lessor or
otherwise, for a term or terms which may, at Lessor's option, be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the Term; (iii) Lessee shall also pay to Lessor the amount by which
the Basic Rent exceeds the net amount, if any, of the rents collected on account
of the leases of the Leased Property for each monthly period which would
otherwise have constituted the Term, which amounts shall be paid in monthly
installments by Lessee on the respective Installment Payment Dates specified
therefor,
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and any suit brought to collect said amounts for any period shall not prejudice
in any way the rights of Lessor to collect the deficiency in any subsequent
period by a similar action or proceeding; (iv) Lessee shall also pay to Lessor
all other damages and expenses which Lessor shall reasonably have sustained by
reason of the breach of any provision of this Lease, including without
limitation reasonable attorneys' fees and expenses, brokerage commissions and
expenses incurred in altering, repairing and putting the Leased Property in
good order and condition and in preparing the same for reletting, which expenses
shall be paid by Lessee as they are incurred by Lessor; and (v) at the option
of Lessor exercised at any time, Lessor forthwith shall be entitled to recover
from Lessee as liquidated damages, in addition to any other proper claims but in
lieu of and not in addition to any amount which would thereafter have become
payable under the preceding clause (iii), the Termination Value for the date on
which Lessor demands such payment together with the Reinvestment Premium less
the present value (using a discount rate of 8% per annum) of the fair market
rental value of the Leased Property for the remainder of the Term. In
calculating the rent reserved for the residue of the Term, there shall be
included, in addition to the Basic Rent, all Additional Rent and the value of
all other consideration agreed to be paid or performed by Lessee for said
residue. Lessor, at Lessor's option, may make such alterations or decorations in
the Leased Property as Lessor, in Lessor's sole judgment, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations or decorations shall not operate or be construed to release
Lessee from liability hereunder as aforesaid.
(d) No receipt of moneys by Lessor from Lessee after a termination of this
Lease by Lessor shall reinstate, continue or extend the Term of this Lease or
affect any notice theretofore given to Lessee, or operate as a waiver of the
right of Lessor to enforce the payment of Basic Rent and Additional Rent, and
any Termination Value or related amounts to be paid by Lessee to Lessor for the
purchase of the Leased Property then due or thereafter falling due, it being
agreed that after the commencement of suit for possession of the Leased
Property, or after final order or judgment for the possession of the Leased
Property, Lessor may demand, receive and collect any moneys due or thereafter
falling due without in any manner affecting such suit, order or judgment, all
such moneys collected being deemed payments on account of the use and occupation
of the Leased Property or, at the election of Lessor, on account of Lessee's
liability hereunder. Lessee hereby waives any and all rights of redemption
provided by any law, statute or ordinance now in effect or which may hereafter
be enacted.
(e) The word "re-enter", as used in this Lease, shall not be restricted to
its technical legal meaning, but is used in the broadest sense. No such taking
of possession of the Leased Property by Lessor shall constitute an election to
terminate the Term of this Lease unless notice of such intention be given to
Lessee or unless such termination be decreed by a court.
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(f) If an action shall be brought by either party for the enforcement of
any provision of this Lease, the prevailing party shall pay to the other party
all reasonable costs and other expenses incurred by the prevailing party as a
result thereof, including reasonable attorneys' fees and expenses.
(g) No right or remedy herein conferred upon or reserved to Lessor is
intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to any other legal or equitable right
or remedy given hereunder, or at any time existing. The failure of Lessor or
Lessee to insist upon the strict performance of any provision or to exercise any
option, right, power or remedy contained in this Lease shall not be construed as
a waiver or a relinquishment thereof for the future. Receipt by Lessor of any
Basic Rent or Additional Rent or any other sum payable hereunder with knowledge
of the breach of any provision contained in this Lease shall not constitute a
waiver of such breach. No waiver by Lessor or Lessee of any provision of this
Lease shall be deemed to have been made unless made under signature of an
authorized representative of such party.
21. Granting of Easements, Etc. If no Event of Default has occurred and is
--------------------------
continuing, Lessee may from time to time in writing request Lessor to join with
Lessee (at Lessee's cost and expense), to (i) grant easements, licenses, rights
of way and other rights and privileges in the nature of easements for the
purposes of providing utilities and the like to the Leased Property, (ii)
release existing easements and appurtenances relating to the provision of
utilities and the like to the Leased Property and (iii) execute and deliver any
instrument, in form and substance reasonably acceptable to Lessor, necessary or
appropriate to make or confirm such grants or releases to any Person, with or
without consideration; provided that an Executive Officer of Lessee shall have
certified to Lessor and Lessor's Mortgagee that such grant or release does not
materially interfere with and is not materially detrimental to the conduct of
business on the Leased Property and does not impair the usefulness or fair
market value of the Leased Property, and was made for no or only nominal
consideration. Notwithstanding the foregoing, Lessor and/or Lessor's Mortgagee
may condition its consent to such action on being provided evidence satisfactory
to each in its sole discretion that such action presents no material risk of
liability, expense or adverse tax consequences to Lessor, Lessor's Mortgagee or
the holder of any CMBS. Lessee shall pay as Additional Rent to Lessor on demand
all reasonable costs and expenses of Lessor and Lessor's Mortgagee (including
attorneys' fees) in reviewing or executing any instrument pursuant to this
Article 21.
22. Intentionally Omitted/Not Applicable.
------------------------------------
23. Rent Reset. In accordance with and subject to the provisions of this
----------
Section 23, Lessor and Lessee agree to (a) amend the Basic Rent payable
hereunder from and after a date which is on or before the Year 10 Expiration
Date (defined in Schedule B)
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(the Basic Rent as so amended shall be hereinafter referred to as the Reset
Rent), and (b) execute and deliver a Rent Reset Lease Amendment (hereinafter
defined), both no later than the dates specified in subparagraphs (d) or (f)
below, as applicable (the Rent Reset).
(a) The Reset Rent payable by Lessee to Lessor from and after the effective
date of the Rent Reset provided for in subparagraphs (d) or (f) below, as
applicable, shall equal the sum of (i) the Fixed Amount (hereinafter defined),
plus (ii) the Variable Amount (hereinafter defined).
For purposes of this Section 23, the "Fixed Amount" shall equal
$29,753.00 per month and the "Variable Amount" shall equal an amount per month
for the remainder of the Basic Term from the effective date of the Rent Reset
sufficient to amortize the sum of (x) $6,611,388.00 and (y) Lessor's estimate of
the Closing Costs (defined in Section 23(g)) (the sum of (x) and (y) being
referred to herein as the "Reset Amount") together with imputed interest on such
Reset Amount at the Imputed Interest Rate (hereinafter defined) over an
amortization period of 22 years. The "Imputed Interest Rate" used to calculate
the Variable Amount portion of the Reset Rent shall reflect the actual or
imputed interest rate at which Lessor is able to borrow the Reset Amount (as
provided for in subparagraphs (b) and (c) below) from an Institutional Investor
(defined in Appendix I) (such interest rate is hereafter referred to as the
Lessor's Rate) pursuant to a non-recourse loan secured solely by a first
mortgage encumbering the Leased Property together with a collateral assignment
of this Lease, taking into account the creditworthiness of Lessee and Guarantor
and the terms and conditions contained in this Lease.
(b) No sooner than 240 days and no later than 180 days prior to the Year 10
Expiration Date, Lessor will specify in writing to Lessee (a Lessor's Year 10
Notice) the proposed Lessor's Rate, which shall be based upon a firm written
commitment for financing (a Lessor's Loan) actually obtained by Lessor from an
Institutional Investor (a Lessor's Loan Commitment), or if no such Lessor's Loan
Commitment has been obtained, upon Lessor's determination as to what would have
been Lessor's Rate had Lessee obtained such a firm written commitment, provided,
--------
however, that if, in Lessor's judgment, no loan from an Institutional Investor
- -------
on the terms specified in subparagraph (a) is or would be available, whether due
to the creditworthiness of Lessee and Guarantor, the conditions of the capital
markets generally, or any other matter not within Lessor's control, Lessor shall
so specify in its Year 10 Lessor's Notice and the provisions of subparagraph (e)
below shall apply. If the Lessor's Rate specified in Lessor's Year 10 Notice is
based upon a Lessor's Loan Commitment, Lessor's Year 10 Notice shall also
specify any commitment fees, rate lock fees and the like payable in connection
with such Lessor's Loan Commitment (Lessor Loan Commitment Fees).
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(c) If Lessor specifies a Lessor's Rate in its Lessor's Year 10 Notice,
Lessee shall, within 45 days of Lessor's Year 10 Notice, notify Lessor that it
either (i) accepts the Lessor's Rate so specified (subject to any change in such
rate which occurs until any applicable rate lock or other Lessor Loan
Commitment Fees necessary to fix the rate are paid by Lessee), and if such
Lessor's Rate is based upon a Lessor's Loan Commitment, such acceptance shall be
effective only if Lessee shall simultaneously pay any Lessor Loan Commitment
Fees with such acceptance (which Lessor Loan Commitment fees shall be
reimbursed to Lessee at the closing of the Lessor's Loan or if the Lessor's Loan
fails to close due to the default of Lessor), or (ii) notify Lessor that it is
not satisfied with the Lessor's Rate so specified, in which event Lessee will
have the right to cause Lessor to use when calculating the Variable Amount of
the Reset Rent a rate of interest (Lessee's Rate) specified in a firm written
commitment from an Institutional Investor addressed to Lessor and obtained by
Lessee no later than 90 days prior to the Year 10 Expiration Date at Lessee's
sole cost and expense to provide financing (Lessee's Loan) in the amount of the
Reset Amount (which may be modified by Lessee to the extent Lessee's estimate of
Closing Costs is different from Lessor's, or if Lessee chooses not to finance
Closing Costs), provided that (i) the terms of the Lessee's Loan are at least as
favorable to Lessor as those provided for in subparagraph (b) and are subject
only to commercially customary conditions to close (the cost of satisfaction and
attempted satisfaction of which shall be the responsibility of Lessee as
Additional Rent hereunder) and (ii) the Lessee Loan is without recourse to
Lessor (the Lessee's Loan Commitment). (If Lessee fails to make an effective
election pursuant to the immediately preceding sentence, it shall be deemed to
have selected option (i)). If Lessee provides Lessor with a Lessee's Loan
Commitment no later than 90 days prior to the Year 10 Expiration Date, Lessor
will have the option either to (i) reject the Lessee's Loan Commitment but apply
Lessee's Rate in establishing the Variable Amount of the Reset Rent or (ii)
accept the Lessee's Loan Commitment, use reasonable efforts at Lessee's expense
to close the loan described therein and, if the loan closes, apply the Lessee's
Rate in calculating the Variable Amount of the Reset Rent.
(d) On or before the date which is the earlier of (i) the date a Lessor's
Loan or Lessee's Loan actually closes, or (ii) the date which is 30 days prior
to the Year 10 Expiration Date (the Outside Date), Lessor and Lessee shall
execute and deliver an amendment of this Lease (Rent Reset Lease Amendment)
confirming the Basic Rent payable after the earlier to occur of the date a
Lessor's Loan or a Lessee's Loan actually closes or the Year 10 Expiration Date,
and establishing Termination Values which shall be equal to the sum from time to
time of (x) $3,129,060.00, plus (y) the outstanding principal balance from time
to time of Lessor's Loan or Lessee's Loan, as the case may be for the period
from the Year 10 Expiration Date to the Year 20 Expiration Date. Subject to
subparagraph (f) below, if for any reason, including without limitation a
dispute between Lessor and Lessee as to the proper calculation of the Reset
Rent, the Rent Reset Amendment is not entered into by such date, the provisions
of subparagraph (e) below shall apply.
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(e) If in any Year 10 Lessor's Notice Lessor states that it cannot state a
Lessor's Rate, or if Lessee rejects the Lessor's Rate proposed by Lessor, and in
either case Lessee does not obtain a Lessee's Loan Commitment by the date which
is 90 days prior to the Year 10 Expiration Date, Lessee shall have the option to
do one of the following, such option to be exercised by written notice to Lessor
no later than 90 days prior to the Year 10 Expiration Date, and if it fails to
elect either option by such date, it shall be deemed to have elected option 2
below. Further, if a Rent Reset Lease Amendment is not entered into by the date
required by subparagraph (d) above, Lessee shall, no later than 10 days after
such date elect one of the two options described below, and if it fails to elect
either option by such date it shall be deemed to have elected option 2 below.
1. On the Year 10 Expiration Date, Lessee shall be obligated to make a
final rent payment to Lessor in the amount of the Reset Amount included in
Lessor's Year 10 Notice, and the Lease term shall expire on the Year 10
Expiration Date without any right of renewal, as if the Year 10 Expiration Date
were the originally scheduled expiration date of the term of this Lease; or
2. On the Year 10 Expiration Date, Lessee shall be obligated to make a
Basic Rent payment to Lessor in the amount of the Reset Amount included in
Lessor's Year 10 Notice, Basic Rent payable after the Year 10 Expiration Date,
until the Year 20 Expiration Date (defined in Schedule B), shall be the Fixed
Amount per month, and Termination Values shall be established for the period
from the Year 10 Expiration Date to the Year 20 Expiration Date which shall
always be equal to $3,129,060.00.
(f) Notwithstanding anything to the contrary contained herein, if the
Variable Amount is based upon a Lessor's Loan Commitment or a Lessee's Loan
Commitment, and the loan described in such commitment fails to close by the
Outside Date for any reason other than the intentional default of Lessor
hereunder, the Variable Amount shall be established based upon a Lessor's Year
10 Notice given promptly after the earlier of (i) the Outside Date and (ii) the
expiration or termination of the applicable loan commitment, which notice shall
specify a Lessor's Rate, and if Lessee is not satisfied with the Lessor's Rate
specified in such Year 10 Notice or if such Notice specifies that Lessor is
unable to establish a Lessor's Rate, the provisions of subparagraph (e) above
shall apply, provided that if the Lessor's Year 10 Notice given under this
subparagraph (f) is given less than 90 days prior to the Year 10 Expiration
Date, Lessee shall have 10 days to elect which of the two options specified in
subparagraph (e) shall govern (and if it fails to so elect, it shall be deemed
to have elected option 2 under subparagraph (e)), and the Rent Reset Amendment
described in subparagraph (e) shall be entered into no later than the later of
10 days after Lessee's election or deemed election of such option, or the date
which is 30 days prior to the Year 10 Expiration Date.
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(g) Subject to the provisions of this subsection (g), Lessee shall be
responsible for all costs and expenses incurred by Lessor in closing or
attempting to close any loan pursuant to this Article 23, in arranging for the
repayment of any existing indebtedness which is paid off in connection with a
Rent Reset (other than any prepayment premiums or penalties, which shall not be
the responsibility of Lessee), and in Lessor's Performance of its obligations
under this Section 23, including, without limitation, legal, accounting,
mortgage brokerage, due diligence, title, and advisors' fees, expenses and
premiums, and financing fees, origination fees, rate lock fees and the like
payable under any Lessor's Loan Commitment which is the basis for a Lessor's
Rate accepted or deemed accepted by Lessee, or any Lessee's Loan Commitment
("Closing Costs"). Lessor shall include its estimate of Closing Costs in the
Reset Amount for the purposes of its Lessor's Year 10 Notice, which estimate
shall be binding upon Lessor if Lessee accepts the Lessor's Rate specified in
Lessor's Year 10 Notice. If Lessee arranges for a Lessee's Loan, it may include
in the Reset Amount its estimate of such Closing Costs, but Lessee shall in
all events be responsible for all Closing Costs, and to the extent the proceeds
of Lessee's Loan are not available to pay all Closing Costs, the same shall be
payable promptly when due as Additional Rent by Lessee.
24. Notices. All communications herein provided for or made pursuant hereto
-------
shall be in writing and shall sent by (i) registered or certified mail, return
receipt requested, and the giving of such communication shall be deemed complete
on the third Business Day after the same is deposited in a United States Post
Office with postage charges prepaid, (ii) reputable overnight delivery service
with acknowledgment receipt returned, and the giving of such communication shall
be deemed complete on the immediately succeeding Business Day after the same is
deposited with such delivery service, (iii) legible fax with original to follow
in due course (failure to send such original shall not affect the validity of
such fax notice), and the giving of such communication shall be complete when
such fax is received, or (iv) hand delivery:
(a) if to Lessor, at the address set forth in Item 7 of Schedule B.
(b) if to Lessee, at the address set forth in Item 8 of Schedule B.
Lessor shall give notice to Lessee of the name and address of Lessor's
Mortgagee, and Lessee shall deliver (in the manner described above) to such
Lessor's Mortgagee at such address a copy of any notice given by Lessee to
Lessor. No notice by Lessee to Lessor pursuant to the provisions of this Lease
shall be deemed effective unless and until such notice is also so delivered to
such Lessor's Mortgagee; and no notice by Lessor to Lessee pursuant to the
provisions of this Lease shall be deemed effective unless and until such notice
is joined in or consented to in writing by Lessor's Mortgagee. Either party, and
Lessor's Mortgagee, may change the address where notices are to be sent by
giving the other party (or parties) and Lessor's Mortgagee ten (10) days' prior
written notice of such change.
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25. Estoppel Certificates. Each party hereto agrees that at any time and from
---------------------
time to time during the term of this Lease, it will promptly, but in no event
later than ten days after request by the other party hereto, execute,
acknowledge and deliver to such other party a certificate stating, to the best
of such party's knowledge, (a) that this Lease is unmodified and in force and
effect (or if there have been modifications, that this Lease is in force and
effect as modified, and setting forth any modifications); (b) the date to which
Basic Rent, Additional Rent and other sums payable hereunder have been paid; (c)
whether or not there is an existing default by Lessee in the payment of Basic
Rent, Additional Rent or any other sum required to be paid hereunder, and
whether or not there is any other existing default by Lessee with respect to
which a notice of default has been served or of which the signer has Actual
Knowledge, and, if there is any such default, specifying the nature and extent
thereof; (d) whether or not there are any setoffs, defenses or counterclaims
against enforcement of the obligations to be performed hereunder existing in
favor of the party executing such certificate;(e) stating that Lessee is in
possession of the Leased Property or setting forth the parties in possession and
identifying the instruments pursuant to which they took possession; and (f)
stating such other information with respect to the Leased Property and/or this
Lease as may be reasonably requested.
26. No Merger. Lessee agrees that there shall be no merger of this Lease or of
---------
any sublease under this Lease or of any leasehold or subleasehold estate hereby
or thereby created with the fee or any other estate or ownership interest in the
Leased Property or any part thereof by reason of the fact that the same entity
may acquire or own or hold, directly or indirectly, (a) this Lease or any
sublease or any leasehold or subleasehold estate created hereby or thereby or
any interest in this Lease or any such sublease or in any such leasehold or
subleasehold estate and (b) the fee estate or other estate or ownership interest
in the Leased Property or any part thereof.
27. Surrender.
---------
(a) Upon the expiration or earlier termination of the Term of this Lease,
Lessee shall peaceably leave and surrender the Leased Property to Lessor in the
same condition in which the Leased Property was originally received from Lessor
on the Commencement Date, except as repaired, rebuilt, restored, altered or
added to as required by or permitted by any provision of this Lease (ordinary
wear and tear and the consequences of any Destruction resulting in the
termination of this Lease pursuant to paragraph (c) of Article 12 hereof, and
damages caused by Lessor excepted). Lessee shall remove from the Leased Property
on or prior to such expiration or earlier termination all property situated
thereon which is not the property of Lessor, and shall repair any damage caused
by such removal. Property not so removed shall become the property of Lessor,
and Lessor may cause such property to be removed from the Leased Property and
disposed of, and Lessee shall pay the cost of any such removal and disposition
and of repairing any damage caused by such removal.
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(b) Except for surrender upon the expiration or earlier termination of the
Term hereof, no surrender to Lessor of this Lease or of the Leased Property
shall be valid or effective unless agreed to and accepted in writing by Lessor.
28. Separability. Each provision contained in this Lease shall be separate and
------------
independent and the breach of any such provision by Lessor shall not discharge
or relieve Lessee from its obligation to perform each obligation of this Lease
to be performed by Lessee. If any provision of this Lease or the application
thereof to any Person or circumstance shall to any extent be invalid and
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and enforceable to the extent permitted by law.
29. Signs; Showing. During the three-month period preceding the date on which
--------------
the then current Term of this Lease shall expire, Lessor may (a) place signs in
reasonable locations on the grounds in front of the Leased Property advertising
that the same will be available for rent or purchase, and (b) upon not less than
twenty-four (24) hours notice to Lessee, show the Leased Property to prospective
lessees or purchasers during normal business hours as Lessor may elect.
30. Waiver of Trial by Jury. Lessor and Lessee hereby waive trial by jury in
-----------------------
any litigation brought by either against the other on any matter arising out of
or in connected with this Lease or the Leased Property.
31. Recording. Lessor and Lessee will execute, acknowledge, deliver and cause
---------
to be recorded or filed or, at Lessee's expense, registered and re-recorded,
refiled or re-registered in the manner and place required by any present or
future law, a memorandum thereof, and all other instruments, including, without
limitation, releases and instruments of similar character, which shall be
reasonably requested by Lessor or Lessee as being necessary or appropriate in
order to protect their respective interests in the Leased Property.
32. Miscellaneous. This Lease shall be binding upon and shall inure to the
-------------
benefit of and be enforceable by the parties hereto and their respective
successors and assigns permitted hereunder. Concurrently with the execution and
delivery of this Lease, Lessee shall cause to be delivered to Lessor and
Lessor's Mortgagee an opinion of counsel to Lessee, satisfactory in form and
substance to Lessor and Lessor's Mortgagee, as to the due authorization,
execution and delivery of this Lease by Lessee and the validity, binding effect
and enforceability as to Lessee of this Lease and such other matters relating to
Lessee and this Lease as Lessor or Lessor's Mortgagee may reasonably request.
This Lease may not be amended, changed, waived, discharged or terminated orally,
but only by an instrument specifically evidencing an intent to amend signed by
the party against whom enforcement thereof
-40-
<PAGE>
is sought. No failure, delay, forbearance or indulgence on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, or as an acquiescence in any breach, nor shall any single or partial
exercise of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. This
Lease and the rights and obligations in respect hereof shall be governed by, and
construed and interpreted in accordance with, the laws of the state within which
the Leased Property is located. All headings are for reference only and shall
not be considered as part of this Lease. This Lease may be executed in any
number of counterparts, each of which shall be an original, and such
counterparts together shall constitute but one and the same instrument. Lessee
may cause to be performed any obligations of Lessee under this Lease in lieu of
performing such obligation itself.
33. Additional Provisions Relating to Leased Property. The additional provisions
-------------------------------------------------
set forth in Item 11 of Schedule B are hereby incorporated in this Lease and
made a part hereof.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed and delivered as of the date first written above.
Lessor:
Signed, Sealed, Acknowledged CRICBW ANDERSON TRUST,
and Delivered in the Presence a Delaware business trust
of the following Witnesses:
/s/ Cara A. Ahola By: /s/ J. Charles Carlson
- ------------------------------------ ------------------------------
Print Name: Cara A. Ahola J. Charles Carlson
Administrative Trustee
/s/ Andrea M. Cross
- ------------------------------------
Print Name: Andrea M. Cross
Lessee:
Signed, Sealed, Acknowledged MILTON CAN COMPANY, INC.,
and Delivered in the Presence a Delaware corporation
of the following Witnesses:
/s/ Christopher Szarpa By: /s/ Blair G. Schlossberg
- ------------------------------------ ---------------------------------
Print Name: Christopher Szarpa Name: Blair G. Schlossberg
Title: Secretary
/s/ Kimberly Owenby
- ------------------------------------
Print Name: Kimberly Owenby
-41-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS)
)SS:
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me the 20nd day of August,
1999 by J. Charles Carlson, Administrative Trustee of CRICBW ANDERSON TRUST,
a business trust organized under the laws of Delaware, on behalf of the trust.
MARILYN A. RUBBICO, NOTARY PUBLIC /s/ Marilyn A. Rubbico
MY COMMISSION EXPIRES AUGUST 13, 2004 -------------------------------
Notary Public
My commission expires: 8/13/04
STATE OF GEORGIA )
)SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me the 19th day of
August, 1999 by Blair G. Schlossberg as Secretary of Milton Can Company, Inc., a
Delaware corporation, on behalf of the corporation.
/s/ Julia L. Afflick
-------------------------------
Notary Public
My commission expires:
Julia L. Afflick
Notary Public, Dekalb County, Georgia
My Commission Expires December 26, 2000
-42-
<PAGE>
APPENDIX I
----------
DEFINITIONS
-----------
Actual Knowledge by the Lessee with respect to any matter means knowledge
----------------
of such matter by an Executive Officer. Actual Knowledge shall be presumed
conclusively as to the content of any notice to Lessee made in accordance with
the provisions of this Lease.
Additional Rent is defined in paragraph (b) of Article 3.
---------------
Affiliate with respect to any Person means any other Person controlling,
---------
controlled by or under common control with such Person.
Asbestos O & M Plan is defined in Subparagraph (a)(iv) of Article 9.
-------------------
Bankruptcy Code means Title 11 of the United States Code or any other
---------------
Federal or state bankruptcy, insolvency or similar law, now or hereafter in
effect in the United States.
Basic Rent is defined in paragraph (a) of Article 3.
----------
Basic Term is defined in paragraph (a) of Article 2.
----------
Basic Term Expiration Date is defined in paragraph (a) of Article 2.
--------------------------
Business Day means any day except Saturdays, Sundays and the days in which
------------
banks located in the state of New York shall be closed.
Casualty is defined in paragraph (a) of Article 12.
--------
Closing means the closing for the acquisition of the Leased Property by
-------
Lessor and the leasing of the Leased Property by Lessor to Lessee.
Closing Costs are defined in paragraph (g) of Article 23.
-------------
Completion Conditions is defined in paragraph (c) of Article 10.
---------------------
Credit Rating is defined in paragraph (b)(i) of Section 12.
-------------
Credit Rating Test is defined in paragraph (c) of Article 12.
------------------
DCR means Duff & Phelps Credit Rating Co. and any successor thereto.
---
Depositary is defined in paragraph (b) of Article 12.
----------
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<PAGE>
Destruction is defined in paragraph (a) of Article 12.
-----------
Environmental Laws means and includes but shall not be limited to the
------------------
Resource Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.).
-------
as amended by the Hazardous and Solid Waste Amendments of 1984, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
(S)9601 et seq.), as amended by the Superfund Amendments and Reauthorization
-------
Act of 1986, the Hazardous Materials Transportation Act (49 U.S.C. (S)1802 et
--
seq.), the Toxic Substances Control Act (15 U.S.C. (S)2601 et seq.), Clean Air
- ---- -------
Act (42 U.S.C. (S)7401 et seq.), the Clean Water Act (33 U.S.C. (S)1251 et seq.)
------- -------
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S)136 et seq.)
-------
the Occupational Safety and Health Act (29 U.S.C. (S)651 et seq.) and all
------
applicable federal, state and local environmental laws, including obligations
under the common law, ordinances, rules, regulations and publications, as any
of the foregoing may have been or may be from time to time amended,
supplemented or supplanted, and any other federal, state or local laws,
including obligations under the common law, ordinances, rules, regulations and
publications, now or hereafter existing relating to regulation or control of
Hazardous Substances or environmental protection, health and safety.
Environmental Site Assessments means those certain reports entitled "Phase
------------------------------
I Environmental Site Assessment of Industrial Plant, 8200 Broadwell Road,
Cincinnati, Ohio 45244, Loan No. TBD" EMG Project No. 55857, Date of Report
August 17, 1999, On-Site Date April 22, 1999, prepared by EMG, "Phase II
Environmental Assessment of the Industrial Plant, 8200 Broadwell Road,
Cincinnati, Ohio 45244" prepared by EMG dated August 17, 1999, and
"Environmental Assessment of Ball Corporation's Metal Food Container Facility,
Cincinnati, Ohio," prepared by ENVIRON International Corporation, dated
November, 1996, with respect to the environmental condition of the Leased
Property.
Escrow Funds is defined in paragraph (c) of Article 10.
------------
Executive Officer means the President, Executive Vice President, Treasurer,
-----------------
Financial Vice President, Director of Real Estate or if such office does not
exist, its closest equivalent.
Fitch means Fitch Investors Service and any successor thereto.
-----
Guarantor means BWAY Corporation, its successors and assigns, and any other
---------
entity which guarantees the obligations of Lessee hereunder.
Hazardous Substances means (i) those substances included within the
--------------------
definitions of or identified as "hazardous substances", "hazardous materials",
or "toxic substances" in or pursuant to, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. (S)9601
et seq.) (CERCLA), as amended by Superfund Amendments and Reauthorization Act of
- -------
1986 (Pub. L. 99-499, 100 Stat. 1613) (SARA), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C., (S)6901 et seq.) (RCRA), the Occupational
-------
Safety and Health Act of 1970 (29 U.S.C. (S)651 et seq.) (OSHA), and the
-------
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<PAGE>
Hazardous Materials Transportation Act, 49 U.S.C. (S)1801 et seq., and in the
------
regulations promulgated pursuant to said laws, all as amended; (ii) those
substances listed in the United States Department of Transportation Table (40
CFR 172101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR Part 302 and
amendments thereto); (iii) any material, waste or substance which is or contains
(A) petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) designated as "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C (S)1251 et seq., (33 U.S.C (S)1321)
------
or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. (S)1317);
(E) flammable explosives; (F) radioactive materials; and (iv) such other
substances, materials and wastes which are or become regulated as hazardous,
toxic or "special wastes" under applicable local, state or federal law, or the
United States government, or which are classified as hazardous, toxic or as
"special wastes" under federal, state or local laws or regulations.
Immediate Repair Work is defined in paragraph (c) of Article 10.
---------------------
Improvements is defined in Article 1.
------------
Indemnified Parties is defined in Article 8.
-------------------
Installment Payment Dates is defined in paragraph (a) of Article 3.
-------------------------
Institutional Investor means a bank, insurance company, a bank affiliate or
----------------------
wholly owned subsidiary of any such bank, or any other financial or lending
institution organized under the laws of the United States or any state thereof
or Canada or any province thereof with a net worth of at least $25,000,000,
including, without limitation, a real estate investment trust and/or trust,
corporation or other entity engaged in so-called conduit lending, or a public or
private pension plan or institutionally managed fund having gross assets of at
least $100,000,000.
Insurance Requirements is defined in Article 13.
----------------------
Land is defined in Article 1.
----
Leased Property is defined in Article 1.
---------------
Legal Requirements is defined in Article 6(c).
------------------
Lessee's Loss is defined in paragraph (a) of Article 12.
-------------
Lessor's Mortgagee means any lender holding a lien (whether by mortgage,
------------------
deed of trust or otherwise) granted by Lessor on the Leased Property. The term
"Lessor's Mortgagee" shall include the servicer and/or trustee with respect to
the pool of collateral
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<PAGE>
for any commercial mortgage-backed securities or mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (collectively, CMBSs) into which
pool Lessor's mortgage or other lien instrument covering the Leased Property has
been sold, assigned, transferred or pledged and also the issuer of such CMBSs.
Any references in this Lease to Lessor's Mortgagee at a time, if any, when there
is no Lessor's Mortgagee shall be construed to mean "Lessor's Mortgagee, if
any."
Loan Documents shall mean the Notes, the Mortgage and all documents related
--------------
thereto.
Market Rent is defined in Schedule H.
-----------
Minor Addition is defined in paragraph (e) of Article 10.
--------------
Moody's means Moody's Investor Services.
-------
Mortgage is defined in paragraph (b) of Article 7.
--------
Net Award means the entire award, compensation, insurance proceeds or other
---------
payment, if any, on account of any Destruction, less any expenses reasonably
incurred by Lessee, Lessor or Lessor's Mortgagee in obtaining and collecting
such award, compensation insurance proceeds or other payment, and any cost and
expense of either in connection with the administration of the distribution of
the same and not already paid (or reimbursed) to Lessor or Lessor's Mortgage,
plus any investment income earned with respect to the foregoing amounts.
Note means the Note (or Notes) of Lessor secured by the "Mortgage" referred
----
to in the SNDA Agreement dated on or about the date of this Lease, and any notes
issued in exchange or replacement thereof. The Note is secured by a mortgage
lien on the Leased Property and by an assignment of Lessor's interest in this
Lease.
Officer's Certificate means a certificate executed by an Executive Officer
---------------------
of Lessee.
Original Uses is defined in Article 4.
-------------
Outside Restoration Date is defined in paragraph (c) of Article 12.
-------------------
Overdue Rate is defined in paragraph (b) of Article 3.
------------
Permitted Encumbrances means, with respect to the Leased Property: (a)
----------------------
rights reserved to or vested in any municipality or public authority to
condemn, appropriate, recapture or designate a purchaser of the Leased
Property; (b) any liens thereon for taxes, assessments and other governmental
charges and any liens of mechanics, materialmen and laborers for work or
services performed or material furnished in connection with the Leased
-46-
<PAGE>
Property, which are not due and payable, or the amount or validity of which are
being contested as permitted by Article 6 hereof; (c) easements, rights-of-way,
servitudes, zoning laws, use regulations, and other similar reservations, rights
and restrictions and other minor defects and irregularities in the title to the
Leased Property existing on the Term Commencement Date or granted in accordance
with Article 21 hereof; (d) the lien of any Lessor's Mortgagee and any
assignment of this Lease as further security for the note or notes secured by
such Mortgage; (e) all other matters affecting title existing on the date of
this Lease as set forth in Schedule D.
Person means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, trustee of a trust, unincorporated
organization or government or governmental authority, agency or political
subdivision thereof.
Property Condition Survey means that certain Property Condition Survey of
-------------------------
Industrial Plant, 8200 Broadwell Road, Cincinnati, Ohio, EMG Project No. 55858,
dated July 14, 1999, prepared by EMG, Baltimore, Maryland.
Rating Agencies mean S&P, Fitch, DCR and Moody's.
---------------
Reinvestment Premium means the amount computed in accordance with Schedule
--------------------
C.
Renewal Term is defined in paragraph (b) of Article 2.
------------
Rent Reset Lease Amendment is defined in Article 23.
--------------------------
Reset Rent means the, Basic Rent payable once the Rent Reset has been
----------
determined.
Restoration Test is defined in paragraph (c) of Article 12.
----------------
Restoration Threshold Amount is defined in paragraph (b) of Article 12.
----------------------------
S&P means Standard & Poor's Ratings Services.
---
Sale Transaction means the sale of the Leased Property from Lessee to
----------------
Lessor on or about the date of this Lease.
Taxes and Impositions is defined in paragraph (a) of Article 6.
---------------------
Term means the Basic Term, plus any Renewal Term or Terms.
----
Termination Date is defined in paragraph (c) of Article 12.
----------------
Termination Value means the amount computed in accordance with Schedule C.
-----------------
Trade Fixtures is defined in Article 11.
--------------
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<PAGE>
SCHEDULE A
Description of Leased Property
----------------------------
(Follows This Page)
-48-
<PAGE>
EXHIBIT A
PARCEL 1
Situated in the State of Ohio, County of Hamilton, Township of Anderson,
part of Military Survey No. 1575 and 1769 and being part of Registered Land
Certificate No. 55873 and 170914 and being a parcel of land, now or formerly in
the name of Milton Can Company as recorded in Deed Volume 7088, Page 2230 of the
Hamilton County Records of Deeds, and more fully described as follows:
Commencing for Reference at a Railroad Spike found in the centerline of
Broadwell Road of the southwesterly corner of a parcel of land, now or formerly
in the name of Dravo Basic Materials Company, Inc. as recorded in Registered
Land Certificate No. 142078;
Thence, South 65(d)09'09" East, along the centerline of Broadwell Road
and the southwesterly line of said Certificate No. 142078, a distance of 1367.61
feet to the southwesterly corner of aforesaid Milton Can Company and the TRUE
PLACE OF BEGINNING of the Parcel of land herein to be described;
Thence, North 24(d)50'45" East, along a southeasterly line of said
Certificate No. 142078, passing over an Iron Pin set of 25.00 feet a distance of
1267.30 feet to an "x" on a brass bar in a 6" concrete monument;
Thence, South 65(d)00'14" East, along a southerly line of Certificate
No. 142078, a distance of 934.63 feet to a "x" on an brass bar in a 6" concrete
monument;
Thence, North 56(d)33'00" East, along a southerly line of said
Certificate No. 142078, a distance of 1164.33 feet to an "x" on a brass bar in a
6" concrete monument on the Westerly line of Norfolk and Western Railroad;
Thence, South 04(d)30'00" West, along said Westerly line a distance of
109.09 feet to a "x" on a 1-1/8" Steel Bar found S 75(d)43'40" W 1.08':
Thence, South 00(d)42'00" East, along said Westerly line a distance of
789.41 feet to a Iron Pin set;
Thence, South 89(d)18'00" West, a distance of 304.49 feet to an Iron Pin
set;
Thence, South 24(d)04'23" West, a distance of 782.32 feet to an Iron Pin
set;
Thence, North 65(d)55'37" West, a distance of 597.16 feet to an Iron Pin
set;
Thence, South 25(d)14'17" West, a distance of 299.00 feet to a Railroad
Spike set;
Thence, North 65(d)05'57" West, a distance of 542.22 feet to an Iron Pin
set;
Thence, South 24(d)54'49" West, passing over an Iron Pin set at 225.45 a
distance of 250.62 feet to a point in the centerline of Broadwell Road;
Thence, North 58(d)'26'14" West, along the centerline of Broadwell Road
a distance of 179.72 feet to a point;
Thence, North 30(d)47'05" East, passing over an Iron Pin set at 25.00
feet a distance of 157.63 feet to an Iron Pin set;
Thence, North 60(d)21'08" West, a distance of 79.19 feet to an Iron Pin
set;
Thence, South 29(d)12'36" West, passing over an Iron Pin set at 25.02
feet a distance of 155.10 feet to a point in the centerline of Broadwell Road;
Thence, North 65(d)09'09" West, along the centerline of Broadwell Road,
a distance 266.14 feet to the true place of beginning and containing 49.2749
acres (including 0.2555 acre within the right-of-way limits of Broadwell Road)
of land, more or less as surveyed in May 1999 by Robert A. Dorner, Registered
Professional Surveyor Number S-6943, for and on behalf of Bock & Clark, Inc.
under Project Number 99033.
PARCEL 2
Together with Reciprocal Easement and Restriction Agreement by and
between Milton Can Company, Inc. and CRICBW Anderson Trust, dated ________ 1999,
filed for record ______, 1999 and recorded in Volume ____, Page ___ of Hamilton
County Records.
<PAGE>
SCHEDULE B
Lease Data
----------
1. Date of Lease: August 20, 1999
2. Lessor CRICBW Anderson Trust, a Delaware business trust
c/o Corporate Realty Investment Company L.L.C.
One Exeter Plaza, 11th Floor
Boston, Massachusetts 02116
3. Lessee: Milton Can Company, a Delaware corporation
c/o BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
4. Commencement Date: August 20, 1999
5. Basic Term Expiration Date: August 31, 2019
6. Year 10 Expiration Date: August 31, 2009
Year 20 Expiration Date: August 31, 2019
7. Basic Rent shall be paid as follows:
a. Basic Rent shall accrue for and be payable for the period from the
Commencement Date through the last day of the month in which the Commencement
Date occurs in the amount of $36,769.18, and shall be payable on the
Commencement Date. Thereafter, Basic Rent that accrues and for which Lessee
becomes liable for each calendar month during the period from the first day of
the first full calendar month after the month in which the Commencement Date
occurs through the last day of the calendar month in which the Year 10
Expiration Date occurs is payable in equal monthly installments of $91,922.95,
on the 15th day of each month, commencing September 15, 1999, and on the 15th
day of each month thereafter through and including August 15, 2019. Basic Rent
payable pursuant to paragraph (e) of Article 23 on the Year 10 Expiration Date
shall accrue and be payable on such date.
b. If Basic Rent is reset in accordance with Article 23, Basic Rent shall
be paid on the 15th day of each month in accordance with the Rent Reset Lease
Amendment, defined in Article 23.
C. On each of September 15, 2019 and the 15th day of each month thereafter
relating to any Renewal Term, an amount equal to the applicable monthly
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<PAGE>
Market Rent determined in accordance with Schedule H In addition, a pro rated
portion of such applicable Monthly Market Rent shall be payable on the first day
of any Renewal Term for the period commencing on that day and ending on the last
day of the month in which the applicable Renewal Term commences.
8. Lessor's Address: c/o Corporate Realty Investment Company L.L.C.
One Exeter Plaza, 11th Floor
Boston, Massachusetts 02116
Fax: (617) 303-4440
Attention: Chief Operating Officer
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Fax: (617) 526-5000
Attention: William R. O'Reilly, Jr., Esq.
9. Lessee's Address: c/o BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
Fax: (770) 587-0186
Attention: Chief Financial Officer
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Fax: (312) 881-2200
Attention: Gregory Spitzer, Esq.
10. Intentionally omitted.
11. Additional Provisions relating to Leased Property:
A. Lessor covenants that it will not voluntarily convey its interest in
the Leased Property prior to the expiration of the Term, or earlier
termination of this Lease, to any individual or entity appearing on the
list of competitors of Lessee (or of any Guarantor) listed below. For
the purposes of this paragraph, "competitor" shall mean any individual
or entity engaged in the business of aerosol can manufacturing. Lessee
shall have the right to update such list of competitors from time to
time, but not more than once in any six month period, by notice to
Lessor.
-50-
<PAGE>
The initial list of competitors, if any, is as follows:
Ball Corporation
Crown Cork & Seal
Silgan
Sonoco
US. Can Corporation
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<PAGE>
SCHEDULE C
Termination Values
------------------
The Termination Value is the applicable amount (in dollars) shown on the
second column of the computer printout attached to this Schedule C and hereby
made a part hereof. The numbers in the first column of such printout identify
the monthly periods to which such Termination Value figures correspond. The
Termination Value opposite number 0 in the first column is for the period
commencing on the first day of the Term and ending on (and including) the last
day of the month in which the Term commenced. Thereafter each number corresponds
to the monthly period beginning on (and including) the first day of each
succeeding calendar month and ending on (and including) the last day of such
calendar month.
Reinvestment Premium
--------------------
The Reinvestment Premium shall mean: an amount equal to the difference
between (x) the present value, as of the applicable date, of (i) during the
period prior to and including the Year 10 Expiration Date, the remaining
scheduled payments of Basic Rent from the applicable date through the Year 10
Expiration Date plus the Termination Value as of the Year 10 Expiration Date, or
(ii) following the Year 10 Expiration Date, the remaining scheduled payments of
Basic Rent from the applicable date through the Year 20 Expiration Date, plus
the Termination Value as of the Year 20 Expiration Date, and in either case,
determined by discounting such payments at the "Discount Rate" (as hereinafter
defined), minus (y) the Termination Value actually paid. Discount Rate shall
mean: the rate which, when compounded monthly, is equivalent to the "Treasury
Rate" (hereinafter defined) when compounded semi-annually. The term Treasury
Rate shall mean the yield calculated by the linear interpolation of the yields,
as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates
under the heading U.S. Government Securities/Treasury Constant Maturities for
the week ending prior to the applicable date, of U.S. Treasury constant
maturities with maturity dates (one longer and one shorter) most nearly
approximating the Year 10 Expiration Date (if the calculation is made prior
thereto) or the Year 20 Expiration Date (if the calculation is made after the
Year 10 Expiration Date). (In the event Release H.15 is no longer published,
Lessor shall select a comparable publication to determine the Treasury Rate.)
Lessor shall notify Lessee of the amount and the basis of determination of the
required Reinvestment Premium.
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<PAGE>
EXHIBIT 10.42
LEASE AGREEMENT
---------------
This LEASE AGREEMENT (this "Lease"), is made as of this 15th day of
September, 1999, by and among DIVISION STREET PARTNERS, L.P., a New Jersey
limited partnership ("Landlord"), with its office located at c/o William J.
Milton, Jr., 321 Forest Drive South, Short Hills, New Jersey 07078, BROCKWAY
STANDARD (NEW JERSEY), INC., a New Jersey corporation (the "Tenant"), with its
office located at 580 Division Street, Elizabeth, Union County, New Jersey
07207, Attn: General Counsel, and Fairmount Realty, L.L.C., a New Jersey limited
liability company ("Fairmount"), with its office located at c/o William J.
Milton, Jr., 321 Forest Drive South, Short Hills, New Jersey 07078.
RECITALS
--------
WHEREAS, Landlord is the owner of the land, building and premises commonly
known as 580 Division Street, in the City of Elizabeth, Union County, New Jersey
07207, and which is more particularly depicted in "Exhibit A" attached hereto
and incorporated herein (the "Leased Premises").
WHEREAS, Fairmount is the owner of the land, building and premises commonly
known as 860 Fairmount Avenue, which is more particularly depicted in "Exhibit
A" (the "860 Premises").
WHEREAS, Landlord desires to lease the Leased Premises to Tenant, and
Tenant desires to lease the Leased Premises from Landlord.
WHEREAS, Landlord desires to reserve certain rights of access with respect
to the 860 Premises in favor of Fairmount, and Tenant is willing to take the
Leased Premises subject to such right of access.
WHEREAS, Tenant desires to have an exclusive license to use certain parking
spaces on the 860 Premises, and Fairmount is willing to grant such exclusive
license to Tenant.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Lease, and other good and valuable consideration, the receipt of which are
hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1. PREMISES; RIGHT OF ACCESS; PARKING.
- ---------------------------------------------
1.1 Landlord does hereby lease to Tenant, and Tenant does hereby lease
from Landlord, the Leased Premises.
1.2 Fairmount and the tenant or other occupant of the 860 Premises (the
"860 Premises Tenant") shall have a non-exclusive right of access for ingress
and egress to the 860 Premises over that certain portion of the Leased Premises
as shown on the attached Exhibit A (the "Right of Access"). Fairmount shall, at
Fairmount's cost and expense, clearly demarcate or otherwise designate the
boundaries of the Right of Access at the Leased Premises as depicted on Exhibit
A.
<PAGE>
Fairmount shall maintain and repair the portion of the Leases
Premises comprising the Right of Access to keep the same in reasonably good
condition and repair, including, without limitation, removing snow and ice from
the Right of Access. Tenant shall reimburse Fairmount, within ten (10) days
after Fairmount's written demand, for Tenant's Proportionate Share of the costs
and expenses incurred by Fairmount for such maintenance and repair; provided,
however, that Tenant shall not be required to reimburse Fairmount for any work
performed for or on behalf of the 860 Premises Tenant. For the purposes of this
Lease, the terms "Fairmount's Proportionate Share" and "Tenant's Proportionate
Share" (as the case may be) shall mean the proportion of the relative square
footage of the buildings on the Leased Premises and the 860 Premises, as exists
from time to time.
The gate on Fairmount Avenue as depicted on Exhibit A either shall
remain open at all times for access by the Tenant as well as the 860 Premises
Tenant during regular business hours, and Fairmount shall furnish to Tenant as
well as the 860 Premises Tenant a key to open said gate after ordinary business
hours. Fairmount shall be responsible for ensuring that the 860 Premises Tenant
shall not park any vehicles in nor obstruct or interfere with the Right of
Access or the Parking Spaces. Tenant shall not park any vehicles in, or
otherwise obstruct or interfere with, the Right of Access.
Tenant and the 860 Premises Tenant shall comply with all reasonable
rules and regulations promulgated by Fairmount in respect of the use and
enjoyment of the Right of Access by both Tenant and the 860 Premises Tenant;
provided, however, that the same shall apply uniformly to the Tenant and the 860
Premises Tenant and shall not materially interfere with Tenant's use, enjoyment
and occupancy of the Leased Premises or the Parking Spaces.
1.3 Fairmount hereby grants Tenant a non-exclusive license to use eight
(8) parking spaces as shown on the attached Exhibit A (the "Parking Spaces").
Fairmount shall, at Fairmount's cost and expense, clearly demarcate or otherwise
designate the boundaries of the Parking Spaces as depicted on Exhibit A.
Fairmount shall maintain and repair the Parking Spaces to keep the
same in reasonably good condition and repair, including, without limitation,
removing snow and ice from the Parking Spaces, and Tenant shall reimburse
Fairmount, within ten (10) days after Fairmount's written demand, for such costs
and expenses incurred by Fairmount.
Section 2. TERM
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2.1 The initial term of this Lease shall be for a term of five (5) years
starting on October 1, 1999, and ending on September 30, 2004 (the "Initial
Term").
2.2 The Tenant shall have the option to extend the Initial Term for one
(1) additional five (5) year period commencing October 1, 2004 and ending
September 30, 2009 (the "Renewal Term"). The annual rent for such Renewal Term
shall be equal to the product of: (i) the annual
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rent for the Initial Term as provided in Section 2.1, multiplied by (ii) a
fraction, the numerator of which shall be the CPI for the most recent month for
which the CPI is available prior to the commencement of the Renewal Term, and
the denominator of which shall be the Base CPI. For purposes of this Section
2.2, (i) the term "CPI" shall mean the Consumer Price Index (All Urban
Consumers)(All Items)(base year 1982-1984=100) for the U.S. City Average
published by the Bureau of Labor Statistics, U.S. Department of Labor, or any
comparable successor index appropriately adjusted, and (ii) the term "Base CPI"
shall mean the CPI for the month of October, 1999.
2.3 For the purposes of this Lease, the "Term" shall mean collectively
the Initial Term and the Renewal Term, provided that Tenant has exercised its
option to extend pursuant to Section 2.2.
SECTION 3. RENT AND TAXES
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3.1 Tenant agrees to pay to the Landlord as rent during the Initial Term
of this Lease, the sum of $676,695.30 per year to be paid in monthly
installments of $56,391.28 on or before the first day of each month beginning on
October 1, 1999.
3.2 Tenant shall pay as additional rent all real estate taxes assessed
with respect to the Leased Premises. Tenant shall pay such taxes directly to the
applicable taxing authority. Notwithstanding the foregoing, if taxes upon rent
shall be substituted in whole or in part for the present general real estate
taxes, Tenant shall pay the taxes upon rent, but only to the extent to which
they shall be substituted for said real estate taxes and only in such amounts as
would be payable by the Landlord if the rent payable hereunder were the only
rent subject to such taxes.
3.3 If Tenant fails to make any payment of rent or any other amount due
and payable by Tenant to Landlord under this Lease within the Grace Period, then
Tenant shall pay interest at the Prime Rate plus four percent (4%) on such
amount for each day after the Grace Period that such amount remains unpaid. For
the purposes of this Lease, (i) the term "Grace Period" shall mean five (5) days
after the date such payment of rent or other amount first becomes due and
payable; provided, however, that if Tenant fails to make any such payment of
rent or any other amount within such five (5) day period at any time during a
calendar year, then the Grace Period shall be reduced to two (2) days for the
remainder of such calendar year, and (ii) the term "Prime Rate" shall mean the
"prime rate" as published in the Wall Street Journal, or if no longer published
in the Wall Street Journal, the prime rate of interest for the then largest
commercial bank by capitalization in the State of New Jersey.
SECTION 4. USE OF THE LEASED PREMISES
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4.1 The Leased Premises shall be used for the sole purpose of
manufacturing and warehousing composite, metal and plastic containers or any
other lawful purpose.
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SECTION 5. MAINTENANCE AND REPAIRS
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5.1 Except for Landlord's maintenance and repair obligations set forth in
this Section 5 and Fairmount's maintenance and repair obligations set forth in
Sections 1.2 and 1.3, Tenant, at its cost and expense, shall maintain, and make
all necessary repairs to keep, the Leased Premises in reasonably good order and
condition, including, without limitation, maintaining and repairing the (i)
loading docks, (ii) foundation and flooring occasioned by Tenant's installation,
use or removal of fixtures and equipment used in connection with its use and
occupancy of the Leased Premises, or storage of inventory such that the load
placed on the floors exceeds normal use of concrete floors or as a result of the
use of steel tires on forklift equipment, or as a result of Tenant's negligence
or willful act in connection with the installation, use or removal of fixtures
and equipment utilized in connection with its use and occupancy of the Leased
Premises or storage of inventory, and (iii) the roof and roof membrane
occasioned by Tenant's installation, use or removal of fixtures and equipment
utilized in connection with its use and occupancy of the Leased Premises which
shall void in whole or in part any roof or roof membrane warranty or guarantee
obtained by Landlord. All such maintenance and repairs by Tenant shall be
performed in a good and workmanlike manner. Tenant, at its cost and expense,
shall arrange for snow and ice removal to the Leased Premises and for its own
internal cleaning services and rubbish removal.
5.2 At the expiration of the Term or termination of this Lease, Tenant
shall deliver the Leased Premises to Landlord in reasonably good order and
condition, except for reasonable wear and tear or damage from any casualty.
5.3 Landlord, at its cost and expense, shall maintain, and make all
necessary repairs and replacements to keep, the Structural Components of the
buildings on the Leased Premises in reasonably good order and condition, except
to the extent such damage to the Structural Components has been caused by the
negligence of Tenant or its agents, sublessees, assignees, invitees or
licensees. The term "Structural Components" shall mean the roof, steel
structure, exterior walls, foundation, footings or subsurface support thereof,
and load bearing columns and walls, including, without limitation, any dangerous
or hazardous condition which would result from the foregoing. The Landlord's
obligation set forth in this Section 5.3 shall be limited to the maintenance,
repair and replacement of the Structural Components and shall not under any
circumstances extend to any consequential damage resulting to any personal
property of the Tenant, unless such damage is caused by Landlord's failure to
maintain such Structural Components or unless such damage has been caused by the
negligence or willful act of the Landlord or its employees or agents in carrying
out such maintenance, repairs or replacements of the Structural Components.
6. ALTERATIONS AND IMPROVEMENTS
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Tenant may make such alterations, additions or improvements as may be
reasonably necessary in the conduct of its business, provided however, that
(i) Tenant shall provide prior notice to Landlord if Tenant undertakes any
alterations, additions or improvements in excess of One Hundred Thousand and
no/100 Dollars ($100,000.00), and (ii) Tenant may not make any alterations,
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additions or improvements affecting in any material respect the Structural
Components, without the written consent of the Landlord. Except for Tenant's
trade fixtures and equipment, all such alterations, additions or improvements
and systems, when made, installed in or attached to the Leased Premises, shall
belong to and become the property of the Landlord and shall be surrendered with
the Leased Premises upon the expiration or sooner termination of this Lease.
7. UTILITIES
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7.1 Except as set forth in Section 7.2, Tenant shall pay when due all the
rents or charges for water, gas, electric, or other utilities (including garbage
and industrial waste collection and removal) used by the Tenant, which are or
may be assessed or imposed upon the Leased Premises or which are or may be
charged to the Landlord by the suppliers thereof during the Term, and if not
paid when due, such rents or charges shall be added to and become payable as
additional rent within ten (10) days after written demand by Landlord. Landlord
and Fairmount, at their cost and expense, prior to the commencement date of this
Lease shall cause the appropriate utility service providers to install separate
meters for utilities provided to the building on the Leased Premises and the 860
Premises; provided, however, that with respect to the water meter, the Tenant
and Fairmount or the 860 Premises Tenant jointly shall take readings, or cause
the appropriate utility provider to take readings, of the water sub-meter
located in the 860 Premises at each time the utility provider takes readings of
the water meter on the Leased Premises, and Fairmount or the 860 Premises Tenant
shall reimburse Tenant within ten (10) days after written demand by Tenant for
the water charges allocable to the 860 Premises based on such readings.
7.2 Tenant and Fairmount recognize that the sprinkler system in the 860
Premises is interconnected with the building on the Leased Premises. Fairmount
and the 860 Premises Tenant acknowledge and agree that Tenant shall be
responsible, at its cost and expense, for the maintenance and repair of the
portion of the sprinkler system located on the Leased Premises, and Fairmount
shall be responsible, at its cost and expense, for the maintenance and repair of
the portion of the sprinkler system located on the 860 Premises. Fairmount
shall reimburse Tenant, within ten (10) days after written demand from Tenant,
but no more frequently than quarterly, for Fairmount's Proportionate Share of
all costs and expenses incurred by Tenant for the sprinkler system which
benefits the sprinkler system as a whole, and not just the portion of the
sprinkler system located on the Leased Premises.
8. COMPLIANCE WITH LAWS
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8.1 Except as otherwise provided in Section 8.2, Tenant, at Tenant's cost
and expense, shall comply in all material respects with all (i) statutes, laws,
ordinances, rules, regulations, legally binding requirements and directives of
the federal, state and municipal governmental authorities and of all their
departments, bureaus and subdivisions, applicable to and affecting the Leased
Premises or their use and occupancy, or the environmental condition of the
Leased Premises, and (ii) orders, regulations, requirements and directives of
the Board of Fire Underwriters or similar authority and of any insurance
companies which have issued or are about to issue policies of insurance covering
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the Leased Premises and its contents, for the prevention of fire or other
casualty, damage or injury (collectively, the "Legal and Insurance
Requirements"). Without limiting the generality of the foregoing, (i) Tenant
shall comply with Tenant's obligations under the Industrial Site Recovery Act
("ISRA") which are triggered by the expiration of the Term or termination of
this Lease, and Landlord shall cooperate in all reasonable respects with Tenant
with respect to any such obligations of Tenant, and (ii) Landlord shall comply
with Landlord's obligations under ISRA which are triggered by the expiration of
the term or termination of this Lease and Tenant shall cooperate in all
reasonable respects with Landlord with respect to any such obligations of
Landlord.
8.2 Notwithstanding the foregoing in Section 8.1, Landlord, at its cost
and expense, shall be responsible for the compliance with any Legal and
Insurance Requirements to the extent that the condition resulting in a violation
of such Legal and Insurance Requirements (i) would require any alterations,
additions or improvements to the Structural Components, or (ii) existed prior to
the commencement of Tenant's occupancy under any prior leases.
8.3 Fairmount, at Fairmount's cost and expense, shall comply in all
material respects with all Legal and Insurance Requirements applicable to and
affecting the use, occupancy or environmental condition of the Right of Access
and Parking Spaces.
8.4 Tenant shall indemnify and save harmless Landlord from any fine,
suit, claim, action, liability, damage, loss, cost or expense, including,
without limitation, attorney's fees and court costs, of any kind arising out of
or in any way connected with (i) any spills or discharges of hazardous
substances or wastes at, onto or from the Leased Premises caused by Tenant or
its employees or agents from and after May 28, 1996, until the earlier of the
expiration of the Term or termination of this Lease, and (ii) Tenant's failure
to comply with applicable environmental laws.
8.5 Landlord shall indemnify and save harmless Tenant from any fine,
suit, claim, action, liability, damage, loss, cost or expense, including,
without limitation, attorney's fees and court costs, of any kind arising out of
or in any way connected with (i) any spills or discharges of hazardous
substances or wastes at, onto or from the Leased Premises caused by Landlord or
arising from facts, events or conditions prior to May 28, 1996, and (ii)
Landlord's failure (or failure by any person or entity prior to the commencement
date of this Lease) to comply with applicable environmental laws.
8.6 Fairmount shall indemnify and save harmless Tenant from any fine,
suit, claim, action, liability, damage, loss, cost or expense, including,
without limitation, attorney's fees and court costs, of any kind arising out of
or in any way connected with (i) any spills or discharges of hazardous
substances or wastes at, onto or from the Right of Access, Parking Spaces or the
860 Premises caused by Fairmount, the 860 Premises Tenant or its employees or
agents, and (ii) the failure by Fairmount or the 860 Premises Tenant (or failure
by any person or entity prior to the commencement date of this Lease) to comply
with applicable environmental laws.
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9. LIABILITY INSURANCE AND INDEMNIFICATION
- -------------------------------------------
9.1 Tenant, at its cost and expense, shall obtain or provide and keep in
full force for the benefit of the Landlord general public liability insurance,
insuring Tenant, and naming Landlord as an additional insured, against any and
all liability or claims of liability arising out of, occasioned by or resulting
from any accident or otherwise in or about the Leased Premises, for injuries to
any person or persons, for limits of not less than $5,000,000 for injuries to
one person and $5,000,000 for injuries to more than one person, in any accident
or occurrence, and for loss or damage to the property of any person or persons
of not less than $500,000.
9.2 Tenant, at its cost and expense, shall obtain or provide and keep in
full force for the benefit of the Landlord fire insurance, with an extended
coverage endorsement, for damage to the building on the Leased Premises in an
amount not less than ninety percent (90%) of the full replacement cost thereof.
Landlord and Landlord's lender shall be named as loss payees thereunder.
9.3 The policies of insurance shall be written by a company or companies
authorized to do business in the State of New Jersey. At least fifteen (15)
days prior to the expiration or termination date of any policy, Tenant shall
deliver a certificate of insurance for a renewal or replacement policy with
proof of the payment of the premium therefor. Each of the policies required to
be maintained by the Tenant herein shall contain a provision that the same may
not be canceled or altered without a least fifteen (15) days prior written
notice to the Landlord.
9.4 Tenant shall save, hold, and keep harmless and indemnify Landlord and
its shareholders, directors, officers, employees and agents, and their
respective heirs, legal representatives, successors and assigns (the "Landlord
Indemnitees") from and for any and all liability, damage, loss, cost or expense
(including, without limitation, attorney fees and court costs) incurred by any
of the Landlord Indemnitees wholly or in part arising from or in connection with
(i) any breach or default by Tenant of its duties or obligations under this
Lease; (ii) any acts or omissions by the Tenant or the Tenant's employees,
agents, guests, licensees, invitees or subtenants, or (iii) the use or occupancy
of the Leased Premises by Tenant and the conduct of Tenant's business thereon.
Tenant shall save, hold, and keep harmless and indemnify Fairmount, and
their respective shareholders, directors, officers, employees and agents, and
their respective heirs, legal representatives, successors and assigns (the
"Fairmount Indemnitees") from and for any and all liability, damage, loss, cost
or expense (including, without limitation, attorney fees and court costs)
incurred by any of the Fairmount Indemnitees wholly or in part arising from or
in connection with the use, enjoyment or occupancy of the Parking Spaces by
Tenant or its employees or agents.
9.5 Landlord shall save, hold, and keep harmless and indemnify Tenant and
its shareholders, directors, officers, employees and agents, and their
respective heirs, legal representatives, successors and assigns (the "Tenant
Indemnitees") from and for any and all liability, damage, loss, cost or expense
(including, without limitation, attorney fees and court costs) incurred
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by any of the Tenant Indemnitees wholly or in part arising from or in connection
with (i) any breach or default by Landlord of its duties or obligations under
this Lease, or (ii) the negligence or intentional misconduct by Landlord or its
employees, agents, guests, licensees or invitees.
9.6 Fairmount shall save, hold, and keep harmless and indemnify the
Tenant Indemnitees from and for any and all liability, damage, loss, cost or
expense (including, without limitation, attorney fees and court costs) incurred
by any of the Tenant Indemnitees wholly or in part arising from or in connection
with (i) any breach or default by Fairmount of its duties or obligations under
this Lease; (ii) the negligence or intentional misconduct by Fairmount or its
employees, agents, guests, licensees or invitees; (iii) the use, occupancy or
enjoyment of the Right of Access by Fairmount or the 860 Premises Tenant, or
their respective employees, agents, guests, licensees, invitees or subtenants.
10. ASSIGNMENT AND SUBLETTING
- ------------------------------
10.1 The Tenant shall not, without the written consent of the Landlord,
assign, mortgage or hypothecate this Lease, nor sublet or sublease the Leased
Premises or any part thereof, which consent shall not be unreasonably withheld,
conditioned or delayed.
10.2 Notwithstanding the foregoing in Section 10.1, Tenant shall have the
right, without obtaining the Landlord's consent, to assign its interest in this
Lease or to sublet or sublease the Leased Premises or any portion thereof, to
an entity which: (i) controls, is controlled by, or is under common control
with, Tenant, (ii) succeeds to Tenant's business by merger, consolidation or
other form of corporate transaction, or (iii) has a net worth equal to or
greater than the net worth of the Tenant as of the commencement date of this
Lease.
11. SUBORDINATION AND NONDISTURBANCE; LANDLORD'S FINANCING;
- ------------------------------------------------------------
ESTOPPEL CERTIFICATE
--------------------
11.1 This Lease is subject and subordinate to the lien of all mortgages
which may now or hereafter affect the Leased Premises; provided, however, that
Landlord shall obtain a non-disturbance agreement from the person or entity
holding such lien in favor of Tenant, in form and substance satisfactory to
Tenant (the "Non-Disturbance Agreement"). Upon Tenant's receipt of the Non-
Disturbance Agreement, (i) Tenant, at Landlord's request, shall execute,
acknowledge and deliver to Landlord, any instruments and certificates reasonably
requested by Landlord to evidence, confirm or further effect such subordination.
11.2 If any prospective lender of Landlord which has committed to provide
financing to be secured by the Premises or the rents under the Lease requests
any amendments to any terms or provisions of this Lease as a condition of
providing such financing, Tenant shall agree to such amendments requested by
such prospective lender; provided, however, that Tenant shall not be required to
consent to such amendments if the same (i) would affect any economic terms of
the
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Lease, or (ii) in Tenant's reasonable judgment, might adversely affect Tenant's
use or enjoyment of the Premises.
11.3 Landlord and Tenant agree, within ten (10) days after written request
by the other, to execute, acknowledge and deliver to and in favor of any
proposed lender, purchaser, permitted assignee, subtenant or other person or
entity, an estoppel certificate, in a form reasonably satisfactory to such
proposed lender, purchaser, permitted assignee or sublessee, stating among other
things: (i) whether this Lease is in full force and effect; (ii) whether this
Lease has been modified or amended and, if so, identifying and describing any
such modification or amendment; (iii) the date through which rent has been paid;
and (iv) whether the party giving such certificate knows of any default on the
part of the other party or has any claim against the other party and, if so,
specifying the nature of such default or claim.
12. CONDEMNATION; EMINENT DOMAIN
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12.1 If a Taking (as defined in Section 12.3) occurs with respect to the
entire Leased Premises or any portion thereof which, in Tenant's reasonable
judgment, materially interferes with Tenant's use, occupancy or enjoyment of the
Leased Premises then this Lease shall terminate on the date on which the Leased
Premises or such portion thereof is conveyed to the condemning authorities and
Tenant shall be liable for the payment of rent only to the date of such
conveyance.
12.2 If a Taking (as defined in Section 12.3) occurs with respect to a
portion of the Leased Premises which, in Tenant's reasonable judgment, does not
materially interfere with Tenant's use, occupancy or enjoyment of the Leased
Premises, then this Lease shall terminate on the date on which the Leased
Premises is conveyed to the condemning authorities only as to such portion of
the Leased Premises is conveyed, and this Lease shall remain in full force and
effect as to the portion of the Leased Premises not conveyed to the condemning
authorities, provided, however, that the rent for such remaining portion shall
be equitably abated.
12.3 For the purposes of this Section 12, the term "Taking" shall mean
(i) the exercise by any governmental or other public authority, agency, body or
public utility, of the right of eminent domain or condemnation proceedings, or
if suit or other action shall be instituted for the taking or condemnation
thereof, or (ii) if in lieu of any formal condemnation proceedings or actions,
Landlord sale and conveyance or granting of an option to purchase the Leased
Premises or any portion thereof, to the governmental or other public authority,
agency, body or public utility, seeking to take said land and Leased Premises or
any portion thereof.
12.4 Landlord shall have the right to receive all awards made in respect
of any Taking and Tenant shall have no claim or right to claim or be entitled to
any portion of such award, except to the extent a separate award is made to
Tenant for the value of Tenant's leasehold estate or Tenant's trade fixtures,
equipment or personal property on the Leased Premises.
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12.5 Tenant, at Landlord's expense, shall execute, acknowledge and deliver
any instruments, as necessary or required to expedite any Taking or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the Leased
Premises or any portion thereof.
13. FIRE AND OTHER CASUALTY
- ----------------------------
13.1 If a fire, the elements or other casualty (a "Casualty") results in
damage to the Leased Premises, the Tenant shall give immediate notice to the
Landlord. If the Leased Premises is partially damaged by a Casualty, Landlord
shall repair the Leased Premises as soon as practicable to the same condition as
existing prior to such Casualty, and Tenant's obligation to pay the rent shall
be equitably abated until the Leased Premises have been repaired or restored to
its condition existing prior to such Casualty, the amount of such abatement of
rent depending upon the character and extent of damage and loss of use to the
Tenant.
13.2 If (i) the Leased Premises are totally destroyed (which would require
the razing of entire sidewalls of the building before reconstruction would be
practical) or, (ii) the Leased Premises be so extensively and substantially
damaged as to render them untenantable, then the rent shall be paid up to the
time of such destruction and this Lease shall terminate. In no event however,
shall the provisions of this clause become effective or be applicable, if the
Casualty shall be the result of the negligence or intentional misconduct of
Tenant or Tenant's agents, employees, guests, licensees, invitees or subtenants.
In such case, Tenant's liability for the payment of the rent shall continue
unabated for the remainder of the Term.
13.3 If Tenant shall have been insured against any Casualty, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder.
14. REIMBURSEMENT
- ------------------
If Landlord, Tenant or Fairmount shall fail or refuse to comply with and
perform any of its conditions and covenants in this Lease, the other party may,
if it so elects, after ten (10) days written notice from such party to the non-
complying party carry out and perform such conditions and covenants, at the cost
and expense of the non-complying party. The cost and expense incurred by such
party shall be payable by the non-complying party within ten (10) days after
demand, or at the option of the party incurring such costs, shall be added to
the installment of rent next due and payable, or reduced as an abatement of rent
due and payable (as the case may be). This remedy shall be in addition to such
other remedies the Landlord, Tenant or Fairmount may have hereunder by reason of
the breach by the either party of any of the covenants and conditions contained
in this Lease.
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15. INSPECTION AND REPAIRS
- ---------------------------
Landlord and Landlord's agents, employees or other representatives, shall
have the right to enter into and upon the Leased Premises or any part thereof,
at all reasonable hours with at least 24 hours prior written notice (except in
the case of emergencies), for the purpose of examining the same and for making
such repairs and replacements as required by Landlord under this Lease, or
alterations, additions or improvements as may be necessary for the safety and
preservation thereof. This clause shall not be deemed to be a covenant by the
Landlord nor be construed to create an obligation on the part of the Landlord to
make such inspection or repairs other than those obligations set forth in this
Lease.
16. RIGHT TO EXHIBIT
- ---------------------
Tenant shall permit Landlord and Landlord's agents, employees or other
representatives to show the Leased Premises to prospective purchasers at any
time, and to prospective tenant during the last six (6) months of the Term, and
Tenant agrees that on and after three (3) months before the expiration of the
Term, Landlord and Landlord's agents, employees or other representatives shall
have the right to place notices on the Leased Premises, offering the premises
for rent or for sale.
17. REMOVAL OF TENANT'S PROPERTY
- ---------------------------------
Any equipment, fixtures, goods or other property of the Tenant, not removed
by the Tenant upon the expiration of the Term or upon any quitting, vacating or
abandonment of the Leased Premises by the Tenant, or in the case of a
termination of this Lease and Tenant's eviction, within thirty (30) days after
such termination and eviction, shall be considered as abandoned and the Landlord
shall have the right, without any notice to the Tenant, to sell or otherwise
dispose of the same, and shall not be accountable to Tenant for any part of the
proceeds of such sale, if any.
18. REMEDIES UPON TENANT'S DEFAULT
- -----------------------------------
18.1 Any of the following shall be deemed an event of default by Tenant
under this Lease:
(i) The failure to make any payment of rent when due and payable if
such failure continues for five (5) business days after written
notice, or if Tenant has received two (2) or more notices
within any twelve (12) month period, the failure to make any
payment of rent within five (5) days after such rent is due and
payable;
(ii) Tenant's failure to perform any covenant or obligation of
Tenant under this Lease and such failure shall continue for
thirty (30) days after written notice, or if such default is
not curable within a thirty (30) day period, Tenant fails to
commence such cure within such thirty (30) day period or fails
to diligently prosecute such cure to completion;
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(iii) The Leased Premises shall be or become abandoned or deserted,
vacated or vacant; or
(iv) Tenant be adjudicated a bankrupt, insolvent or placed in
receivership, or should proceedings be instituted by or against
the Tenant for bankruptcy, insolvency, receivership, agreement
of composition or assignment for the benefit of creditors which
are not dismissed within thirty (30) days after filing.
18.2 Upon an event of default, Landlord, in addition to any other remedies
herein contained or as may be permitted by law, may either
18.2.1 terminate Tenant's right to possession, and by any lawful
means, re-enter the Leased Premises and have and again possess and enjoy the
Leased Premises, re-let the Leased Premises and receive the rents therefor and
apply the same, first to the payment of such expenses, reasonable attorney fees
and costs, as the Landlord has reasonably incurred in re-entering and
repossessing the same and in making such repairs and alteration as may be
necessary; and second to the payment of the rents due hereunder, in which case
Tenant shall remain liable for such rents as may be in arrears and also the
rents as may accrue subsequent to the re-entry by Landlord, to the extent of the
difference between the rents reserved hereunder and the rents, if any, received
by the Landlord during the remainder of the unexpired term hereof, after
deducting the aforementioned expenses, fees and costs; the same to be paid as
such deficiencies arise and are ascertained each month, or
18.2.2 terminate the Lease with five (5) days notice in writing of
the Landlord's intention so to do. Upon the giving of such notice, this Lease
and the term thereof shall end on the date fixed in such notice as if the said
date were the date originally fixed in this Lease for the expiration hereof,
provided, however, that Tenant shall have the right to removed any of its trade
fixtures, equipment or other personal property within thirty (30) days after the
date of such termination, and Landlord shall have the right to remove all
persons, goods, fixtures and chattels therefrom, by force or otherwise, without
liability for damages, which are not removed by Tenant during such thirty (30)
day period.
19. LIMITATION ON LANDLORD'S LIABILITY
- ---------------------------------------
Tenant acknowledges and agrees that Landlord shall not be liable for any
damage or injury which is sustained by Tenant or any other person as a
consequence of the failure, breakage, leakage or obstruction of the any of the
building's electrical, plumbing or mechanical systems or utilities, except to
the extent arising from or in connection with (i) any breach or default by
Landlord of its duties or obligations under this Lease, or (ii) the negligence
or intentional misconduct by Landlord or its employees, agents, guests,
licensees or invitees.
-12-
<PAGE>
20. NON-WAIVER
- ---------------
The various rights, remedies, options and elections of Landlord, Tenant and
Fairmount are cumulative, and the failure of such party to enforce the strict
performance by the other party of its covenants and obligations under this Lease
or to exercise any election or option or to resort or have recourse to any
remedy provided in this Lease herein, at law or in equity, and the acceptance by
Landlord of any installment of rent after any breach by the Tenant, in any one
or more instances, shall not be construed or deemed to be a waiver or a
relinquishment for the future by such party of any such covenants, obligations,
rights, remedies, options or elections, but the same shall continue in full
force and effect.
21. SEVERABILITY OF LEASE
- --------------------------
The terms, conditions, covenants and provisions of this Lease shall be
deemed to be severable. If any clause or provisions herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect. Landlord, Tenant or Fairmount may pursue the
relief or remedy sought in any invalid clause, by conforming the said clause
with the provisions of the statutes or the regulations of any governmental
agency in such case made and provided as if the particular provisions of the
applicable statutes or regulations were set forth herein at length.
22. NOTICES
- ------------
All notices, demands, consents and other communication required under this
Lease shall be given in writing and sent by: (i) personal delivery, (ii) mailing
such notices by certified mail, return receipt requested, or (iii) nationally
recognized overnight courier, to the address of the parties as shown at the head
of this Lease, or to such other address as may be designated in writing, which
notice of change of address shall be given in the same manner, and shall be
deemed delivered upon (i) receipt by the party to whom such notice, or (ii) upon
attempted delivery if the party to whom such notice is sent refuses delivery or
is no longer at the address set for in the head of this Lease and failed to
notify Landlord of its new address. Landlord, Tenant and Fairmount shall have
the right to change their address for such notices, demands, consents and other
communications by providing a notice pursuant to this Section 22 to the other
parties to this Lease.
23. TITLE AND QUIET ENJOYMENT
- ------------------------------
23.1 Landlord represents and warrants that Landlord is the owner of the
Leased Premises and has the right and authority to enter into, execute and
deliver this Lease, and covenants that Tenant on paying the rent and performing
its covenants and obligations herein contained, shall and may peaceably and
quietly have, hold and enjoy the Leased Premises during the Term.
-13-
<PAGE>
23.2 Fairmount represents and warrants that Fairmount is the owner of the
Parking Spaces and has the right and authority to enter into, execute and
deliver this Lease, and covenants that Tenant on performing its covenants and
obligations herein with respect to the Parking Spaces, shall and may peaceably
and quietly have, hold and enjoy the Parking Spaces during the Term.
24. ENTIRE CONTRACT
- --------------------
This Lease sets forth the entire understanding and agreement among
Landlord, Tenant and Fairmount, and supersedes all prior or contemporaneous
written or oral understandings or agreements. No amendments, additions, changes
or modifications, renewals or extensions hereof, shall be binding unless set
forth in writing and signed by Landlord and Tenant, and if such amendments
affect any rights or obligations of Fairmount, by Fairmount as well.
25. MECHANIC'S LIENS
- ---------------------
If any mechanics' or other liens shall be created or filed against the
Leased Premises by reason of labor performed or materials furnished for the
Tenant in the erection, construction, completion, alteration, repair or addition
to any building or improvement, Tenant, at Tenant's cost and expense, cause such
lien or liens to be satisfied, bonded, or discharged of record together with any
Notices of Intention that may have been filed within thirty (30) days after
Tenant receives notice of such lien.
26. WAIVER OF SUBROGATION
- --------------------------
Each party hereto waives any cause of action it might have against the
other party on account of any liability, damage, loss, cost or expense that is
insured against under any insurance policy to the extent of insurance proceeds
paid under such insurance policy; provided, however, that this waiver shall be
ineffective against any insurer of Landlord, Tenant or Fairmount to the extent
such waiver is prohibited by the laws of the State of New Jersey.
27. INTERPRETATION
- -------------------
In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended to
include the appropriate gender or number as the text of the within instrument
may require.
28. SUCCESSORS AND ASSIGNS
- ---------------------------
All the terms, covenants and conditions herein contained shall be for and
shall inure to the benefit of and shall bind Landlord, Tenant, Fairmount, and
their respective and their heirs, executors, administrators, personal or legal
representatives, successors and assigns. Fairmount shall incorporate its rights
and obligations under this Lease into any lease agreement with the 860 Premises
Tenant.
-14-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
LANDLORD:
--------
DIVISION STREET PARTNERS, L.P.,
a New Jersey Limited Partnership
By: DIVISION STREET REALTY CORP.
a New Jersey Corporation
Its: General Partner
By: /s/ William J. Milton, Jr.
--------------------------
Name: William J. Milton, Jr.
Title: President
TENANT:
------
BROCKWAY STANDARD (NEW JERSEY), INC.,
a New Jersey corporation
By: /s/ Blair Schlossberg
----------------------------
Name: Blair Schlossberg
----------------------------
Title: Secretary & General Counsel
----------------------------
IN WITNESS WHEREOF, Fairmount has executed this Lease as of the day and
year first above written only for the purposes of Sections 1.2, 1.3, 7.1, 7.2,
8.3, 8.6, 9.6, 14, 20, 21, 22, 23.2, 24, 26, 27 and 28.
FAIRMOUNT:
---------
FAIRMOUNT REALTY, L.L.C.,
a New Jersey Limited Liability Company
By: /s/ William J. Milton, Jr.
--------------------------
Name: William J. Milton, Jr.
Title: Manager
-15-
<PAGE>
SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1
BWAY CORPORATION
- ----------------
Brockway Standard, Inc.
Armstrong Containers, Inc.
Plate Masters, Inc.
Milton Can Company, Inc.
Brockway Standard (New Jersey), Inc.
Northeast Tin Plate Company
Milton Metal Graphics, Inc.
BMAT, Inc.
BMAT (Newtown), Inc.
BMAT (MDD), Inc.
Chicago Metal Decorating, Inc.
Chicago Service Division, Inc.
Brookfield Service Division, Inc.
Trenton Metal Decorating, Inc.
Brockway Standard (Canada), Inc.
BWAY Foreign Sales Corporation
The Company and most of its significant subsidiaries are Delaware corporations,
except for Northeast Tin Plate Company (a New Jersey Corporation), Milton Metal
Graphics, Inc. (an Illinois Corporation), BWAY Foreign Sales Corporation
(incorporated in Barbados), and Brockway Standard (Canada), Inc. which is
organized within the Ontario Province.
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> OCT-03-1999 OCT-03-1999
<PERIOD-START> JUL-05-1999 SEP-28-1998
<PERIOD-END> OCT-03-1999 OCT-03-1999
<CASH> 696 696
<SECURITIES> 0 0
<RECEIVABLES> 53,374 53,374
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<PP&E> 158,071 158,071
<DEPRECIATION> 13,355 13,355
<TOTAL-ASSETS> 362,023 362,023
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