<PAGE>
 
                               BWAY CORPORATION
                          SECOND AMENDED AND RESTATED
                         1995 LONG-TERM INCENTIVE PLAN
                         -----------------------------
                                        
                                    Recitals
                                    --------

     This second amendment amends and restates the Amended and Restated 1995
Long-Term Incentive Plan established in June of 1995 and amended in August of
1996 to (a) increase the aggregate number of shares of common stock that may be
issued under this Plan to 1,425,000 shares and (b) to allow, with the consent of
the Committee, participants to more freely transfer certain options granted
under this Plan under certain circumstances.

1.   Purpose.
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     This plan shall be known as the BWAY Corporation Second Amended and
Restated 1995 Long-Term Incentive Plan (the "Plan").  The purpose of the Plan
shall be to promote the long-term growth and profitability of BWAY Corporation
(the "Company") and its subsidiaries by (i) providing certain directors,
officers, employees and consultants of the Company and its subsidiaries with
incentives to maximize stockholder value and otherwise contribute to the success
of the Company and (ii) enabling the Company to attract, retain and reward the
best available persons for positions of substantial responsibility.  Grants of
incentive or nonqualified stock options, stock appreciation rights ("SARs") in
tandem with options, restricted stock, performance awards, or any combination of
the foregoing may be made under the Plan.

2.   Definitions.
     ----------- 

     (a)  "Board of Directors" and "Board" mean the board of directors of BWAY
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Corporation.

     (b)  "Cause" means the occurrence of one of the following events:
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          (i)   Conviction of a felony or any crime or offense lesser than a
felony involving the property of the Company or a subsidiary; or

          (ii)  Conduct that has caused demonstrable and serious injury to the
Company or a subsidiary, monetary or otherwise; or

          (iii) Willful refusal to perform or substantial disregard of duties
properly assigned, as determined by the Company.

     (c)  "Change in Control" means the occurrence of one of the following
           -----------------
events:

          (i)   if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), other than an Exempt Person, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
<PAGE>
 
          (ii)  during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or

          (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in all or a portion of the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets,
other than a sale to an Exempt Person.

     (d)  "Code"  means the Internal Revenue Code of 1986, as amended.
           ----                                                       

     (e)  "Committee" means the compensation committee of the Board. The
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membership of the Committee shall be constituted so as to comply at all times
with the applicable requirements of Rule 16b-3 under the Exchange Act and
Section 162(m) of the Code.

     (f)  "Competition" is deemed to occur if a person whose employment with the
           -----------                                                          
Company or its subsidiaries has terminated obtains a position as a full time or
part-time employee of, as a member of the board of directors of, or as a
consultant or advisor with or to, or acquires an ownership interest in excess of
5% of, a corporation, partnership, firm or other entity that engages in any of
the businesses of the Company or any subsidiary with which the person was
involved in a management role at any time during his or her last five years of
employment with the Company or any subsidiary.

     (g)  "Covered Employee" means an individual defined in Code Section
           ----------------                                                 
162(m)(3), as amended from time to time.

     (h)  "Disability" means a permanent and total disability as defined in the
           ----------                                                          
Company's Long-Term Disability Plan or as otherwise approved by the Committee.

     (i)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.
           ------------                                                        

     (j)  "Exempt Person" means (i) the Chairman of the Company on the effective
           -------------                                                     
date of this Plan, (ii) any person who owns 15% or more of the outstanding
shares of Common Stock on the effective date of this Plan, (iii) any person (or
group of related persons) that becomes the owner of 15% or more of the
outstanding shares of Common Stock as a result of a gift or bequest from a
person included in (i) or (ii) above, (iv) any person, entity or group under the
control of any party included in clause (i), (ii) or (iii), and (v) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company.
<PAGE>
 
     (k) "Fair Market Value", on any date, means (i) if the Common Stock is
          -----------------                                                
listed on a securities exchange or is traded over the New York Stock Exchange
("NYSE"), the closing sales price on such exchange or over such system on the
immediately preceding date on which sales were reported, or (ii) if the Common
Stock is not listed on a securities exchange or traded over the NYSE, the mean
between the bid and offered prices as quoted by NYSE for the immediately
preceding date on which sales were reported, provided that if it is determined
that the fair market value is not properly reflected by such NYSE quotations,
Fair Market Value will be determined by such other method as the Committee
determines in good faith to be reasonable.

     (l) "Incentive Stock Option" means an option conforming to the requirements
          ----------------------                                              
of Section 422 of the Code.

     (m) "Non-Employee Director" has the meaning given to such term in Rule 
          ---------------------                                           
16b-3 under the Exchange Act.

     (n) "Nonqualified Stock Option" means any stock option other than an
          -------------------------                                         
Incentive Stock Option.

     (o) "Retirement" means retirement as defined under the Company's Pension
          ----------                                                          
Plan or termination of one's employment on retirement with the approval of the
Committee.

     (p) "Subsidiary" means a corporation or other entity of which outstanding
          ----------                                                          
shares or ownership interest representing 50% or more of the combined voting
power of such corporation or other entity are owned directly or indirectly by
the Company.

3.   Administration.
     -------------- 

     The Plan shall be administered by the Committee.  Subject to the provisions
of the Plan, the Committee shall be authorized to (i) select persons to
participate in the Plan, (ii) determine the form and substance of grants made
under the Plan to each participant, and the conditions and restrictions, if any,
subject to which such grants will be made, (iii) interpret the Plan and (iv)
adopt, amend, or rescind such rules and regulations for carrying out the Plan as
it may deem appropriate.  Decisions of the Committee on all matters relating to
the Plan shall be in the Committee's sole discretion and shall be conclusive and
binding on all parties.  The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal and state laws and rules and regulations promulgated
pursuant thereto.
<PAGE>
 
4.   Shares Available for the Plan; Limitations on Awards.
     ---------------------------------------------------- 

     Subject to adjustments as provided in Section 16, an aggregate of 1,425,000
shares of Common Stock, par value $.01 per share, of the Company (hereinafter
the "Shares") may be issued pursuant to the Plan; provided, however, that not
more than 10% of such shares may be issued in the form of restricted stock.
Such Shares may be in whole or in part authorized and unissued, or shares which
have been reacquired by the Company and held as treasury shares.  If any grant
under the Plan expires or terminates unexercised, becomes unexercisable or is
forfeited as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan unless, in the case of
options granted under the Plan, related SARs are exercised.
 
5.   Participation.
     ------------- 

     Participation in the Plan shall be limited to those directors (including
Non-Employee Directors), officers, employees and consultants of the Company and
its Subsidiaries selected by the Committee.  Nothing in the Plan or in any grant
thereunder shall confer any right on an employee to continue in the employ of
the Company or shall interfere in any way with the right of the Company to
terminate an employee at any time.

     Incentive Stock Options or Nonqualified Stock Options, SARs in tandem with
options, restricted stock awards, performance awards, or any combination
thereof, may be granted to such persons and for such number of Shares as the
Committee shall determine (such individuals to whom grants are made being
sometimes herein called "optionees" or "grantees" as the case may be).  A grant
of any type made hereunder in any one year to an eligible participant shall
neither guarantee nor preclude a further grant of that or any other type to such
person in that year or subsequent years.

6.   Incentive and Nonqualified Options.
     ---------------------------------- 

     The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof.
In any one calendar year, the Committee shall not grant to any one participant,
options to purchase a number of shares of Common Stock in excess of 375,000.
The options granted shall take such form as the Committee shall determine,
subject to the following terms and conditions.

     (a) Price. The price per Share deliverable upon the exercise of each option
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("exercise price") shall be established by the Committee, except that the
exercise price may not be less than 100% of the Fair Market Value of the Shares
at the date of grant. In the case of the grant of any Incentive Stock Option to
an employee who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries, such price per Share, if required by the Code, shall not be less
that 110% of the Fair Market Value of the Shares at the date of grant.

     (b) Payment. Options may be exercised in whole or in part, upon payment of
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the exercise price of the Shares to be acquired. Payment shall be made in cash
(including check, bank draft or money order) or, in the discretion of the
Committee, (i) in cash and/or shares of Common Stock and/or by delivery of the
optionee's promissory note (if
<PAGE>
 
in accordance with policies approved by the Committee), or (ii) by special
arrangement through a broker selected by the Committee. The fair market value of
shares of Common Stock tendered on exercise of options shall be the Fair Market
Value as of such date.

     (c) Withholding Tax.  Unless otherwise determined by the Committee, a
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participant may elect to deliver shares of Common Stock (or have the company
withhold shares acquired upon exercise of the option) to satisfy in whole or in
part, the amount the Company is required to withhold for taxes in connection
with the exercise of an option. Such election must be made on or before the date
the amount of tax to be withheld is determined. Once made, the election shall be
irrevocable. The fair market value of the shares to be withheld or delivered
will be the Fair Market Value as of the date the amount of tax to be withheld is
determined.

     (d) Terms of Options. The term during which each option may be exercised
         ----------------   
shall be determined by the Committee, but, except as otherwise provided herein,
in no event shall an option be exercisable in whole or in part more than ten
years from the date it is granted; and, in the case of the grant of an Incentive
Stock Option to an employee who at the time of the grant owns more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, in no event shall such option be exercisable, if required by
the Code, more than five years from the date of the grant. All rights to
purchase shares pursuant to an option shall, unless sooner terminated, expire at
the date designated by the Committee. The Committee shall determine the date on
which each option shall become exercisable and may provide that an option shall
become exercisable in installments. The shares constituting each installment may
be purchased in whole or in part at any time after such installment becomes
exercisable, subject to such minimum exercise requirements as are designated by
the Committee. Prior to the exercise of the option and delivery of the Shares
represented thereby, the optionee shall have no right to any dividends or be
entitled to any voting rights on any Shares covered by outstanding options.

     (e) Limitations on Grants. If required by the Code, the aggregate Fair
         ---------------------      
Market Value (determined as of the grant date) of Shares for which an Incentive
Stock Option is exercisable for the first time during any calendar year may not
exceed $100,000.

     (f) Termination of Employment; Change in Control.
         -------------------------------------------- 

          (i) If a participant ceases to be a director, officer, employee or
consultant of the Company or any Subsidiary due to death or Disability, all of
the participant's options, and SARs shall become fully vested and exercisable
and shall remain so for a period of one year from the date of such termination,
but in no event after the expiration date of the option. Notwithstanding the
foregoing, if the Disability giving rise to the termination of employment is not
within the meaning of Section 422(e)(3) of the Code, Incentive Stock Options not
exercised by such participant within 90 days after the date of termination of
employment will cease to qualify as Incentive Stock Options and will be treated
as Nonqualified Stock Options under the Plan if required to be so treated under
the Code.
<PAGE>
 
          (ii) If a participant ceases to be a director, officer, employee or
consultant of the Company or a Subsidiary upon the occurrence of his or her
Retirement, (A) each of his or her options and SARs that was exercisable on the
date of Retirement shall remain exercisable for, and shall otherwise terminate
at the end of, a period of up to five years after the date of Retirement (as
specified in the option agreement), but in no event after the expiration date of
the option; provided that the participant does not engage in Competition during
such five-year period unless he or she receives written consent to do so from
the Board or the Committee, and (B) all of the participant's options and SARs
that were not exercisable on the date of Retirement shall be forfeited
immediately upon such cessation. Notwithstanding the foregoing, Incentive Stock
Options not exercised by such participant within 90 days after Retirement will
cease to qualify as Incentive Stock Options and will be treated as Nonqualified
Stock Options under the Plan if required to be so treated under the Code.

          (iii) If a participant ceases to be a director, officer, employee or
consultant of the Company or a Subsidiary due to Cause, all of his or her
options and SARs shall be forfeited immediately upon such cessation.

          (iv) Unless otherwise determined by the Committee, if a participant
     ceases to be a director, officer, employee or consultant of the Company or
     a Subsidiary for any reason other than death, Disability, Retirement or
     Cause, (A) each of his or her options and SARs that was exercisable on the
     date of termination shall remain exercisable for, and shall otherwise
     terminate at the end of, a period of 90 days after the date of such
     termination, but in no event after the expiration date of the option;
     provided that participant does not engage in Competition during such 90-day
     period unless he or she receives written consent to do so from the Board or
     the Committee, and (B) all of the participant's options and SARs that were
     not exercisable on the date of such termination shall be forfeited.

          (v) If there is a Change in Control of the Company, all of the
     participant's options and SARs shall become fully vested and exercisable.

7.   Stock Appreciation Rights.
     ------------------------- 

     The Committee shall have the authority to grant SARs under this Plan to any
optionee, either at the time of grant of an option or, in the case of a
Nonqualified Stock Option, thereafter by amendment to the option. The exercise
of an option shall result in an immediate forfeiture of its related SAR to the
extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of its related option to the extent the SAR is exercised.
SARs shall be subject to such other terms and conditions as the Committee may
specify. An SAR shall expire at the same time as the related option expires and
shall be transferable only when, and under the same conditions as, the related
option is transferable.

      SARs shall be exercisable only when, to the extent and on the conditions
that the related option is exercisable. No SAR may be exercised unless the Fair
Market Value of a share of Common Stock of the Company on the date of exercise
exceeds the exercise price of the option to which the SAR corresponds.
<PAGE>
 
      Upon the exercise of an SAR, the optionee shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock of the Company on the date of exercise and the
exercise price of the option to which the SAR is related multiplied by the
number of Shares as to which the SAR is exercised. The Committee shall decide
whether such distribution shall be in cash, in shares, or in a combination
thereof.

      All SARs will be exercised automatically on the last day prior to the
expiration date of the related option, so long as the Fair Market Value of a
share of the Company's Common Stock on that date exceeds the exercise price of
the related option.

8.   Restricted Stock.
     ---------------- 

     The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least one year), and the time or times at which such restrictions shall lapse
with respect to all or a specified number of Shares that are part of the grant.

     The participant will be required to deposit Shares with the Company during
any period of restriction thereon and to execute a blank stock power therefor.
Except as otherwise provided by the Committee, during such period of restriction
the participant shall have all of the rights of a holder of Common Stock,
including but not limited to the rights to receive dividends (or amounts
equivalent to dividends) and to vote.

     Except as otherwise provided by the Committee, on termination of a
grantee's status as a director, officer, employee or consultant due to death,
Disability or Retirement with the consent of the Company during any period of
restriction all restrictions on Shares granted to such grantee shall lapse. On
such termination of a grantee for any other reason, all restricted stock granted
to such grantee on which the restrictions have not lapsed shall be forfeited to
the Company. If there is a Change in Control of the Company, all restrictions on
outstanding shares of restricted stock shall lapse as of the date of the Change
in Control.

9.   Performance Awards.
     ------------------ 

     Performance awards may be granted on a contingent basis to participants at
any time and from time to time as determined by the Committee. The Committee
shall have complete discretion in determining the size and composition of
performance awards so granted to a participant and the appropriate period over
which performance is to be measured ("performance cycle"). Performance awards
may include (i) specific dollar-value target awards (ii) performance units, the
value of each such unit being determined by the Committee at the time of
issuance, and/or (iii) performance Shares, the value of each such Share being
equal to the Fair Market Value of a share of the Company's Common Stock.
<PAGE>
 
      The Committee shall determine the portion of each performance award that
is earned by a participant on the basis of the Company's performance over the
performance cycle in relation to the performance goals for such cycle.
Performance Awards may be paid out in Shares, cash, or a combination of both, as
the Committee may determine, and shall have such other terms and conditions as
determined by the Committee and reflected in the award agreement.

      In the event of a Change in Control, all performance cycles shall
terminate and a participant shall be entitled to the greater of (i) the portion
of the performance award that the participant would have earned based on actual
performance through the Change in Control; or (ii) the target award amount,
assuming all performance goals had been met but not exceeded.

10.   Performance Goals.
      ----------------- 

     The Committee may determine that any award granted pursuant to this Plan to
a participant (including, but not limited to, participants who are Covered
Employees) shall be determined solely on the basis of (a) the achievement by the
Company or Subsidiary of a specified target return on equity or return on
assets, (b) the Company's or Subsidiary's stock price, (c) the achievement by a
business unit of the Company or Subsidiary of a specified target net income or
earnings per share, or (d) any combination of the goals set forth in (a) through
(c) above.  Furthermore, the Committee reserves the right for any reason to
reduce (but not increase) any award, notwithstanding the achievement of a
specified goal.  If an award is made on such basis, the Committee shall
establish goals prior to the beginning of the period for which such performance
goal relates (or such later date as may be permitted under Code Section 162
(m)).  Any payment of an award granted with performance goals shall be
conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were satisfied.

11.   Withholding Taxes.
      ----------------- 

      The Company may require, as a condition to any grant or exercise under the
Plan or to the delivery of certificates for Shares issued hereunder, that the
grantee pay to the Company, in cash, any federal, state or local taxes of any
kind required by law to be withheld with respect to any grant or any delivery of
Shares. The Company, to the extent permitted or required by law, shall have the
right to deduct from any payment of any kind (including salary or bonus)
otherwise due to a grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any grant or to the delivery of
Shares under the Plan, or to retain or sell without notice a sufficient number
of the Shares to be issued to such grantee to cover any such taxes.

12.   Written Agreement; Vesting.
      -------------------------- 

      Each employee to whom a grant is made under the Plan shall enter into a
written agreement with the Company that shall contain such provisions, including
without limitation vesting requirements, consistent with the provisions of the
Plan, as may be approved by the Committee.
<PAGE>
 
13.   Transferability.
      --------------- 

      Except as set forth in the next sentence of this Section 12, and unless
the agreement pursuant to which a grant is made provides otherwise, an option,
tandem SAR, performance award, or restricted stock granted under the Plan shall
not be transferable by a grantee other than by operation of a death beneficiary
designation made by the employee in accordance with rules established by the
Committee, by will or the applicable laws of descent and distribution and shall
be exercisable during the grantee's lifetime only by him or her or his or her
guardian or legal representative if the grantee is legally incompetent.
Notwithstanding the foregoing, the Committee shall have the power and authority
to provide, as a term of any Nonqualified Stock Option granted under the Plan,
that such Nonqualified Stock Option may be transferred without consideration by
the optionee to a member or members of his or her immediate family (i.e., a
child, children, grandchild, grandchildren or spouse) and/or to a trust or
trusts for the benefit of an immediate family member or family members.

14.   Listing and Registration.
      ------------------------ 

      If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award, or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in whole or in part, no such performance award paid out and no Shares issued
unless such listing, registration or qualification is effected free of any
conditions not acceptable to the Committee.

15.   Transfer of Employee.
      -------------------- 

      Transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, and from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military or sick leave or such other
leave of absence which is considered by the Committee as continuing intact the
employment relationship.

16.   Adjustments.
      ----------- 

      In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants made under the
Plan, and in the exercise price of outstanding options. In the event of any
merger, consolidation or other reorganization in which the Company is not the
surviving or continuing corporation or in which a Change in Control is to occur,
all of the Company's obligations regarding options, SARs performance awards, and
restricted stock that were granted hereunder and that are outstanding on the
date of such event shall, on such terms as may be approved by the Committee
prior to such event, be assumed by the surviving or continuing corporation or
canceled in exchange for property (including cash).
<PAGE>
 
17.   Termination and Modification of the Plan.
      ---------------------------------------- 

      With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Plan without stockholder approval;
provided, however, that the Committee may condition any amendment or
modification on the approval of stockholders of the Company if such approval is
necessary or deemed advisable with respect to tax, securities or other
applicable laws, policies or regulations.

18.   Amendment or Substitution of Awards under the Plan.
      -------------------------------------------------- 

      The terms of any outstanding award under the Plan may be amended from time
to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder); provided that no such amendment shall
adversely affect in a material manner any right of a participant under the award
without his written consent, unless the Committee determines in its discretion
that there have occurred or are about to occur significant changes in the
participant's position, duties or responsibilities, or significant changes in
economic, legislative, regulatory, tax, accounting or cost/benefit conditions
which are determined by the Committee in its discretion to have or to be
expected to have a substantial effect on the performance of the Company, or any
subsidiary, affiliate, division or department thereof, on the Plan or on any
award under the Plan. Notwithstanding the above, the Committee may not reduce
the exercise price of an outstanding option. The Committee may, in its
discretion, permit holders of awards under the Plan to surrender outstanding
awards in order to exercise or realize rights under other awards, or in exchange
for the grant of new awards, or require holders of awards to surrender
outstanding awards as a condition precedent to the grant of new awards under the
Plan.
 
19.   Commencement Date; Termination Date.
      ----------------------------------- 

      The Board and the stockholders initially approved the Plan as of June,
1995. On August 20, 1996, the Board approved an amendment and restatement of the
Plan. The stockholders approved this amendment and restatement of the Plan in
February 1997. On November 17, 1997, the Board approved a second amendment and
restatement of the Plan. Unless previously terminated upon the adoption of a
resolution of the Board terminating the Plan, the Plan shall terminate at the
close of business on May 31, 2005. No termination of the Plan shall materially
and adversely affect any of the rights or obligations of any person, without his
consent, under any grant of options or other incentives theretofore granted
under the Plan.