As filed with the Securities and Exchange Commission on September 29, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
BERRY PLASTICS CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 35-1813706
<S> <C> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BPC HOLDING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 35-1814673
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BERRY IOWA CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 42-1382173
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BERRY TRI-PLAS CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 56-1949250
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BERRY STERLING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 54-1749681
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
AEROCON, INC.
(Exact name of registrant as specified in charter)
Delaware 3089 35-1948748
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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<PAGE>
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PACKERWARE CORPORATION
(Exact name of registrant as specified in charter)
Kansas 3089 48-0759852
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BERRY PLASTICS DESIGN CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 62-1689708
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
VENTURE PACKAGING, INC.
(Exact name of registrant as specified in charter)
Delaware 3089 51-0368479
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
VENTURE PACKAGING MIDWEST, INC.
(Exact name of registrant as specified in charter)
Ohio 3089 34-1809003
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
VENTURE PACKAGING SOUTHEAST, INC.
(Exact name of registrant as specified in charter)
South Carolina 3089 57-1029638
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
NIM HOLDINGS LIMITED
(Exact name of registrant as specified in charter)
England and Wales 3089 Pending
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
NORWICH INJECTION MOULDERS LIMITED
(Exact name of registrant as specified in charter)
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
England and Wales 3089 Pending
incorporation or organization) Classification Code Number) Identification Number)
___________________
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101 Oakley Street
Evansville, Indiana 47710
(812) 424-2904
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(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
___________________
Martin R. Imbler
President and Chief Executive Officer
Berry Plastics Corporation
101 Oakley Street
Evansville, Indiana 47710
(812) 424-2904
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
___________________
WITH COPIES TO:
Julie M. Allen, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2400
___________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are being offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the following box: ___________________
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. __________________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. _____________________
___________________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED TO BE MAXIMUM MAXIMUM REGISTRATION
REGISTERED OFFERING PRICE AGGREGATE FEE
PER NOTE OFFERING PRICE(1)
==============================================================================================================================
<S> <C> <C> <C> <C>
12 1/4% Series C Senior Subordinated $25,000,000 105.5% $26,375,000 $7,781
Notes due 2004
Guarantees of 12 1/4% Series C Senior (2) (2) (2) (2)
Subordinated Notes due 2004
Total $25,000,000 105.5% $26,375,000 $7,781
(1)Estimated solely for the purpose of calculating the registration fee.
(2)No additional consideration will be paid by the purchasers of the 12{1}/{4}% Series C Senior Subordinated Notes due 2004 for
the Guarantees.
Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the Guarantees.
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___________________
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER
BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
Subject to Completion, dated September 29, 1998
PROSPECTUS
Berry Plastics Corporation
Offer to Exchange up to $25,000,000 of its
12{1}/{4}% Series C Senior Subordinated Notes due 2004
for any and all outstanding
12{1}/{4}% Series B Senior Subordinated Notes due 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED
Berry Plastics Corporation, a Delaware corporation ("Berry", the "Company" or
the "Issuer") and wholly owned subsidiary of BPC Holding Corporation, a
Delaware corporation ("Holding"), hereby offers, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer") to exchange $1,000
principal amount of 12{1}/{4}% Series C Senior Subordinated Notes due 2004 (the
"New Notes") of the Issuer for each $1,000 principal amount of the issued and
outstanding 12{1}/{4}% Series B Senior Subordinated Notes due 2004 (the "Old
Notes", and the Old Notes and the New Notes, collectively, the "Notes") of the
Issuer from the Holders (as defined herein) thereof. As of the date of this
Prospectus, there is $25,000,000 aggregate principal amount of the Old Notes
outstanding. The terms of the New Notes are identical in all material respects
to the Old Notes, except that the New Notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and therefore will
not bear legends restricting their transfer and will not contain certain
provisions providing for the payment of liquidated damages to the holders of
the Old Notes under certain circumstances relating to the Registration Rights
Agreement (as defined herein), which provisions will terminate as to all of the
Notes upon the consummation of the Exchange Offer.
Interest on the New Notes will accrue from October 15, 1998 and will be payable
in cash semi-annually in arrears on October 15 and April 15 of each year,
commencing April 15, 1999. Interest will be payable on the Old Notes accepted
for exchange to, but not including, October 15, 1998.
The New Notes will be unconditionally guaranteed (the "Note Guarantees") on a
senior subordinated basis by Holding, Berry Iowa Corporation, a Delaware
corporation and wholly owned subsidiary of the Company ("Berry Iowa"), Berry
Tri-Plas Corporation, a Delaware corporation and wholly owned subsidiary of the
Company ("Berry Tri-Plas"), Berry Sterling Corporation, a Delaware corporation
and wholly owned subsidiary of the Company ("Berry Sterling"), AeroCon, Inc., a
Delaware corporation and wholly owned subsidiary of the Company ("AeroCon"),
PackerWare Corporation, a Kansas corporation and wholly owned subsidiary of the
Company ("PackerWare"), Berry Plastics Design Corporation, a Delaware
corporation and wholly owned subsidiary of the Company ("Berry Design"),
Venture Packaging, Inc., a Delaware corporation and wholly owned subsidiary of
the Company ("Venture Holdings"), Venture Packaging Midwest, Inc., an Ohio
corporation and wholly owned subsidiary of Venture Holdings ("Venture
Midwest"), Venture Packaging Southeast, Inc., a South Carolina corporation and
wholly owned subsidiary of Venture Holdings ("Venture Southeast"), NIM Holdings
Limited, a company organized under the laws of England and Wales and wholly
owned subsidiary of the Company ("NIM Holdings"), and Norwich Injection
Moulders Limited, a company organized under the laws of England and Wales and
wholly owned subsidiary of NIM Holdings ("Norwich" and, collectively with
Holding, Berry Iowa, Berry Tri-Plas, Berry Sterling, AeroCon, PackerWare, Berry
Design, Venture Holdings, Venture Midwest, Venture Southeast and NIM Holdings,
the "Guarantors").
The New Notes will mature on April 15, 2004. On or after April 15, 1999, the
New Notes will be redeemable at any time at the option of the Company, in whole
or in part, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, in the event of a
Change of Control (as defined herein), each holder of New Notes may require the
Company to repurchase such holder's New Notes, in whole or in part, at a price
equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. For a definition of the
term "Change of Control," see "Description of New Notes - Repurchase at the
Option of Holders - Change of Control."
The New Notes will be unsecured senior subordinated obligations of the Company,
ranking PARI PASSU with the $100 million of the Company's 12{1}/{4}% Senior
Subordinated Notes due 2004 (the "1994 Notes"), and will be subordinate in
right of payment to all Senior Indebtedness (as defined herein) of the Company,
which includes borrowings under the Credit Facility (as defined herein). The
New Notes will be senior to any indebtedness which by its terms is subordinate
to the New Notes, regardless of when such indebtedness is incurred. The Note
Guarantees will be unconditional joint and several unsecured senior
subordinated obligations of the Guarantors and will be subordinate in right of
payment to all Senior Indebtedness of the Guarantors, including their
guarantees of the Company's indebtedness under the Credit Facility. As of June
27, 1998, on a pro forma basis after giving effect to (i) the offering of the
Old Notes (the "Offering") and the application of the proceeds therefrom and
(ii) the Norwich Acquisition (as defined herein), the aggregate amount of
outstanding Senior Indebtedness of the Company would have been $84.8 million,
the aggregate amount of outstanding total indebtedness of the Company would
have been $211.1 million, including the 1994 Notes, and the indebtedness of the
Guarantors senior to the Note Guarantees would have been $315.7 million. As of
June 27, 1998, on such pro forma basis, all indebtedness of the Company other
than the Senior Indebtedness would have been PARI PASSU in right of payment to
the Notes, and there would have been no indebtedness subordinated to the Notes.
The Indenture (as defined herein) will permit the Company and its subsidiaries
to incur additional indebtedness, including Senior Indebtedness, subject to
certain limitations. The Indenture also provides that the Company and the
Guarantors will not incur any additional indebtedness that is both subordinate
in right of payment to any Senior Indebtedness and senior in right of payment
to the Notes or the Note Guarantees, as the case may be. See "Description of
Notes." Holding is a holding company and is entirely dependent on the
declaration by the Company of dividends to pay its obligations, including its
obligations on its Note Guarantee. Under the terms of the Credit Facility, the
Company is severely restricted from declaring dividends to Holding. In
addition, the indenture (the "1996 Indenture") governing the 1996 Notes (as
defined herein) of Holding restricts the ability of Holding to make certain
payments, including payments under its Note Guarantee. See "Risk Factors -
Limited Ability of Holding to Perform Under Note Guarantee."
CONTINUED ON NEXT PAGE.
___________________
SEE "RISK FACTORS" COMMENCING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
___________________
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
The Old Notes were not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Issuer and the Guarantors contained in the
Registration Rights Agreement. Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission" or "SEC") set forth in no-
action letters issued to third parties, the Issuer believes that the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Issuer within the meaning of Rule
405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Notwithstanding the foregoing, each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with any resale of New Notes received in exchange for such
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities (other than Old Notes
acquired directly from the Issuer). The Issuer and the Guarantors have agreed
that, for a period of one year after the date of this Prospectus, they will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. There is no established
trading market for the New Notes. The Issuer does not currently intend to list
the New Notes on any securities exchange or to seek approval for quotation
through any automated quotations system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Issuer will not receive any proceeds from the Exchange Offer. The Issuer
will pay all of the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn as provided herein at any
time prior to the Expiration Date (as defined herein). The Exchange Offer is
subject to certain customary conditions.
This Prospectus has been prepared for use in connection with the Exchange Offer
and may be used by Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
in connection with offers and sales related to market-making transactions in
the Notes. DLJ may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of sale.
See "Plan of Distribution."
Information contained herein is subject to completion or amendment. A regis-
tration statement relating to these securities has been filed with the
<PAGE>
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, soliciation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
State.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE
STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY,
PRIMARILY WITH RESPECT TO THE FUTURE OPERATING PERFORMANCE OF THE COMPANY.
WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. HOLDERS OF THE NOTES ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. VARIOUS ECONOMIC AND
COMPETITIVE FACTORS COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY
FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE
INFORMATION SET FORTH UNDER "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," IDENTIFIES
IMPORTANT FACTORS THAT COULD CAUSE SUCH DIFFERENCES, INCLUDING THE COMPANY'S
ABILITY TO PASS THROUGH RAW MATERIAL PRICE INCREASES TO ITS CUSTOMERS, ITS
ABILITY TO SERVICE DEBT, THE AVAILABILITY OF PLASTIC RESIN, THE IMPACT OF
CHANGING ENVIRONMENTAL LAWS AND CHANGES IN THE LEVEL OF THE COMPANY'S CAPITAL
INVESTMENT. ALTHOUGH MANAGEMENT BELIEVES IT HAS THE BUSINESS STRATEGY AND
RESOURCES NEEDED FOR IMPROVED OPERATIONS, FUTURE REVENUE AND MARGIN TRENDS
CANNOT BE RELIABLY PREDICTED.
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NO DEALER,SALES PERSON OR ANY OTHER
PERSON IS AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THE
PROSPECTUS, AND, IF GIVEN OR MADE, $25,000,000
SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS Berry Plastics Corporation
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF 12 1/4% Series C Senior Subordinated
AN OFFER TO BUY ANY SECURITY OTHER Notes
THAN THE SECURITIES OFFERED HEREBY, due 2004
NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
______________________________
TABLE OF CONTENTS
PAGE _____________________________
Available Information ii
Incorporation of Certain PROSPECTUS
Documents by Reference ii _____________________________
Summary of Prospectus 1
Risk Factors 11
Company History 17
The Exchange Offer 19
Capitalization27
Pro Forma Condensed
Consolidated Financial
Statements 28
Selected Historical Financial
Data 33
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 35
Business 40
Management 48
Principal Stockholders 55
Certain Transactions 57
Description of Certain
Indebtedness 60
Description of Notes 63 ,1998
Certain Federal Income Tax
Considerations 85
Plan of Distribution 88
Legal Matters 89
Experts 89
Index to Financial Statements F-1
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AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed or
incorporated by reference as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the matter
involved, and each such statement is qualified in its entirety by such
reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material may also be obtained at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of prescribed fees. Such materials can also be
inspected on the Internet at http://www.sec.gov.
The Company and Holding are subject to the informational reporting requirements
of the Exchange Act. In accordance therewith, the Company and Holding file
reports and other information with the Commission. Such materials filed by the
Company and Holding with the Commission may be inspected, and copies thereof
obtained, at the places, and in the manner, set forth above.
In the event that the Issuer ceases to be subject to the informational
reporting requirements of the Exchange Act, the Issuer has agreed that, so long
as the Notes remain outstanding, it will file with the Commission and
distribute to holders of the Notes copies of (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuer were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to annual information only, a
report thereon by the Issuer's independent auditors and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Issuer
were required to file such reports. The Issuer will also make such reports
available to prospective purchasers of the Notes, securities analysts and
broker-dealers upon their request. In addition, the Issuer has agreed that for
so long as any of the Old Notes remain outstanding it will make available to
any prospective purchaser of the Old Notes or beneficial owner of the Old Notes
in connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Issuer has either exchanged
the Old Notes for New Notes or until such time as the holders thereof have
disposed of such Old Notes pursuant to an effective registration statement
filed by the Issuer.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained herein or in a
document all or part of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY
PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST
OF SUCH PERSON, A COPY OF ANY AND ALL OF THE FOREGOING DOCUMENTS INCORPORATED
HEREIN BY REFERENCE (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED
THEREIN). SUCH DOCUMENTS ARE AVAILABLE UPON REQUEST FROM JAMES M. KRATOCHVIL,
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY,
BERRY PLASTICS CORPORATION, 101 OAKLEY STREET, EVANSVILLE, INDIANA 47710, (812)
424-2904. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY , 1998 (FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION
DATE).
<PAGE>
SUMMARY OF PROSPECTUS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES,
THE TERMS "BERRY," THE "COMPANY" AND THE "ISSUER" REFER TO BERRY PLASTICS
CORPORATION, ITS SUBSIDIARIES AND THEIR RESPECTIVE OPERATIONS, AND THE TERM
"HOLDING" REFERS TO BPC HOLDING CORPORATION. THE FISCAL YEAR OF HOLDING AND
THE COMPANY IS THE 52 OR 53 WEEK PERIOD ENDING ON THE SATURDAY CLOSEST TO
DECEMBER 31. ALL REFERENCES IN THIS PROSPECTUS TO "FISCAL 1993," "FISCAL
1994," "FISCAL 1995," "FISCAL 1996" AND "FISCAL 1997" REFER TO THE FISCAL YEARS
OF THE COMPANY ENDED ON JANUARY 1, 1994, DECEMBER 31, 1994, DECEMBER 30, 1995,
DECEMBER 28, 1996 AND DECEMBER 27, 1997, RESPECTIVELY.
THE COMPANY
The Company is a leading domestic manufacturer and marketer of plastic
packaging products focused on four key markets: the aerosol overcap, rigid
open-top container, drink cup and houseware markets. Within each of its
markets, the Company concentrates on manufacturing value-added products sold to
marketers of image-conscious industrial and consumer products that utilize the
Company's proprietary molds, superior color matching capabilities and
sophisticated multi-color printing capabilities. The Company believes that it
is the largest supplier of aerosol overcaps in the United States, with sales of
over 1.4 billion overcaps in 1997. Berry also believes that it is the largest
domestic supplier of thinwall, child-resistant and pry-off open top containers.
Berry has utilized its national sales force and existing molding and printing
capacity at multiple-plant locations to become a leader in the plastic drink
cup market, which includes the Company's 32 ounce and 44 ounce drive-through
("DT") cups, which fit in standard vehicle cup holders. The Company entered
the housewares market (which includes the lawn and garden market) for semi-
disposable plastic products, sold primarily to national retail marketers, as a
result of the acquisition of PackerWare in January 1997. From fiscal 1993 to
the twelve months ended June 27, 1998, on a pro forma basis, the Company's net
sales increased from $87.8 million to $279.9 million, representing a compound
annual growth rate ("CAGR") of 29%, and Adjusted EBITDA (as defined herein)
increased from $21.7 million to $55.2 million, representing a CAGR of 23%.
The Company supplies aerosol overcaps for a wide variety of commercial and
consumer products. Similarly, the Company's containers are used for packaging
a broad spectrum of commercial and consumer products. The Company's plastic
drink cups are sold primarily to fast food restaurants, convenience stores,
stadiums, table top restaurants and retail. The Company also sells houseware
products, primarily seasonal, semi-disposable housewares and lawn and garden
items, to major retail marketers. Berry's customer base is comprised of over
4,000 customers with operations in a widely diversified range of markets. The
Company's top ten customers accounted for approximately 19% of the Company's
fiscal 1997 net sales, and no customer accounted for more than 4% of the
Company's net sales in fiscal 1997.
The historical allocation of the Company's total net sales among its product
categories is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL Twenty-Six
---------------------------------------------- Weeks Ended
1995 1996 1997 June 27, 1998
-------- -------- -------- -------------
Aerosol overcaps 31% 33% 21% 17%
Rigid open-top containers 51 53 49 54
Drink cups 12 9 17 15
Housewares -- -- 8 11
Other 6 5 5 3
</TABLE>
The Company believes that it derives a strong competitive position from its
state-of-the-art production capabilities, extensive array of proprietary molds
in a wide variety of sizes and styles and dedication to service and quality.
In the aerosol overcap market, the Company distinguishes itself with superior
color matching capabilities, which is of extreme importance to its base of
image-conscious consumer products customers, and proprietary packing equipment,
which enables the Company to deliver a higher quality product while lowering
warehousing and shipping costs. In the container market, an in-house graphic
arts department and sophisticated printing and decorating capabilities permit
the Company to offer extensive value-added decorating options. The Company's
drink cup product line is strengthened by both the larger market share and
diversification provided through its acquisition of PackerWare. Berry entered
the housewares business with its acquisition of PackerWare, which has a
reputation for outstanding quality and service among major retail marketers and
for products which offer high value at a reasonable price to consumers. The
Company believes that it is an industry innovator, particularly in the area of
decoration. These market-related strengths, combined with the Company's modern
proprietary mold technology, high speed molding capabilities and multiple-plant
locations, all contribute to the Company's strong market position.
In addition to these marketing and manufacturing strengths, the Company
believes that its close working relationships with customers are crucial to
maintaining market positions and developing future growth opportunities. The
Company employs a direct sales force which is focused on working with customers
and the Company's production and product design personnel to develop customized
packaging that enhances customer product differentiation and improves product
performance. The Company works to develop innovative new products and identify
and pursue non-traditional markets that can use existing Company products.
The Company's address is 101 Oakley Street, Evansville, Indiana 47710. The
Company's telephone number is (812) 424-2904.
RECENT ACQUISITIONS
THE NORWICH ACQUISITION
On July 2, 1998, NIM Holdings, a newly formed, wholly owned subsidiary of the
Company, acquired all of the capital stock of Norwich Injection Moulders
Limited ("Norwich Moulders") of Norwich, England (the "Norwich Acquisition"),
for aggregate consideration of approximately pound-sterling 8.5 million
(approximately $14 million). Norwich Moulders, a manufacturer and marketer of
injection-molded overcaps and closures for the European market, had fiscal 1997
net sales of approximately pound-sterling 8.1 million (approximately $13
million).
Management believes that the Norwich Acquisition will provide the Company with
a production platform that will allow it to better serve its global customers
and to introduce its product lines in Europe.
THE VENTURE PACKAGING ACQUISITION
On August 29, 1997, the Company acquired Venture Packaging, Inc. of
Monroeville, Ohio ("Venture Packaging") for aggregate consideration of
approximately $43.7 million which included cash, the payment or assumption of
indebtedness, and $5.0 million of preferred stock of Holding and warrants to
purchase stock of Holding (the "Venture Packaging Acquisition"). Venture
Packaging, a manufacturer and marketer of injection-molded containers used in
the food, dairy and various other markets, had fiscal 1996 net sales of
approximately $42 million.
Management believes that the Venture Packaging Acquisition has strategically
assisted the Company in marketing its product line of open-top containers and
lids. Venture Packaging is a leading supplier to the food service industry.
The Monroeville, Ohio facility is strategically located to service the large
northeastern U.S. market, and Venture Packaging has an excellent reputation for
outstanding service. Management believes that continued sales to Venture
Packaging's customers has enhanced the Company's position in the container
market.
As part of the Venture Packaging Acquisition, the Company acquired the
Anderson, South Carolina operations of Venture Packaging. The Company phased
down the operations of this facility in 1998. The majority of this business
has been relocated to the Company's existing Charlotte, North Carolina
facility. The remaining business has been relocated to the Company's existing
Evansville, Indiana and Monroeville, Ohio facilities.
THE VIRGINIA DESIGN ACQUISITION
On May 13, 1997, Berry Design, a newly formed wholly owned subsidiary of the
Company, acquired substantially all the assets of Virginia Design Packaging
Corp. ("Virginia Design") of Suffolk, Virginia (the "Virginia Design
Acquisition"). Virginia Design, a manufacturer and marketer of injection-
molded containers used primarily for food packaging, had fiscal 1996 net sales
of approximately $15 million. Management believes that the acquisition of
these assets has enhanced the Company's position in the food packaging and food
service markets.
THE PACKERWARE ACQUISITION
On January 21, 1997, the Company acquired PackerWare Corporation, a Kansas
corporation, for aggregate consideration of approximately $28.1 million
(including the payment of outstanding debt of PackerWare) by way of a merger of
PackerWare with and into a newly formed, wholly owned subsidiary of the Company
(the "PackerWare Acquisition"). PackerWare, a manufacturer and marketer of
plastic containers, drink cups, housewares and lawn and garden products, had
fiscal 1996 net sales of approximately $43 million.
Management believes that the PackerWare Acquisition significantly diversified
and expanded the Company's position in the drink cup business and gave the
Company immediate penetration into the housewares market. PackerWare's
reputation among its major customers for outstanding quality and service is
consistent with the customer-oriented goals of Berry. PackerWare's houseware
product line is primarily in the seasonal semi-disposable plastic segment of
the market, with other products in the complementary lawn and garden segment.
Customers for this product line are primarily large retail marketers with
national chains. The PackerWare Acquisition provided the Company with a plant
located in Lawrence, Kansas, that is well-situated to service its markets. In
addition, the PackerWare Acquisition provided additional product line breadth
and market presence to Berry's existing open-top container product line.
THE CONTAINER INDUSTRIES ACQUISITION
On January 17, 1997, the Company acquired certain assets of Container
Industries, Inc. ("Container Industries") of Pacoima, California (the
"Container Industries Acquisition") . Container Industries, a manufacturer and
marketer of injection molded industrial and pry-off containers for building
products and other industrial markets, had fiscal 1996 net sales of
approximately $4 million. Berry did not acquire Container Industries'
manufacturing facility located in Pacoima, and Berry transferred production to
its Henderson, Nevada plant. Management believes the Container Industries
Acquisition has provided additional market presence on the west coast,
primarily in the pry-off container product line.
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<CAPTION>
REGISTRATION RIGHTS AGREEMENT The Old Notes were sold by the Company on August 24, 1998
to Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser"), who placed the Old Notes with
institutional investors. In connection therewith, the
Company, the Guarantors and the Initial Purchaser executed
and delivered for the benefit of the holders of the Old
Notes a registration rights agreement (the "Registration
Rights Agreement") providing, among other things, for the
Exchange Offer.
<S> <C>
THE EXCHANGE OFFER New Notes are being offered in exchange for a like
principal amount of Old Notes. As of the date hereof,
$25,000,000 aggregate principal amount of Old Notes are
outstanding. The Company will issue the New Notes to
Holders promptly following the Expiration Date. See "Risk
Factors - Consequences of Failure to Exchange."
EXPIRATION DATE 5:00 p.m., New York City time, on , 1998, unless
the Exchange Offer is extended as provided herein, in which
case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
INTEREST Each New Note will bear interest from October 15, 1998.
Interest will be payable on the Old Notes accepted for
exchange to, but not including, October 15, 1998.
CONDITIONS TO THE EXCHANGE OFFER The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to amend, terminate or extend
the Exchange Offer at any time prior to the Expiration Date
upon the occurrence of any such condition. See "The
Exchange Offer - Conditions."
PROCEDURES FOR TENDERING OLD NOTES Each Holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with the
instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, or an Agent's Message (as defined herein)
together with the Old Notes and any other required
documentation to the exchange agent (the "Exchange Agent")
at the address set forth herein. By executing the Letter
of Transmittal or delivering an Agent's Message, each
Holder will represent to the Company, among other things,
that (i) the New Notes acquired pursuant to the Exchange
Offer by the Holder and any beneficial owners of Old Notes
are being obtained in the ordinary course of business of
the person receiving such New Notes, (ii) neither the
Holder nor such beneficial owner has an arrangement with
any person to participate in the distribution of such New
Notes, (iii) neither the Holder nor such beneficial owner
nor any such other person is engaging in or intends to
engage in a distribution of such New Notes and (iv) neither
the Holder nor such beneficial owner is an "affiliate," as
defined under Rule 405 promulgated under the Securities
Act, of the Company. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading
activities (other than Old Notes acquired directly from the
Company), may participate in the Exchange Offer but may be
deemed an "underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
See "The Exchange Offer - Procedures for Tendering" and
"Plan of Distribution."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact such
registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such beneficial
owner's own behalf, such beneficial owner must, prior to
completing and executing the Letter of Transmittal or
delivering an Agent's Message and delivering his Old Notes,
either make appropriate arrangements to register ownership
of the Old Notes in such beneficial owner's name or obtain
a properly completed bond power from the registered Holder.
The transfer of registered ownership may take considerable
time. See "The Exchange Offer - Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES Holders of Old Notes who wish to tender their Old Notes and
whose Old Notes are not immediately available or who cannot
deliver their Old Notes, the Letter of Transmittal or an
Agent's Message or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer - Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS Tenders may be withdrawn as provided herein at any time
prior to 5:00 p.m., New York City time, on the Expiration
Date. See "The Exchange Offer - Withdrawal of Tenders."
ACCEPTANCE OF OLD NOTES AND DELIVERY OF NEW NOTES The Company will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See "The
Exchange Offer - Terms of the Exchange Offer."
EXCHANGE AGENT is serving as Exchange Agent in
connection with the Exchange Offer. See "The Exchange
Offer - Exchange Agent."
USE OF PROCEEDS There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES The exchange of Old Notes for New Notes will not be a
taxable exchange for Federal income tax purposes. See
"Certain Federal Income Tax Considerations."
CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Old Notes who do not exchange their Old Notes
for New Notes pursuant to the Exchange Offer will continue
to be subject to the restrictions on transfer of such Old
Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state
securities laws. In general, Old Notes may not be offered
or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws.
</TABLE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $25,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to
the Old Notes, except that the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain certain provisions providing for an increase in the
interest rate on the Old Notes under certain circumstances relating to the
Registration Rights Agreement, which provisions will terminate as to all of the
Notes upon the consummation of the Exchange Offer. The New Notes will evidence
the same debt as the Old Notes and, except as set forth in the immediately
preceding sentence, will be entitled to the benefits of the Indenture, under
which both the Old Notes were, and the New Notes will be, issued. See
"Description of New Notes."
<TABLE>
<CAPTION>
THE NEW NOTES ............................................ $25 million in aggregate principal amount at maturity of 12
1/4% Series C Senior Subordinated Notes due 2004.
<S> <C>
MATURITY DATE ............................................ April 15, 2004.
INTEREST PAYMENT DATES ................................... October 15 and April 15 of each year, commencing on April
15, 1999.
MANDATORY REDEMPTION ..................................... The Company is not required to make mandatory redemption or
sinking fund payments with respect to the New Notes.
OPTIONAL REDEMPTION ...................................... On or after April 15, 1999, the New Notes will be
redeemable at any time at the option of the Company, in
whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the
date of redemption.
CHANGE OF CONTROL ........................................ In the event of a Change of Control, each Holder of the
Notes will have the right to require the Company to
repurchase such Holder's Notes, in whole or in part, at a
price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the
date of repurchase.
GUARANTEES ............................................... The New Notes will be guaranteed by the Guarantors. The
Note Guarantees will be unconditional joint and several
obligations of each Guarantor and will be subordinated as
described below under "Ranking."
RANKING .................................................. The New Notes will be unsecured senior subordinated
obligations of the Company, will rank PARI PASSU with the
1994 Notes and will be subordinate in right of payment to
all Senior Indebtedness of the Company, which will include
borrowings under the Credit Facility. The New Notes will
be senior to any indebtedness which by its terms is
subordinate to the New Notes, regardless of when such
indebtedness is incurred. Each Note Guarantee will be
subordinate in right of payment to all Senior Indebtedness
of each respective Guarantor. Senior Indebtedness of the
Company consists of borrowings under the Credit Facility,
the Nevada Bonds (as defined herein) and the South Carolina
Bonds (as defined herein). Senior Indebtedness of the
Guarantors consists of their joint and several guarantee of
the obligations of the Company under the Credit Facility
and obligations with respect to the Nevada Bonds and the
South Carolina Bonds and, in the case of Holding, the 1996
Notes. As of June 27, 1998, on a pro forma basis after
giving effect to (i) the Offering and the application of
the proceeds therefrom and (ii) the Norwich Acquisition,
the aggregate amount of outstanding Senior Indebtedness of
the Company would have been $84.8 million, the aggregate
amount of outstanding total indebtedness of the Company,
including the 1994 Notes, would have been $211.1 million,
and the indebtedness of the Guarantors senior to the Note
Guarantees would have been $315.7 million. As of June 27,
1998, on such pro forma basis, all indebtedness of the
Company other than the Senior Indebtedness would have been
PARI PASSU in right of payment to the New Notes, and there
would have been no indebtedness subordinated to the New
Notes.
Certain Covenants ........................................ The Indenture pursuant to which the Old Notes were, and the
New Notes will be, issued (the "Indenture") contains
covenants, including, but not limited to, covenants with
respect to the following matters: (i) limitations on the
retention of proceeds from asset sales; (ii) limitations on
the incurrence of additional indebtedness and the issuance
of disqualified stock; (iii) limitations on restricted
payments; (iv) limitations on transactions with affiliates;
(v) limitations on liens; (vi) limitations on dividends and
other payment restrictions affecting subsidiaries; and
(vii) limitations on mergers, consolidations and sales of
assets. In addition, while the Indenture contains, among
other things, the foregoing covenants as well as a
requirement to offer to purchase New Notes upon a Change of
Control, the Indenture does not contain any provisions
specifically intended to protect Holders of the New Notes
in the event of a future highly leveraged transaction
involving the Company or any Guarantor. See "Description
of Notes."
</TABLE>
RISK FACTORS
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE EXCHANGE OFFER.
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth (i) summary consolidated historical financial
data of Holding and its subsidiaries and (ii) pro forma consolidated summary
financial data of Holding and its subsidiaries which gives effect to (a) the
Offering and the application of the net proceeds therefrom and (b) the
PackerWare, Virginia Design, Venture Packaging and Norwich Acquisitions as of
December 29, 1996 for consolidated operations statement data and consolidated
other data for the year ended December 27, 1997; and June 27, 1998 for balance
sheet data. The pro forma consolidated summary financial data of Holding and
its subsidiaries for the twelve months ended June 27, 1998 gives effect to (x)
the Offering and the application of the net proceeds therefrom and (y) the
Venture Packaging and Norwich Acquisitions as of June 29, 1997 for consolidated
operations statement data. The following financial data should be read in
conjunction with "Capitalization," "Pro Forma Condensed Consolidated Financial
Statements," "Selected Historical Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of Holding and its subsidiaries and the accompanying notes
thereto, which information is included elsewhere herein.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
FISCAL Year Ended Twelve Months,
------------------------------------- December 27, Ended June 27,
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS STATEMENT DATA:
Net sales ............................... $140,681 $151,058 $226,953 $270,598 $279,895
Cost of goods sold ...................... 102,484 110,110 180,249 214,429 215,216
-------- -------- -------- -------- --------
Gross margin ............................ 38,197 40,948 46,704 56,169 64,679
Operating expenses(1).................... 17,670 23,679 30,505 36,711 40,686
-------- -------- -------- -------- --------
Operating income ........................ 20,527 17,269 16,199 19,458 23,993
Other expenses(2)........................ 127 302 226 226 566
Interest expense, net(3)................. 13,389 20,075 30,246 35,238 35,457
-------- -------- -------- -------- --------
Income (loss) before income taxes .. 7,011 (3,108) (14,273) (16,006) (12,030)
Income taxes ............................ 678 239 138 428 353
-------- -------- -------- -------- --------
Net income (loss)................... $6,333 ($3,347) ($14,411) ($16,434) ($12,383)
======== ======== ======== ======== ========
Preferred stock dividends ............... -- (1,116) (2,558) (2,558) (3,293)
Common stock dividends .................. -- -- -- -- --
CONSOLIDATED OTHER DATA:
EBITDA(4) .............................. $30,716 $33,319 $39,340 $47,948 $53,828
EBITDA margin(5) ....................... 21.8% 22.1% 17.3% 17.7% 19.2%
Adjusted EBITDA(6) ..................... 31,569 34,718 40,268 48,876 55,182
Adjusted EBITDA margin(7)............... 22.4% 23.0% 17.7% 18.1% 19.7%
Depreciation and amortization(8) ....... 9,536 11,331 19,026 24,371 25,120
Capital expenditures ................... 11,247 13,581 16,774
BERRY PLASTICS CORPORATION DATA:
Cash interest expense, net ............. $12,439 $12,854 $17,187 $22,142 $21,462
Ratio of Adjusted EBITDA to
cash interest expense, net ..................................................... 2.2x 2.6x
Ratio of net long-term debt to Adjusted
EBITDA ......................................................................... 4.4x 3.8x
AT JUNE 27, 1998
-----------------------------
HISTORICAL Pro Forma
------------ -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents ...................................................... $ 2,680 $ 2,680
Working capital (deficiency) ................................................... 18,763 18,480
Total assets ................................................................... 231,171 247,691
Total Berry Plastics long-term debt ............................................ 194,855 211,092
Total long-term debt ........................................................... 299,855 316,092
Stockholders' equity (deficit) ................................................. (112,563) (112,563)
</TABLE>
____________________
(1) Operating expenses include pursued acquisition costs of $473 and business
start-up expenses of $394 in fiscal 1995; compensation expense related to the
1996 Transaction (as defined herein) of $2,762, Tri-Plas Acquisition (as
defined herein) start-up expenses of $671 and $907 for costs related to the
consolidation of the Winchester, Virginia facility during fiscal 1996; and
business start-up and machine integration expenses of $3,255 related to the
1997 Acquisitions (as defined herein), and plant consolidation expenses of $480
and $368 related to the shutdown of the Winchester, Virginia and Reno, Nevada
facilities, respectively, during fiscal 1997. Pro forma fiscal 1997 operating
expenses include the same non-recurring expenses as disclosed above for fiscal
1997. Operating expenses include business start-up and machine integration
expenses of $3,205 related to the 1997 Acquisitions and plant consolidation
expenses of $205 and $1,327 related to the shutdown of the Reno, Nevada and
Anderson, South Carolina facilities, respectively, for the pro forma twelve
months ended June 27, 1998.
(2) Other expenses consist of loss on disposal of property and equipment for
the respective periods.
(3) Includes non-cash interest expense of $950, $1,212 and $2,005 in fiscal
1995, 1996 and 1997, respectively, and $2,042 and $2,109 for the pro forma year
ended December 27, 1997 and the pro forma twelve months ended June 27, 1998,
respectively.
(4) EBITDA is defined as income (loss) before income taxes, net interest
expense, depreciation and amortization of intangibles adjusted to exclude (i)
non-cash charges relating to amortization of restricted stock awards and market
value adjustment related to stock options of ($214) and $358 for fiscal 1995
and 1996, respectively, (ii) other non-recurring or "one-time" expenses as
described in Note (1) above and (iii) loss on disposal of property and
equipment as described in Note (2) above. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur debt. However, EBITDA should not be considered in isolation or as an
alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity. In addition, the Company's
calculation of EBITDA may differ from that presented by certain other companies
and thus may not be comparable to similarly titled measures used by other
companies.
(5) EBITDA margin represents EBITDA as a percentage of net sales.
(6) Adjusted EBITDA represents EBITDA, as described in Note (4) above,
adjusted to exclude management fees and reimbursed expenses paid to First
Atlantic (as defined herein) of $853, $749, $828 and $854 for fiscal year 1995,
1996 and 1997 and pro forma twelve months ended June 27, 1998, respectively,
and certain legal expenses associated with unusual litigation of $650, $100 and
$500 for fiscal year 1996 and 1997 and pro forma twelve months ended June 27,
1998, respectively. Pro forma fiscal 1997 adjustments are the same as fiscal
1997 adjustments. Adjusted EBITDA should not be considered in isolation or as
an alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity. In addition, the Company's
calculation of Adjusted EBITDA differs from that presented by certain other
companies and thus is not necessarily comparable to similarly titled measures
used by other companies.
(7) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net
sales.
(8) Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt discount amortization which are
included in interest expense.
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BY HOLDERS OF OLD NOTES BEFORE
MAKING A DECISION TO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
HIGHLY LEVERAGED CONDITION
The Company and Holding are highly leveraged. As of June 27, 1998, after
giving pro forma effect to (i) the Offering and the application of the proceeds
therefrom and (ii) the Norwich Acquisition, the Company's total consolidated
indebtedness would have been approximately $211.1 million. As of June 27,
1998, Holding's consolidated stockholders' deficit was approximately $112.6
million. For the twenty-six weeks ended June 27, 1998, on a pro forma basis,
Holding's consolidated earnings were insufficient to cover fixed charges by
$2.5 million. See "Description of Certain Indebtedness."
The high degree of leverage could have important consequences to holders of the
Notes, including, but not limited to, the following: (i) a substantial portion
of Berry's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds
available to Berry for other purposes; (ii) Berry's ability to obtain
additional debt financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired; (iii) certain of Berry's borrowings will be at variable rates of
interest, which will expose Berry to the risk of higher interest rates; (iv)
the indebtedness outstanding under the Credit Facility is secured by
substantially all of the assets of Berry and matures prior to the maturity of
the Notes; (v) Berry is substantially more leveraged than certain of its
competitors, which may place Berry at a competitive disadvantage, particularly
in light of its acquisition strategy; and (vi) Berry's degree of leverage may
hinder its ability to adjust rapidly to changing market conditions and could
make it more vulnerable in the event of a downturn in general economic
conditions or its business.
Berry's ability to pay principal and interest on the Notes will depend on
Berry's financial and operating performance, which in turn are subject to
prevailing economic conditions and to certain financial, business and other
factors beyond its control. However, if Berry cannot generate sufficient cash
flow from operations to meet its obligations, then it may be forced to take
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There is no assurance that any of these remedies could be effected on
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results and Operations - Liquidity and Capital
Resources."
COMPANY GROWTH AND RISKS RELATED TO ACQUISITIONS
As part of its growth strategy, the Company aggressively pursues the
acquisition of other companies, assets and product lines that either complement
or expand its existing business. In fiscal 1997, the Company consummated the
Container Industries Acquisition, the PackerWare Acquisition, the Virginia
Design Acquisition and the Venture Packaging Acquisition (collectively, the
"1997 Acquisitions") and on July 2, 1998, the Company consummated the Norwich
Acquisition. See "Summary of Prospectus - Recent Acquisitions." The Company
continually evaluates potential acquisition opportunities, including those
which could be material in size and scope. Acquisitions involve a number of
special risks and factors, including the diversion of management's attention to
the assimilation of the acquired companies and the management of expanding
operations, the incorporation of acquired products into the Company's product
line, the increasing demands on the Company's operational systems, adverse
effects on the Company's reported operating results, the amortization of
acquired intangible assets, the loss of key employees and the difficulty of
presenting a unified corporate image.
The Company has had preliminary acquisition discussions with, or has evaluated
the potential acquisition of, numerous companies over the last year.
Acquisition opportunities identified to date include companies and divisions of
companies, with annual revenues ranging from several million dollars to
revenues that approach those of the Company. The Company has taken the
following actions in the pursuit of various acquisitions opportunities:
preliminary discussions; exchange of confidential, nonpublic information;
verbal and written expressions of interest; and proposals and negotiations
regarding potential transaction structure and price.
The Company is unable to predict whether or when any prospective acquisition
candidates will become available or the likelihood of a material acquisition
being completed. If the Company proceeds with an acquisition, and if such
acquisition is relatively large and consideration is in the form of cash, a
substantial portion of the Company's available cash resources could be used in
order to consummate any such acquisition. In addition, due to the relatively
large size of several potential acquisition opportunities, the general risks
described above inherent in acquisitions would be particularly acute.
The Company has no agreements, arrangements or understandings concerning any
acquisition which would be material in size and scope to the Company's
business. The Company anticipates, however, that one or more potential
acquisition opportunities, including those that would be material, may become
available in the near future. The Company intends to pursue appropriate
acquisition opportunities actively. No assurance can be given that any
acquisition by the Company will or will not occur, that if an acquisition does
occur that it will not materially and adversely affect the Company or that any
such acquisition will be successful in enhancing the Company's business.
OPERATING RESTRICTIONS
The Indenture restricts, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends, redeem capital
stock, create liens, dispose of certain assets, engage in mergers, make
contributions, loans or advances and enter into transactions with affiliates.
In the event that the Company's cash flow and existing working capital are
insufficient to fund the Company's expenditures or to service its indebtedness,
including the Notes, the 1994 Notes and borrowings under the Credit Facility,
the Company would be required to raise additional funds through capital
contributions from Holding, the refinancing of all or a part of the Company's
indebtedness or a sale of assets or subsidiaries. The restrictions contained
in the Indenture, the indenture governing the 1994 Notes (the "1994 Indenture")
and the Credit Facility, in combination with the Company's highly leveraged
financial position, could severely limit the Company's ability to raise such
additional funds or to respond to changing market and economic conditions,
provide for capital expenditures or take advantage of business opportunities
which may arise. See "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources," "Description of Certain Indebtedness" and "Description of Notes."
LIMITED ABILITY OF HOLDING TO PERFORM UNDER NOTE GUARANTEE
Holding is a holding company and is entirely dependent on the declaration by
the Company of dividends to pay its obligations, including its obligations
under its Note Guarantee. Under the terms of the Credit Facility, the Company
is severely restricted from declaring dividends to Holding. In addition, the
1996 Indenture governing the 1996 Notes limits the ability of Holding to make
certain payments, including payments under its Note Guarantee.
HISTORICAL NET LOSSES
In the twenty-six weeks ended June 27, 1998 and fiscal years 1997 and 1996,
consolidated earnings have been insufficient to cover fixed charges. In
addition, Holding has experienced consolidated net losses during each of such
periods principally as a result of expenses and charges incurred in connection
with acquisitions by the Company. These net losses were $1.7 million, $14.4
million and $3.3 million for the twenty-six weeks ended June 27, 1998 and
fiscal years 1997 and 1996, respectively. For the twenty-six weeks ended June
27, 1998, on a pro forma basis after giving effect to the Offering and the
Norwich Acquisition, consolidated net losses would have been $2.2 million.
Holding expects that it will continue to experience consolidated net losses for
the foreseeable future.
SUBORDINATION OF THE NOTES AND NOTE GUARANTEES; UNSECURED STATUS OF NOTES
SUBORDINATION
Pursuant to the terms of the Indenture, payments on the Notes are subordinated
to the prior payment of all Senior Indebtedness, which includes borrowings
under the Credit Facility, the Nevada Bonds and the South Carolina Bonds. As
of June 27, 1998, on a pro forma basis after giving effect to (i) the Offering
and the application of the proceeds therefrom and (ii) the Norwich Acquisition,
the Notes would have been subordinated to approximately $84.8 million of Senior
Indebtedness of the Company. In addition, as of such date, on a pro forma
basis, up to $41.6 million would have been available for borrowing under the
Credit Facility (subject to applicable borrowing base limitations), and there
would have been no indebtedness subordinated to the Notes. See "Description of
Certain Indebtedness - Credit Facility." The Indenture does not limit the
amount of additional Senior Indebtedness that may be incurred by the Company or
its subsidiaries provided that a certain fixed charge coverage test is met.
See "Description of Notes."
By reason of such subordination, in the event of the insolvency, liquidation,
reorganization, dissolution or the winding up of the Company, or in the event
that the Senior Indebtedness is otherwise accelerated, holders of Senior
Indebtedness must be paid in full before the holders of the Notes may be paid
by the Company. In such event, there may be insufficient assets remaining to
satisfy the claims of the holders of the Notes. In addition, the Company will
not be permitted to make any payment with respect to the Notes for a
substantial period of time if defaults under the Credit Facility or certain
other Senior Indebtedness exist and are continuing and certain other conditions
are satisfied. The Notes rank PARI PASSU with the 1994 Notes and PARI PASSU
with, or senior to, all other subordinated debt of the Company. In addition,
the Note Guarantees are subordinated to all existing and future Senior
Indebtedness of each Guarantor, including the guarantees under the Credit
Facility, and, in the case of Holding, the 1996 Notes.
UNSECURED STATUS OF NOTES
The Notes and Note Guarantees are unsecured obligations of the Company and the
Guarantors, respectively. The Indenture permits the Company to incur certain
secured indebtedness, including indebtedness under the Credit Facility, which
is secured by a lien on substantially all of the assets of the Company and the
Guarantors. The holders of any secured indebtedness will have a claim prior to
the holders of the Notes with respect to any assets pledged by the Company as
security for such indebtedness. Upon an event of default under the Credit
Facility, the lender thereunder would be entitled to foreclose on the assets of
the Company and the Guarantors. In such event, the assets of the Company and
the Guarantors remaining after repayment of such secured indebtedness may be
insufficient to satisfy the obligations of the Company with respect to the
Notes.
RANKING OF NOTES WITH 1994 NOTES
The terms of the 1994 Notes and the Notes are identical in all material
respects except that the 1994 Notes have a priority upon the payment of
proceeds pursuant to an Asset Sale (as defined herein). See "Description of
Notes - Repurchase at the Option of Holders - Asset Sales."
FLUCTUATING INTEREST EXPENSE ON SENIOR INDEBTEDNESS
The Company's and the Guarantors' respective obligations under the Credit
Facility, the Nevada Bonds and the South Carolina Bonds bear interest at rates
that may be expected to fluctuate over time. Under the terms of the Indenture,
the Company may incur indebtedness under the Credit Facility of up to the
greater of $132.6 million and the Borrowing Base (as defined herein).
Accordingly, a substantial increase in interest rates could adversely affect
the Company's ability to service its debt obligations, including its
obligations on the Notes. See "Description of Certain Indebtedness."
POSSIBLE ADVERSE EFFECT OF INCREASE IN RESIN PRICES
The primary materials used by the Company in the manufacture of its products
are various plastic resins, which in the twenty-six weeks ended June 27, 1998
and fiscal 1997 constituted approximately $35.4 million, or 35%, and $72.1
million, or 40%, respectively, of the Company's total cost of goods sold.
Accordingly, the Company's financial performance is materially dependent on its
ability to pass through resin price increases to its customers. Plastic resins
are subject to cyclical price fluctuations, including those arising from supply
shortages and as a result of changes in the prices of natural gas, crude oil
and other petrochemical intermediates from which resins are produced. Although
the Company has been able historically to pass on increases in resin prices to
its customers, no assurance can be given that this trend will continue or that
a significant increase in resin prices would not have a material adverse effect
on the Company's financial performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - General Economic
Conditions and Inflation" and "Business - Sources and Availability of Raw
Materials."
RELIANCE ON CERTAIN SUPPLIER
The Company purchases approximately 58% of its total resin requirements (in
dollars) from Dow Chemical Company ("Dow") pursuant to purchase orders issued
from time to time by the Company. The Company has a long-standing relationship
with Dow, and has worked closely with Dow to develop resins which yield maximum
performance from the Company's equipment. Although the Company believes its
relationship with Dow is mutually beneficial, no assurance can be given that
Dow will continue to be a supplier to the Company in the future or that
alternative sources would be available for the Company's resin requirements.
CONTROLLING STOCKHOLDERS; MANAGEMENT STOCKHOLDERS
Atlantic Equity Partners International II, L.P., a Delaware limited partnership
("International"), owns approximately 54% (on a voting common stock equivalent
basis) of Holding's outstanding voting capital stock. As such, subject to the
terms of the New Stockholders Agreement (as defined herein), International has
the ability to elect all of the members of Holding's board of directors and can
determine the outcome of any corporate transaction or other matter submitted to
the stockholders of Holding or the Company for approval, including mergers,
consolidations and the sale of the Company or all or substantially all of the
Company's assets. See "Certain Transactions - Stockholders Agreements."
Atlantic Equity Associates International II, L.P., a Delaware limited
partnership ("AEA II"), is the sole general partner of International. Mr.
Buaron, the Chairman and a director of the Company, is the sole shareholder of
Buaron Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II.
Through his affiliations with BHL and AEA II, Mr. Buaron may be deemed to
control International. See "Principal Stockholders."
Including the shares of capital stock owned by International, all executive
officers and directors of the Company as a group beneficially own approximately
94.9% (on a voting common stock equivalent basis) of Holding's outstanding
voting capital stock. See "Management" and "Principal Stockholders."
COMPETITION
Most of the Company's products are sold in highly competitive markets in the
United States. The Company competes with a significant number of companies of
varying sizes, including divisions or subsidiaries of larger companies, on the
basis of price, service, quality and the ability to supply products to
customers in a timely manner. A number of the Company's competitors have
financial and other resources that are substantially greater than those of the
Company. Competitive pressures or other factors could cause the Company's
products to lose market share or could result in significant price erosion,
either of which would have a material adverse effect on the Company's results
of operations. See "Business."
ENVIRONMENTAL MATTERS
Federal, state and local governments could enact laws or regulations concerning
environmental matters that increase the cost of producing, or otherwise
adversely affect the demand for, plastic products. The Company is aware that
certain local governments have adopted ordinances prohibiting or restricting
the use or disposal of certain plastic products that are among the types of
products produced by the Company. If such prohibitions or restrictions were
widely adopted, such regulatory and environmental measures or a decline in
consumer preference for plastic products due to environmental considerations
could have a material adverse effect upon the Company. In addition, certain of
the Company's operations are subject to Federal, state and local environmental
laws and regulations that impose limitations on the discharge of pollutants
into the air and water and establish standards for the treatment, storage and
disposal of solid and hazardous wastes. While the Company has not been
required historically to make significant capital expenditures in order to
comply with applicable environmental laws and regulations, the Company cannot
predict with any certainty its future capital expenditure requirements because
of continually changing compliance standards and environmental technology.
Furthermore, although the Company is not aware of additional environmental
issues, currently unknown conditions of noncompliance or currently unknown
contamination of sites currently or formerly owned or operated by the Company
(including contamination caused by prior owners and operators of such sites)
may give rise to additional compliance or remediation costs or other
liabilities. The Company does not have insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future. See
"Business - Environmental Matters and Governmental Regulation."
POTENTIAL LACK OF FUNDING FOR CHANGE OF CONTROL OFFER
In the event of a Change of Control, the Company will be required, subject to
certain conditions, to offer to purchase all outstanding Notes and 1994 Notes
at a purchase price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase. There can be no assurance that the Company
will have sufficient funds available to purchase all of the outstanding Notes
were they to be tendered in response to an offer made as a result of a Change
of Control. Moreover, the Credit Facility and the 1996 Indenture restrict such
a purchase and the offer would require the approval of the lender or
securityholders thereunder, as the case may be. As a result of this potential
lack of funds and the restrictions contained in the Credit Facility and the
1996 Indenture, the Indenture may offer little, if any, protection to the
Holders of the Notes in the event of a Change of Control. See "Description of
Certain Indebtedness - Credit Facility" and "Description of Notes - Repurchase
at Option of Holders - Change of Control."
LACK OF A PUBLIC MARKET FOR THE NEW NOTES
The New Notes will constitute a new class of securities with no established
trading market. The Company does not intend to list the New Notes on any
national securities exchange or to seek the admission thereof to trading in the
Nasdaq National Market. The Old Notes are designated for trading in the PORTAL
market. The Company has been advised by DLJ that DLJ currently intends to make
a market in the New Notes. DLJ is not obligated to do so, however, and any
market-making activities with respect to the New Notes may be discontinued at
any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act, and
may be limited during the Exchange Offer and the pendency of any Shelf
Registration Statement (as defined herein). Accordingly, no assurance can be
given that an active public or other market will develop for the New Notes or
as to the liquidity of the trading market for the New Notes. If a trading
market does not develop or is not maintained, holders of the New Notes may
experience difficulty in reselling the New Notes or may be unable to sell them
at all. If a market develops for the New Notes, future trading prices of the
New Notes will depend on many factors, including among other things, prevailing
interest rates, the Company's and Holding's consolidated financial condition
and results of operations and the market for similar notes. Depending on those
and other factors, the New Notes may trade at a discount from their principal
amount.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, PROVIDED
that such New Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Notwithstanding the foregoing, each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with any resale of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than Old Notes
acquired directly from the Company). The Company and the Guarantors have
agreed that, for a period of one year from the date of this Prospectus, they
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." However, the ability of any
Holder to resell the New Notes is subject to applicable state securities laws
as described in "Risk Factors - Blue Sky Restrictions on Resale of New Notes."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on transfer
of the Old Notes, Holders of Old Notes must transmit a properly completed
Letter of Transmittal or an Agent's Message, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at one of the
addresses set forth below under "The Exchange Offer - Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described herein. See "The Exchange Offer."
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the New
Notes may not be offered or resold by any holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to
register or qualify the resale of the New Notes in any such jurisdictions.
However, an exemption is generally available for sales to registered broker-
dealers and certain institutional buyers. Other exemptions under applicable
state securities laws may also be available.
<PAGE>
COMPANY HISTORY
HISTORY
Imperial Plastics, the Company's predecessor, was established in 1967 in
Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983 to
purchase substantially all of the assets of Imperial Plastics. In 1988, Old
Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading
manufacturer of aerosol overcaps, and subsequently relocated Gilbert Plastics'
production to Old Berry's Evansville, Indiana facility. In 1990, the Company
and Holding, the holder of 100% of the outstanding capital stock of the
Company, were formed to purchase the assets of Old Berry. The Company acquired
substantially all of the assets (the "Mammoth Acquisition") of the Mammoth
Containers division of Genpak Corporation in February 1992, adding plants in
Forest City, North Carolina (which was subsequently sold by the Company) and
Iowa Falls, Iowa.
In March 1995, Berry Sterling, a newly formed, wholly owned subsidiary of the
Company, acquired substantially all of the assets of Sterling Products, Inc.
(the "Sterling Products Acquisition"), a producer of injection molded plastic
drink cups and lids. Management believes that the Sterling Products
Acquisition gave the Company immediate penetration into a rapidly expanding
plastic drink cup market.
In December 1995, Berry Tri-Plas (formerly Berry-CPI Corp.) acquired
substantially all of the assets of Tri-Plas, Inc. (the "Tri-Plas Acquisition"),
a manufacturer of injection molded containers and lids, and added manufacturing
plants in Charlotte, North Carolina and York, Pennsylvania. Management
believes that the Tri-Plas Acquisition gave the Company an immediate presence
in the polypropylene container product line, which is mainly used for food and
"hot fill" applications.
In January 1996, the Company acquired the assets relating to the plastic drink
cup product line and decorating equipment of Alpha Products, Inc., a subsidiary
of Aladdin Industries, Inc. The addition of these assets complemented the
drink cup product line acquired in the Sterling Products Acquisition.
In January 1997, the Company acquired PackerWare Corporation of Lawrence,
Kansas and certain assets of Container Industries, Inc. of Pacoima, California.
In May 1997, Berry Design acquired substantially all of the assets of Virginia
Design Packaging Corp. of Suffolk, Virginia. In August 1997, the Company
acquired Venture Packaging, Inc. of Monroeville, Ohio. In July 1998, the
Company acquired Norwich Injection Moulders Limited of Norwich, England. See
"Summary of Prospectus - Recent Acquisitions."
THE 1996 TRANSACTION
On June 18, 1996, Holding consummated the transaction described below (the
"1996 Transaction"). BPC Mergerco, Inc. ("Mergerco") was organized by
International, Chase Venture Capital Associates, L.P. ("CVCA") and certain
other institutional investors to effect the acquisition of a majority of the
outstanding capital stock of Holding. Pursuant to the terms of a Stock
Purchase and Recapitalization Agreement dated as of June 12, 1996, each of
International, CVCA and certain other equity investors (collectively, the
"Common Stock Purchasers") subscribed for shares of common stock of Mergerco.
In addition, pursuant to the terms of a Preferred Stock and Warrant Purchase
Agreement dated as of June 12, 1996, CVCA and an additional institutional
investor (the "Preferred Stock Purchasers") purchased shares of preferred stock
of Mergerco (the "Preferred Stock") and warrants (the "1996 Warrants") to
purchase shares of common stock of Mergerco. Immediately after the purchase of
the common stock, the preferred stock and the 1996 Warrants of Mergerco,
Mergerco merged (the "Merger") with and into Holding, with Holding being the
surviving corporation. Upon the consummation of the Merger, each share of
Class A Common Stock, $.00005 par value, and Class B Common Stock, $.00005 par
value, of Holding and certain privately held warrants exercisable for such
Class A and Class B Common Stock were converted into the right to receive cash
equal to the purchase price per share for the common stock into which such
warrants were exercisable less the amount of the nominal exercise price
therefor, and all other classes of common stock of Holding, a majority of which
was held by certain members of management, were converted into shares of common
stock of the surviving corporation. In addition, upon the consummation of the
Merger, the holders of the warrants (the "1994 Warrants") to purchase capital
stock of Holding that were issued in connection with the offering in April 1994
by Berry of $100 million aggregate principal amount of the 1994 Notes (such
transaction being the "1994 Transaction"), became entitled to receive cash
equal to the purchase price per share for the common stock into which such
warrants were exercisable less the amount of the exercise price therefor.
The aggregate consideration paid to the sellers of the equity interests in
Holding, including the holders of the 1994 Warrants, was approximately $119.6
million in cash. In order to finance the 1996 Transaction, including the
payment of related fees and expenses: (i) Holding issued 12.50% Senior Secured
Notes due 2006 (with such Notes being exchanged in October 1996 for the 12.50%
Series B Senior Secured Notes due 2006 (the "1996 Notes")) for net proceeds of
approximately $100.2 million (or $64.6 million after deducting the amount of
such net proceeds used to purchase marketable securities available for payment
of interest on the 1996 Notes); (ii) the Common Stock Purchasers, the Preferred
Stock Purchasers and certain members of management made equity and rollover
investments in the aggregate amount of $70.0 million (which amount included
rollover investments of approximately $7.1 million by certain members of
management and $3.0 million by an existing institutional shareholder); and
(iii) Holding received an aggregate of approximately $0.9 million in connection
with the exercise of certain management stock options to purchase common stock
of Holding.
In connection with the 1996 Transaction, International, CVCA, certain other
institutional investors and certain members of management entered into the New
Stockholders Agreement pursuant to which certain stockholders, among other
things, (i) were granted certain registration rights and (ii) under certain
circumstances, have the right to force a sale of Holding. See "Certain
Transactions - Stockholders Agreements."
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on August 24, 1998 to the Initial
Purchaser, who placed the Old Notes with institutional investors. In
connection therewith, the Company, the Guarantors and the Initial Purchaser
entered into the Registration Rights Agreement, pursuant to which the Company
and the Guarantors agreed, for the benefit of the Holders of the Old Notes,
that the Company and the Guarantors would, at their sole cost, among other
things, (i) within 90 days following the original issuance of the Old Notes,
file with the Commission the Registration Statement (of which this Prospectus
is a part) under the Securities Act with respect to an issue of a series of new
notes of the Company identical in all material respects to the series of Old
Notes (except that such New Notes would not contain terms with respect to
transfer restrictions) and (ii) cause such Registration Statement to be
declared effective under the Securities Act within 150 days following the
original issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
of Transfer Restricted Securities (as defined herein) who are able to make
certain representations the opportunity to exchange their Transfer Restricted
Securities for a like principal amount of New Notes, to be issued without a
restrictive legend and which may, generally, be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. The term
"Holder" with respect to the Exchange Offer means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Transfer
Restricted Securities may be offered for sale, resold or otherwise transferred
by any holder without compliance with the registration and prospectus delivery
provisions of the Securities Act. Instead, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Transfer Restricted Securities may be offered for resale, resold
and otherwise transferred by any holder of such New Notes (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, PROVIDED that such
New Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither such holder nor any other such
person is engaging in or intends to engage in a distribution of such New Notes.
Since the Commission has not considered the Exchange Offer in the context of a
no-action letter, there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer. Any
Holder who is an affiliate of the Company or who tenders in the Exchange Offer
for the purpose of participating in a distribution of the New Notes cannot rely
on such interpretations by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Transfer Restricted Securities where such
Transfer Restricted Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company). The Company and the
Guarantors have agreed that, for a period of one year after the date of this
Prospectus, they will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
If (i) the Company and the Guarantors are not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any holder of Transfer Restricted Securities notifies
the Company prior to the 20th day following consummation of the Exchange Offer
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) that it may not resell the New Notes acquired by it in
the Exchange Offer to the public without delivering a prospectus and this
Prospectus is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company, the Company and the Guarantors will file with the Commission a
shelf registration statement (the "Shelf Registration Statement") to cover
resales of the Notes by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company and the Guarantors will use their best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Note (together with any related
note guarantees) until (i) the date on which such Old Note has been exchanged
by a person other than a broker-dealer for a New Note in the Exchange Offer,
(ii) following the exchange by a broker-dealer in the Exchange Offer of an Old
Note for a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
this Prospectus, (iii) the date on which such Old Note has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Old Note is
distributed to the public pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that (i) the Company and the
Guarantors will file the Registration Statement with the Commission on or prior
to 90 days after the original issuance of the Old Notes, (ii) the Company will
use its best efforts to have the Registration Statement declared effective by
the Commission on or prior to 150 days after the original issuance of the Old
Notes, (iii) unless the Exchange Offer would not be permitted by applicable law
or Commission policy, the Company and the Guarantors will commence the Exchange
Offer and use their best efforts to issue, on or prior to 30 business days
after the date on which the Registration Statement was declared effective by
the Commission, New Notes in exchange for all Old Notes tendered prior thereto
in the Exchange Offer and (iv) if obligated to file the Shelf Registration
Statement, the Company and the Guarantors will use their best efforts to file
the Shelf Registration Statement with the Commission on or prior to 45 days
after such filing obligation arises and to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Company and the Guarantors fail to
file any of the registration statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
registration statements is not declared effective by the Commission on or prior
to the dated specified for such effectiveness (the "Effectiveness Target
Date"), or (c) the Company and the Guarantors fail to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Registration Statement, or (d) the Shelf Registration Statement or the
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Company and the Guarantors will pay Liquidated Damages to
each Holder of Old Notes with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal
to $.05 per week per $1,000 principal amount of Old Notes held by such Holder.
The amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Old Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages for all Registration Defaults of $.50 per week per
$1,000 principal amount of Old Notes. All accrued Liquidated Damages will be
paid by the Company and the Guarantors on each Damages Payment Date to the
Global Note Holder (as defined herein) by wire transfer of immediately
available funds or by Federal funds check and to Holders of Certificated
Securities (as defined herein) by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts
have been specified. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company and the Guarantors in order to participate in the Exchange Offer and
will be required to deliver certain information to be used in connection with
the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions regarding Liquidated
Damages set forth above.
The summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity
of the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material respects
to the form and terms of the Old Notes, except that the New Notes have been
registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing
for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture under which the Old Notes were, and the New Notes will be,
issued.
As of the date of this Prospectus, $25,000,000 aggregate principal amount of
the Old Notes are outstanding. The Company has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of determining
the persons to whom this Prospectus, together with the Letter of Transmittal,
will initially be sent. As of such date, there were
registered Holders of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral notice (confirmed in writing) or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
any such unaccepted Old Notes will be returned, without expense, to the
tendering Holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant
to the Exchange Offer. The Company will pay all charges and expenses, other
than certain applicable taxes, in connection with the Exchange Offer. See "The
Exchange Offer - Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, to extend the Exchange Offer or, if any of the conditions set
forth below under "The Exchange Offer - Conditions" shall not have been
satisfied, to terminate the Exchange Offer, by giving oral notice (confirmed in
writing) or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from October 15, 1998. Interest will be
payable on the Old Notes accepted for exchange to, but not including, October
15, 1998.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the procedures
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between such Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about , 1998, to all Holders of Old Notes
known to the Company and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange Offer.
A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, or an Agent's Message, including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) the certificates for
such Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation") of such Old Notes, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, the Old Notes, Letter of Transmittal or
Agent's Message and other required documents must be received by the Exchange
Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY
TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR
OLD NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal or delivering an Agent's Message and delivering such beneficial
owner's Old Notes, either make appropriate arrangements to register ownership
of the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that (i) the New Notes acquired by the Holder and any beneficial owners of Old
Notes pursuant to the Exchange Offer are being obtained in the ordinary course
of business of the persons receiving such New Notes, (ii) neither the Holder
nor such beneficial owner has an arrangement with any person to participate in
the distribution of such New Notes, (iii) neither the Holder nor such
beneficial owner nor any such other person is engaging in or intends to engage
in a distribution of such New Notes and (iv) neither the Holder nor any such
other person is an "affiliate," as defined under Rule 405 promulgated under the
Securities Act, of the Company. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, or an
Agent's Message, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth below under "The Exchange Offer -
Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a)the tender is made through an Eligible Institution;
(b)prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder, the certificate number(s) of such Old
Notes and the principal amount of Old Notes tendered, stating that the tender
is being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) or an Agent's Message, together with the certificate(s)
representing the Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c)such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other document required by the
Letter of Transmittal are received by the Exchange Agent within three New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes), (iii) be signed by the
Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the persons withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above under "The Exchange Offer - Procedures for
Tendering" at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for payment
due to withdrawal, rejection of tender or termination of the Exchange Offer
will be returned as soon as practicable to the Holder thereof without cost to
such Holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to
the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not be
required to accept for exchange, or exchange New Notes for, any Old Notes, and
may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a)the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b)any action or proceeding is instituted or threatened in any court or by
any governmental agency that might materially impair the ability of the Company
to proceed with the Exchange Offer or any material adverse development has
occurred in any existing action or proceeding with respect to the Company; or
(c)any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions are
not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Holders to withdraw such Old Notes (see "The Exchange
Offer - Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
EXCHANGE AGENT
has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
<TABLE>
<CAPTION>
MAIL: BY FACSIMILE: HAND/OVERNIGHT DELIVERY:
<S> <C>
CONFIRM BY TELEPHONE:
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer and the unamortized expenses related to the
issuance of the Old Notes will be amortized over the term of the New Notes.
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the consolidated capitalization of Holding and
its subsidiaries at June 27, 1998 and the pro forma capitalization of Holding
and its subsidiaries as of such date after giving effect to (i) the Offering
and the application of the proceeds therefrom and (ii) the Norwich Acquisition.
The information in the table below is qualified in its entirety by, and should
be read in conjunction with, the historical consolidated financial statements
of Holding and the related notes included elsewhere herein.
<TABLE>
<CAPTION>
AT JUNE 27, 1998
-----------------------------
HISTORICAL PRO FORMA
------------ -----------
<S> <C> <C>
Marketable securities ($12,890 available to pay interest on 1996 Notes) ...... $13,345 $13,345
======= =======
Current portion of long-term debt ............................................ $12,313 $12,313
======= =======
Long-term debt, excluding current portion:
BERRY PLASTICS CORPORATION:
Revolving credit facility .............................................. $22,187 $ --
Term loans ............................................................. 45,605 57,654
Nevada Bonds ........................................................... 4,000 4,000
Iowa Bonds(1) .......................................................... 5,130 5,130
South Carolina Bonds ................................................... 5,981 5,981
Capital lease obligations .............................................. 147 147
1994 Notes ............................................................. 100,000 100,000
Notes .................................................................. -- 25,000
Debt premium (discount) ................................................ (508) 867
------- -------
Total Berry Plastics long-term debt, excluding current portion 182,542 198,779
HOLDING:
1996 Notes ............................................................. 105,000 105,000
------- -------
Total consolidated long-term debt, excluding current portion ......... 287,542 303,779
------- -------
Stockholders' equity:
Class A Preferred Stock; 800,000 shares authorized; 600,000
shares issued .................................................. 14,572 14,572
Less discount .......................................................... (2,917) (2,917)
Class B Preferred Stock; 200,000 shares authorized and issued .......... 5,000 5,000
Class A Common Stock, par value $0.01:
Voting: 500,000 shares authorized; 91,000 shares issued ............. 1 1
Nonvoting: 500,000 shares authorized; 259,000 shares issued ......... 3 3
Class B Common Stock, par value $0.01:
Voting: 500,000 shares authorized; 144,936 shares issued ............ 1 1
Nonvoting: 500,000 shares authorized; 57,387 shares issued .......... 1 1
Class C Common Stock, par value $0.01:
Nonvoting: 500,000 shares authorized; 16,960 shares issued .......... -- --
Treasury stock; 726 shares ............................................. (81) (81)
Additional paid-in capital ............................................. 47,445 47,445
Warrants ............................................................... 3,511 3,511
Retained earnings (deficit) ............................................ (180,099) (180,099)
------- -------
Total stockholders' equity (deficit) .................................. (112,563) (112,563)
------- -------
Total capitalization ........................................... $174,979 $191,216
======= =======`
</TABLE>
____________________
(1) The Iowa Industrial Revenue Bonds (the "Iowa Bonds") were repaid by the
Company in July 1998 with borrowings under the Credit Facility's term loan
facility.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statement of
operations data and condensed consolidated balance sheet of Holding
(collectively, the "Pro Forma Statements") give effect to (i) the Offering and
the application of the proceeds therefrom and (ii) the PackerWare, Virginia
Design, Venture Packaging and Norwich Acquisitions, as if the transactions had
occurred as of December 29, 1996 for the statement of operations data and other
data and June 27, 1998 for the balance sheet data. The Pro Forma Statements do
not purport to represent what Holding's consolidated financial position or
results of operations would actually have been if such transactions had in fact
occurred on such dates or to project Holding's consolidated financial position
or results of operations for any future date or period. The pro forma
adjustments are based on information and upon assumptions that management
believes to be reasonable. The Pro Forma Statements and accompanying notes
should be read in conjunction with the historical consolidated financial
statements and other financial information pertaining to Holding and related
notes thereto included elsewhere in this Prospectus.
BPC HOLDING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 27, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Holding Acquisitions Pro Forma Offering Pro Forma
Historical Adjustments for the Adjustments for the
Acquisitions Acquisitions
and the
Offering
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales .......................... $226,953 $43,645 (1) $270,598 $ -- $270,598
Cost of goods sold ................. 180,249 34,180 (2) 214,429 -- 214,429
------- ------- ------- ------- -------
Gross margin ....................... 46,704 9,465 56,169 -- 56,169
Operating expenses ................. 30,505 6,206 (3) 36,711 -- 36,711
------- ------- ------- ------- -------
Operating income ................... 16,199 3,259 19,458 -- 19,458
Other expenses ..................... 226 0 226 -- 226
Interest expense, net .............. 30,246 3,903 (4) 34,149 1,089 (9) 35,238
------- ------- ------- ------- -------
Loss before income taxes ........... (14,273) (644) (14,917) (1,089) (16,006)
Income taxes ....................... 138 290 (5) 428 -- 428
------- ------- ------- ------- -------
Net loss ........................... ($14,411) ($934) ($15,345) (1,089) ($16,434)
======= ======= ======= ======= =======
OTHER DATA:
EBITDA ............................. $39,340 $8,608 (6) $47,948 -- $47,948
Adjusted EBITDA .................... 40,268 8,608 48,876 -- 48,876
Depreciation and amortization ...... 19,026 5,345 (7) 24,371 -- 24,371
BERRY PLASTICS CORPORATION DATA:
Cash interest expense, net ......... $17,187 $3,825 (8) $21,012 $1,130 $22,142
</TABLE>
<PAGE>
BPC HOLDING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
26 WEEKS ENDED JUNE 27, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HOLDING Norwich Pro Forma Offering Pro Forma
HISTORICAL Acquisition for the Norwich Adjustments for the Norwich
Adjustments Acquisition Acquisition
and the
Offering
---------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Net sales .................... $136,317 $6,861(1) $143,178 $ -- $143,178
Cost of goods sold ........... 100,016 5,078(2) 105,094 -- 105,094
-------- --------- --------- ---------- ---------
Gross margin ................. 36,301 1,783 38,084 -- 38,084
Operating expenses ........... 20,725 967(3) 21,692 -- 21,692
-------- --------- --------- ---------- ---------
Operating income ............. 15,576 816 16,392 -- 16,392
Other expenses ............... 430 -- 430 -- 430
Interest expense, net ........ 16,866 683(4) 17,549 544(9) 18,093
-------- --------- --------- ---------- ---------
Income (loss) before income
taxes .................... (1,720) 133 (1,587) (544) (2,131)
Income taxes ................. 26 40(5) 66 -- 66
-------- --------- --------- ---------- ---------
Net income (loss) ($1,746) $93 ($1,653) ($544) ($2,197)
======== ========= ========= ========== =========
OTHER DATA:
EBITDA ....................... $29,633 $1,563(6) $31,196 -- $31,196
Adjusted EBITDA .............. 30,468 1,563 32,031 -- 32,031
Depreciation and amortization 11,783 747(7) 12,530 -- 12,530
BERRY PLASTICS CORPORATION DATA:
Cash interest expense, net ... $9,956 $683(8) $10,639 $565 $11,204
</TABLE>
<PAGE>
BPC HOLDING CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED 26 WEEKS
DECEMBER 27, ENDED
1997 JUNE 27, 1998
----------- -------------
<S> <C> <C>
PACKERWARE, VIRGINIA DESIGN, VENTURE PACKAGING AND NORWICH ACQUISITION
ADJUSTMENTS:
(1)Partial year net sales of the acquisitions ....................... $50,715 $6,861
Deduct customers lost due to acquisitions ........................ (7,070) --
-------- ----------
Adjusted net sales for acquisitions ........................... $43,645 $6,861
======== ==========
(2)Cost of goods sold of the acquisitions ........................... $42,790 $5,078
Deduct cost of goods sold due to customers lost from acquisitions (6,970) --
Deduct resin costs due to volume discounts available to Berry .... (1,640) --
-------- ----------
Adjusted cost of goods sold for acquisitions .................. $34,180 $5,078
======== ==========
(3)Operating expenses of the acquisitions ........................... $5,924 $791
Deduct costs related to closed operating facility, net of
incremental costs incurred .................................... (612) --
Deduct salaries of owners of acquisitions no longer employed by the
Company ...................................................... (455) (129)
Add amortization of goodwill resulting from the acquisitions ..... 1,349 305
-------- ----------
Adjusted operating expenses for acquisitions ................. $6,206 $967
======== ==========
(4)Interest expense of the acquisitions ............................. $1,323 $59
Add incremental interest expense from the acquisitions ........... 2,580 624
-------- ----------
Adjusted interest expense for acquisitions ................... $3,903 $683
======== ==========
(5)Provision for income taxes of the acquisitions ................... $106 $289
Adjust taxes for the acquisitions ................................ 184 (249)
-------- ----------
Adjusted tax expense for acquisitions ........................ $290 $40
======== ==========
(6)EBITDA of the acquisitions ....................................... $6,001 $1,434
Add total of adjustments in Notes (1), (2) and (3) (excluding
amortization) .................................................... 2,607 129
-------- ----------
Adjusted EBITDA for acquisitions ............................. $8,608 $1,563
======== ==========
(7)Depreciation and amortization of the acquisitions ................ $3,996 $442
Add amortization of goodwill resulting from the acquisitions ..... 1,349 305
-------- ----------
Adjusted depreciation and amortization for acquisitions ...... $5,345 $747
======== ==========
(8)Net cash interest expense of the acquisitions .................... $1,323 $59
Add incremental net cash interest expense from acquisitions ...... 2,502 624
-------- ----------
Adjusted net cash interest expense for acquisitions .......... $3,825 $683
======== ==========
OFFERING ADJUSTMENTS:
(9)Adjustment of net interest expense:
Interest on Notes ................................................ $3,062 $1,531
Interest on debt reduction ....................................... (1,932) (966)
Amortization of premium on Notes ................................. (239) (120)
Amortization of deferred financing costs associated with the
Offering ..................................................... 198 99
--------- ----------
Change in net interest expense ............................... $1,089 $544
========= ==========
</TABLE>
<PAGE>
BPC HOLDING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT JUNE 27, 1998
-----------------------------------------------------------------------------------
HOLDING Norwich Pro Forma Offering Pro Forma
HISTORICAL Acquisition for the Norwich Adjustments for the Norwich
Adjustments Acquisition Acquisition
and the
Offering
------------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......... $2,680 $ -- $2,680 $ -- $2,680
Accounts receivable ................ 33,951 -- 33,951 -- 33,951
Inventories ........................ 27,508 -- 27,508 -- 27,508
Other current assets ............... 2,465 -- 2,465 -- 2,465
--------- ---------- -------- ---------- --------
Total current assets ............. 66,604 -- 66,604 -- 66,604
Assets held in trust .................... 13,345 -- 13,345 -- 13,345
Property and equipment .................. 105,260 -- 105,260 -- 105,260
Intangible assets ....................... 43,080 -- 43,080 1,141 44,221
Investment in subsidiary ................ -- 15,379 15,379 -- 15,379
Other assets ............................ 2,882 -- 2,882 -- 2,882
--------- ---------- --------- ---------- ---------
Total assets ....................... $231,171 $15,379 $246,550 $1,141 $247,691
========= ========== ========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .. $12,313 $ -- $12,313 $ -- $12,313
Accounts payable ................... 15,746 -- 15,746 -- 15,746
Accrued liabilities ................ 19,782 283 20,065 -- 20,065
--------- ---------- -------- ---------- --------
Total current liabilities ........ 47,841 283 48,124 -- 48,124
Long-term debt:
Industrial bonds (Iowa, Nevada and
South Carolina (1) ............. 16,550 -- 16,550 -- 16,550
Term loans ......................... 56,206 15,096 71,302 (3,047) 68,255
Revolving line of credit ........... 22,187 -- 22,187 (22,187) --
Capital lease obligations .......... 420 -- 420 -- 420
1994 Notes ......................... 100,000 -- 100,000 -- 100,000
Notes .............................. -- -- -- 25,000 25,000
1996 Notes ......................... 105,000 -- 105,000 -- 105,000
Debt (discount) premium ............ (508) -- (508) 1,375 867
Less: current portion ............. (12,313) -- (12,313) -- (12,313)
--------- ---------- -------- ---------- --------
Total long-term debt ............. 287,542 15,096 302,638 1,141 303,779
Other liabilities ....................... 8,351 -- 8,351 -- 8,351
--------- ---------- -------- ---------- --------
Total liabilities .................. 343,734 15,379 359,113 1,141 360,254
--------- ---------- -------- ---------- --------
Stockholders' equity:
Preferred stock .................... 19,572 -- 19,572 -- 19,572
Less discount on preferred stock ... (2,917) -- (2,917) -- (2,917)
Treasury stock ..................... (81) -- (81) -- (81)
Common stock ....................... 6 -- 6 -- 6
Additional paid-in capital ......... 47,445 -- 47,445 -- 47,445
Warrants ........................... 3,511 -- 3,511 -- 3,511
Retained earnings (deficit)......... (180,099) -- (180,099) -- (180,099)
--------- ---------- ---------- ---------- ---------
Total stockholders' equity
(deficit) .................... (112,563) -- (112,563) -- (112,563)
--------- ---------- ---------- ---------- ---------
Total liabilities and
stockholders'equity (deficit) $231,171 $15,379 $246,550 $1,141 $247,691
========= ========== ========== ========== =========
</TABLE>
_____________________
(1) The Iowa Bonds were repaid by the Company in July 1998 with borrowings
under the Credit Facility's term loan facility.
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following selected financial data of Holding and its subsidiaries as of and
for the five fiscal years ended December 27, 1997 are derived from the
consolidated financial statements of Holding which have been audited by Ernst &
Young LLP, independent auditors. The following selected consolidated financial
data for the 26 weeks ended June 28, 1997 and June 27, 1998 are derived from
the unaudited condensed consolidated financial statements of Holding and, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data.
Operating results for the 26 weeks ended June 27, 1998 are not necessarily
indicative of the results that may be achieved for Holding's fiscal year ending
January 2, 1999. The selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements, related notes and
other financial information included in this Prospectus.
<TABLE>
<CAPTION>
Fiscal Twenty-Six Weeks Ended
---------------------------------------------------------------- ---------------------
<CAPTION>
Statement of Operations Data: 1993 1994 1995 1996 1997 June 28, June 27,
1997 1998
------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales ....................... $87,830 $106,141 $140,681 $151,058 $226,953 $105,936 $136,317
Cost of goods sold .............. 65,652 73,997 102,484 110,110 180,249 82,167 100,016
------- -------- -------- -------- -------- -------- --------
Gross margin .................... 22,178 32,144 38,197 40,948 46,704 23,769 36,301
Operating expenses (1) .......... 14,447 15,160 17,670 23,679 30,505 13,786 20,725
------- -------- -------- -------- -------- -------- --------
Operating income ................ 7,731 16,984 20,527 17,269 16,199 9,983 15,576
Other expenses (2) .............. 2,780 184 127 302 226 90 430
Interest expense, net (3) ....... 6,582 10,972 13,389 20,075 30,246 14,394 16,866
------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes (1,631) 5,828 7,011 (3,108) (14,273) (4,501) (1,720)
and extraordinary charge ....
Income taxes .................... 72 11 678 239 138 92 26
------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
charge ...................... (1,703) 5,817 6,333 (3,347) (14,411) (4,593) (1,746)
Extraordinary charge (4) ........ - 3,652 - - - - -
------- -------- -------- -------- -------- -------- --------
Net income (loss) ............... $(1,703) $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (4,593) $ (1,746)
======= ======== ======== ======== ======== ======== ========
Preferred stock dividends ....... $ - $ - $ - $ (1,116) $ (2,558) $ (1,048) $ (1,783)
Common stock dividends .......... - 50,000 - - - - -
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital ................. $ 384 $ 13,393 $ 13,012 $ 15,910 $ 20,863 $16,563 $18,763
Fixed assets .................... 36,615 38,103 52,441 55,664 108,218 81,852 105,260
Total assets .................... 60,143 91,790 103,465 145,798 239,444 188,373 231,171
Total debt ...................... 40,936 112,287 111,676 216,046 306,335 255,531 299,855
Stockholders' equity (deficit) .. 5,973 (38,838) (32,484) (97,550) (108,975) (103,045) (112,563)
OTHER DATA:
EBITDA(5) ....................... $20,840 $25,683 $30,716 $33,319 $39,340 $19,530 $29,633
Depreciation and amortization (6) 11,198 8,176 9,536 11,331 19,026 7,873 11,783
Capital expenditures ............ 5,586 9,118 11,247 13,581 16,774 4,801 7,854
Ratio of earnings to
fixed charges(7) ............... - 1.5x 1.4x - - - -
</TABLE>
________________________________
(1) Operating expenses include $3,675 of costs associated principally with
the shutdown and disposal of a facility acquired in the Mammoth Acquisition and
$330 of costs related to an unsuccessful acquisition in fiscal 1993; $116 in
pursued acquisition costs in fiscal 1994; pursued acquisition costs of $473 and
business start-up expenses of $394 in fiscal 1995; compensation expense related
to the 1996 Transaction of $2,762, Tri-Plas Acquisition start-up expenses of
$671 and $907 for costs related to the consolidation of the Winchester,
Virginia facility during fiscal 1996; business start-up and machine integration
expenses of $3,255 related to the 1997 Acquisitions and plant consolidation
expenses of $480 and $368 related to the shutdown of the Winchester, Virginia
and Reno, Nevada facilities, respectively, during fiscal 1997; plant
consolidation expenses related to the shutdown of the Winchester and Reno
facilities of $344 and $368, respectively, and $1,017 of integration expenses
related to the 1997 Acquisitions for the twenty-six weeks ended June 28, 1997;
and $943 of business start-up and machine integration expenses related to the
1997 Acquisitions and plant consolidation expenses of $1,327 and $94 related to
the shutdown of the Anderson, South Carolina and Reno, Nevada facilities,
respectively, for the twenty-six weeks ended June 27, 1998.
(2) Other expenses consist of loss on disposal of property and equipment for
the respective periods.
(3) Includes non-cash interest expense of $1,617, $1,178, $950, $1,212 and
$2,005 in fiscal 1993, 1994, 1995, 1996 and 1997, respectively, and $739 and
$884 for the twenty-six weeks ended June 28, 1997 and June 27, 1998.
(4) During 1994, an extraordinary charge of $3.7 million was recognized as a
result of the retirement of debt concurrent with the issuance of the 1994
Notes.
(5) EBITDA is defined as income (loss) before income taxes, net interest
expense, depreciation and amortization of intangibles adjusted to exclude (i)
non-cash charges relating to amortization of restricted stock awards and market
value adjustment related to stock options, (ii) other non-recurring or "one-
time" expenses as described in Note (1) above and (iii) loss on disposal of
property and equipment as described in Note (2) above. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as an alternative to income from operations or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of a
company's operating performance or as a measure of liquidity. In addition, the
Company's calculation of EBITDA may differ from that presented by certain other
companies and thus may not be comparable to similarly titled measures used by
other companies.
(6) Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt discount amortization which are
included in interest expense.
(7) In calculating the ratio of earnings to fixed charges, earnings consist
of (i) income (loss) before income taxes, plus (ii) fixed charges consisting of
interest on indebtedness (including amortization of deferred financing fees),
plus (iii) that portion of lease rental expense representative of the interest
factor. Earnings were inadequate to cover fixed charges for fiscal 1993, 1996
and 1997 and the twenty-six weeks ended June 28, 1997 and July 27, 1998 by
$1,468, $3,333, $14,614, $4,842 and $2,045, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with
"Selected Historical Financial Data" and the consolidated
financial statements and the notes thereto included elsewhere
in this Prospectus. Unless the context requires otherwise, the
"Company" as used in this Management's Discussion and Analysis
of Financial Condition and Results of Operations shall include
Holding and its subsidiaries on a consolidated basis.
RESULTS OF OPERATIONS
26 WEEKS ENDED JUNE 27, 1998 ("YTD")
COMPARED TO 26 WEEKS ENDED JUNE 28, 1997 ("PRIOR YTD")
NET SALES. Net sales increased $30.4 million, or 29%, to
$136.3 million for the YTD from $105.9 million for the prior
YTD with an approximate 1% decrease in net selling prices due
mainly to competitive market conditions. The increase in net
sales can be primarily attributed to the addition of Venture
Packaging with YTD net sales of $21.0 million and higher non-
Venture Packaging container sales of $7.5 million.
GROSS MARGIN. Gross margin increased by $12.5 million to $36.3
million for the YTD from $23.8 million for the prior YTD. This
increase in gross margin can be attributed to the combined
impact of the sales volume, productivity improvement
initiatives and the cyclical impact of lower raw material
costs.
OPERATING EXPENSES. Selling expenses increased by $2.0 million
to $7.1 million for the YTD from $5.1 million for the prior YTD
principally as a result of expanded sales coverage related to
the acquisition of Venture Packaging and increased product
development and marketing expenses. General and administrative
expenses increased by $3.1 million to $8.8 million for the YTD
from $5.7 million for the prior YTD. The increase of $3.1
million is primarily attributable to increased patent
litigation expenses and increased accrued employee profit
sharing expense. YTD one-time transition expenses include $1.3
million related to the shutdown of the Reno and Anderson
facilities and $1.0 million related to the 1997 Acquisitions.
One-time transition expenses for the prior YTD were $1.4
million related to the PackerWare Acquisition, the Container
Industries Acquisition and the Virginia Design Acquisition and
$0.3 million related to the Winchester plant consolidation.
INTEREST EXPENSE. Interest expense increased $1.8 million to
$17.4 million for the YTD compared to $15.6 million for the
prior YTD primarily due to additional borrowings under the
Credit Facility to support the 1997 Acquisitions.
INCOME TAX. The Company's income tax expense was $0.1 million
for the YTD compared to an income tax expense of $0.1 million
in the prior YTD. The Company continues to operate in a net
operating loss carryforward position for Federal income tax
purposes.
NET LOSS AND EBITDA. Net loss YTD of $1.7 million improved
$2.9 million from a net loss of $4.6 million for the prior YTD
for the reasons discussed above. EBITDA was $29.6 million YTD
compared to $19.5 million for the prior YTD.
YEAR ENDED DECEMBER 27, 1997
COMPARED TO YEAR ENDED DECEMBER 28, 1996
NET SALES. Net sales increased 50.2% to $227.0 million in
1997, up $75.9 million from $151.1 million in 1996, which sales
included an approximate 2% increase in net selling price due
mainly to the impact of cyclical adjustments in the price of
plastic resin. Container sales increased $30.1 million in
1997, primarily due to the continued market strength of base
products and the Venture Packaging, Virginia Design and
Container Industries Acquisitions. Net sales in the drink cup
product line increased $23.8 million in 1997 as a result of the
PackerWare Acquisition and a strong increase in existing drink
cup business. Aerosol overcap net sales were relatively flat,
decreasing approximately $2.6 million. The PackerWare
Acquisition also brought the Company into the housewares
product market, which provided an additional $17.5 million of
net sales in 1997. Other product lines, including custom
molded products and custom mold building, increased $7.1
million due to large custom programs that occurred in 1997.
GROSS MARGIN. Gross margin increased $5.8 million or 14.1%
from $40.9 million (27.1% of net sales) in 1996 to $46.7
million (20.6% of net sales) in 1997. The increase in gross
margin is primarily attributed to increased sales volume as
described above. The gross margin as a percent of net sales
derived from the 1997 Acquisitions was approximately 10.6%
compared to 23.8% for non-acquisition related sales.
Significant productivity improvements were made during the
year, including the addition of state-of-the-art injection
molding equipment, molds and printing equipment at several of
the Company's facilities. These productivity improvements were
offset by increased resin prices in 1997 and the transition
expenses of the 1997 Acquisitions.
OPERATING EXPENSES. Operating expenses during 1997 were $30.5
million (13.4% of net sales), compared with $23.7 million
(15.7% of net sales) for 1996. Sales related expenses,
including the cost of expanded sales coverage and higher
product development and marketing expenses, increased $4.4
million, primarily as a result of the 1997 Acquisitions ($3.3
million). General and administrative expenses decreased $2.3
million in 1997 primarily as a result of the $2.8 million one-
time compensation expense incurred in 1996 which related to the
1996 Transaction. Intangible amortization increased from $0.5
million in 1996 to $2.2 million for 1997, primarily as a result
of the amortization of $1.6 million related to the 1997
Acquisitions.
Other expense increased $2.5 million from $1.6 million for 1996
to $4.1 million in 1997. The 1997 Acquisitions resulted in a
charge of $3.2 million in 1997 for start-up related expenses.
The PackerWare Acquisition included a facility in Reno, Nevada,
which was closed in 1997. Expense related to the closing of
the Reno facility was $0.5 million in 1997. Plant closing
expenses related to the Winchester, Virginia facility resulted
in expenses of $0.4 million for 1997. Included in 1996 was a
charge of $0.7 million of start-up related expenses associated
with the Tri-Plas Acquisition and $0.9 million related to the
Winchester plant closing.
INTEREST EXPENSE AND INCOME. Net interest expense, including
amortization of deferred financing costs for 1997, was $30.2
million (13.3% of net sales) compared to $20.1 million (13.3%
of net sales) in 1996, an increase of $10.1 million. This
increase is due to the full year impact of the 1996
Transaction, which occurred in June 1996. The 1996 Transaction
included an offering of $105.0 million aggregate principal
amount of the 1996 Notes, which bear interest at 12.5%
annually. $35.6 million of the proceeds from the 1996 Notes
were placed in escrow to pay the first three years of interest
on the 1996 Notes. Interest is payable semi-annually on June
15 and December 15 of each year. Cash interest paid in 1997 was
$29.9 million as compared to $19.7 million for 1996. Interest
income for 1997 was $2.0 million, up from $1.3 million in 1996,
also attributed to the full year impact of the 1996
Transaction.
INCOME TAXES. During fiscal 1997, the Company incurred $0.1
million in Federal and state income tax compared to $0.2
million for fiscal 1996. The Company continues to operate in a
net operating loss carryforward position for Federal income tax
purposes.
NET INCOME (LOSS) AND EBITDA. The Company recorded a net loss
of $14.4 million in 1997 compared to a $3.3 million net loss in
1996 for the reasons stated above. Adjusted EBITDA for 1997
increased 18.3% to $39.4 million from $33.3 million in 1996.
Adjusted EBITDA is calculated as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
($ million)
EBITDA ............................................. $35.1 $31.3
Loss on the disposal of assets ..................... 0.2 0.3
Other adjustments .................................. 4.1 1.7
----- -----
Total Adjusted EBITDA ......................... $39.4 $33.3
===== =====
</TABLE>
YEAR ENDED DECEMBER 28, 1996
COMPARED TO YEAR ENDED DECEMBER 30, 1995
NET SALES. Net sales increased 7% to $151.1 million in 1996,
up $10.4 million from $140.7 million in 1995. Sales of aerosol
overcaps increased $6.1 million. This growth of 14% was mainly
due to a strengthening of base business and the addition of new
products. Container sales increased $9.7 million in 1996, due
to the continued market strength of base products and the Tri-
Plas Acquisition. Sales in the drink cup product line declined
$3.2 million principally because a national promotion from a
major marketer that was received in 1995 was not repeated in
1996. Other product lines, including custom molded products
and custom mold building, decreased $2.2 million also due to a
custom program that occurred in 1995 but was not repeated in
1996. Overall, prices declined approximately 2.0% from 1995
due to both market response to changing raw material prices and
competitive market conditions.
GROSS MARGIN. Gross margin increased $2.7 million or 7.1% from
$38.2 million (27.2% of net sales) for 1995 to $40.9 million
(27.1% of net sales) in 1996. The increase in gross margin is
primarily attributed to increased sales volume. Significant
productivity improvements were made during the year, including
the addition of state-of-the-art injection molding equipment,
molds and printing equipment at several of the Company's
facilities. The increase in operating efficiency offset the
previously mentioned price declines, preserving the Company's
gross margin as a percentage of sales.
The Winchester, Virginia facility, which was added to the
Company as part of the Sterling Products Acquisition and used
primarily for the production of drink cups, was consolidated
into other Berry locations late in 1996 to better utilize the
operating leverage at other manufacturing facilities throughout
the Company.
OPERATING EXPENSES. Operating expenses during 1996 were $23.7
million (15.7% of net sales), compared with $17.7 million
(12.6% of net sales) for 1995. Sales related expenses,
including the cost of expanded sales coverage, and higher
product development and marketing expenses, increased $1.3
million. General and administrative expenses increased $4.3
million, including $2.7 million due to a one-time compensation
expense directly related to the 1996 Transaction, patent
litigation expenses of $0.8 million and $0.6 million of
additional expense as a result of the Tri-Plas Acquisition.
Other expense increased $0.7 million from $0.9 million for 1995
to $1.6 million in 1996. Included in 1996 was a charge of $0.9
million for plant closing expenses related to the Winchester,
Virginia facility, and $0.6 million of start-up related expense
associated with the Tri-Plas Acquisition. Included in 1995
expense was a charge of $0.5 million due to the discontinued
pursuit of a potential acquisition and $0.2 million of costs
associated with the transfer of the Tri-Plas business.
INTEREST EXPENSE AND INCOME. Net interest expense, including
amortization of deferred financing costs for 1996, was $20.1
million (13.3% of net sales) compared to $13.4 million (9.5% of
net sales) in 1995, an increase of $6.7 million. This increase
is due to the 1996 Transaction, when the Company completed an
offering of $105.0 million aggregate principal amount of the
1996 Notes which bear interest at 12.5% annually. Interest is
payable semi-annually on June 15 and December 15 of each year.
Cash interest paid in 1996 was $19.7 million as compared to
$13.4 million for 1995. Interest income for 1996 was $1.3
million and 1995 was $0.6 million.
INCOME TAXES. During fiscal 1996, the Company incurred $0.2
million in income tax compared to $0.7 million of income tax
for fiscal 1995.
NET INCOME (LOSS) AND EBITDA. The Company recorded a net loss
of $3.3 million in 1996 compared to net income in 1995 of $6.3
million for the reasons stated above. Adjusted EBITDA for 1996
increased 8.5% to $33.3 million from $30.7 million in 1995.
Adjusted EBITDA is calculated as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
($ million)
EBITDA ................................................ $31.3 $29.7
Loss on the disposal of assets ........................ 0.3 0.1
Other adjustments ..................................... 1.7 0.9
----- -----
Total Adjusted EBITDA ................................. $33.3 $30.7
===== =====
</TABLE>
INCOME TAX MATTERS
Holding has unused operating loss carryforwards of $21.7
million for Federal income tax purposes which begin to expire
in 2010. AMT credit carryforwards of approximately $2.0
million are available to Holding indefinitely to reduce future
years' Federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit facility with NationsBank, N.A. for a
senior secured line of credit in an aggregate principal amount
of $132.6 million (plus the UK Revolver (as defined herein) and
the UK Term Loan (as defined herein)). The Credit Facility
provides Berry with a $50.0 million revolving line of credit
(plus pound-sterling 1.5 million under the UK Revolver),
subject to a borrowing base formula, $63.7 million in term loan
facilities (plus pound-sterling 4.5 million under the UK Term
Loan), and $12.6 million in letters of credit to support
Berry's and its subsidiaries' obligations under the Nevada
Bonds and the South Carolina Bonds. The indebtedness under the
Credit Facility is guaranteed by Holding and the Company's
subsidiaries. See "Description of Certain Indebtedness -
Credit Facility."
The 1994 Indenture and the 1996 Indenture restrict, and the
Indenture will restrict, the Company's ability to incur
additional debt and contains other provisions which could limit
the liquidity of the Company. See "Description of Certain
Indebtedness" and "Description of Notes."
Net cash provided by operating activities was $14.4 million for
the YTD, an increase of $12.1 million from the prior YTD. The
increase is primarily the result of improved operating
performance with income before depreciation and amortization
increasing $6.8 million from the prior YTD. Net working
capital changes (defined as accounts receivable, inventories,
prepaid expenses, other receivables, accounts payable and
accrued expenses) also increased for the YTD cash $4.6 million
from the prior YTD. Net cash provided by operating activities
was $14.2 million in 1997 as compared to $14.4 million in 1996.
The decrease can be attributed to a reduction in accounts
payable of approximately $3.5 million resulting from a
discounting program with a key supplier offset partially by
positive operating cash flows generated primarily from
increased sales volume.
YTD capital spending of $7.9 million included $4.9 million for
molds and machines and $3.0 million for building and accessory
equipment. Berry currently intends to finance future capital
spending through cash flow from operations, existing cash
balances and cash available under the Credit Facility's
revolving line of credit. Capital expenditures in 1997 were
$16.8 million, an increase of $3.2 million from $13.6 million
in 1996. Included in capital expenditures during 1997 was $3.3
million relating to the addition of a new warehouse, production
systems and offices necessary to support production operating
levels throughout the Company. Capital expenditures also
included investment of $8.7 million for molds, $1.2 million for
molding machines, $1.4 million for printing equipment and $2.2
million for miscellaneous accessory equipment and systems.
Increased working capital needs occur whenever the Company
experiences strong incremental demand or a significant rise in
the cost of raw material, particularly plastic resin. However,
the Company anticipates that its cash interest, working capital
and capital expenditure requirements for 1998 will be satisfied
through a combination of funds generated from operating
activities and cash on hand, together with funds available
under the Credit Facility. Management bases such belief on
historical experience and the substantial funds available under
the Credit Facility. However, the Company cannot predict its
future results of operations.
The Indenture and the 1994 Indenture restrict, and the Credit
Facility prohibits, Berry's ability to pay any dividend or make
any distribution of funds to Holding to satisfy interest and
other obligations on the 1996 Notes. Based upon historical
operating results, without a substantial increase in the
operating results of Berry, management anticipates that it will
be unable to generate sufficient cash flow to permit a dividend
to Holding in an amount sufficient to meet Holding's interest
payment obligations under the 1996 Notes which begin after the
depletion of the escrow account that was established to pay
such interest and the expiration of Holding's option to pay
interest by issuing additional 1996 Notes. In that event,
management anticipates that such obligations will only be met
by refinancing the 1996 Notes or raising capital through equity
offerings.
At June 27, 1998, the Company's cash balance was $2.7 million,
and the Company had unused borrowing capacity under the Credit
Facility's borrowing base of approximately $19.4 million. At
June 27, 1998, on a pro forma basis after giving effect to (i)
the Offering and the application of the proceeds therefrom and
(ii) the Norwich Acquisition, the Company's cash balance was
approximately $2.7 million, and the Company had unused
borrowing capacity under the Credit Facility's borrowing base
of approximately $41.6 million.
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company faces various economic risks ranging from an
economic downturn adversely impacting the Company's primary
markets to market fluctuations in plastic resin prices. In the
short term, rapid increases in resin cost, such as those
experienced during 1996, may not be fully recovered through
price increases to customers. Also, shortages of raw materials
may occur from time to time. In the long term, however, raw
material availability and price changes generally do not have a
material adverse effect on gross margin. Cost changes
generally are passed through to customers. In addition, the
Company believes that its sensitivity to economic downturns in
its primary markets is less significant due to its diverse
customer base and its ability to provide a wide array of
products to numerous end markets.
The Company believes that it is not affected by inflation
except to the extent that the economy in general is thereby
affected. Should inflationary pressures drive costs higher,
the Company believes that general industry competitive price
increases would sustain operating results, although there can
be no assurance that this will be the case.
IMPACT OF YEAR 2000
The Company has been working on modifying or replacing portions
of its software since 1991 so that its computer systems will
function properly with respect to dates in the Year 2000 and
thereafter. Because the Company commenced this process early,
the costs incurred to address this issue in any single year
have not been significant.
However, the Company is currently evaluating the necessity to
replace significant portions of its primary information
systems, principally because of the growth the Company has
experienced in recent years due to acquisitions. Such
replacement, when undertaken, will allow the Company to
continue to achieve its future growth plans and will be fully
Year 2000 compliant. The Company anticipates that the
selection and implementation of such systems is likely to occur
before the Year 2000, but it is not necessary for the
replacement to occur in order for the Company to minimize its
exposure to Year 2000 system failures.
The Company has not fully evaluated the impact of the Year 2000
issue on its suppliers and customers. The Company is currently
unable to predict the extent to which the Year 2000 issue will
affect its suppliers or customers, or the extent to which it
would be vulnerable to its suppliers' or customers' failure to
remediate any Year 2000 issues on a timely basis. If a major
supplier or customer fails to convert its systems on a timely
basis, the Company could be materially adversely affected.
<PAGE>
BUSINESS
GENERAL
The Company is a leading domestic manufacturer and marketer of
plastic packaging products focused on four key markets: the
aerosol overcap, rigid open-top container, drink cup and
houseware markets. Within each of its markets, the Company
concentrates on manufacturing value-added products sold to
marketers of image-conscious industrial and consumer products
that utilize the Company's proprietary molds, superior color
matching capabilities and sophisticated multi-color printing
capabilities. The Company believes that it is the largest
supplier of aerosol overcaps in the United States, with sales
of over 1.4 billion overcaps in 1997. Berry also believes that
it is the largest domestic supplier of thinwall,
child-resistant and pry-off open top containers. Berry has
utilized its national sales force and existing molding and
printing capacity at multiple-plant locations to become a
leader in the plastic drink cup market, which includes the
Company's 32 ounce and 44 ounce DT cups, which fit in standard
vehicle cup holders. The Company entered the housewares market
(which includes the lawn and garden market) for semi-disposable
plastic products, sold primarily to national retail marketers,
as a result of the acquisition of PackerWare in January 1997.
From fiscal 1993 to the twelve months ended June 27, 1998, on a
pro forma basis, the Company's net sales increased from $87.8
million to $279.9 million, representing a CAGR of 29%, and
Adjusted EBITDA increased from $21.7 million to $55.2 million,
representing a CAGR of 23%.
The Company supplies aerosol overcaps for a wide variety of
commercial and consumer products. Similarly, the Company's
containers are used for packaging a broad spectrum of
commercial and consumer products. The Company's plastic drink
cups are sold primarily to fast food restaurants, convenience
stores, stadiums, table top restaurants and retail. The
Company also sells houseware products, primarily seasonal,
semi-disposable housewares and lawn and garden items, to major
retail marketers. Berry's customer base is comprised of over
4,000 customers with operations in a widely diversified range
of markets. The Company's top ten customers accounted for
approximately 19% of the fiscal 1997 net sales, and no customer
accounted for more than 4% of the Company's net sales in fiscal
1997.
The historical allocation of the Company's total net sales
among its product categories is as follows:
<TABLE>
<CAPTION>
Twenty-Six
FISCAL Weeks Ended
1995 1996 1997 June 27, 1998
---- ---- ---- -------------
<S> <C> <C> <C> <C>
Aerosol overcaps .......................... 31% 33% 21% 17%
Rigid open-top containers ................. 51 53 49 54
Drink cups ................................ 12 9 17 15
Housewares ................................ -- -- 8 11
Other ..................................... 6 5 5 3
</TABLE>
The Company believes that it derives a strong competitive position from its
state-of-the-art production capabilities, extensive array of proprietary molds
in a wide variety of sizes and styles and dedication to service and quality.
In the aerosol overcap market, the Company distinguishes itself with superior
color matching capabilities, which is of extreme importance to its base of
image-conscious consumer products customers, and proprietary packing equipment,
which enables the Company to deliver a higher quality product while lowering
warehousing and shipping costs. In the container market, an in-house graphic
arts department and sophisticated printing and decorating capabilities permit
the Company to offer extensive value-added decorating options. The Company's
drink cup product line is strengthened by both the larger market share and
diversification provided through its acquisition of PackerWare. Berry entered
the housewares business with its acquisition of PackerWare, which has a
reputation for outstanding quality and service among major retail marketers and
for products which offer high value at a reasonable price to consumers. The
Company believes that it is an industry innovator, particularly in the area of
decoration. These market-related strengths, combined with the Company's modern
proprietary mold technology, high speed molding capabilities and multiple-plant
locations, all contribute to the Company's strong market position.
In addition to these marketing and manufacturing strengths, the Company
believes that its close working relationships with customers are crucial to
maintaining market positions and developing future growth opportunities. The
Company employs a direct sales force which is focused on working with customers
and the Company's production and product design personnel to develop customized
packaging that enhances customer product differentiation and improves product
performance. The Company works to develop innovative new products and identify
and pursue non-traditional markets that can use existing Company products.
AEROSOL OVERCAP MARKET
The Company believes it is the leader in the U.S. market for aerosol overcaps.
Approximately one-third of this market consists of national marketers who
produce overcaps in-house for their own needs. Management believes that a
portion of these in-house producers will increase the outsourcing of their
production to high technology, low cost manufacturers, such as the Company, as
a means of reducing manufacturing assets and focusing on their core marketing
objectives.
The Company's aerosol overcaps are used in a wide variety of end-use markets
including spray paints, household and personal care products, insecticides and
a myriad of other commercial and consumer products. Most U.S. manufacturers
and contract fillers of aerosol products are customers of the Company for some
portion of their needs. In fiscal 1997, no single overcap customer accounted
for more than 3% of the Company's total net sales.
Management believes that, over the years, the Company has developed several
significant competitive advantages, including a reputation for outstanding
quality, short lead-time requirements, long-standing relationships with major
customers, the ability to accurately reproduce over 3,500 colors, proprietary
packing technology that minimizes freight cost and warehouse space, high-speed,
low-cost molding and decorating capability and a broad product line of
proprietary molds. The Company continues to develop new products in the
overcap market, including the "spray-thru" line of aerosol overcaps.
The Company's major competitor in this product line is Knight Engineering. In
addition, a number of companies, including several of the Company's customers
(e.g., S.C. Johnson, Cheseborough-Ponds and Reckitt & Colman), currently
produce aerosol overcaps for their own use.
<PAGE>
CONTAINER MARKET
The Company classifies its containers into six product lines: thinwall,
child-resistant, pry-off, dairy, polypropylene and industrial. Management
believes that the Company is the leading U.S. manufacturer in the thinwall,
child-resistant and pry-off product lines. Management considers industrial
containers to be a commodity market, characterized by little product
differentiation and an absence of higher margin niches. The following table
describes each of the Company's six product lines.
<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION SIZES MAJOR END MARKETS
--------------- -------------- ----------- ---------------------
<S> <C> <C> <C>
Thinwall Thinwalled, multi-purpose 6 oz. to 2 gallons Food, promotional products, toys
containers with or without and a wide variety of other uses
handles and lids
Child-resistant Containers that meet Consumer 2 lbs. to 2 gallons Pool and other chemicals
Product Safety Commission
standards for child safety
Pry-off Containers having a tight lid-fit 4 oz. to 2 gallons Building products, adhesives,
and requiring an opening device other industrial uses
Dairy Thinwall containers in 6 oz. to 5 lbs., Multi- Cultured dairy products including
traditional dairy market sizes pack yogurt, cottage cheese, sour
and styles cream and dips
Polypropylene Usually clear containers in 6 oz. to 5 lbs. Food, deli, sauces, salads
round, oblong or rectangular
shapes
Industrial Thick-walled, larger pails 2.5 to 5 gallons Building products, chemicals,
designed to accommodate heavy paints, other industrial uses
loads
</TABLE>
The largest end-uses for the Company's containers are food products, building
products, chemicals and dairy products. The Company has a diverse customer
base for its container lines, and no single container customer exceeded 3% of
the Company's total net sales in fiscal 1997.
Management believes that no other container manufacturer in the U.S. has the
breadth of product line offered by the Company. The Company's container
capacities range from 4 ounces to 5 gallons and are offered in various styles
with accompanying lids, bails and handles, as well as a wide array of
decorating options. In addition to a complete product line, the Company has
sophisticated printing capabilities, an in-house graphic arts department, low
cost manufacturing capability with nine plants strategically located throughout
the United States and a dedication to high quality products and customer
service. Product engineers, located in most of the Company's facilities, work
with customers to design and commercialize new containers.
The Company seeks to develop niche container products and new applications by
taking advantage of the Company's state-of-the-art decorating and graphic arts
capabilities and dedication to service and quality. Management believes that
these capabilities have given the Company a significant competitive advantage
in certain high-margin niche container applications for specialized products.
Examples include popcorn containers for new movie promotions and professional
and college sporting and entertainment events, where the ability to produce
sophisticated and colorful graphics is crucial to the product's success. In
order to identify new applications for existing products, the Company relies
extensively on its national sales force. Once these opportunities are
identified, the Company's sales force interfaces with product design engineers
to meet customers' needs. Finally, the quality and performance of the
Company's dairy product line have enabled the Company to establish a solid and
growing reputation in this market.
In non-industrial containers, the Company's strongest competitors include
Airlite, Sweetheart, Landis, Cardinal and Polytainers. The Company also
produces commodity industrial pails for a market which is dominated by large
volume competitors such as Letica, Plastican, NAMPAC and Ropak. The Company
does not participate heavily in this market due to generally lower margins.
The Company intends to selectively participate in the industrial container
market when higher margin opportunities, equipment utilization or customer
requirements make participation an attractive option.
DRINK CUP MARKET
The Company believes that it is a leading provider of plastic drink cups in the
U.S. As beverage producers, convenience stores and fast food restaurants
increase their marketing efforts for larger sized drinks, the Company believes
that the plastic drink cup market will expand because of plastic's desirability
over paper for larger drink cups. Injection-molded plastic cups range in size
from 12 to 64 ounces, and often come with lids. Primary markets are fast food
restaurants, convenience stores, stadiums, table top restaurants and retail.
Virtually all cups are decorated, often as promotional items, and Berry is
known in the industry for innovative, state-of-the-art graphics capability.
Berry has historically supplied a full line of traditional straight-sided and
DT style drink cups from 12 to 64 ounces with disposable and reusable lids
primarily to fast food and convenience store chains. With the PackerWare
Acquisition, the Company expanded its presence while diversifying into the
stadium and table top restaurant markets. The 64 ounce cup, which has been
highly successful with convenience stores, is one of the Company's fastest
growing drink cups. In addition to a full product line, Berry has the
advantage of being the only supplier that can provide sophisticated printing
and/or labeling capacity on a nation-wide basis; in 1997, five different plants
molded and decorated drink cups. Major drink cup competitors include Packaging
Resources Incorporated, Pescor Plastics and WNA (formerly Cups Illustrated).
HOUSEWARES MARKET
The Company entered the housewares market as a result of the PackerWare
Acquisition in January 1997. The housewares market is a multi-billion dollar
market. The Company's participation is limited to seasonal (spring and summer)
semi-disposable plastic housewares and plastic lawn and garden products, which
consist primarily of outdoor flower pots. Berry sells virtually all of its
products in this market through major national retail marketers and national
chain stores.
PackerWare's historical position with this market was to provide a high value
to consumers at a relatively modest price, consistent with the key price points
of the retail marketers. Berry believes outstanding service and fashion
capabilities further enhance its position in this market.
CUSTOM MOLDED PRODUCTS MARKET
The Company also produces custom molded products by utilizing molds provided by
its customers. Typically, the low cost of entry in the custom molded products
market creates a commodity-like marketplace. However, the Company has focused
its custom molding efforts on those customers that are cognizant of the
Company's mold and product design expertise, superior color matching abilities
and sophisticated multi-color printing capabilities. The majority of the
Company's custom business in 1997 required specialized equipment and expertise,
supporting the Company's desire to pursue higher volume-added niche
opportunities in every market in which it participates.
MARKETING AND SALES
The Company reaches its large and diversified base of over 4,000 customers
primarily through its direct field sales force, which has been expanded from 14
sales representatives in fiscal 1990 to 45 at the end of fiscal 1997. These
field sales representatives are focused on individual product lines, but are
encouraged to sell all Company products to serve the needs of the Company's
customers. The Company believes that a direct field sales force is able to
better focus on target markets and customers, with the added benefit of
permitting the Company to control pricing decisions centrally. The Company
also utilizes the services of manufacturing representatives to augment its
direct sales force.
The Company believes that it has a reputation for a high level of customer
satisfaction. Highly skilled customer service representatives are located in
each of the Company's facilities to support the national field sales force. In
addition, telemarketing representatives, marketing managers and sales/marketing
executives oversee the marketing and sales efforts. Manufacturing and
engineering personnel work closely with field sales personnel to satisfy
customers' needs through the production of high-quality, value-added products
and on-time deliveries.
Additional marketing and sales techniques include a Graphic Arts department
with computer-assisted graphic design capabilities and in-house production of
photopolymer printing plates. Berry also has a centralized Color Matching and
Materials Blending department that utilizes a computerized spectrophotometer to
insure that colors match those requested by customers.
MANUFACTURING
GENERAL
The Company manufactures its products using the plastic injection molding
process. The process begins when plastic resin, in the form of small pellets,
is fed into an injection molding machine. The injection molding machine then
melts the plastic resin and injects it into a multi-cavity steel mold, forcing
the plastic resin to take the final shape of the product. At the end of each
molding cycle (generally five to 25 seconds), the plastic parts are ejected
from the mold into automated handling systems from which they are packed in
corrugated containers for further processing or shipment. After molding, the
product may be either decorated (printing, silk-screening, labeling) or
assembled (e.g., bail handles fitted to containers). The Company believes that
its molding and decorating capabilities are among the best in the industry.
Each of the Company's plants is managed by a local plant manager and is treated
as a profit center. The Company's overall manufacturing philosophy is to be a
low-cost producer by using high speed molding machines, modern multi-cavity hot
runner, cold runner and insulated runner molds, extensive material handling
automation and sophisticated printing technology. The Company utilizes
state-of-the-art robotic packaging processes for large volume products, which
enables the Company to deliver a higher quality product (due to reduced
breakage) while lowering warehousing and shipping costs (due to more efficient
use of space). Each plant has complete tooling maintenance capability to
support molding and decorating operations. The Company has historically made,
and intends to continue to make, significant capital investments in plant and
equipment because of the Company's objectives to grow, to improve productivity,
to maintain competitive advantages and to meet the asset-intensive nature of
the injection molding business.
The Company operates 175 molding machines ranging from 150 to 825 ton clamp
capacity. The Company's largest overcap machines are capable of producing 10
thousand to 15 thousand aerosol overcaps per hour. Due to the wide variety of
container and drink cup styles and sizes produced by the Company, production
rates vary significantly. The Company owns over 750 active molds.
PRODUCT DEVELOPMENT
The Company utilizes full-time product engineers who use three-dimensional
computer-aided-design (CAD) technology to design and modify new products and
prepare mold drawings. Engineers use an in-house model shop, which includes a
thermoforming machine, to produce prototypes and sample parts. The Company can
simulate the molding environment by running unit-cavity prototype molds in a
small injection molding machine dedicated to research and development of new
products. Production molds are then designed and outsourced for production by
various companies in the United States and Canada with whom the Company has
extensive experience and established relationships. The Company's engineers
oversee the mold-building process from start to finish.
QUALITY ASSURANCE
Each plant extensively utilizes Total Quality Management philosophies,
including the use of statistical process control and extensive involvement of
employees to increase productivity. This teamwork approach to problem-solving
increases employee participation and provides necessary training at all levels.
The Evansville, Henderson and Iowa Falls plants were approved for ISO 9000
certification in 1994, 1995 and 1996, respectively, which certifies compliance
by a company with a set of shipping, trading and technology standards
promulgated by the International Standardization Organization. The Company is
actively pursuing ISO certification in all of the remaining facilities.
Extensive testing of parts for size, color, strength and material quality using
statistical process control (SPC) techniques and sophisticated technology is
also an ongoing part of the Company's traditional quality assurance activities.
SYSTEMS
Berry utilizes a fully integrated computer software system at its plants
capable of producing complete financial and operational reports by plant as
well as by product line. This accounting and control system is easily
expandable to add new features and/or locations as the Company grows. In
addition, the Company has in place a sophisticated quality assurance system
based on ISO 9000 certification, a bar code based material management system
and an integrated manufacturing system.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important raw material purchased by the Company is plastic resin. The
Company purchased approximately $68 million of resin in fiscal 1997 (excluding
specialty resins), of which 74% was high density polyethylene ("HDPE"), 11%
linear low density polyethylene and 15% polypropylene. The Company's
purchasing strategy is to deal with only high-quality, dependable suppliers,
such as Dow, Union Carbide, Chevron and Phillips.
All resin suppliers commit to the Company to provide uninterrupted supply at
competitive prices. Management believes that the Company has maintained
outstanding relationships with these key suppliers over the past several years
and expects that such relationships will continue into the foreseeable future.
See "Risk Factors - Possible Adverse Effect of Increase in Resin Prices" and "-
Reliance on Certain Supplier."
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,100 employees. No
employees of the Company are covered by collective bargaining agreements. On
February 5, 1998, the employees in Monroeville, Ohio voted to decertify the
union in the facility. This facility was acquired as a result of the Venture
Packaging Acquisition and was the Company's only plant with a collective
bargaining agreement during 1997.
PATENTS AND TRADEMARKS
The Company has numerous patents and trademarks with respect to its products.
None of the patents or trademarks are considered by management to be material
to the business of the Company. See "- Legal Proceedings" below.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing Federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes or otherwise relating to the protection of
the environment. The Company believes that it is in substantial compliance
with applicable environmental laws and regulations. However, the Company
cannot predict with any certainty that it will not in the future incur
liability under environmental statutes and regulations with respect to non-
compliance with environmental laws, contamination of sites formerly or
currently owned or operated by the Company (including contamination caused by
prior owners and operators of such sites) or the off-site disposal of hazardous
substances.
Based upon a May 1998 compliance inspection, the Ohio Environmental Protection
Agency ("OEPA") issued a Notice of Violation dated June 23, 1998 to Venture
Packaging alleging that the Monroeville, Ohio facility failed to file certain
reports required pursuant to the Federal Emergency Planning and Community
Right-to-Know Act of 1986 (also known as "SARA Title III") for reporting years
1994 and 1995. The Company filed the subject reports in June 1998. The OEPA
notice states that the alleged violations have been referred to its Division of
Air Pollution Enforcement for review and that further enforcement action may be
forthcoming. Based upon information currently available to the Company, the
Company does not believe that any sanctions that might be imposed for the cited
violations would have a material adverse effect on its business or financial
condition.
Like any manufacturer, the Company is subject to the possibility that it may
receive notices of potential liability, pursuant to CERCLA or analogous state
laws, for cleanup costs associated with offsite waste recycling or disposal
facilities at which wastes associated with its operations have allegedly come
to be located. Liability under CERCLA is strict, retroactive and joint and
several. No such notices are currently pending.
The Food and Drug Administration (the "FDA") regulates the material content of
direct-contact food containers and packages, including certain thinwall
containers manufactured by the Company. The Company uses approved resins and
pigments in its direct contact food products and believes it is in material
compliance with all such applicable FDA regulations.
The plastics industry in general, and the Company in particular, also are
subject to existing and potential Federal, state, local and foreign legislation
designed to reduce solid wastes by requiring, among other things, plastics to
be degradable in landfills, minimum levels of recycled content, various
recycling requirements, disposal fees and limits on the use of plastic
products. In addition, various consumer and special interest groups have
lobbied from time to time for the implementation of these and other similar
measures. The principal resin used in the Company's products, HDPE, is
recyclable, and, accordingly, the Company believes that the legislation
promulgated to date and such initiatives to date have not had a material
adverse effect on the Company. There can be no assurance that any such future
legislative or regulatory efforts or future initiatives would not have a
material adverse effect on the Company. On January 1, 1995, legislation in
Oregon, California and Wisconsin went into effect requiring products packaged
in rigid plastic containers to comply with standards intended to encourage
recycling and increased use of recycled materials. Although the regulations
vary by state, the principal requirement is the use of post consumer regrind
("PCR") as an ingredient in containers sold for non-food uses. Additionally,
Oregon and California allow lightweighting of the container or concentrating
the product sold in the container as options for compliance. Oregon and
California provide for an exemption from all such regulations if statewide
recycling reaches or exceeds 25% of rigid plastic containers. In September
1996, California passed a new bill permanently exempting food and cosmetics
containers from the foregoing requirement. However, non-food containers are
still required to comply.
In December 1996, the Department of Environmental Quality estimated that Oregon
had met its recycling goal of 25% for 1997 (based on 1996 data), and
accordingly, is in compliance for the 1997 calendar year. However, in January
1998, California finally approved a 23.2% recycling rate for the state during
1996, and since this falls below the required 25% rate for exemption of non-
food containers, the state can now begin enforcing its recycled content mandate
on any non-food plastic containers from 8 oz. to 5 gallons. The Company, in
order to facilitate individual customer compliance with these regulations, is
providing customers the option of purchasing containers which contain PCR or
using containers with reduced weight. See "Risk Factors - Environmental
Matters."
PROPERTIES
The following table sets forth the Company's principal facilities:
<TABLE>
<CAPTION>
LOCATION ACRES SQUARE FOOTAGE USE
---------- ------- ---------------- -----------
<S> <C> <C> <C>
Evansville, IN 12.4 397,000 Headquarters and manufacturing
Henderson, NV 12.0 168,000 Manufacturing
Iowa Falls, IA 14.0 101,000 Manufacturing
Charlotte, NC 32.0 48,000 Manufacturing
Lawrence, KS 19.3 423,000 Manufacturing
York, PA 10.0 40,000 Manufacturing
Suffolk, VA 14.0 102,000 Manufacturing
Monroeville, OH 19.0 112,000 Manufacturing
North Walsham, England 5.0 44,000 Manufacturing
</TABLE>
The Company believes that its property and equipment are well maintained, in
good operating condition and adequate for its present needs.
LEGAL PROCEEDINGS
The Company is party to various legal proceedings involving routine claims
which are incidental to its business. Although the Company's legal and
financial liability with respect to such proceedings cannot be estimated with
certainty, the Company believes that any ultimate liability would not be
material to its financial condition.
The Company and/or Berry Sterling are currently litigating two lawsuits that
involve United States Patent No. Des. 362,368 (the "'368 Patent"). The '368
Patent claims an ornamental design for a cup that fits an automobile cup
holder. On September 21, 1995, Berry Sterling filed suit in United States
District Court, Eastern District of Virginia, against Pescor Plastics, Inc.
("Pescor Plastics") for infringement of the '368 Patent. Pescor Plastics filed
counterclaims seeking a declaratory judgment of invalidity and
non-infringement, and damages under the Lanham Act. On December 28, 1995,
Berry Sterling filed suit against Packaging Resources Incorporated ("Packaging
Resources") in United States District Court, Southern District of New York, for
infringement of the '368 Patent. Packaging Resources has filed counterclaims
against Berry Sterling alleging violation of the Lanham Act, tortious
interference with Packaging Resources' prospective business advantage, consumer
fraud and requesting a declaratory judgment that its "Drive-N-Go" cup does not
infringe the '368 Patent. On February 25, 1998, after trial, a jury rendered a
verdict in Berry Sterling's action against Pescor Plastics. The jury found the
'368 Patent to be invalid on the grounds of functionality and obviousness and
awarded Pescor $150,000 on its counterclaim. The jury also found that Pescor
willfully infringed the '368 Patent and awarded Berry Sterling damages of $1.2
million, but this award was not included in the judgment because of the finding
of the invalidity of the Patent. On March 11, 1998, Berry Sterling filed a
motion with the Court to set aside the verdict of invalidity and the award on
the counterclaim, which was subsequently denied by the Court. On April 29,
1998, Berry Sterling filed a Notice of Appeal of the Court's judgment and the
denial of its motion to set aside the jury's verdict. The Court in the
Packaging Resources case put the case on its suspense calendar pending the
appeal in the Pescor Plastics case.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers, directors and certain key personnel of Holding and its
subsidiaries:
<TABLE>
<CAPTION>
NAME Age Title Entity
------- ------ --------- --------
<S> <C> <C> <C>
Roberto Buaron(1)(4) 51 Chairman and Director Company and Holding
Martin R. Imbler(1)(4) 50 President, Chief Executive Company
Officer and Director
President and Director Holding
Ira G. Boots 44 Executive Vice President, Company
Operations and Director
James M. Kratochvil 41 Executive Vice President, Chief Company
Financial Officer, Treasurer and
Secretary
Executive Vice President, Chief Holding
Financial Officer and Secretary
R. Brent Beeler 45 Executive Vice President, Sales Company
and Marketing
Randy Hobson 32 Vice President - Sales and Company
Marketing
Ruth Richmond 35 Vice President - Planning and Company
Administration and Assistant
Secretary
Assistant Secretary Holding
David Weaver 35 Vice President and Plant Manager Company
- Lawrence
Fredrick A. Heseman 45 Vice President and Plant Manager Company
- Evansville
Bruce J. Sims 48 Vice President - Sales and Company
Marketing, Housewares
George A. Willbrandt 53 Vice President - Sales and Company
Marketing
Joseph S. Levy(2)(3) 30 Vice President, Assistant Company
Secretary and Director
Vice President, Assistant Holding
Secretary and Director
David M. Clarke 47 Director Company and Holding
Lawrence G. Graev(2)(3) 53 Director Company and Holding
Donald J. Hofmann, Jr.(1)(2)(3)(4) 40 Director Company and Holding
Mathew J. Lori 34 Director Company and Holding
</TABLE>
________________________________
(1)Member of the Stock Option Committee of Holding.
(2)Member of the Audit Committee of Holding.
(3)Member of the Audit Committee of the Company.
(4)Member of the Compensation Committee of the Company.
<PAGE>
ROBERTO BUARON has been Chairman and a Director of the Company since it was
organized in December 1990. He has also served as Chairman and a Director of
Holding since 1990. He is the Chairman and Chief Executive Officer of First
Atlantic Capital, Ltd. ("First Atlantic"), which he founded in 1989. From 1987
to 1989, he was an Executive Vice President with Overseas Partners, Inc., an
investment management firm. From 1983 to 1986, he was First Vice President of
Smith Barney, Inc., and a General Partner of First Century Partnership, its
venture capital affiliate. Prior to 1983, he was a Principal at McKinsey &
Company. Mr. Buaron is also a director of CFP Holdings, Inc., a processed meat
company.
MARTIN R. IMBLER has been President, Chief Executive Officer and a Director of
the Company since January 1991. He has also served as a Director of Holding
since January 1991, and as President of Holding since May 1996. From June 1987
to December 1990, he was President and Chief Executive Officer of Risdon
Corporation, a cosmetic packaging company. Mr. Imbler was employed by American
Can Company from 1981 to 1987, as Vice President and General Manager of the
East/South Region Food and General Line Packaging business from 1985 to 1987
and as Vice President, Marketing, from 1981 to 1985. Mr. Imbler is also a
Director of Portola Packaging, Inc., a manufacturer of closures used in the
dairy industry.
IRA G. BOOTS has been Executive Vice President, Operations, and a Director of
the Company since April 1992. Prior to that, Mr. Boots was Vice President of
Operations, Engineering and Product Development of the Company from December
1990 to April 1992. Mr. Boots was employed by Old Berry from 1984 to December
1990 as Vice President, Operations.
JAMES M. KRATOCHVIL was promoted to Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company in December 1997. He formerly
served as Vice President, Chief Financial Officer and Secretary of the Company
since 1991, and as Treasurer of the Company since May 1996. He was also
promoted to Executive Vice President, Chief Financial Officer and Secretary of
Holding in December 1997. He formerly served as Vice President, Chief
Financial Officer and Secretary of Holding since 1991. Mr. Kratochvil was
employed by Old Berry from 1985 to 1991 as Controller.
R. BRENT BEELER was promoted to Executive Vice President, Sales and Marketing
in February, 1996. He formerly served as Vice President, Sales and Marketing
of the Company since December 1990. Mr. Beeler was employed by Old Berry from
October 1988 to December 1990 as Vice President, Sales and Marketing.
RANDY HOBSON has been Vice President - Sales and Marketing of the Company since
June 1998. Mr. Hobson was Marketing Manager - Containers for the Company from
November 1997 to June 1998. Prior to that, he was a Regional Sales Manager
from 1992 to November 1997. Mr. Hobson joined Old Berry in 1988.
RUTH RICHMOND has been Assistant Secretary of Holding and the Company since
April 1998. Ms. Richmond has been Vice President, Planning and Administration
of the Company since January 1995. From January 1994 to December 1994, Ms.
Richmond was Vice President and Plant Manager-Henderson. Ms. Richmond was
Plant Manager-Henderson from February 1993 to January 1994 and Assistant
General Manager-Henderson from February 1991 to February 1993. Ms. Richmond
joined the accounting department of Old Berry in 1986.
DAVID WEAVER has been Vice President and Plant Manager-Lawrence of the Company
since January 1997. From January 1993 to January 1997, he was Vice President
and Plant Manager-Iowa Falls. From February 1992 to January 1993, Mr. Weaver
was Plant Manager-Iowa Falls and, prior to that, he was Maintenance Engineering
Supervisor from July 1990 to February 1992. Mr. Weaver was a Project Engineer
from January 1989 to July 1990 for Old Berry.
FREDRICK A. HESEMAN was promoted to Vice President and Plant Manager-Evansville
of the Company in December 1997. From October 1996 to December 1997, Mr.
Heseman was Plant Manager-Evansville, and prior to that, he was Engineering
Manager from December 1990 to October 1996. Mr. Heseman was employed by Old
Berry from June 1987 to December 1990 as Engineering Manager.
BRUCE J. SIMS has been Vice President, Sales and Marketing, Housewares of the
Company since January 1997. Prior to the PackerWare Acquisition, Mr. Sims
served as President of PackerWare from March 1996 to January 1997 and as Vice
President from October 1994 to March 1996. From January 1990 to October 1994,
he was Vice President of the Miner Container Corporation, a national injection
molder. Mr. Sims was Executive Vice President of MKM Distribution Company from
1985 to 1990.
GEORGE A. WILLBRANDT was promoted to Vice President, Sales and Marketing of the
Company in April 1997. He formerly served as Vice President, Sales and
Marketing of Berry Sterling since 1995. Prior to that, he was President and
co-owner of Sterling Products, which he founded in 1983.
JOSEPH S. LEVY has been Vice President and Assistant Secretary of the Company
and Holding since April 1995. Mr. Levy has been a Director of Holding and the
Company since April 1998. Mr. Levy has been a Vice President of First Atlantic
since December 1994. From 1991 to December 1994, Mr. Levy was an Associate at
First Atlantic.
DAVID M. CLARKE has been a Director of Holding and the Company since June 1996.
Mr. Clarke is a Managing Director with Aetna, Inc., a private equity investment
group and, prior to that, he had been a Vice President in the Investment Group
of Aetna Life Insurance Company from 1988 to 1996.
LAWRENCE G. GRAEV has been a Director of the Company and Holding since August
1995. Mr. Graev is the Chairman of the law firm of O'Sullivan Graev &
Karabell, LLP of New York, where he has been a partner since 1974. Mr. Graev
is also a Director of First Atlantic.
DONALD J. HOFMANN, JR. has been a Director of Holding and the Company since
June 1996. Mr. Hofmann has been a General Partner of Chase Capital Partners
since 1992. Prior to that, he was head of MH Capital Partners Inc., the equity
investment arm of Manufacturers Hanover.
MATHEW J. LORI has been a Director of the Company and Holding since October
1996. Mr. Lori has been a Principal with Chase Capital Partners since January
1998, and prior to that, Mr. Lori had been an Associate since April 1996. From
September 1993 to March 1996, he was an Associate in the Merchant Banking Group
of The Chase Manhattan Bank, N.A.
The New Stockholders Agreement contains provisions regarding the election of
directors. See "Certain Transactions - Stockholders Agreements."
BOARD COMMITTEES
The Board of Directors of Holding has an Audit Committee and a Stock Option
Committee, and the Board of Directors of the Company has an Audit Committee and
a Compensation Committee. The Audit Committees oversee the activities of the
independent auditors and internal controls. The Stock Option Committee
administers the BPC Holding Corporation 1996 Stock Option Plan. The
Compensation Committee makes recommendations to the Board of Directors of the
Company concerning salaries and incentive compensation for officers and
employees of the Company.
<PAGE>
Executive Compensation
The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during fiscal 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- --------------
<CAPTION>
SECURITIES
Fiscal UNDERLYING OTHER
Name and Principal Position YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------------------- -------- ------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Martin R. Imbler ....................... 1997 $ 307,396 $ 87,623 - $ 1,520
President and Chief Executive Officer 1996 292,078 128,993 8,472 595,848
1995 275,625 157,500 - 1,424
Douglas E. Bell(2) ..................... 1997 154,485 72,868 - 1,520
Executive Vice President, Sales and Marketing 1996 145,735 94,205 5,214 239,335
1995 137,525 124,428 - 1,424
Ira G. Boots ........................... 1997 151,691 72,868 - 1,520
Executive Vice President, Operations 1996 145,735 94,205 5,214 239,335
1995 137,525 124,428 - 1,424
James M. Kratochvil .................... 1997 119,459 56,307 - 1,520
Executive Vice President, Chief Financial 1996 112,614 72,796 3,259 120,427
Officer, Treasurer and Secretary 1995 106,270 96,150 - 1,424
R. Brent Beeler ......................... 1997 125,973 60,554 - 1,520
Executive Vice President, Sales and Marketing 1996 121,108 72,796 3,259 120,427
1995 106,270 96,150 - 1,424
</TABLE>
________________________
(1)Amounts shown reflect contributions by the Company under the Company's
401(k) plan and payments made in fiscal 1996 under a one-time deferred bonus
award plan. See "Certain Transactions - Management."
(2)Mr. Bell resigned from the Company in June 1998.
<PAGE>
FISCAL YEAR-END OPTION HOLDINGS
The following table provides information on the number of exercisable and
unexercisable management stock options held by the Named Executive Officers at
December 27, 1997.
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year-End at Fiscal Year-End
NAME EXERCISABILE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------- ---------------------------- -------------------------
(#)(2) (2)
Martin R. Imbler ............. 2,541/5,931 $55,902/$130,482
Douglas E. Bell .............. 1,564/3,650 34,408/80,300
Ira G. Boots ................. 1,564/3,650 34,408/80,300
James M. Kratochvil .......... 977/2,282 21,494/50,204
R. Brent Beeler .............. 977/2,282 21,494/50,204
</TABLE>
_______________________
(1)None of Holding's capital stock is currently publicly traded. The values
reflect management's estimate of the fair market value of the Class B Nonvoting
Common Stock at December 27, 1997.
(2)All options granted to management of the Company are exercisable for shares
of Class B Nonvoting Common Stock, par value $.01 per share, of Holding.
DIRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of
Directors of Holding or the Company, but directors are reimbursed for
out-of-pocket expenses incurred in connection with their duties as
directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Imbler (the "Imbler
Employment Agreement") that expires on June 30, 2001. Base
compensation under the Imbler Employment Agreement for fiscal 1997
was $307,396. The Imbler Employment Agreement also provides for an
annual performance bonus of $50,000 to $175,000 based upon the
Company's attainment of certain financial targets. The Company may
terminate Mr. Imbler's employment for "cause" or upon a "disability"
(as such terms are defined in the Imbler Employment Agreement). If
the Company terminates Mr. Imbler "without cause" (as defined in the
Imbler Employment Agreement), Mr. Imbler is entitled to receive,
among other things, the greater of (i) one year's salary or (ii) 1/12
of one year's salary for each year (not to exceed 24 years in the
aggregate) of employment with the Company. The Imbler Employment
Agreement also contains customary noncompetition, nondisclosure and
nonsolicitation provisions.
The Company also has employment agreements with each of Messrs.
Boots, Kratochvil and Beeler (each, an "Employment Agreement" and,
collectively, the "Employment Agreements"), each of which expires on
June 30, 2001. The Employment Agreements provided for fiscal 1997
base compensation of $151,691, $119,459 and $125,973, respectively.
Salaries are subject in each case to annual adjustment at the
discretion of the Compensation Committee of the Board of Directors of
the Company. The Employment Agreements entitle each executive to
participate in all other incentive compensation plans established for
executive officers of the Company. The Company may terminate each
Employment Agreement for "cause" or a "disability" (as such terms are
defined in the Employment Agreements). If the Company terminates an
executive's employment without "cause" (as defined in the Employment
Agreements), the Employment Agreements require the Company to pay
certain amounts to the terminated executive, including (i) the
greater of (A) one year's salary or (B) 1/12 of one year's salary for
each year (not to exceed 24 years in the aggregate) of employment
with the Company, and (ii) certain benefits under applicable
incentive compensation plans. Each Employment Agreement also
includes customary noncompetition, nondisclosure and nonsolicitation
provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established the Compensation Committee, comprised of
Messrs. Buaron, Imbler and Hoffman, in October 1996. The annual
salary and bonus paid to Messrs. Imbler, Bell, Boots, Kratochvil and
Beeler for fiscal 1997 were determined by the Compensation Committee
in accordance with their respective employment agreements. All other
compensation decisions with respect to officers of the Company are
made by Mr. Imbler pursuant to policies established in consultation
with the Compensation Committee.
The Company is party to an Amended and Restated Management Agreement
(the "FACL Management Agreement") with First Atlantic pursuant to
which First Atlantic provides the Company with financial advisory and
management consulting services in exchange for an annual fee of
$750,000 and reimbursement for out-of-pocket costs and expenses. In
consideration of such services, the Company paid First Atlantic fees
and expenses of $771,200 for fiscal 1997, $787,600 for fiscal 1996
and $816,900 for fiscal 1995. First Atlantic also received a
$100,000 advisory fee in both March and December 1995 for
originating, structuring and negotiating the Sterling Products
Acquisition and the Tri-Plas Acquisition, respectively. In
connection with the 1996 Transaction, the FACL Management Agreement
was amended to provide for a fee for services rendered in connection
with certain transactions equal to the lesser of (i) 1% of the total
transaction value and (ii) $1,250,000 for any such transaction
consummated plus out-of-pocket expenses in respect of such
transaction, whether or not consummated. Also in connection with the
1996 Transaction, Holding paid a fee of $1,250,000 plus reimbursement
for out-of-pocket expenses to First Atlantic for advisory services,
including originating, structuring and negotiating the 1996
Transaction. First Atlantic received advisory fees of approximately
$287,500 and $28,700 in January 1997 for originating, structuring and
negotiating the PackerWare Acquisition and the Container Industries
Acquisition, respectively. First Atlantic received advisory fees of
approximately $117,900 and $531,600 in May 1997 and August 1997,
respectively, for originating, structuring and negotiating the
Virginia Design Acquisition and the Venture Packaging Acquisition,
respectively. First Atlantic received an advisory fee of
approximately $140,000 in July 1998 for originating, structuring and
negotiating the Norwich Acquisition. See "Certain Transactions."
Mr. Buaron, the Chairman and a director of Holding and the Company,
is the Chairman and Chief Executive Officer of First Atlantic. Mr.
Graev is a director of First Atlantic. As an officer and the sole
stockholder of First Atlantic, Mr. Buaron is entitled to receive any
bonuses paid and any dividends declared by First Atlantic on its
capital stock, including any bonuses paid as a result of, and any
dividends paid out of, the $1,250,000 fee paid by Holding to First
Atlantic in connection with the 1996 Transaction or any of the fees
paid with respect to the acquisitions described above. First
Atlantic is engaged by International to provide certain financial and
management consulting services for which it receives annual fees.
First Atlantic and International have completely distinct ownership
and equity structures. See "Certain Transactions."
Atlantic Equity Partners, L.P. (the "AEP Fund"), a stockholder of
Holding prior to the consummation of the 1996 Transaction, received
approximately $67.6 million from the sale of its common stock in
Holding and warrants to purchase common stock. First Atlantic is
engaged by the AEP Fund to provide certain financial and management
consulting services for which it receives annual fees. First
Atlantic and the AEP Fund have completely distinct ownership and
equity structures. Atlantic Equity Associates, L.P., a Delaware
limited partnership ("AEA"), is the sole general partner of the AEP
Fund. Mr. Buaron is the sole shareholder of Buaron Capital
Corporation ("Buaron Capital"). Buaron Capital is the managing and
sole general partner of AEA. By virtue of their direct and indirect
ownership interests in the AEP Fund, Mr. Levy and Buaron Capital are
entitled to receive a portion of the proceeds from the sale of the
equity interests in Holding. See "Certain Transactions."
In connection with the 1996 Transaction, Mr. Imbler, a director of
the Company and Holding, and Messrs. Bell and Boots, a former
director and director of the Company, respectively, received
approximately $5.9 million, $2.5 million and $2.4 million,
respectively, from their sale of certain equity interests in Holding.
In connection with the 1994 Transaction, the Company paid a $50.0
million dividend on its common stock to Holding, and Holding
distributed that amount to its holders of equity interests. In
connection therewith, Holding agreed to pay cash bonuses, upon the
occurrence of certain events, to the members of management who held
options under Holding's 1991 Stock Option Plan in amounts equal to
the amounts they would have been entitled to had the shares of common
stock underlying their unvested options been outstanding at the time
of the declaration of the $50.0 million dividend by Holding. As a
result of the 1996 Transaction, such bonuses were paid to Messrs.
Imbler, Bell and Boots in the amounts of approximately $594,000,
$238,000 and $238,000, respectively. See "Certain Transactions."
In connection with the 1996 Transaction, Chase Securities, Inc.
("Chase Securities"), an affiliate of CVCA and Messrs. Hofmann and
Lori, received a fee of $500,000 for arranging the sale of $15.0
million of Holding's Common Stock to certain of the Common Stock
Purchasers and the sale of $15.0 million of Holding's Preferred Stock
to CVCA. Chase Manhattan Investment Holdings, Inc. ("CMIHI"), an
affiliate of Chase Securities and Messrs. Hofmann and Lori, received
approximately $13.6 million from the sale of equity interests of
Holding in the 1996 Transaction.
STOCK OPTION PLAN
Employees, directors and certain independent consultants of the
Company and its subsidiaries are entitled to participate in the BPC
Holding Corporation 1996 Stock Option Plan (the "Option Plan"), which
provides for the grant of both "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and stock options that are non-qualified under
the Code. The total number of shares of Class B Nonvoting Common
Stock of Holding for which options may be granted pursuant to the
Option Plan is 51,620. The Option Plan will terminate on October 3,
2003 or such earlier date on which the Board of Directors of Holding,
in its sole discretion, determines. The Stock Option Committee of
the Board of Directors of Holding administers all aspects of the
Option Plan, including selecting which of the Company's directors,
employees and independent consultants will receive options, the time
when options are granted, whether the options are incentive stock
options or non-qualified stock options, the manner and timing for
vesting of such options, the terms of such options, the exercise date
of any options and the number of shares subject to such options.
Directors who are also employees are eligible to receive options
under the Option Plan.
The exercise price of incentive stock options granted by Holding
under the Option Plan may not be less than 100% of the fair market
value of the Class B Nonvoting Common Stock at the time of grant and
the term of any option may not exceed seven years. With respect to
any employee who owns stock representing more than 10% of the voting
power of the outstanding capital stock of Holding, the exercise price
of any incentive stock option may not be less than 110% of the fair
market value of such shares at the time of grant and the term of such
option may not exceed five years. The exercise price of a non-
qualified stock option is determined by the Stock Option Committee on
the date the option is granted. However, the exercise price of a
non-qualified stock option may not be less than 100% of the fair
market value of Class B Nonvoting Common Stock if the option is
granted at any time after the initial public offering of such stock.
Options granted under the Option Plan are nontransferable except by
will and the laws of descent and distribution. Options granted under
the Option Plan typically expire after seven years and vest over a
five-year period based on timing as well as achieving financial
performance targets.
Under the Option Plan, as of December 27, 1997, there were
outstanding options to purchase an aggregate of 47,708 shares of
Class B Nonvoting Common Stock to 52 employees of the Company, at an
exercise price between $100 and $108 per share. Of that amount,
options to purchase an aggregate of 25,418 shares have been issued to
the Named Executive Officers in October 1996, at an exercise price of
$100 per share, including 8,472 to Mr. Imbler, 5,214 to each of
Messrs. Bell and Boots, and 3,259 to each of Messrs. Beeler and
Kratochvil.
<PAGE>
PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of the Company is owned by
Holding. The following table sets forth certain information
regarding the ownership of the capital stock of Holding with respect
to (i) each person known by Holding to own beneficially more than 5%
of the outstanding shares of any class of its voting capital stock,
(ii) each of Holding's directors, (iii) the Named Executive Officers
and (iv) all directors and officers as a group. Except as otherwise
indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned. Unless
otherwise indicated, the address for each stockholder is c/o Berry
Plastics Corporation, 101 Oakley Street, Evansville, Indiana 47710.
<TABLE>
<CAPTION>
Shares of Shares of
Voting Nonvoting
Common Stock(1) Common Stock(1)
----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage of
Percentage of All Classes of
Name and Address of Voting Common
Beneficial Owner Class A Class B Common Stock Class A Class B Class C Stock
(Fully-Diluted)
- ---------------------------------------------------------------------------------------------------------------------------
Atlantic Equity Partners
International II, L.P.(2) - 128,142 54.3% - 3,385 11,470 21.4%
Chase Venture
Associates,L.P.(3) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 33.4
BPC Equity, LLC(5) 31,200 - 13.2 88,800 - - 17.9
Roberto Buaron(6) - 128,142 54.3 - 3,385 11,470 21.4
Martin R.Imbler - 5,494 2.3 - 18,177 (7) 1,795 4.7
Joseph S. Levy(8) - 42 * - 118 14 *
David M. Clarke(9) 31,200 - 13.2 88,800 - - 17.9
Lawrence G. Graev(10) - - - - - - -
Donald J. Hofmann, Jr.(11) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 33.4
Mathew J. Lori(12) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 33.4
Douglas E. Bell - - - - 3,423 - *
Ira G. Boots - 2,280 1.0 - 8,054 (13) 744 2.2
James M. Kratochvil - 1,196 * - 4,381 (14) 391 *
R. Brent Beeler - 1,196 * - 4,381 (15) 391 *
All officers and directors as
a group (17 persons) 83,200 146,071 94.9 236,800 68,014 15,491 83.9
</TABLE>
____________________________
*Less than one percent.
(1)The authorized capital stock of Holding consists of 3,500,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value (the
"Holding Common Stock"), and 1,000,000 shares of Preferred Stock, $.01 par
value (the "Holding Preferred Stock"). Of the 2,500,000 shares of Holding
Common Stock, 500,000 shares are designated Class A Voting Common Stock,
500,000 shares are designated Class A Nonvoting Common Stock, 500,000 shares
are designated Class B Voting Common Stock, 500,000 shares are designated Class
B Nonvoting Common Stock, and 500,000 shares are designated Class C Nonvoting
Common Stock. Of the 1,000,000 shares of Holding Preferred Stock, 600,000
shares are designated Series A Senior Cumulative Exchangeable Preferred Stock,
and 200,000 shares are designated Series B Cumulative Preferred Stock.
(2)Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman,
Cayman Islands, British West Indies. Atlantic Equity Associates International
II, L.P., a Delaware limited partnership ("AEA II"), is the sole general
partner of International and as such exercises voting and/or investment power
over shares of capital stock owned by International, including the shares of
Holding Common Stock held by International (the "International Shares"). Mr.
Buaron is the sole shareholder of Buaron Holdings Ltd. ("BHL"). BHL is the
sole general partner of AEA II. As the general partner of AEA II, BHL may be
deemed to beneficially own the International Shares. BHL disclaims any
beneficial ownership of any shares of capital stock owned by International,
including the International Shares. Through his affiliation with BHL and AEA
II, Mr. Buaron controls the sole general partner of International and therefore
has the authority to control voting and/or investment power over, and may be
deemed to beneficially own, the International Shares. Mr. Buaron disclaims any
beneficial ownership of any of the International Shares.
(3)Address is 380 Madison Avenue, 12th Floor, New York, New York 10017.
(4)Represents warrants to purchase such shares of common stock held by CVCA
which are currently exercisable.
(5)Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151
Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance Company
exercises voting and/or investment power over shares of capital stock owned by
BPC Equity, LLC ("BPC Equity"), including shares of Holding Common Stock held
by BPC Equity.
(6)Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York 10022. Represents shares of Holding Common Stock owned by
International. Mr. Buaron is the sole shareholder of BHL. BHL is the sole
general partner of AEA II. AEA II is the sole general partner of International
and as such, exercises voting and/or investment power over shares of capital
stock owned by International, including the International Shares. Mr. Buaron,
as the sole shareholder and Chief Executive Officer of BHL, controls the sole
general partner of International and therefore has voting and/or investment
power over, and may be deemed to beneficially own, the International Shares.
Mr. Buaron disclaims any beneficial ownership of the International Shares.
(7)Includes 2,541 options granted to Mr. Imbler, which are presently
exercisable.
(8)Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York 10022.
(9)Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151
Farmington Avenue, Hartford, Connecticut 06156. Represents shares owned by BPC
Equity. Mr. Clarke is a Managing Director of Aetna, Inc., an affiliate of
Aetna Life Insurance Company, which is a member of BPC Equity. Mr. Clarke
disclaims any beneficial ownership of the shares of Holding Common Stock held
by BPC Equity.
(10)Address is c/o O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New
York, New York 10112.
(11)Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares owned by CVCA. Mr. Hofmann is a
General Partner of Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of CVCA.
Mr. Hofmann disclaims any beneficial ownership of the shares of Holding Common
Stock held by CVCA.
(12)Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares owned by CVCA. Mr. Lori is a
Principal with Chase Capital Partners, which is the private equity investment
arm of Chase Manhattan Corporation, which is an affiliate of CVCA. Mr. Lori
disclaims any beneficial ownership of the shares of Holding Common Stock held
by CVCA.
(13)Includes 1,564 options granted to Mr. Boots, which are currently
exercisable.
(14)Includes 977 options granted to Mr. Kratochvil, which are currently
exercisable.
(15)Includes 977 options granted to Mr. Beeler, which are currently
exercisable.
<PAGE>
CERTAIN TRANSACTIONS
FIRST ATLANTIC
Pursuant to the FACL Management Agreement, First Atlantic provides the Company
with financial advisory and management consulting services in exchange for an
annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses.
In consideration of such services, the Company paid First Atlantic fees and
expenses of approximately $771,200 for fiscal 1997, $787,600 for fiscal 1996
and $816,900 for fiscal 1995. First Atlantic also received a $100,000 advisory
fee in both March and December 1995 for originating, structuring and
negotiating the Sterling Products Acquisition and the Tri-Plas Acquisition,
respectively. In connection with the 1996 Transaction, the FACL Management
Agreement was amended to provide for a fee for services rendered in connection
with certain transactions equal to the lesser of (i) 1% of the total
transaction value and (ii) $1,250,000 for any such transaction consummated plus
out-of-pocket expenses in respect of such transaction, whether or not
consummated. Also in connection with the 1996 Transaction, Holding paid a fee
of $1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic
for advisory services, including originating, structuring and negotiating the
1996 Transaction. First Atlantic received advisory fees of approximately
$287,500 and $28,700 in January 1997 for originating, structuring and
negotiating the PackerWare Acquisition and the Container Industries
Acquisition, respectively. First Atlantic received advisory fees of
approximately $117,900 and $531,600 in May 1997 and August 1997, respectively,
for originating, structuring and negotiating the Virginia Design Acquisition
and the Venture Packaging Acquisition, respectively. First Atlantic received
an advisory fee of approximately $140,000 in July 1998 for originating,
structuring and negotiating the Norwich Acquisition.
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. As an officer and the
sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any
bonuses paid and any dividends declared by First Atlantic on its capital stock,
including any bonuses paid as a result of, and any dividends paid out of, the
$1,250,000 fee paid by Holding to First Atlantic in connection with the 1996
Transaction or any of the fees paid with respect to the acquisitions described
above. Mr. Graev is also a director of First Atlantic, and Mr. Levy is an
officer of First Atlantic. First Atlantic is engaged by International to
provide certain financial and management consulting services for which it
receives annual fees. First Atlantic and International have completely
distinct ownership and equity structures.
The AEP Fund, a stockholder of Holding prior to the consummation of the 1996
Transaction, received approximately $67.6 million from the sale of its common
stock in Holding and warrants to purchase common stock. First Atlantic is
engaged by the AEP Fund to provide certain financial and management consulting
services for which it receives annual fees. First Atlantic and the AEP Fund
have completely distinct ownership and equity structures. AEA is the sole
general partner of the AEP Fund. Mr. Buaron is the sole shareholder of Buaron
Capital, and Buaron Capital is the managing and sole general partner of AEA.
By virtue of their direct and indirect ownership interests in the AEP Fund, Mr.
Levy and Buaron Capital are entitled to receive a portion of the proceeds from
the sale of the equity interests in Holding.
MANAGEMENT
In connection with the 1996 Transaction, Messrs. Imbler, Bell, Boots,
Kratochvil and Beeler received approximately $5.9 million, $2.5 million, $2.4
million, $1.3 million and $1.3 million, respectively, from their sale of
certain equity interests in Holding. In connection with the 1994 Transaction,
the Company paid a $50.0 million dividend on its common stock to Holding, and
Holding distributed that amount to its holders of equity interests. In
connection therewith, Holding agreed to pay cash bonuses, upon the occurrence
of certain events, to the members of management who held options under
Holding's 1991 Stock Option Plan in amounts equal to the amounts they would
have been entitled to had the shares of common stock underlying their unvested
options been outstanding at the time of the declaration of the $50.0 million
dividend by Holding. As a result of the 1996 Transaction, such bonuses were
paid to Messrs. Imbler, Bell, Boots, Kratochvil and Beeler in the amounts of
approximately $594,000, $238,000, $238,000, $119,000 and $119,000,
respectively.
STOCKHOLDERS AGREEMENTS
In connection with the 1996 Transaction, Holding entered into a Stockholders
Agreement dated as of June 18, 1996 (the "New Stockholders Agreement") with the
Common Stock Purchasers, certain Management Stockholders (as defined herein)
and, for limited purposes thereunder, the Preferred Stock Purchasers. The New
Stockholders Agreement grants the Common Stock Purchasers certain rights and
obligations, including the following: (i) until the occurrence of certain
events specified in the New Stockholders Agreement, to designate the members of
a seven person Board of Directors as follows: (A) one director will be Roberto
Buaron or his designee; (B) International will have the right to designate
three directors (who are currently Messrs. Graev, Imbler and Levy); (C) CVCA
will have the right to designate two directors (who are currently Messrs.
Hofmann and Lori); and (D) the institutional holders (excluding International
and CVCA) will have the right to designate one director (who is currently Mr.
Clarke); (ii) in the case of certain Common Stock Purchasers, to subscribe for
a proportional share of future equity issuances by Holding; (iii) under certain
circumstances and in the case of International or CVCA, to cause the initial
public offering of equity securities of Holding or a sale of Holding subsequent
to the fifth anniversary of the closing of the 1996 Transaction and (iv) under
certain circumstances and in the case of a majority in interest of the
institutional holders, to cause the initial public offering of equity
securities of Holding or a sale of Holding subsequent to the sixth anniversary
of the closing of the 1996 Transaction. Provisions under the New Stockholders
Agreement also (i) prohibit Holding from taking certain actions without the
consent of holders of a majority of voting stock held by CVCA and the
institutional holders other than International (or, following the occurrence of
certain events, International's consent), including certain transactions
between Holding and any subsidiary, on the one hand, and First Atlantic or any
of its affiliates, on the other hand; (ii) obligate Holding to provide certain
Common Stock Purchasers with financial and other information regarding Holding
and to provide access and inspection rights to all Common Stock Purchasers; and
(iii) restrict transfers of equity by the Common Stock Purchasers, subject to
certain exceptions (including for transfers of up to 10% of the equity
(including warrants to purchase equity) held by each Common Stock Purchaser on
the date of the New Stockholders Agreement). Pursuant to the New Stockholders
Agreement, under certain circumstances the Preferred Stock Purchasers (and
their transferees) have tag-along rights with respect to the 1996 Warrants and
the Holding Common Stock issuable upon exercise of the 1996 Warrants. Under
specified circumstances and subject to certain exceptions, the Preferred Stock
Purchasers (and their transferees) are entitled to include a pro rata share of
their Preferred Stock in a transaction (or series of related transactions)
involving the transfer by International, CVCA and the Institutional Holders (as
defined in the New Stockholders Agreement) of more than 50% of the aggregate
amount of securities held by them immediately following the closing of the 1996
Transaction.
The New Stockholders Agreement grants registration rights, under certain
circumstances and subject to specified conditions, to the Common Stock
Purchasers. International and CVCA each have the right, on three occasions, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. Under certain circumstances, a majority in interest of the
institutional holders (excluding International and CVCA) have the right, on one
occasion, to demand registration, at Holding's expense, of their shares of
Holding Common Stock. The New Stockholders Agreement provides that if Holding
proposes to register any of its securities, either for its own account or for
the account of other stockholders, Holding will be required to notify all
Common Stock Purchasers and to include in such registration the shares of
Holding Common Stock requested to be included by them. All shares of Holding
Common Stock owned by the Common Stock Purchasers requested to be included in a
registration will be subject to cutbacks under certain circumstances in
connection with an underwritten public offering.
The provisions of the New Stockholders Agreement regarding voting rights,
negative covenants, information/inspection rights, the right to force a sale of
Holding, preemptive rights and transfer restrictions generally will expire on
the earlier to occur of (i) the later of (A) the fifth anniversary of the
closing of the 1996 Transaction if an underwritten public offering of equity
securities of Holding resulting in gross proceeds of at least $20.0 million
occurs prior to such fifth anniversary and (B) the occurrence of such
underwritten public offering that occurs subsequent to such fifth anniversary
of the closing of the 1996 Transaction; (ii) the twentieth anniversary of the
closing of the 1996 Transaction; and (iii) a sale of Holding. In addition, the
New Stockholders Agreement provides that certain rights of a Common Stock
Purchaser (to the extent such rights apply to such Common Stock Purchaser) to
designate members of the Board of Directors of Holding and/or to approve
certain actions by Holding will terminate if certain circumstances occur.
Holding is also party to the Amended and Restated Stockholders Agreement dated
June 18, 1996 (the "Management Stockholders Agreement"), with International and
all management shareholders including, among others, Messrs. Imbler, Boots,
Kratochvil and Beeler (collectively, the "Management Stockholders"). The
Management Stockholders Agreement contains provisions (i) limiting transfers of
equity by the Management Stockholders; (ii) requiring the Management
Stockholders to sell their shares as designated by Holding or International
upon the consummation of certain transactions; (iii) granting the Management
Stockholders certain rights of co-sale in connection with sales by
International; (iv) granting Holding rights to repurchase capital stock from
the Management Stockholders upon the occurrence of certain events; and (v)
requiring the Management Stockholders to offer shares to Holding prior to any
permitted transfer.
CHASE SECURITIES, INC.
In connection with the 1996 Transaction, Chase Securities, an affiliate of CVCA
and Messrs. Hofmann and Lori, who are members of the Board of Directors of
Holding and the Company, received a fee of $500,000 for arranging the sale of
$15.0 million of Holding's Common Stock to certain of the Common Stock
Purchasers and the sale of $15.0 million of Holding Preferred Stock to CVCA.
CMIHI, an affiliate of Chase Securities and Messrs. Hofmann and Lori, received
approximately $13.6 million from the sale of equity interests of Holding in the
1996 Transaction.
LEGAL SERVICES
Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP,
New York, New York. O'Sullivan Graev & Karabell, LLP provides legal services
to the Company and Holding in connection with certain matters, principally
relating to transactional, securities law, general corporate and litigation
matters. See "Legal Matters."
TRANSACTIONS WITH AFFILIATES
The 1996 Indenture, the New Stockholders Agreement, the 1994 Indenture and the
Credit Facility restrict, and the Indenture will restrict, the Company's and
its affiliates' ability to enter into transactions with their affiliates,
including their officers, directors and principal stockholders.
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
HOLDING 1996 NOTES
On June 18, 1996, Holding, as part of a recapitalization, issued 12.50% Senior
Secured Notes due 2006 (the "1996 Offering") for net proceeds, after expenses,
of approximately $100.2 million (or $64.6 million after deducting the amount of
such net proceeds used to purchase marketable securities available for payment
of interest on the notes). These notes were exchanged in October 1996 for the
12.50% Series B Senior Secured Notes due 2006. Interest on the 1996 Notes is
payable semi-annually on June 15 and December 15 of each year. In addition,
from December 15, 1999 until June 15, 2001, Holding may, at its option, pay
interest, at an increased rate of 0.75% per annum, in additional 1996 Notes
valued at 100% of the principal amount thereof.
In connection with the 1996 Notes, $35.6 million was placed in escrow, which
has been invested in U.S. government securities, to pay three years' interest
on the notes. Pending disbursement, the trustee under the 1996 Indenture will
have a first priority lien on the escrow account for the benefit of the holders
of the 1996 Notes. Funds may be disbursed from the escrow account only to pay
interest on the 1996 Notes and, upon certain repurchases or redemptions of the
1996 Notes, to pay principal of and premium, if any, thereon. The balance in
the escrow account as of December 27, 1997 was $18.9 million.
The 1996 Notes rank senior in right of payment to all existing and future
subordinated indebtedness of Holding, including Holding's subordinated
guarantee of the 1994 Notes and the Notes and PARI PASSU in right of payment
with all senior indebtedness of Holding. The 1996 Notes are effectively
subordinated to all existing and future senior indebtedness of Berry, including
borrowings under the Credit Facility, the Nevada Bonds and the South Carolina
Bonds.
BERRY 1994 NOTES
On April 21, 1994, Berry completed an offering of 100,000 units consisting of
$100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation
Senior Subordinated Notes due 2004 and 100,000 warrants to purchase 1.13237
shares of Class A Common Stock, $.00005 par value, of Holding. The 1994 Notes
mature on April 15, 2004 and interest is payable semi-annually on October 15
and April 15 of each year and commenced on October 15, 1994. The 1994 Notes
are unconditionally guaranteed on a senior subordinated basis by the
Guarantors. The net proceeds to Berry from the sale of the 1994 Notes, after
expenses, were $93.0 million.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the 1994 Notes. Subsequent to April 15, 1999, the 1994 Notes
may be redeemed at the option of Berry, in whole or in part, at redemption
prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a
change in control, as defined in the 1994 Indenture, each holder of 1994 Notes
will have the right to require Berry to repurchase all or any part of such
holder's notes at a repurchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued interest.
The 1994 Notes rank PARI PASSU with the Notes and PARI PASSU with or senior in
right of payment to all existing and future subordinated indebtedness of Berry.
The 1994 Notes rank junior in right of payment to all existing and future
Senior Indebtedness of Berry, including borrowings under the Credit Facility,
the Nevada Bonds and the South Carolina Bonds.
The 1994 Indenture contains certain covenants which, among other things, limit
Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell,
lease or transfer assets, make dividend payments and engage in transactions
with affiliates.
CREDIT FACILITY
Concurrent with the Venture Packaging Acquisition, the Company amended its then
existing financing and security agreement (the "Security Agreement") with
NationsBank, N.A. for a senior secured line of credit to increase the
commitments thereunder to an aggregate principal amount of $127.2 million (the
"Credit Facility"). Concurrently with the Norwich Acquisition, the Credit
Facility was amended and increased to $132.6 million (plus an additional
revolving credit facility of pound-sterling 1.5 million (the "UK Revolver")
and a term loan facility of pound-sterling 4.5 million (the "UK Term Loan"),
each for NIM Holdings and Norwich). The indebtedness under the Credit Facility
is guaranteed by Holding and substantially all of its subsidiaries. The Credit
Facility replaced the facility previously provided by Fleet Capital
Corporation.
The Credit Facility provides the Company with (i) a $50.0 million revolving
line of credit, subject to a borrowing base formula and a reserve for certain
obligations under the South Carolina Bonds, (ii) the UK Revolver, subject to a
borrowing base, (iii) a $63.7 million term loan facility, (iv) the UK Term Loan
and (v) a $12.6 million standby letter of credit facility to support the
Company's and its subsidiaries' obligations under the Nevada Bonds and the
South Carolina Bonds. The Credit Facility also provides for a $5.4 million
term loan facility, the proceeds of which were used to retire in July 1998 the
Company's and its subsidiaries' obligations under the Iowa Bonds, on which
Berry Iowa had agreed, pursuant to a Loan and Trust Agreement with The City of
Iowa Falls, Iowa, to pay amounts sufficient to pay principal, interest and any
premium with respect to the Iowa Bonds. The Company borrowed all amounts
available under the term loan facility and the UK Term Loan to finance the
PackerWare Acquisition, the Virginia Design Acquisition, the Venture Packaging
Acquisition and the Norwich Acquisition. At June 27, 1998, the Company had
unused borrowing capacity under the Credit Facility's revolving line of credit
of approximately $19.4 million. At June 27, 1998, on a pro forma basis after
giving effect to (i) the Offering and the application of the proceeds therefrom
and (ii) the Norwich Acquisition, the Company had unused borrowing capacity
under the Credit Facility's revolving line of credit of approximately $41.6
million.
The Credit Facility matures on January 21, 2002 unless previously terminated by
the Company or by the lenders upon an Event of Default as defined in the
Security Agreement. The term loan facility requires periodic payments, varying
in amount, through the maturity of the facility. After giving effect to the
Offering and the application of the proceeds therefrom, such periodic payments
will aggregate $9.0 million for the remainder of fiscal 1998 and $18.9 million
for fiscal 1999. Interest on borrowings under the Credit Facility is based on
either (i) the lender's base rate (which is the higher of the lender's prime
rate and the federal funds rate plus 0.50%) plus an applicable margin of 0.50%
or (ii) LIBOR (adjusted for reserves) plus an applicable margin of 2.0%, at the
Company's option. Following receipt of the financial statements for the period
ending June 30, 1998, the agent under the Credit Facility will have the option
to change the applicable interest rate margin on loans (other than under the UK
Revolver and UK Term Loan) once per quarter to a specified margin determined by
the ratio of funded debt to EBITDA of the Company and its subsidiaries.
Notwithstanding the foregoing, interest on borrowings under the UK Revolver and
the UK Term Loan is based on LIBOR (adjusted for reserves) plus 2.50%.
The Credit Facility contains various covenants which include, among other
things: (i) maintenance of certain financial ratios and compliance with certain
financial tests and limitations, (ii) limitations on the issuance of additional
indebtedness and (iii) limitations on capital expenditures.
NEVADA INDUSTRIAL REVENUE BONDS
The Company is party to a Financing Agreement with the City of Henderson,
Nevada Public Improvement Trust (the "Nevada Issuer"), pursuant to which the
Company has agreed to pay to the Nevada Issuer amounts sufficient to pay
principal, interest and any premium on the Nevada Industrial Revenue Bonds (the
"Nevada Bonds").
The Nevada Bonds bear interest at a variable rate (4.6% at December 27, 1997
and December 28, 1996), require annual principal payments of $0.5 million on
each April 1 until maturity, are collateralized by irrevocable letters of
credit issued by NationsBank under the Credit Facility and mature in April
2007.
SOUTH CAROLINA INDUSTRIAL DEVELOPMENT BONDS
Venture Holdings is party to a Loan Agreement with the South Carolina Jobs -
Economic Development Authority (the "South Carolina Issuer"), pursuant to which
Venture Holdings has agreed to pay to the South Carolina Issuer amounts
sufficient to pay principal, interest and any premium on the South Carolina
Industrial Development Revenue Bonds (the "South Carolina Bonds").
The South Carolina Bonds bear interest at a variable rate (4.3% at December 27,
1997), require semi-annual principal payments of $0.3 million on each April 1
and October 1 until maturity with a final balloon payment of $0.9 on April 1,
2010, and are collateralized by irrevocable letters of credit issued by
NationsBank under the Credit Facility.
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an Indenture
(the "Indenture") between the Company and United States Trust Company of New
York, as trustee (the "Trustee"), and the Old Notes were, and the New Notes
will be, guaranteed, on a senior subordinated basis, by the Guarantors. The
terms of the New Notes are identical in all material respects to the Old Notes,
except that the New Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not
contain certain provisions providing for an increase in the interest rate on
the Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate upon the consummation of the
Exchange Offer.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and the Trust Indenture Act
for a complete statement thereof. The following summary of certain provisions
of the Indenture does not purport to be complete and is qualified in its
entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the Indenture is available as set forth
under "Available Information." The definitions of certain terms used in the
following summary are set forth below under "- Certain Definitions."
The Notes rank PARI PASSU with the 1994 Notes and PARI PASSU with or senior in
right of payment to all existing and future subordinated Indebtedness of the
Company. The Notes rank junior in right of payment to all existing and future
Senior Indebtedness of the Company, including borrowings under the Credit
Facility, the Nevada Bonds and the South Carolina Bonds. Each Guarantor's Note
Guarantee ranks PARI PASSU with or senior in right of payment to all existing
and future subordinated Indebtedness of such Guarantor and ranks junior in
right of payment to all existing and future Senior Indebtedness of such
Guarantor, including such Guarantor's Guarantee of borrowings under the Credit
Facility, the Nevada Bonds and the South Carolina Bonds.
The terms of the Notes are identical in all material respects to the terms of
the 1994 Notes, except that the 1994 Notes have a priority upon the payment of
proceeds pursuant to an Asset Sale. Since the Notes will be issued pursuant to
a separate indenture from the 1994 Notes, holders of the Notes will vote as a
separate class from holders of the 1994 Notes.
PRINCIPAL, MATURITY AND INTEREST
The Notes are unsecured obligations of the Company, limited in aggregate
principal amount to $100.0 million, of which $25.0 million was issued in the
Offering, and will mature on April 15, 2004. Interest on the Notes accrues at
the rate of 12 1/4% per annum and will be payable semi-annually in arrears on
October 15 and April 15, commencing on October 15, 1998, to Holders of record
on the immediately preceding October 1 and April 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance. Additional Notes
("Additional Notes") may be issued from time to time after the Offering,
subject to the provisions of the Indenture described below under the caption
"-Certain Covenants - Incurrence of Indebtedness and Issuance of Disqualified
Stock." The Notes and any Additional Notes subsequently issued will be treated
as a single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. Interest
is computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal and interest and Liquidated Damages, if any, on the Notes is payable
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to April 15, 1999.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if
any, thereon, to the applicable redemption date, if redeemed during the twelve-
month period beginning on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR Percentage
------ ----------
<S> <C>
1999 ......................................... 106.125%
2000 ......................................... 104.083%
2001 ......................................... 102.042%
2002 and thereafter .......................... 100.000%
</TABLE>
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (the "Change
of Control Payment"). Within 10 days following any Change of Control, the
Company will mail a notice to each Holder stating: (1) that the Change of
Control Offer is being made pursuant to the covenant entitled "Change of
Control" and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date; (5) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (7) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes in connection with a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful,
(1) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer, (2) deposit with the Paying Agent an amount equal to
the Change of Control Payment in respect of all Notes or portions thereof so
tendered and (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent will promptly mail to each
Holder of Notes so accepted the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. Prior to making the Change of Control Payment, but in any event
within 90 days following a Change of Control, the Company shall either repay
all outstanding Designated Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Designated Senior
Indebtedness to permit the repurchase of Notes required by this covenant. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
As noted above, one of the events that constitutes a Change of Control under
the Indenture is a sale, lease or transfer of all or substantially all of
Holding's or the Company's assets. The Indenture is governed by New York law,
and there is no established quantitative definition under New York law of
"substantially all" of the assets of a corporation. Accordingly, if Holding or
the Company were to engage in a transaction in which it disposed of less than
all of their respective assets, a question of interpretation could arise as to
whether such disposition was "substantially all" of their respective assets and
whether the Company was required to make a Change of Control Offer. In such
cases, the Company might not be required to make a Change of Control Offer and
would be permitted, subject to the restrictions contained in the Indenture,
including with respect to Restricted Payments, to find alternative uses for the
proceeds of such sale. Pursuant to the terms of the Indenture, however, the
Company could be required to make an Asset Sale Offer in such circumstances.
Neither the Board of Directors of Holding nor the Trustee may waive the
operation of the Change of Control covenant.
The Credit Facility provides that events similar to a Change of Control will
constitute an event of default thereunder. Upon the occurrence of an event of
default under the Credit Facility, all amounts outstanding thereunder may
become due and payable. All indebtedness of the Company under the Credit
Facility, which may be up to $132.6 million (plus pound-sterling 1.5 million
under the UK Revolver and pound-sterling 4.5 million under the UK Term Loan),
is Senior Indebtedness. Accordingly, in the event of an event of default under
the Credit Facility, including with respect to an event similar to a Change of
Control, the subordination provisions contained in the Indenture will prohibit
the Company (if the holders of Senior Indebtedness issue a notice to the
Company to such effect) from making any payment on the Notes until such event
of default is cured or upon the expiration of 179 days (unless the holders of
Senior Indebtedness accelerate the maturity of the Senior Indebtedness). See
"- Subordination."
The provisions of the Indenture may not afford Holders of Notes the right to
require the Company to repurchase the Notes in the event of a highly leveraged
transaction or certain transactions with Holding's management or affiliates,
including a reorganization, restructuring, merger or similar transaction
(including, in certain circumstances, an acquisition of Holding by its
management or affiliates) involving Holding that may adversely affect Holders
of Notes, if such transaction is not a transaction defined as a "Change of
Control." A transaction involving Holding's management or affiliates, or a
transaction involving a recapitalization of Holding, may result in a Change of
Control if it is the type of transaction specified by such definition.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of Holding, and,
thus, the removal of incumbent management. The Change of Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate Holding's stock or to obtain control of Holding by means
of a merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change
of Control purchase feature is a result of negotiations between the Company and
the Initial Purchaser. Management has no present intention to engage in a
transaction involving a Change of Control, although it is possible that Holding
would decide to do so in the future. Subject to the limitations discussed
below, Holding could, in the future, enter into certain transactions including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase the
amount of indebtedness outstanding at such time or otherwise affect Holding's
capital structure or credit ratings.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale,
lease or transfer, in one or a series of related transactions, of all or
substantially all of Holding's or the Company's assets to any person or group
(as such term is used in Section 13(d)(3) of the Exchange Act) (other than the
Principal and his Related Parties (as defined herein)), (ii) the adoption of a
plan relating to the liquidation or dissolution of Holding or the Company,
(iii) the acquisition by any person or group (as such term is used in Section
13(d)(3) of the Exchange Act) (other than by the Principal and his Related
Parties) of a direct or indirect interest in more than 35% of the voting power
of the voting stock of Holding by way of purchase, merger or consolidation or
otherwise if (a) such person or group (as defined above) (other than the
Principal and his Related Parties) owns, directly or indirectly, more of the
voting power of the voting stock of Holding than the Principal and his Related
Parties and (b) such acquisition occurs prior to the Initial Public Offering,
(iv) the acquisition by any person or group (as such term is used in Section
13(d)(3) of the Exchange Act) (other than by the Principal and his Related
Parties) of a direct or indirect interest in more than 50% of the voting power
of the voting stock of Holding by way of purchase, merger or consolidation or
otherwise if such acquisition occurs subsequent to the Initial Public Offering
or (v) the first day on which a majority of the members of the Board of
Directors of Holding are not Continuing Directors.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of Holding who (i) was a member of such Board of
Directors on the Issuance Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"INITIAL PUBLIC OFFERING" means a public offering of the Common Stock of
Holding that first results in the Common Stock of Holding becoming listed for
trading on a Stock Exchange.
"PRINCIPAL" means Roberto Buaron.
"RELATED PARTY" means with respect to the Principal (A) any spouse, sibling or
descendant of such Principal (whether or not such relationship arises from
birth, adoption or marriage or despite such relationship being dissolved by
divorce) or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding a
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
"STOCK EXCHANGE" means the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, conduct an Asset Sale (as defined herein), unless (x) the
Company (or the Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee no later than immediately prior to the consummation of
such proposed Asset Sale with respect to any Asset Sale involving aggregate
payments in excess of $1 million) of the assets sold or otherwise disposed of
and (y) at least 75% of the consideration therefor received by the Company or
such Subsidiary is in the form of cash; PROVIDED, HOWEVER, that the amount of
(A) any liabilities (as shown on the Company's or such Subsidiary's most recent
balance sheet or in the notes thereto), of the Company or any Subsidiary (other
than liabilities that are by their terms subordinated to the Notes or any
Guarantee thereof) that are assumed by the transferee of any such assets and
(B) any notes or other obligations received by the Company or any such
Subsidiary from such transferee that are immediately converted by the Company
or such Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 180 days after any Asset Sale, the Company may apply the Net Proceeds
from such Asset Sale to either (a) permanently reduce Senior Indebtedness, or
(b) make an investment in another business or capital expenditure or other
long-term/tangible assets, in each case, in the same or a similar line of
business as the Company was engaged in on the Issuance Date. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Bank Indebtedness or otherwise invest such Net Proceeds in Cash Equivalents.
Any Net Proceeds from the Asset Sale that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." If the aggregate amount of Excess Proceeds exceeds $5
million, upon completion of the Asset Sale Offer required under the 1994
Indenture, the Company shall make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes, that is an
integral multiple of $1,000, that may be purchased out of the Excess Proceeds,
if any, remaining upon completion of the Asset Sale Offer required under the
1994 Indenture, at an offer price in cash in an amount equal to 101% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased
in the manner described under the caption "Selection and Notice" below. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset to zero. The Indenture will also provide that the Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with an Asset Sale.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any
property or assets of the Company or any Subsidiary (including by way of a
sale-and-leaseback) other than sales of inventory in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company shall be governed by the
provisions of the Indenture described above under the caption "-Change of
Control" and the provisions described below under the caption "- Certain
Covenants - Merger, Consolidation or Sale of Assets"), or (ii) the issuance or
sale of Equity Interests of any of its Subsidiaries, in the case of either
clause (i) or (ii) above, whether in a single transaction or a series of
related transactions, (a) that have a fair market value in excess of $250,000,
or (b) for net proceeds in excess of $250,000. For purposes of this
definition, the term "Asset Sale" shall not include (i) the transfer of assets
by the Company to a Wholly Owned Subsidiary of the Company or by a Wholly Owned
Subsidiary of the Company to the Company or to another Wholly Owned Subsidiary
of the Company, (ii) any Restricted Payment, dividend or purchase or retirement
of Equity Interests permitted under the covenant entitled "Restricted Payments"
or (iii) the issuance or sale of Equity Interests of any Subsidiary of the
Company, PROVIDED that such Equity Interests are issued or sold in
consideration for the acquisition of assets by such Subsidiary or in connection
with a merger or consolidation of another Person into such Subsidiary.
The Credit Facility restricts the Company from purchasing any Notes prior to
the termination thereof and provides that certain change of control events with
respect to Holding and asset sales would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Indebtedness to
which the Company becomes a party may contain similar or more restrictive
provisions. In the event a Change of Control or Asset Sale occurs at a time
when the Company is prohibited from purchasing Notes, the Company could seek
the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does
not obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute an default under the Credit
Facility. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be purchased in an Asset Sale Offer or
redeemed at any time, selection of Notes for purchase or redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if the
Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate, PROVIDED that no Notes of $1,000 or
less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the purchase or redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be purchased
or redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be purchased or
redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed portion
of any Note purchased or redeemed in part will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date, interest ceases to accrue on Notes or portions
thereof purchased or called for redemption.
SUBORDINATION
The payment of principal of, and premium, if any, interest and Liquidated
Damages, if any, on, the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Indebtedness
of the Company, whether outstanding on the Issuance Date or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness of the Company will
be entitled to receive payment in full of all Obligations due in respect of
such Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness of the
Company, whether or not such interest was an allowed claim) before the Holders
of Notes will be entitled to receive any payment with respect to the Notes and,
until all such Obligations with respect to Senior Indebtedness of the Company
are paid in full, any distribution to which the Holders of Notes would
otherwise be entitled shall be made to the holders of Senior Indebtedness of
the Company (except that Holders of Notes may receive securities that are
subordinated, at least to the same extent as are the Notes, to Senior
Indebtedness and to any securities issued in exchange for any such Senior
Indebtedness).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (a) a default in the payment when
due, whether upon acceleration or otherwise, of the principal of, premium, if
any, or interest on any Senior Indebtedness of the Company occurs and is
continuing or (b) any other default occurs and is continuing with respect to
any Designated Senior Indebtedness and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or from, or on behalf
of, the holders of any such Designated Senior Indebtedness. Payments on the
Notes may and shall be resumed (i) in the case of a payment default, upon the
date on which such default is cured or waived and (ii) in the case of a
nonpayment default, on the earlier of the date on which such nonpayment default
is cured or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any such Designated Senior
Indebtedness has been accelerated. No new period of payment blockage may be
commenced within 365 days after the receipt by the Trustee of any prior Payment
Blockage Notice.
The Indenture further requires that the Company promptly notify each
representative of holders of Senior Indebtedness of the Company if payment of
the Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
the insolvency or liquidation of the Company, Holders of Notes may recover
less, ratably, than creditors of the Company who are holders of Senior
Indebtedness or of other indebtedness which is not subordinated to the Notes.
The Indenture provides that holders of Senior Indebtedness are third party
beneficiaries of the subordination provisions of the Indenture and no amendment
thereof shall be effected without the prior written consent of the holders of a
majority of the outstanding principal amount of Senior Indebtedness.
On a pro forma basis, after giving effect to (i) the Offering and the
application of the net proceeds therefrom and (ii) the Norwich Acquisition, the
aggregate amount of Senior Indebtedness of the Company outstanding at June 27,
1998 would have been approximately $84.8 million. As of June 27, 1998, all
Indebtedness of the Company other than the Senior Indebtedness would have been
PARI PASSU in right of payment to the Notes, and there would have been no
Indebtedness of the Company subordinated to the Notes. Subject to certain
financial tests, the Indenture does not limit the amount of additional
Indebtedness, including Senior Indebtedness, that the Company and its
Subsidiaries can incur. See "- Certain Covenants."
NOTE GUARANTEES
The Company's obligations under the Notes, including the Company's payment
obligations, are unconditionally guaranteed, jointly and severally (each, a
"Note Guarantee" and, together, the "Note Guarantees"), by the Guarantors.
Rights of Holders of Notes pursuant to each such Note Guarantee are
subordinated to the Senior Indebtedness of each of the Guarantors in the same
manner as the rights of Holders of Notes are subordinated to those of the
Senior Indebtedness of the Company. Accordingly, the Note Guarantee of each
Guarantor is subordinated to the prior payment in full of all Senior
Indebtedness of such Guarantor, which, on a pro forma basis after giving effect
to (i) the Offering and the application of the proceeds therefrom and (ii) the
Norwich Acquisition, would have been approximately $315.7 million of Senior
Indebtedness, and the amounts for which such Guarantor will be liable under its
Guarantees issued from time to time with respect to Senior Indebtedness. As of
June 27, 1998, all indebtedness of the Guarantors other than the Senior
Indebtedness would have been PARI PASSU in right of payment to the Note
Guarantees, and there would have been no Indebtedness of the Guarantors
subordinated to the Note Guarantees. The obligations of each Guarantor under
its Note Guarantee is limited to the extent necessary to insure that it does
not constitute a fraudulent conveyance under applicable law.
The Indenture provides that no Guarantor shall consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another Person
whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph and certain other provisions of the
Indenture, the Person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the obligations of such Guarantor
pursuant to a supplemental indenture in form reasonably satisfactory to the
Trustee, under its Note Guarantee and the Indenture; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists; and
(iii) in the case of any Guarantor other than Holding, such Guarantor, or any
Person formed by or surviving any such consolidation or merger, (A) will have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction and (B) will be permitted by virtue of
the Company's pro forma Fixed Charge Coverage Ratio to incur, immediately after
giving effect to such transaction, at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock."
The Indenture provides that in the event of a sale or other disposition of all
or substantially all of the assets of any Guarantor (other than Holding), by
way of merger, consolidation or otherwise, or a sale or other disposition of
all of the Capital Stock of any Guarantor, then such Guarantor (in the event of
a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the Capital Stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Note Guarantee; PROVIDED that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture. See "- Repurchase at the Option of
Holders - Asset Sales."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of the Company's or any of its Subsidiaries'
Equity Interests (other than: dividends or distributions payable in Equity
Interests of the Person making such dividend or distribution, other than
Disqualified Stock; or dividends or distributions payable to the Company or any
Wholly Owned Subsidiary of the Company that is a Guarantor); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any Subsidiary or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Subsidiary of
the Company that is a Guarantor); (iii) purchase, redeem or otherwise acquire
or retire for value any Indebtedness (other than the 1994 Notes, the Notes and
Indebtedness between or among the Company and its Subsidiaries or between or
among such Subsidiaries) that is PARI PASSU with or subordinated to the Notes
or any Note Guarantee; (iv) directly or indirectly make any loan or advance to,
or make any payment to, Holding; or (v) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (v) above
being collectively referred to as "Restricted Payments"), unless, at the time
of such Restricted Payment:
(a)no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(b)the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock;" and
(c)such Restricted Payment, (A) in the case of any Restricted Payment
other than as defined by clause (i) above, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries after April
21, 1994 (including Restricted Payments permitted by the next succeeding
paragraph (other than such Restricted Payments permitted by clauses (iv), (v)
and (vi) of the next succeeding paragraph)) or (B) in the case of any
Restricted Payment defined by clause (i) above, together with the aggregate of
all other Restricted Payments made by the Company and its Subsidiaries after
April 21, 1994 (including Restricted Payments permitted by the next succeeding
paragraph (other than Restricted Payments permitted by clauses (iv) and (v) of
the next succeeding paragraph)) is less than the sum of (x) 50% of the sum of
the Consolidated Net Income and Consolidated Step-Up Depreciation and
Amortization of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter that began after April 21, 1994
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income plus Consolidated Step-Up
Depreciation and Amortization for such period is a deficit, 100% of such
deficit), plus (y) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since April 21, 1994 of Equity Interests of the
Company or of debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock).
The foregoing provisions do not prohibit (i) the payment of any dividend within
60 days after the date of declaration thereof, if at said date of declaration
such payment would have complied with the provisions of the Indenture; (ii) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); (iii) the
defeasance, redemption or repurchase of PARI PASSU or subordinated Indebtedness
in a Permitted Refinancing; (iv) a Restricted Payment to Holding pursuant to
the Tax Sharing Agreement as the same may be amended from time to time in a
manner that is not materially adverse to the Company; (v) a Restricted Payment
to Holding to pay its operating and administrative expenses including, without
limitation, directors fees, legal and audit expenses, the Commission compliance
expenses and corporate franchise and other taxes, not to exceed in any fiscal
year $500,000; (vi) a Restricted Payment to Holding to pay management fees not
to exceed $750,000 in any fiscal year of the Company; (vii) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of Holding pursuant to any management equity subscription agreement or stock
option agreement in effect as of April 21, 1994; PROVIDED, HOWEVER, that (a)
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1 million and (b) no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; and (viii) Investments by the Company in joint ventures or similar
projects in a business similar to that conducted by the Company and its
Subsidiaries on the Issuance Date in an aggregate amount not to exceed $1
million.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant entitled "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable with respect to
(collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness
(including Acquired Debt) and that the Company will not issue any, and will not
permit any of its Subsidiaries to issue any, shares of Disqualified Stock;
PROVIDED, HOWEVER, that the Company and its Subsidiaries may incur Indebtedness
or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.25 to 1 determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom and including the earnings of
any business acquired by the Company or any of its Subsidiaries with the
proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period. In addition, the Indenture provides that each of the
following Indebtedness must be subordinated in right of payment to the Notes or
the Note Guarantees, as the case may be, at least to the same extent as the
Notes are subordinated to Senior Indebtedness: (A) all Indebtedness that does
not provide for all interest payments to be made in cash; (B) all Indebtedness
of the Company to any of its Subsidiaries; and (C) any Indebtedness of the
Company and its Subsidiaries if, at the time of incurrence thereof,
Indebtedness of the Company and the Guarantors that is PARI PASSU in right of
payment to the Notes and the Note Guarantees (including, on a pro forma basis,
the Indebtedness to be incurred) exceeds $100 million other than the 1994 Notes
and the Notes.
The foregoing limitations do not apply to (a) revolving credit Indebtedness and
letters of credit pursuant to the Credit Facility in an aggregate principal
amount not to exceed at any one time outstanding the greater of (i) $60 million
in principal amount (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company thereunder),
less the aggregate amount of all repayments after April 21, 1994 that
permanently reduce the commitment under the Credit Facility, and (ii) the
Borrowing Base; (b) the Existing Indebtedness; (c) the Notes (other than any
Additional Notes) or any Note Guarantee; (d) the incurrence by the Company or
any of its Subsidiaries of Refinancing Indebtedness; PROVIDED, HOWEVER, that
such Refinancing Indebtedness is a Permitted Refinancing; (e) Indebtedness
between or among the Company and any of its Wholly Owned Subsidiaries that are
Guarantors; (f) Indebtedness from the Company to Holding PROVIDED that the
advances evidenced by such Indebtedness are permitted under the covenant
entitled "Restricted Payments;" (g) Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture to
be outstanding; and (h) the incurrence by the Company or its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount at any time outstanding not to
exceed the sum of $1 million at any one time.
Notwithstanding anything to the contrary, the Indenture provides that the
Company and its Subsidiaries will not be permitted to incur any additional
Senior Indebtedness unless it is secured.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly (i) create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired by the Company
or any Subsidiary, or any income or profits therefrom or (ii) assign or convey
any right to receive income therefrom, in any such case to secure any
Indebtedness (other than Senior Indebtedness of the Company or Senior
Indebtedness of a Guarantor permitted to be incurred pursuant to the Indenture)
unless contemporaneously therewith or prior thereto, effective provision is
made (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) whereby the Notes or a Note
Guarantee are secured equally and ratably with such other Indebtedness (or if
such other Indebtedness is subordinated to the Notes or a Note Guarantee, the
Notes or a Note Guarantee, as the case may be, are secured on a basis with the
same relative priority to such other Indebtedness).
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a)(i) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (A) on its Capital
Stock or (B) with respect to any other interest or participation in, or
measured by, its profits, or (ii) pay any indebtedness owed to the Company or
any of its Subsidiaries, (b) make loans or advances to the Company or any of
its Subsidiaries or (c) transfer any of its properties or assets to the Company
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reasons of (i) Existing Indebtedness as in effect on the
Issuance Date, (ii) the Credit Facility as in effect on the Issuance Date, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Facility as in effect on the Issuance Date, (iii) the 1994 Indenture and the
1994 Notes, (iv) the Indenture and the Notes, (v) applicable law, (vi) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, PROVIDED that
the Consolidated Cash Flow of such Person, to the extent of such restriction,
is not taken into account in determining whether such acquisition was permitted
by the terms of the Indenture, (vii) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (viii) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired, or (ix)
permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Refinancing Indebtedness are no more restrictive
than those contained in the agreements governing the Indebtedness being
refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
Person unless (i) the
Company is the surviving Person formed by or surviving any such consolidation
or merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company or any
Person formed by or surviving any such consolidation or merger, or to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made (A) will have Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Subsidiary with a Person who was not an Affiliate and (b) the Company delivers
to the Trustee (i) with respect to any Affiliate Transaction involving
aggregate payments in excess of $2 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (a) above and that such Affiliate Transaction
is approved by a majority of the Board of Directors and (ii) with respect to
any Affiliate Transaction involving aggregate payments in excess of $5 million,
an opinion as to the fairness to the Company or such Subsidiary from a
financial point of view issued by an investment banking firm of national
standing; PROVIDED, HOWEVER, that (i) any employment agreement entered into by
the Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (ii)
transactions between or among the Company and/or its Subsidiaries, (iii)
Restricted Payments permitted by the provisions of the Indenture described
above under the covenant "Restricted Payments" and (iv) the advisory fee being
paid to First Atlantic in connection with the Offering, in each case, shall not
be deemed Affiliate Transactions.
NO SENIOR SUBORDINATED INDEBTEDNESS
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Indebtedness and senior
in any respect in right of payment to the Notes, and (ii) no Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to its Senior
Indebtedness and senior in any respect in right of payment to its Note
Guarantee.
ADDITIONAL GUARANTEES
The Indenture provides that (i) if the Company or any of its Subsidiaries shall
transfer or cause to be transferred, in one or a series of related transactions
(other than a transaction or series of related transactions constituting a
Restricted Payment permitted pursuant to the provisions of the covenant
entitled "Restricted Payments"), any assets, businesses, divisions, real
property or equipment having a book value in excess of $1 million to any
Subsidiary that is not a Guarantor or (ii) if the Company or any of its
Subsidiaries shall acquire another Subsidiary having (a) total assets with a
book value in excess of $1 million or (b) Consolidated Cash Flow in excess of
$1 million, then such transferee or acquired Subsidiary shall execute a Note
Guarantee and deliver an opinion of counsel as to the enforceability of such
Note Guarantee, in accordance with the terms of the Indenture.
REPORTS
Whether or not required by the rules and regulations of the Commission, so long
as any Notes are outstanding, the Company will furnish to the Trustee and to
all Holders of Notes all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and any other information required by Section 13 or 15(d) of
the Exchange Act with the Commission for public availability (unless the
Commission will not accept such a filing) and file such information with the
Trustee and make such information available to investors who request it in
writing. Notwithstanding the foregoing, to the extent permitted under the rules
and regulations of the Commission, the Company may instead supply such
information with respect to Holding.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest and
Liquidated Damages, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the covenants "Repurchase at the
Option of Holders - Change of Control," "Repurchase at the Option of Holders -
Asset Sales," "Certain Covenants - Restricted Payments" or "Certain Covenants -
Incurrence of Indebtedness and Issuance of Disqualified Stock"; (iv) failure by
the Company or the Guarantors for 60 days after notice to comply with any of
its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company, Holding or any of their respective Subsidiaries (or the payment of
which is guaranteed by the Company, Holding or any of their respective
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created
after the Issuance Date, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $2 million or more; (vi) failure by the Company,
Holding or any of their respective Subsidiaries to pay final judgments
aggregating in excess of $2 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) except as permitted by the Indenture,
any Note Guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and effect or any
Guarantor (or its successors or assigns), or any Person acting on behalf of any
Guarantor (or its successors or assigns), shall deny or disaffirm its
obligations or shall fail to comply with any obligations under its Note
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect
to the Company, Holding or any of their respective Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any
Indebtedness is outstanding pursuant to the Credit Facility, upon a declaration
of acceleration, the principal and interest on the Notes shall be payable upon
the earlier of (1) the day which is five business days after notice of
acceleration is given to the Company and the lender under the Credit Facility
or (2) the date of acceleration of the Indebtedness under the Credit Facility.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company,
Holding or any of their respective Subsidiaries, all outstanding Notes will
become due and payable without further action or notice. Under certain
circumstances, the Holders of at least a majority in aggregate principal amount
of the outstanding Notes may rescind any acceleration with respect to the Notes
and its consequences. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring on or after April 15, 1999 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to April 15, 1999 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes prior to April
15, 1999, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
The Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, any Note held by a
non-consenting Holder.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, the Note
Guarantees, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note and the Note Guarantees waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Note Guarantees. Such waiver may not be effective to waive
liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its and
the Guarantors' obligations discharged with respect to the outstanding Notes
and the Note Guarantees ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Notes to receive payments in respect of the principal
of, and premium, if any, interest and Liquidated Damages, if any, on such Notes
when such payments are due, (ii) the Company's and the Guarantors' obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the
Company's and the Guarantors' obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company and
the Guarantors released with respect to certain covenants that are described in
the Indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "- Events of Default and Remedies" will no
longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, and premium, if any, interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, of such principal or installment of
principal of, or premium, if any, interest or Liquidated Damages, if any, on
the outstanding Notes; (ii) in the case of Legal Defeasance, the Company shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the IRS a ruling or (b) since
the Issuance Date, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
an Event of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes pursuant to
the terms of the Indenture concurrently with such incurrence) or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the day on which all applicable preference periods
have run; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the day on which all applicable preference
periods have run, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company or the Guarantors with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or the Guarantors;
and (viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder of Notes): (i)
reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter or waive the provisions with respect to the
redemption of the Notes, (iii) reduce the rate of or change the time for
payment of interest on any Note, (iv) waive a Default or Event of Default in
the payment of principal of, or premium, if any, interest or Liquidated
Damages, if any, on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of the
Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, or premium, if any, interest or Liquidated Damages, if any, on
the Notes, (vii) waive a redemption payment with respect to any Note, (viii)
make any change to the subordination provisions of the Indenture that adversely
affects Holders, (ix) except pursuant to the terms of the Indenture, release
any Guarantor from its obligations under its Note Guarantee, or change any Note
Guarantee in any manner that would adversely affect Holders, or (x) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or any Guarantors' obligations to Holders of the
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes
(including providing for additional Note Guarantees pursuant to the covenant
entitled "Additional Guarantees") or that does not adversely affect the legal
rights under the Indenture of any such Holder, to provide for the issuance of
Additional Notes in accordance with the provisions set forth in the Indenture
or to comply with requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of the Company, the Guarantors or any Affiliate of the
Company or the Guarantors, to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
BOOK-ENTRY; DELIVERY, FORM AND TRANSFER
The Old Notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). Except as set forth below, Notes
will be issued in registered, global form in minimum denominations of $1,000
and integral multiples of $1,000 in excess thereof.
The Rule 144A Notes were, and the New Notes will be, represented by one or more
Notes in registered, global form without interest coupons (collectively, the
"Rule 144A Global Notes" or the "Global Notes"). The Global Notes will be
deposited upon issuance with the Trustee as custodian for The Depository Trust
Company, in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described below.
See "- Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of Certificated
Notes (as defined herein).
Rule 144A Notes (including beneficial interests in the Rule 144A Global Notes)
are subject to certain restrictions on transfer and bear a restrictive legend.
In addition, transfers of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC is provided
solely as a matter of convenience. These operations and procedures are solely
within the control of the settlement system and are subject to changes by it
from time to time. The Company takes no responsibility for these operations
and procedures and urges investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers (including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants with portions of the principal amount of the Global Notes and (ii)
ownership of such interests in the Global Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interests in
a Global Note may be subject to the procedures and requirements of DTC. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes or (ii) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants. DTC
has advised the Company that its current practice, upon receipt of any payment
in respect of securities such as the Notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Interests in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its Participants. See "- Same
Day Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be taken
by a holder of Notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC reserves the right to
exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Neither the Company nor the Trustee nor any of their respective agents will
have any responsibility for the performance by DTC, or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered certificated
form ("Certificated Notes") if (i) DTC (x) notifies the Company that it is
unwilling or unable to continue as depositary for the Global Notes and the
Company thereupon fails to appoint a successor depositary or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Certificated Notes or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes. In
addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon request but only upon prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. In all cases,
Certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear an applicable restrictive legend, if
any, unless the Company determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Notes issued in certificated form may not be exchanged for beneficial interests
in any Global Note unless the transferor first delivers to the Trustee a
written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions, if any,
applicable to such Notes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in any certificated Notes
will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person: (i) Indebtedness
of any other Person existing at the time such other Person merged with or into
or became a Subsidiary of such specified Person, including Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control. Neither Chase Bank, The CIT Group/Equity
Investments, Inc., nor their respective Affiliates will be deemed an Affiliate
of the Company or any of its Subsidiaries for purposes of this definition by
reason of its direct or indirect beneficial ownership of 15% or less of the
Common Stock of Holding or by reason of any employee thereof being appointed to
the Board of Directors of Holding.
"BORROWING BASE" means, as of any date, an amount equal to the sum of (a) 85%
of the face amount of all accounts receivable owned by the Company and its
Subsidiaries as of such date that are not more than 90 days past due, and (b)
65% of the book value (calculated on a FIFO basis) of all inventory owned by
the Company and its Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable or inventory as of a
specific date, the Company may utilize the most recent available information
for purposes of calculating the Borrowing Base.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on a balance sheet prepared in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months from the date of
acquisition and overnight bank deposits, in each case with any lender party to
the Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500 million, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within six months after the date
of acquisition.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (a) an amount equal
to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing Consolidated
Net Income), plus (b) provision for taxes based on income or profits of such
Person for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense of
such Person for such period to the extent such expense was deducted in
computing Consolidated Net Income, plus (d) Consolidated Depreciation and
Amortization Expense of such Person for such period to the extent such expense
was deducted in computing Consolidated Net Income, plus (e) other non-cash
charges (including, without limitation, repricing of stock options, to the
extent deducted in computing Consolidated Net Income; but excluding any non-
cash charge that requires an accrual or reserve for cash expenditures in future
periods or which involved a cash expenditure in a prior period), in each case,
on a consolidated basis and determined in accordance with GAAP.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect to any
Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) of such
Person for such period on a consolidated basis as determined in accordance with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (a) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, non-cash interest payments, the
interest component of capital leases, and net payments (if any) pursuant to
Hedging Obligations), (b) commissions, discounts and other fees and charges
paid or accrued with respect to letters of credit and bankers' acceptance
financing, and (c) interest actually paid by such Person or its Subsidiaries
under a Guarantee of Indebtedness of any other Person.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the
aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED,
that (i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid to the referent Person
or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii) the Net Income
of any Person that is a Subsidiary (other than a Wholly Owned Subsidiary) shall
be included only to the extent of the amount of dividends or distributions paid
to the referent Person or a Wholly Owned Subsidiary thereof that is a
Guarantor, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the
sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of Preferred Stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such Preferred Stock, less (x) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 16 months after the
acquisition of such business) subsequent to April 21, 1994 in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and
(z) all unamortized debt discount and expense and unamortized deferred charges
as of such date, all of the foregoing determined in accordance with GAAP.
"CONSOLIDATED STEP-UP DEPRECIATION AND AMORTIZATION" means, with respect to any
Person for any period, the total amount of depreciation related to the write-up
of assets and amortization of such Person for such period on a consolidated
basis as determined in accordance with GAAP.
"CREDIT FACILITY" means the Second Amended and Restated Financing and Security
Agreement dated as of July 2, 1998, by the Company and NationsBank, N.A.,
providing for up to $132.6 million (plus the pound-sterling 1.5 million UK
Revolver and the pound-sterling 4.5 million UK Term Loan) of borrowings,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"DEFAULT" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) the Senior Bank Indebtedness and
(ii) any other Senior Indebtedness (a) permitted to be incurred under the
Indenture the principal amount of which is $15 million or more and (b)
designated in the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to July
15, 2004.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries
(other than under the Credit Facility) in existence on the Issuance Date, until
such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person for such period, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income and (b) the product of (i) all cash dividend payments (and non-cash
dividend payments in the form of securities (other than Disqualified Stock) of
an issuer) on any series of Preferred Stock of such Person, times (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined Federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period,
the ratio of the Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Company or
any of its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
(other than revolving credit borrowings) or issues Preferred Stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, guarantee or redemption of
Indebtedness, or such issuance or redemption of Preferred Stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with
GAAP) that have been made by the Company or any of its Subsidiaries, including
all mergers and consolidations, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated on a pro forma basis assuming that all such acquisitions,
dispositions, discontinued operations, mergers and consolidations (and the
reduction of any associated fixed charge obligations resulting therefrom) had
occurred on the first day of the four-quarter reference period.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed
by, the United States of America for the payment of which guarantee or
obligations the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTORS" means each of (i) Holding, Berry Iowa, Berry Tri-Plas, Berry
Sterling, AeroCon, PackerWare, Berry Design, Venture Holdings, Venture Midwest,
Venture Southeast, NIM Holdings and Norwich and (ii) any other Person that
executes a Note Guarantee in accordance with the provisions of the Indenture,
and their respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of any Indebtedness of such Person or any
other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel
and similar advances to officers, directors, consultants and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"ISSUANCE DATE" means the closing date for the sale and original issuance of
the Notes.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of Preferred Stock dividends, excluding, however, any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions), and excluding any
extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or any
of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that are the subject of such Asset
Sale and any reserve for indemnification or adjustment in respect of the sale
price of such asset or assets.
"OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a Wholly
Owned Subsidiary of the Company and that is engaged in the same or a similar
line of business as the Company and its Subsidiaries were engaged in on the
Issuance Date and (b) any Investments in Cash Equivalents.
"PERMITTED REFINANCING" means Refinancing Indebtedness if (a) the principal
amount of Refinancing Indebtedness does not exceed the principal amount of
Indebtedness so extended, re-financed, renewed, replaced, defeased or refunded
(plus the amount of premiums, accrued interest and reasonable expenses incurred
in connection therewith); (b) the Refinancing Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (c) the Refinancing Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential right in the
payment of dividends or liquidation or any Disqualified Stock.
"REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness referred to in clauses (a) and (b) of the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock."
"RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment.
"SENIOR BANK INDEBTEDNESS" means the Indebtedness outstanding under the Credit
Facility as such agreement may be restated, further amended, supplemented or
otherwise modified or replaced from time to time hereafter, together with any
refunding or replacement of any such Indebtedness.
"SENIOR INDEBTEDNESS" means (i) the Senior Bank Indebtedness and (ii) any other
Indebtedness permitted to be incurred by the Company or a Guarantor, as the
case may be, under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is PARI PASSU
with or subordinated in right of payment to the Notes or a Note Guarantee, as
the case may be. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness shall not include (w) any liability for Federal, state,
local or other taxes owed or owing by the Company or a Guarantor, as the case
may be, (x) any Indebtedness of the Company or a Guarantor, as the case may be,
to Holding or to any of Holding's other Subsidiaries or other Affiliates, (y)
any trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture.
"SUBSIDIARY" means, with respect to any Person, any corporation, association or
other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, as in effect
on the closing date of the Offering, between the Company and Holding.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (a) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (y) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the due date of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all
of the outstanding Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly
Owned Subsidiaries of such Person.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
considerations relating to the Exchange Offer and to the purchase, ownership
and disposition of the Notes but does not purport to be a complete analysis of
all the potential tax considerations relating thereto. This summary is based
on the Internal Revenue Code of 1986, as amended, existing, temporary and
proposed Treasury Regulations, laws, rulings and decisions now in effect, all
of which are subject to change. Any such changes may be applied retroactively
in a manner that could adversely affect a holder of the Notes. This summary
deals only with holders that will hold Notes as "capital assets" (within the
meaning of Section 1221 of the Code) and that are (i) citizens or residents of
the United States, (ii) corporations, partnerships and other business entities
created or organized under the laws of the United States, (iii) estates the
income of which is subject to United States Federal income taxation regardless
of its source and (iv) trusts if a court within the United States is able to
exercise primary supervision over its administration and one or more United
States persons have the authority to control all of its substantive decisions.
This summary does not address tax considerations applicable to investors that
may be subject to special tax rules, such as banks, tax-exempt organizations,
insurance companies, dealers in securities or currencies, or persons that will
hold Notes as a position in a hedging transaction, "straddle" or "conversion
transaction" for tax purposes. This summary discusses the principal Federal
income tax considerations applicable to the Exchange Offer, initial purchasers
of the Notes who purchase the Notes at a premium and subsequent purchasers of
the Notes. This summary does not consider the effect of any applicable
foreign, state, local or other tax laws. No ruling from the Internal Revenue
Service (the "IRS") will be sought with respect to the Notes, and the IRS could
take a contrary view with respect to the matters described below.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE EXCHANGE OFFER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income of a holder as
ordinary income at the time such interest is received or accrued, in accordance
with such holder's method of accounting for United States Federal income tax
purposes.
NOTES PURCHASED AT A PREMIUM
In general, if a holder purchases a Note for an amount in excess of its stated
redemption price at maturity, the holder may elect to treat such excess as
"amortizable bond premium," in which case the amount required to be included in
the holder's income each year with respect to interest on the Note will be
reduced by the amount of amortizable bond premium allocable (based on the
Note's yield to maturity) to such year. The amount of amortizable bond premium
allocable to a holder's taxable year may be determined, in part, by the
Company's right to redeem the Notes. Holders should consult their own tax
advisors with respect to the amortization of bond premium. Any such election
would apply to all bonds (other than bonds the interest on which is excludable
from gross income) held by the holder at the beginning of the first taxable
year to which the election applies or which thereafter are acquired by the
holder, and such election is irrevocable without the consent of the IRS.
OPTIONAL REDEMPTION OR REPAYMENT
The Notes will not have original issue discount ("OID") because they were
issued at a premium. For purposes of determining OID, Treasury Regulations
provide that (i) the holder's right to require redemption of the Notes upon the
occurrence of a Change of Control will not be taken into account unless, based
on all the facts and circumstances as of the issue date, it is significantly
more likely than not that a Change of Control giving rise to the right to
require redemption will occur and (ii) the Company will be deemed to exercise
its option to redeem the Notes in a manner that minimizes the yield on the
Notes. In the event of a Change of Control, each holder of Notes will have the
right to require the Company to repurchase all or a part of such holder's Notes
as described in "Description of Notes - Repurchase at the Option of holders -
Change of Control." The Company may also redeem the Notes in certain
circumstances, pursuant to the terms of the Notes. See "Description of the
Notes - Optional Redemption." Under the Treasury Regulations discussed above,
the Company believes that neither the repurchase nor the redemption provisions
of the Notes will cause the Notes to be issued with OID.
MARKET DISCOUNT ON RESALE OF NOTES
A holder of a Note should be aware that the purchase or resale of a Note may be
affected by the "market discount" provisions of the Code. The market discount
rules generally provide that if a holder of a Note purchases the Note at a
market discount (i.e., a discount other than at original issue), any gain
recognized upon the disposition of the Note by the holder will be taxable as
ordinary interest income, rather than as capital gain, to the extent such gain
does not exceed the accrued market discount on such Note at the time of such
disposition. "Market discount" generally means the excess, if any, of a Note's
stated redemption price at maturity over the price paid by the holder therefor,
unless a DE MINIMIS exception applies. A holder who acquires a Note at a
market discount also may be required to defer the deduction of a portion of the
amount of interest that the holder paid or accrued during the taxable year on
indebtedness incurred or maintained to purchase or carry such Note, if any.
Any principal payment on a Note acquired by a holder at a market discount will
be included in gross income as ordinary income (generally, as interest income)
to the extent that it does not exceed the accrued market discount at the time
of such payment. The amount of the accrued market discount for purposes of
determining the tax treatment of subsequent payments on, or dispositions of, a
Note is to be reduced by the amounts so treated as ordinary income.
A holder of a Note acquired at a market discount may elect to include market
discount in gross income, for Federal income tax purposes, as such market
discount accrues, either on a straight-line basis or on a constant interest
rate basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a holder of a Note makes such an election, the foregoing rules
regarding the recognition of ordinary interest income on sales and other
dispositions and the receipt of principal payments with respect to such Note,
and regarding the deferral of interest deductions on indebtedness incurred or
maintained to purchase or carry such Note, will not apply.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or redemption of a Note, a holder generally will
recognize capital gain or loss equal to the difference between (i) the amount
of cash proceeds and the fair market value of any property received on the
sale, exchange or redemption (except to the extent such amount is attributable
to either Liquidated Damages, discussed below, or accrued interest income not
previously included in income which is taxable as ordinary income) and (ii)
such holder's adjusted tax basis in the Note. A holder's adjusted tax basis in
a Note generally will equal the cost of the Note to such holder, adjusted for
amortizable bond premium, if any, if the holder made an election to amortize
such premium. Such capital gain or loss will be long-term capital gain or loss
if the holder's holding period in the Note is more than one year at the time of
sale, exchange or redemption.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer should
not be considered a taxable exchange for Federal income tax purposes because
the New Notes should not constitute a material modification of the terms of the
Old Notes. Accordingly, such exchange should have no Federal income tax
consequences to holders of Old Notes, and a holder's basis and holding period
in a New Note will be the same as such holder's adjusted tax basis in the Old
Note exchanged therefor.
Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an "exchange" for Federal income tax purposes. In such event, the
Exchange Offer could be treated as a taxable transaction in which case a holder
would be required to recognize gain or loss equal to the difference between
such holder's tax basis in the Notes and the issue price of the New Notes.
LIQUIDATED DAMAGES
The Company believes that Liquidated Damages, if any, described above under
"The Exchange Offer - Purpose and Effect of the Exchange Offer" will be taxable
to the holder as ordinary income in accordance with the holder's method of
accounting for Federal income tax purposes. The IRS may take a different
position, however, which could affect the timing of a holder's income with
respect to Liquidated Damages, if any.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note and payments of the proceeds
of the sale of a Note to certain noncorporate holders, and a 31% backup
withholding tax may apply to such payments if the holder (i) fails to furnish
or certify its correct taxpayer identification number to the payer in the
manner required, (ii) is notified by the IRS that it has failed to report
payments of interest and dividends properly or (iii) under certain
circumstances, fails to certify that it has not been notified by the IRS that
it is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a
payment to a holder will be allowed as a credit against such holder's United
States Federal income tax and may entitle the holder to a refund, provided that
the required minimum information is furnished to the IRS.
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in no-action
letters issued to third parties, the Company believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not
be able to rely on such interpretations by the staff to the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company and the Guarantors have agreed that, for a
period of one year from the date of this Prospectus, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until 1998 (90 days
from the date of this Prospectus), all dealers effecting transactions in the
New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by broker-
dealers. New Notes received by broker-dealers for their own account pursuant
to the Exchange Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the New Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of one year from the date of this Prospectus, the Company will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company will pay all the
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders) other than commissions or concessions of any broker-dealers.
The Company and the Guarantors have agreed to indemnify the Initial Purchaser
and any broker-dealers participating in the Exchange Offer against certain
liabilities, including liabilities under the Securities Act.
This Prospectus has been prepared for use in connection with the Exchange Offer
and may be used by DLJ in connection with offers and sales related to market-
making transactions in the Notes. DLJ may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale. The Company will not receive any of the proceeds
of such sales. DLJ has no obligation to make a market in the Notes and may
discontinue its market-making activities at any time without notice, at its
sole discretion. The Company has agreed to indemnify DLJ against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which DLJ might be required to make in respect thereof.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company by
O'Sullivan Graev & Karabell, LLP, New York, New York. Lawrence G. Graev, a
director of the Company, is the Chairman of O'Sullivan Graev & Karabell, LLP.
See "Certain Transactions - Legal Services."
EXPERTS
The consolidated financial statements and schedules of Holding as of
December 28, 1996 and December 27, 1997, and for each of the three fiscal years
in the period ended December 27, 1997 included in this Prospectus and
the Registration Statement of which this Prospectus forms a part, have been
audited by Ernst & Young LLP, independent auditors, as stated in their
reports appearing elsewhere herein and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting
and auditing.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors ........................................ F-2
Consolidated Balance Sheets at December 27, 1997 and December 28, 1996 F-3
Consolidated Statements of Operations for the three years in the period
ended December 27, 1997 ........................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the three years in the period ended December 27, 1997 ......... F-6
Consolidated Statements of Cash Flows for the three years in the period
ended December 27, 1997 ........................................... F-7
Notes to Consolidated Financial Statements ............................ F-8
UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet at June 27, 1998 ................. F-19
Condensed Consolidated Statements of Operations for the Thirteen and
Twenty-SixWeeks ended June 27, 1998 and June 28, 1997 ............. F-21
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Deficit)for the Thirteen and Twenty-Six Weeks ended June 27, 1998
and June 28, 1997 ................................................. F-22
Condensed Consolidated Statements of Cash Flows of the Thirteen and
Twenty-Six Weeks ended June 27, 1998 and June 28, 1997 ............ F-23
Notes to Condensed Consolidated Financial Statements .................. F-24
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
BPC Holding Corporation
We have audited the accompanying consolidated balance sheets of BPC Holding
Corporation and subsidiaries as of December 27, 1997 and December 28, 1996, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 27, 1997. These financial statements and schedules are the respon-
sibility of Holding's management. Our responsibility is to express an
opinion on these financial statements and 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BPC
Holding Corporation and subsidiaries at December 27, 1997 and December 28,
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 27, 1997, in conformity
with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Indianapolis, Indiana
February 13, 1998
F-2
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,688 $ 10,192
Accounts receivable (less allowance for doubtful
accounts of $1,038 at December 27, 1997 and $618 at 28,385 17,642
December 28, 1996
Inventories:
Finished goods 22,029 9,100
Raw materials and supplies 7,429 4,507
------------ ------------
29,458 13,607
Prepaid expenses and other receivables 1,834 957
Income taxes recoverable 1,167 436
------------ ------------
Total current assets 63,532 42,834
Assets held in trust 19,738 30,188
Property and equipment:
Land 5,811 4,598
Buildings and improvements 33,891 18,290
Machinery, equipment and tooling 122,991 79,043
Automobiles and trucks 1,241 639
Construction in progress 10,357 3,476
------------ ------------
174,291 106,046
Less accumulated depreciation 66,073 50,382
------------ ------------
108,218 55,664
Intangible assets:
Deferred financing and origination fees, net 10,849 9,912
Covenants not to compete, net 3,940 40
Excess of cost over net assets acquired, net 30,303 4,273
Deferred acquisition costs 13 527
------------ ------------
45,105 14,752
Deferred income taxes 2,049 2,003
Other 802 357
------------ ------------
Total assets $239,444 $145,798
============ ============
</TABLE>
F-3
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 16,732 $ 12,877
Accrued expenses and other liabilities 7,162 4,676
Accrued interest 3,612 3,286
Employee compensation and payroll taxes 7,489 5,230
Income taxes 55 117
Current portion of long-term debt 7,619 738
------------ ------------
Total current liabilities 42,669 26,924
Long-term debt, less current portion 298,716 215,308
Accrued dividends on preferred stock 3,674 1,116
Other liabilities 3,360 -
------------ ------------
348,419 243,348
Stockholders' equity (deficit):
Class A Preferred Stock; 800,000 shares authorized;
600,000 shares issued and outstanding (net of
discount of $3,062 at December 27, 1997 and $3,355 11,509 11,216
at December 28, 1996)
Class B Preferred Stock; 200,000 shares authorized, 5,000 -
issued and outstanding Class A Common Stock;
$.01 par value:
------------ ------------
Voting; 500,000 shares authorized; 91,000
shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 259,000
shares issued and outstanding 3 3
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 145,001 shares
issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 57,788
shares issued and outstanding 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 16,981
shares issued and outstanding - -
Treasury stock: 239 shares (22) (22)
Additional paid-in capital 49,374 51,681
Warrants 3,511 3,511
Retained earnings (deficit) (178,353) (163,942)
------------ ------------
Total stockholders' equity (deficit) (108,975) (97,550)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 239,444 $ 145,798
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $226,953 $151,058 $140,681
Cost of goods sold 180,249 110,110 102,484
Gross margin 46,704 40,948 38,197
Operating expenses:
Selling 11,320 6,950 5,617
General and administrative 11,505 13,769 9,500
Research and development 1,310 858 718
Amortization of intangibles 2,226 524 968
Other expense 4,144 1,578 867
------------ ------------ ------------
Operating income 16,199 17,269 20,527
Other expenses:
Loss on disposal of property and equipment 226 302 127
------------ ------------ ------------
Income before interest and taxes 15,973 16,967 20,400
Interest:
Expense (32,237) (21,364) (14,031)
Income 1,991 1,289 642
------------ ------------ ------------
Income (loss) before income taxes (14,273) (3,108) 7,011
Income taxes 138 239 678
------------ ------------ ------------
Net income (loss) (14,411) (3,347) 6,333
------------ ------------ ------------
Preferred stock dividends (2,558) (1,116) -
------------ ------------ ------------
Net income (loss) attributable to common shareholders $ (16,969) $ (4,463) $ 6,333
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED
STOCK
----------------- -------------- ADDITIONAL DEFERRED RETAINED
CLASS CLASS CLASS CLASS CLASS TREASURY PAID-IN COST- EARNINGS
A B C A B STOCK CAPITAL WARRANTS RESTRICTED (DEFICIT) TOTAL
----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995(1) $ - $ - $ - $ - $ - $ (58) $ 871 $ 4,124 $ (22) $(43,753) $(38,838)
Net income - - - - - - - - - 6,333 6,333
Amortization of deferred
cost-restricted stock - - - - - - - - 22 - 22
Market value adjustment
- warrants - - - - - - 90 (90) - - -
Purchase vested options
from management - - - - - - - (1) - - (1)
----- ----- ----- ------- ----- -------- ---------- -------- ----------- ---------- ----------
Balance at December 30, 1995(1) - - - - - (58) 960 4,034 - (37,420) (32,484)
Net loss - - - - - - - - - (3,347) (3,347)
Market value adjustment
- warrants - - - - - - (1,145) 9,399 - (8,254) -
Exercise of stock options - - - - - - 1,130 - - - 1,130
Distribution on sale of
equity interests - - - - - 58 (1,424) (13,433) - (114,921) (129,720)
Proceeds from newly issued
equity 4 2 - 14,571 - - 52,797 - - - 67,374
Payment of deferred
compensation - - - - - - 479 - - - 479
Issuance of private warrants - - - (3,511) - - - 3,511 - - -
Accrued dividends on preferred
stock - - - - - - (1,116) - - - (1,116)
Amortization of preferred
stock discount - - - 156 - - - - - - 156
Purchase treasury stock
from management - - - - - (22) - - - - (22)
----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ----------
Balance at December 28, 1996 4 2 - 11,216 - (22) 51,681 3,511 - (163,942) (97,550)
Net loss - - - - - - - - - (14,411) (14,411)
Sale of stock to management - - - - - - 325 - - - 325
Issuance of preferred stock - - - - 5,000 - - - - - 5,000
Accrued dividends on preferred
stock - - - - - - (2,558) - - - (2,558)
Amortization of preferred
stock discount - - - 293 - - (74) - - - 219
----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ----------
Balance at December 27, 1997 $4 $2 $- $11,509 $5,000 $(22) $49,374 3,511 - $(178,353) $(108,975)
===== ===== ===== ======= ====== ======= ========== ======== =========== ========== ==========
</TABLE>
(1) Old Class A and Class B Common Stock was redeemed in connection with the
1996 Transaction (see Note 9).
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (14,411) $ (3,347) $ 6,333
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 16,800 10,807 8,568
Non-cash interest expense 2,005 1,212 950
Amortization 2,226 524 968
Interest funded by assets held in trust 11,255 5,412 -
Non-cash compensation - 358 (215)
Write-off of deferred acquisition costs 515 - 390
Loss on sale of property and equipment 226 302 127
Deferred income taxes - 53 (964)
Changes in operating assets and
liabilities:
Accounts receivable, net (2,290) (1,716) (1,989)
Inventories 2,767 (1,710) 926
Prepaid expenses and other (137) 520 (964)
receivables
Other assets (225) (5) (14)
Accounts payable and accrued expenses (4,516) 1,899 (1,000)
Income taxes payable (61) 117 (147)
------------ ------------ ------------
Net cash provided by operating activities 14,154 14,426 12,969
INVESTING ACTIVITIES
Additions to property and equipment (16,774) (13,581) (11,247)
Proceeds from disposal of property and equipment 1,078 94 20
Acquisitions of businesses (86,406) (1,152) (14,158)
------------ ------------ ------------
Net cash used for investing activities (102,102) (14,639) (25,385)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 85,703 105,000 -
Payments on long-term borrowings (2,584) (500) (500)
Payments on capital lease (237) (217) (198)
Reclassification of cash held for acquisition - - 12,000
Exercise of management stock options - 1,130 -
Proceeds from issuance of common stock 325 52,797 -
Proceeds from issuance of preferred stock
and warrants - - 14,571
Rollover investments and share repurchases - (125,219) -
Assets held in trust - (35,600) -
Net payments to public warrant holders - (4,502) -
Debt issuance costs (2,763) (5,090) (178)
------------ ------------ ------------
Net cash provided by financing activities 80,444 2,370 11,124
------------ ------------ ------------
Net increase(decrease)in cash and cash equivalents (7,504) 2,157 (1,292)
Cash and cash equivalents at beginning of year 10,192 8,035 9,327
------------ ------------ ------------
Cash and cash equivalents at end of year $ 2,688 $ 10,192 $ 8,035
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
NOTE 1. ORGANIZATION
BPC Holding Corporation ("Holding"), through its subsidiaries Berry Plastics
Corporation ("Berry" or the "Company"), Berry Iowa Corporation ("Berry Iowa"),
Berry Sterling Corporation ("Berry Sterling"), Berry Tri-Plas Corporation
("Berry Tri-Plas"), Berry Plastics Design Corporation ("Berry Design"),
PackerWare Corporation ("PackerWare"), and Venture Packaging, Inc. ("Venture
Packaging") and its subsidiaries Venture Packaging Midwest, Inc. and Venture
Packaging Southeast, Inc., manufactures and markets plastic packaging products
through its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa
Falls, Iowa; Charlotte, North Carolina; York, Pennsylvania; Suffolk, Virginia;
Anderson, South Carolina; Monroeville, Ohio; and Lawrence, Kansas.
On September 16, 1996, Berry announced the consolidation of its Winchester,
Virginia facility with other Company locations, including Charlotte, North
Carolina; Evansville, Indiana; and Iowa Falls, Iowa. In conjunction with the
PackerWare acquisition in January 1997 (see Note 3), the Company also acquired
a manufacturing facility in Reno, Nevada. This facility was closed in 1997,
and its operations were consolidated into the Henderson, Nevada facility.
Holding's fiscal year is a 52/53 week period ending generally on the Saturday
closest to December 31. All references herein to "1997," "1996" and "1995"
relate to the fiscal years ended December 27, 1997, December 28, 1996, and
December 30, 1995, respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND BUSINESS
The consolidated financial statements include the accounts of Holding and its
subsidiaries all of which are wholly-owned. Intercompany accounts and
transactions have been eliminated in consolidation. Holding, through its
wholly-owned subsidiaries, operates in one industry segment. The Company is a
domestic manufacturer and marketer of plastic packaging, with sales
concentrated in four product groups within this market: aerosol overcaps,
rigid open-top containers, plastic drink cups, and housewares/lawn and garden.
The Company's customers are located principally throughout the United States,
without significant concentration in any one region or any one customer. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
Purchases of various densities of plastic resin used in the manufacture of the
Company's products aggregated approximately $68 million in 1997 (excluding
specialty resins). Dow Chemical Corporation is the principal supplier
(approximately 56%) of the Company's total resin material requirements. The
Company also uses other suppliers such as Union Carbide, Chevron, Phillips and
Equistar (formerly Lyondell and Millennium) to meet its resin requirements.
The Company does not anticipate any material difficulty in obtaining an
uninterrupted supply of raw materials at competitive prices in the near future.
However, should a significant shortage of the supply of resin occur, changes in
both the price and availability of the principal raw material used in the
manufacture of the Company's products could occur and result in financial
disruption to the Company.
The Company is subject to existing and potential federal, state, local and
foreign legislation designed to reduce solid waste in landfills. While the
principal resins used by the Company are recyclable and, therefore, reduce the
Company's exposure to legislation promulgated to date, there can be no
assurance that future legislation or regulatory initiatives would not have a
material adverse effect on the Company. Legislation, if promulgated, requiring
plastics to be degradable in landfills or to have minimum levels of recycled
content would have a significant impact on the Company's business as would
legislation providing for disposal fees or limiting the use of plastic
products.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
F-8
<PAGE>
INVENTORIES
Inventories are valued at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed primarily
by the straight-line method over the estimated useful lives of the assets
ranging from three to 25 years.
INTANGIBLE ASSETS
Origination fees relating to the 1994 Notes and 1996 Notes and deferred
financing fees are being amortized using the straight-line method over the
lives of the respective debt agreements.
The costs in excess of net assets acquired represent the excess purchase price
over the fair value of the net assets acquired in the original acquisition of
Berry Plastics and subsequent acquisitions. These costs are being amortized
over a range of 15 to 20 years.
Covenants not to compete relating to agreements made with certain selling
shareholders of acquired companies are being amortized over the respective life
of the agreement.
Holding periodically evaluates the value of intangible assets to determine if
an impairment has occurred. This evaluation is based on various analyses
including reviewing anticipated cash flows.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts on the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, REPORTING COMPREHENSIVE INCOME, and No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. The Statements will affect the
disclosure requirement for financial statements beginning in 1998. The Company
expects that the new reporting requirements will have no material effect on its
financial position or results of operations.
NOTE 3. ACQUISITIONS
On March 10, 1995, the Company acquired through its newly-formed subsidiary,
Berry Sterling Corporation, substantially all of the assets and assumed certain
liabilities of Sterling Products, Inc. for a purchase price of $7.3 million
(the "Sterling Acquisition"). The operations of Berry Sterling Corporation are
included in the Company's operations since the acquisition date using the
purchase method of accounting.
On December 21, 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of Tri-Plas, Inc. through its subsidiary Berry Tri-
Plas Corporation (formerly Berry-CPI Corporation) for $6.6 million (the "Tri-
Plas Acquisition"). The operations of Berry Tri-Plas are included in the
Company's operations since the acquisition date using the purchase method of
accounting.
F-9
<PAGE>
On January 17, 1997, the Company acquired certain assets and assumed certain
liabilities of Container Industries, Inc. ("Container Industries") of Pacoima,
California for $2.9 million. The purchase was funded out of operating funds.
The operations of Container Industries are included in the Company's operations
since the acquisition date using the purchase method of accounting.
On January 21, 1997, the Company acquired the outstanding stock of PackerWare
Corporation, a Kansas corporation, for aggregate consideration of approximately
$28.1 million and merged PackerWare with a newly-formed, wholly-owned
subsidiary of the Company (with PackerWare being the surviving corporation).
The purchase was primarily financed through the Credit Facility (see Note 5).
The operations of PackerWare are included in the Company's operations since the
acquisition date using the purchase method of accounting.
On May 13, 1997, Berry Design, a newly-formed wholly-owned subsidiary of the
Company, acquired substantially all of the assets and assumed certain
liabilities of Virginia Design Packaging Corp. ("Virginia Design") for
approximately $11.1 million. The purchase was financed through the Credit
Facility (see Note 5). The operations of Berry Design are included in the
Company's operations since the acquisition date using the purchase method of
accounting.
On August 29, 1997, the Company acquired the outstanding common stock of
Venture Packaging for aggregate consideration of $43.7 million and merged
Venture Packaging with a newly formed subsidiary of the Company (with Venture
Packaging being the surviving corporation). The purchase was primarily
financed through the Credit Facility (see Note 5). Additionally, preferred
stock and warrants were issued to certain selling shareholders of Venture
Packaging (see Note 9). The operations of Venture Packaging are included in
the Company's operations since the acquisition date using the purchase method
of accounting.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Sterling Acquisition and the Tri-Plas
Acquisition occurred on January 1, 1995; and the Container Industries,
PackerWare, Virginia Design, and Venture acquisitions occurred on December 31,
1995.
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------------
DECEMBER 27, 1997 DECEMBER 28, 1996 DECEMBER 30, 1995
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 261,531 $ 257,098 $ 157,263
Income (loss)before income taxes (17,699) (9,932) 4,274
Net income (loss) (17,837) (10,171) 3,859
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisitions been consummated at the above date, nor are they
necessarily indicative of future operating results. Further, the information
gathered on the acquired companies is based upon unaudited internal financial
information and reflects only pro forma adjustments for additional interest
expense and amortization of the excess of the cost over the underlying net
assets acquired, net of the applicable income tax effect.
F-10
<PAGE>
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
-------------- --------------
<S> <C> <C>
Deferred financing and origination fees $ 14,578 $ 12,593
Covenants not to compete 4,598 100
Excess of cost over net assets acquired 32,464 5,029
Deferred acquisition costs 13 527
Accumulated amortization (6,548) (3,497)
-------------- --------------
$ 45,105 $ 14,752
============== ==============
</TABLE>
Excess of cost over net assets acquired increased due to the acquisitions of
PackerWare, Container Industries, Virginia Design, and Venture Packaging to the
extent the purchase price exceeded the fair value of the net assets acquired.
The increase in covenants not to compete represents agreements entered into
with certain selling shareholders of the acquired companies in 1997.
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
-------------- --------------
<S> <C> <C>
Holding 12.50% Senior Secured Notes $105,000 $105,000
Berry 12.25% Senior Subordinated Notes 100,000 100,000
Term loans 58,300 -
Revolving line of credit 25,654 -
Nevada Industrial Revenue Bonds 5,000 5,500
Iowa Industrial Revenue Bonds 5,400 5,400
South Carolina Industrial Development Bonds 6,985 -
Capital lease obligation payable through December 547 785
1999
Debt discount (551) (639)
-------------- --------------
306,335 216,046
Less current portion of long-term debt 7,619 738
-------------- --------------
$298,716 $215,308
============== ==============
</TABLE>
HOLDING 12.50% SENIOR SECURED NOTES
On June 18, 1996, Holding, as part of a recapitalization (see Note 9), issued
12.50% Senior Secured Notes due 2006 (the "1996 Offering") for net proceeds,
after expenses, of approximately $100.2 million (or $64.6 million after
deducting the amount of such net proceeds used to purchase marketable
securities available for payment of interest on the notes). These notes were
exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006
(the "1996 Notes"). Interest is payable semi-annually on June 15 and December
15 of each year. In addition, from December 15, 1999 until June 15, 2001,
Holding may, at its option, pay interest, at an increased rate of 0.75% per
annum, in additional 1996 Notes valued at 100% of the principal amount thereof.
In connection with the 1996 Notes, $35.6 million was placed in escrow, which
has been invested in U.S. government securities, to pay three years' interest
on the notes. Pending disbursement, the trustee will have a first priority
lien on the escrow account for the benefit of the holders of the 1996 Notes.
Funds may be disbursed from the escrow account only to pay interest on the 1996
Notes and, upon certain repurchases or redemptions of the notes, to pay
principal of and premium, if any, thereon. The balance in the escrow account
as of December 27, 1997 is $18.9 million.
F-11
<PAGE>
The 1996 Notes rank senior in right of payment to all existing and future
subordinated indebtedness of Holding, including Holding's subordinated
guarantee of the 1994 Notes (as defined hereinafter) and PARI PASSU in right of
payment with all senior indebtedness of Holding. The 1996 Notes are
effectively subordinated to all existing and future senior indebtedness of
Berry, including borrowings under the Credit Facility, the Nevada and Iowa
Industrial Revenue Bonds, and the South Carolina Industrial Development Bonds.
BERRY 12.25% SENIOR SUBORDINATED NOTES
On April 21, 1994, Berry completed an offering of 100,000 units consisting of
$100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation
Senior Subordinated Notes, due 2004 (the "1994 Notes") and 100,000 warrants to
purchase 1.13237 shares of Class A Common Stock, $.00005 par value
(collectively the "1994 Transaction"), of Holding. The 1994 Notes mature on
April 15, 2004 and interest is payable semi-annually on October 15 and April 15
of each year and commenced on October 15, 1994. The 1994 Notes are
unconditionally guaranteed on a senior subordinated basis by Holding and all of
Berry's subsidiaries. The net proceeds to Berry from the sale of the notes,
after expenses, were $93.0 million.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the 1994 Notes. Subsequent to April 15, 1999, the 1994 Notes
may be redeemed at the option of Berry, in whole or in part, at redemption
prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a
change in control, as defined in the indenture entered into in connection with
the 1994 Transaction (the "1994 Indenture"), each holder of notes will have the
right to require Berry to repurchase all or any part of such holder's notes at
a repurchase price in cash equal to 101% of the aggregate principal amount
thereof plus accrued interest.
The 1994 Notes rank PARI PASSU with or senior in right of payment to all
existing and future subordinated indebtedness of Berry. The notes rank junior
in right of payment to all existing and future senior indebtedness of Berry,
including borrowings under the Credit Facility, the Nevada and Iowa Industrial
Revenue Bonds, and the South Carolina Industrial Development Bonds.
The 1994 Indenture contains certain covenants which, among other things, limit
Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell,
lease or transfer assets, make dividend payments and engage in transactions
with affiliates.
CREDIT FACILITY
Concurrent with the PackerWare acquisition, the Company entered into a
financing and security agreement (the "Security Agreement") with NationsBank,
N.A. for a senior secured line of credit in an aggregate principal amount of
$60.0 million (the "Credit Facility"). As a result of the acquisition of
assets of Virginia Design and the acquisition of Venture Packaging, the Credit
Facility was amended and increased to $127.2 million. The indebtedness under
the Credit Facility is guaranteed by Holding and the Company's subsidiaries.
The Credit Facility replaced the facility previously provided by Fleet Capital
Corporation.
The Credit Facility provides the Company with a $50 million revolving line of
credit, subject to a borrowing base formula, a $58.3 million term loan facility
and a $18.9 million standby letter of credit facility to support the Company's
and its subsidiaries' obligations under the Nevada and Iowa Industrial Revenue
Bonds and the South Carolina Industrial Development Bonds. The Company
borrowed all amounts available under the term loan facility to finance the
PackerWare, Virginia Design and Venture Packaging acquisitions. At December
27, 1997, the Company had unused borrowing capacity under the Credit Facility's
borrowing base with respect to the revolving line of credit of approximately
$12.5 million.
F-12
<PAGE>
The Credit Facility matures on January 21, 2002 unless previously terminated by
the Company or by the lenders upon an Event of Default as defined in the
Security Agreement. The term loan facility requires periodic quarterly
payments, varying in amount, beginning in 1998 through the maturity of the
facility. Interest on borrowings on the Credit Facility will be based on the
lender's base rate plus .5% or LIBOR plus 2.0%, at the Company's option.
The Credit Facility contains various covenants which include, among other
things: (i) maintenance of certain financial ratios and compliance with certain
financial tests and limitations, (ii) limitations on the issuance of additional
indebtedness, and (iii) limitations on capital expenditures.
NEVADA INDUSTRIAL REVENUE BONDS
The Nevada Industrial Revenue Bonds bear interest at a variable rate (4.6% at
December 27, 1997 and December 28, 1996), require annual principal payments of
$0.5 million on April 1, are collateralized by irrevocable letters of credit
issued by NationsBank under the Credit Facility and mature in April 2007.
IOWA INDUSTRIAL REVENUE BONDS
The Iowa Industrial Revenue Bonds bear interest at a variable rate (4.4% and
4.0% at December 27, 1997 and December 28, 1996, respectively), require no
periodic principal payments, are collateralized by irrevocable letters of
credit issued by NationsBank under the Credit Facility and mature in August
1998. The Company plans to refinance these bonds through a term loan under the
Credit Facility.
SOUTH CAROLINA INDUSTRIAL DEVELOPMENT BONDS
The South Carolina Industrial Bonds bear interest at a variable rate (4.3% at
December 27, 1997), require semi-annual principal payments of $0.3 million on
April 1 and October 1 with a final balloon payment of $0.9 on April 1, 2010,
and are collateralized by irrevocable letters of credit issued by NationsBank
under the Credit Facility.
OTHER
Future maturities of long-term debt are as follows: 1998, $7,619; 1999,
$17,643; 2000, $13,875; 2001, $13,510; 2002, $43,104 and $211,135 thereafter.
Interest paid was $29,927, $19,744 and $13,432 for 1997, 1996 and 1995,
respectively. Interest capitalized was $341, $225 and $350 for 1997, 1996 and
1995, respectively.
NOTE 6. LEASE AND OTHER COMMITMENTS
Certain property and equipment are leased using capital and operating leases.
Capitalized lease property consisted of manufacturing equipment with a cost of
$1,661 and related accumulated amortization of $831 and $664 at December 27,
1997 and December 28, 1996, respectively. Capital lease amortization is
included in depreciation expense. Total rental expense for operating leases
was approximately $3,332, $2,344, and $1,515 for 1997, 1996, and 1995,
respectively.
F-13
<PAGE>
Future minimum lease payments for capital leases and noncancellable operating
leases with initial terms in excess of one year are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 28, 1997
--------------------------------------
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1998 $ 301 $ 4,041
1999 301 3,064
2000 - 2,824
2001 - 2,696
2002 - 1,987
Thereafter - 1,921
-------------- ----------------
602 $ 16,533
================
Less: amount representing interest 55
--------------
Present value of net minimum lease payments $ 547
==============
</TABLE>
NOTE 7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of deferred tax liabilities and assets at December 27, 1997 and December 28,
1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 11,073 $ 2,316
Other - 104
------------ ------------
Total deferred tax liabilities 11,073 2,420
Deferred tax assets:
Allowance for doubtful accounts 590 331
Inventory 1,391 350
Compensation and benefit accruals 1,198 719
Insurance reserves 338 207
Net operating loss carryforwards 8,372 1,916
Alternative minimum tax (AMT) credit 2,049 2,003
carryforwards
------------ ------------
Total deferred tax assets 13,938 5,526
------------ ------------
2,865 3,106
Valuation allowance for net deferred tax assets (816) (1,103)
------------ ------------
Net deferred tax assets $ 2,049 $ 2,003
============ ============
</TABLE>
F-14
<PAGE>
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current
Federal $ - $ - $ 1,404
State 138 186 237
Deferred
Federal - 69 (900)
State - (16) (63)
------------ ------------ ------------
Income tax expense $ 138 $ 239 $ 678
============ ============ ============
</TABLE>
Holding has unused operating loss carryforwards of approximately $21.7 million
for federal income tax purposes which begin to expire in 2010. AMT credit
carryforwards are available to Holding indefinitely to reduce future years'
federal income taxes. A tax sharing agreement is in place that allows Holding
to make losses available to Berry.
Income taxes paid during 1997, 1996 and 1995 approximated $47, $528, and
$2,001, respectively.
A reconciliation of income tax expense, computed at the federal statutory rate,
to income tax expense, as provided for in the financial statements, is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Federal income tax expense (benefit)
at statutory rate $(4,853) $(1,057) $2,384
State income tax expense, net of 138 112 115
federal benefit
Amortization of goodwill 285 - -
Expenses not deductible for income tax 219 51 19
purposes
Change in valuation allowance for net
deferred tax assets 4,298 1,103 (1,869)
Other 51 30 29
------------ ------------ ------------
Income tax expense $ 138 $ 239 $ 678
============ ============ ============
</TABLE>
NOTE 8. EMPLOYEE RETIREMENT PLANS
Berry sponsors a defined contribution 401(k) retirement plan covering
substantially all employees. Contributions are based upon a fixed dollar
amount for employees who participate and percentages of employee contributions
at specified thresholds. Contribution expense for this plan was approximately
$629, $531, and $384 for 1997, 1996 and 1995, respectively.
NOTE 9. STOCKHOLDERS' EQUITY
COMMON STOCK
On June 18, 1996, Holding consummated the transaction described below (the
"1996 Transaction"). BPC Mergerco, Inc. ("Mergerco"), a wholly-owned
subsidiary of Holding, was organized by Atlantic Equity Partners International
II, L.P. ("International"), Chase Venture Capital Associates, L.P. ("CVCA"),
and certain other institutional investors to effect the acquisition of a
majority of the outstanding capital stock of Holding. Pursuant to the terms of
a Common Stock Purchase Agreement dated as of June 12, 1996 each of
International, CVCA and certain other equity investors (collectively the
"Common Stock Purchasers") subscribed for shares of common stock of Mergerco.
F-15
<PAGE>
In addition, pursuant to the terms of a Preferred Stock Purchase Agreement
dated as of June 12, 1996 (the "Preferred Stock Purchase Agreement"), CVCA and
an additional institutional investor (the "Preferred Stock Purchasers")
purchased shares of preferred stock of Mergerco (the "Preferred Stock") and
warrants (the "1996 Warrants") to purchase shares of common stock of Mergerco.
Immediately after the purchase of the common stock, the preferred stock and the
1996 Warrants of Mergerco, Mergerco merged (the "Merger") with and into
Holding, with Holding being the surviving corporation. Upon the consummation of
the Merger: each share of the Class A Common Stock, $.00005 par value, and
Class B Common Stock, $.00005 par value, of Holding and certain privately-held
warrants exercisable for such Class A and Class B Common Stock were converted
into the right to receive cash equal to the purchase price per share for the
common stock into which such warrants were exercisable less the amount of the
nominal exercise price therefor, and all other classes of common stock of
Holding, a majority of which was held by certain members of management, were
converted into shares of common stock of the surviving corporation. In
addition, upon the consummation of the Merger, the holders of the warrants (the
"1994 Warrants") to purchase capital stock of Holding that were issued in
connection with the 1994 Transaction became entitled to receive cash equal to
the purchase price per share for the common stock into which such warrants were
exercisable less the amount of the exercise price therefor. Additionally, a
$2,762 bonus was paid to management employees who held unvested stock options
at the time of the 1994 Transaction which is included in 1996 general and
administrative expenses.
The authorized capital stock of Holding consists of 3,500,000 shares of capital
stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding
Common Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000
shares are designated Class A voting Common Stock (the "Class A Voting Stock"),
500,000 shares are designated Class A Nonvoting Common Stock (the "Class A
Nonvoting Stock"), 500,000 shares are designated Class B Nonvoting Common Stock
(the "Class B Nonvoting Stock"), and 500,000 shares are designated Class C
Nonvoting Common Stock (the "Class C Nonvoting Stock").
PREFERRED STOCK AND WARRANTS
In connection with the 1996 Transaction, for aggregate consideration of $15.0
million, Mergerco issued units (the "Units") comprised of Series A Senior
Cumulative Exchangeable Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and detachable warrants to purchase shares of Class B
Common Stock (voting and non-voting) constituting 6% of the issued and
outstanding Common Stock of all classes, determined on a fully-diluted basis
(the "Warrants").
Dividends accrue at a rate of 14% per annum, payable quarterly in arrears (each
date of payment, a "Dividend Payment Date") and will accumulate until declared
and paid. Dividends declared and accruing prior to the first Dividend Payment
Date occurring after the sixth anniversary of the issue date (the "Cash
Dividend Date") may, at the option of Holding, be paid in cash in full or in
part or accrue quarterly on a compound basis. Thereafter, all dividends are
payable in cash in arrears. The dividend rate is subject to increase to a rate
of (i) 16% per annum if (and for so long as) Holding fails to declare and pay
dividends in cash for any quarterly period following the Cash Dividend Date and
(ii) 15% per annum if (and for so long as) Holding fails to comply with its
obligations relating to the rights and preferences of the Preferred Stock. If
Holding fails to pay in full, in cash, (a) all accrued and unpaid dividends on
or prior to the twelfth anniversary of the issue date or (b) all accrued
dividends on any Dividend Payment Date following the twelfth anniversary of the
issue date, the holders of Preferred Stock will be permitted to elect a
majority of the Board of Directors of Holding.
The Preferred Stock ranks prior to all other classes of stock of Holding upon
liquidation and is entitled to receive, out of assets available for
distribution, cash in the aggregate amount of $15.0 million, plus all accrued
and unpaid dividends thereon. Subject to the terms of the 1996 Indenture, on
any Dividend Payment Date, Holding has the option of exchanging the Preferred
Stock, in whole but not in part, for Senior Subordinated Exchange Notes, at the
rate of $25 in principal amount of notes for each $25 of liquidation preference
of Preferred Stock held; provided, however, that no shares of Preferred Stock
may be exchanged for so long as any shares of Preferred Stock are held by CVCA
or its affiliates. Upon such exchange, Holding will be required to pay in cash
all accrued and unpaid dividends.
F-16
<PAGE>
Pursuant to the Preferred Stock Purchase Agreement, the holders of Preferred
Stock and Warrants have unlimited incidental registration rights (subject to
cutbacks under certain circumstances). The exercise price of the Warrants is
$.01 per Warrant and the Warrants are exercisable immediately upon issuance.
All unexercised warrants will expire on the tenth anniversary of the issue
date. The number of shares issuable upon exercise of a Warrant are subject to
anti-dilution adjustments upon the occurrence of certain events.
In conjunction with the Venture Packaging acquisition, Holding authorized and
issued 200,000 shares of Series B Cumulative Preferred Stock to certain selling
shareholders of Venture Packaging. The Preferred Stock has a stated value of
$25 per share, and dividends accrue at a rate of 14.75% per annum and will
accumulate until declared and paid. The Preferred Stock ranks junior to the
Series A Preferred Stock and prior to all other capital stock of Holding. In
addition, Warrants to purchase 9,924 shares of Class B Non-Voting Common Stock
at $108 per share were issued to the same selling shareholders of Venture
Packaging.
STOCK OPTION PLAN
Pursuant to the provisions of the BPC Holding Corporation 1996 Stock Option
Plan (the "Option Plan") which reserved 45,620 shares for future issuance,
Holding has granted options to certain officers and key employees to acquire
shares of Class B Nonvoting Common Stock. During 1997, amendments were
approved to the Option Plan reserving an additional 6,000 shares for future
issuance. These options are subject to various option agreements, which among
other things, set forth the class of stock, option price and performance
thresholds to determine exercisability and vesting requirements. The Option
Plan expires October 3, 2003 or such earlier date on which the Board of
Directors of Holding, in its sole discretion, determines. Option prices range
from $100 to $108 per share.
FASB Statement 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("Statement 123"),
prescribes accounting and reporting standards for all stock-based compensation
plans. Statement 123 provides that companies may elect to continue using
existing accounting requirements for stock-based awards or may adopt a new fair
value method to determine their intrinsic value. Holding has elected to
continue following Accounting Principles Board Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES ("APB 25") to account for its employee stock options.
Under APB 25, because the exercise price of Holding's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Pro forma effects on Holding's 1997, 1996
and 1995 consolidated statements of operations using the fair value method
prescribed by Statement 123 have not been disclosed because there is no
material difference between results obtained using this method and using the
criteria set forth in APB 25.
<PAGE>
Information related to the Option Plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996
----------------------------- ----------------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of year 43,393 $100 - $ -
Options granted 5,425 106 43,768 100
Options exercised - - - -
Options canceled (1,110) 100 (375) 100
-------- -------
Options outstanding, end of year 47,708 101 43,393 100
======== =======
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Option price range at end of year $100 - $108 $100
Options available for grant at year end 3,912 2,227
Weighted average fair value of options
granted during year $106 $100
</TABLE>
F-17
<PAGE>
The following table summarizes information about the options outstanding at
December 27, 1997:
<TABLE>
<CAPTION>
Weighted
Range of Weighted Average Average Number
Exercise Number Outstanding Remaining Contractual Exercise Exercisable at
Prices at December 27, 1997 Life Price December 27, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$100 - $108 47,708 4 years $100.72 13,561
</TABLE>
STOCKHOLDERS AGREEMENTS
Holding entered into a new stockholders agreement (the "New Stockholders
Agreement") dated as of June 18, 1996 with the Common Stock Purchasers, certain
management stockholders and, for limited purposes thereunder, the Preferred
Stock Purchasers. The New Stockholders Agreement grants certain rights
including, but not limited to, designation of members of Holding's Board of
Directors, the initiation of an initial public offering of equity securities of
the Company or a sale of Holding. The agreement also restricts certain
transfers of Holding's equity.
Holding entered into an amended and restated agreement with its management
stockholders and International on June 18, 1996. The agreement contains
provisions (i) limiting transfers of equity by the management stockholders;
(ii) requiring the management stockholders to sell their shares as designated
by Holding or International upon the consummation of certain transactions;
(iii) granting the management stockholders certain rights of co-sale in
connection with sales by International; (iv) granting rights to repurchase
capital stock from the management stockholders upon the occurrence of certain
events; and (v) requiring the management stockholders to offer shares to
Holding prior to any permitted transfer.
NOTE 10. RELATED PARTY TRANSACTIONS
The Company is party to a management agreement (the "Management Agreement")
with First Atlantic Capital, Ltd. ("First Atlantic"). In connection with the
1996 Transaction, Holding paid a fee of $1,250 plus reimbursement for out-of-
pocket expenses to First Atlantic for advisory services, including originating,
structuring and negotiating the 1996 Transaction. First Atlantic also received
advisory fees of $966 for originating, structuring and negotiating the 1997
acquisitions and a $100 advisory fee in both March and December 1995 for
originating, structuring and negotiating the Sterling Products acquisition and
the Tri-Plas acquisition, respectively.
In consideration of financial advisory and management consulting services, the
Company paid First Atlantic fees and expenses of $771, $788 and $817 for fiscal
1997, 1996, and 1995, respectively.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION
The Company's financial instruments generally consist of cash and cash
equivalents and the Company's long-term debt. The carrying amounts of the
Company's financial instruments approximate fair value at December 27, 1997,
except for the 1994 Notes and the 1996 Notes for which the fair value exceed
the carrying value by approximately $10.0 million and $10.5 million,
respectively.
NOTE 12. SUMMARY UNAUDITED FINANCIAL INFORMATION (IN THOUSANDS)
The following summarizes unaudited financial information of Holding's wholly-
owned subsidiary, Berry Plastics Corporation and subsidiaries:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS
Current assets $ 62,824 $ 42,445
Property and equipment - net of accumulated depreciation 108,218 55,664
Other noncurrent assets 44,480 12,046
Current liabilities 42,158 26,220
Noncurrent liabilities 205,172 113,113
Equity (deficit) (31,808) (29,177)
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales $226,954 $151,058 $140,681
Cost of goods sold 180,249 110,110 102,484
Income (loss) before income taxes (2,493) 6,490 6,861
Net income (loss) (2,631) 5,989 6,183
</TABLE>
F-18
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 27,
1998 1997
-------------- --------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 2,680 $ 2,688
Accounts receivable (less allowance
for doubtful accounts of $993 at June 27,
1998 and $1,038 at December 27, 1997) 33,951 28,385
Inventories:
Finished goods 20,639 22,029
Raw materials and supplies 6,869 7,429
-------------- --------------
27,508 29,458
Prepaid expenses and other receivables 2,110 1,834
Income taxes recoverable 355 1,167
-------------- --------------
Total current assets 66,604 63,532
Assets held in trust 13,345 19,738
Property and equipment:
Land 6,157 5,811
Buildings and improvements 34,449 33,891
Machinery, equipment and tooling 128,912 122,991
Automobiles and trucks 1,272 1,241
Construction in progress 8,545 10,357
-------------- --------------
179,335 174,291
Less accumulated depreciation 74,075 66,073
-------------- --------------
105,260 108,218
Intangible assets:
Deferred financing and origination fees, net 10,056 10,849
Covenants not to compete, net 3,867 3,940
Excess of cost over net assets acquired, net 29,080 30,303
Deferred acquisition costs 77 13
-------------- --------------
43,080 45,105
Deferred income taxes 2,049 2,049
Other 833 802
-------------- --------------
Total assets $231,171 $239,444
============== ==============
</TABLE>
F-19
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 27,
1998 1997
-------------- --------------
<S> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 15,746 $ 16,732
Accrued expenses and other liabilities 7,536 7,162
Accrued interest 3,525 3,612
Employee compensation and payroll taxes 8,569 7,489
Income taxes 152 55
Current portion of long-term debt 12,313 7,619
-------------- --------------
Total current liabilities 47,841 42,669
Long-term debt, less current portion 287,542 298,716
Accrued dividends on preferred stock 5,457 3,674
Other liabilities 2,894 3,360
-------------- --------------
343,734 348,419
Stockholders' equity (deficit):
Class A Preferred Stock; 800,000 shares
authorized; 600,000 shares issued and
outstanding (net of discount of $2,917 at June 11,655 11,509
27, 1998 and $3,062 at December 27, 1997)
Class B Preferred Stock; 200,000 shares
authorized, issued and outstanding 5,000 5,000
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 91,000
shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 259,000
shares issued and outstanding 3 3
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 144,936
shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 57,387
shares issued and outstanding 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 16,960
shares issued and outstanding - -
Treasury stock: 726 shares (81) (22)
Additional paid-in capital 47,445 49,374
Warrants 3,511 3,511
Retained earnings (deficit) (180,099) (178,353)
-------------- --------------
Total stockholders' equity (deficit) (112,563) (108,975)
-------------- --------------
Total liabilities and stockholders'
equity (deficit) $ 231,171 $ 239,444
============== ==============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-20
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
----------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $69,586 $56,929 $136,317 $105,936
Cost of goods sold 50,768 43,771 100,016 82,167
----------------------------------------------------------------------------
Gross margin 18,818 13,158 36,301 23,769
Operating expenses:
Selling 3,487 2,737 7,112 5,094
General and administrative 4,400 3,120 8,799 5,725
Research and development 347 366 743 602
Amortization of intangibles 828 346 1,708 624
Other 1,230 910 2,363 1,741
----------------------------------------------------------------------------
Operating income 8,526 5,679 15,576 9,983
Other income and expense:
Loss on disposal of property and
equipment 297 90 430 90
----------------------------------------------------------------------------
Income before interest and income 8,229 5,589 15,146 9,893
taxes
Interest:
Expense (8,776) (7,742) (17,441) (15,550)
Income 337 709 575 1,156
----------------------------------------------------------------------------
Loss before income taxes (210) (1,444) (1,720) (4,501)
Income tax expense 13 564 26 92
----------------------------------------------------------------------------
Net loss (223) (2,008) (1,746) (4,593)
Preferred stock dividends (869) (524) (1,783) (1,048)
----------------------------------------------------------------------------
Net loss attributable to common
stockholders $ (1,092) $ (2,532) $ (3,529) $ (5,641)
============================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-21
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED
STOCK
----------------- -------------- ADDITIONAL RETAINED
CLASS CLASS CLASS CLASS CLASS TREASURY PAID-IN EARNINGS
A B C A B STOCK CAPITAL WARRANTS (DEFICIT) TOTAL
----- ----- ----- ------- ------ ------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 27, 1997 $ 4 $ 2 $ - $11,509 $5,000 $ (22) $ 49,374 $ 3,511 $(178,353) $(108,975)
Net loss - - - - - - - - (1,746) (1,746)
Accrued dividends on
preferred stock - - - - - - (1,783) - - (1,783)
Purchase treasury stock
from management - - - - - (59) - - - (59)
Amortization of preferred
stock discount - - - 146 - - (146) - - -
------------------------------------------------------------------------------------
Balance at June 27, 1998 $ 4 $ 2 $ - $11,655 $5,000 $ (81) $ 47,445 $ 3,511 $(180,099) $(112,563)
====================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-22
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------------------------
JUNE 27, JUNE 28,
1998 1997
------------------------------------------------
(UNAUDITED)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (1,746) $ (4,593)
Adjustments to reconcile net loss to net cash
provided by
operating activities:
Depreciation 10,075 7,249
Non-cash interest expense 884 739
Amortization 1,708 624
Interest applied to assets held in trust 6,393 5,459
Loss on sale of property and equipment 430 90
Deferred income taxes - (20)
Changes in operating assets and liabilities:
Accounts receivable, net (5,565) (8,833)
Inventories 1,950 2,492
Prepaid expenses and other receivables 534 (96)
Accounts payable and accrued expenses (114) (1,368)
Other assets (169) 554
------------ ------------
Net cash provided by operating activities 14,380 2,297
INVESTING ACTIVITIES
Additions to property and equipment (7,853) (4,801)
Proceeds from disposal of property and equipment 95 1,060
Acquisitions of businesses - (44,767)
------------ ------------
Net cash used for investing activities (7,759) (48,508)
FINANCING ACTIVITIES
Proceeds from borrowings - 40,807
Payments on long-term borrowings (6,397) (1,250)
Payments on capital lease (127) (116)
Payment of refinancing fees (46) (1,184)
Payment of bond consent fee - (737)
Purchase of stock from management (59) -
------------ ------------
Net cash provided by (used for) financing
activities (6,629) 37,520
------------ ------------
Net decrease in cash and cash equivalents (8) (8,691)
Cash and cash equivalents at beginning of period 2,688 10,192
------------ ------------
Cash and cash equivalents at end of period $ 2,680 $ 1,501
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-23
<PAGE>
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of BPC Holding
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the periods presented
are not necessarily indicative of the results that may be expected for the
full fiscal year. The accompanying financial statements include the results
of BPC Holding Corporation ("Holding") and its wholly-owned subsidiary, Berry
Plastics Corporation ("Berry"), and its wholly-owned subsidiaries: Venture
Packaging, Inc. ("Venture Packaging"), Venture Packaging Midwest, Inc.,
Venture Packaging Southeast, Inc., PackerWare Corporation, Berry Iowa
Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, Berry
Plastics Design Corporation ("Berry Design"), and AeroCon, Inc. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Holding's and Berry's Form 10-K's filed with the
Securities and Exchange Commission for the year ended December 27, 1997.
Certain amounts on the 1997 financial statements have been reclassified to
conform with the 1998 presentation.
2. ACQUISITIONS
On January 17, 1997, Berry acquired certain assets and assumed certain
liabilities of Container Industries, Inc. ("Container Industries") of
Pacoima, California for $2.9 million. The purchase was funded out of
operating funds. The operations of Container Industries are included in the
Berry's operations since the acquisition date using the purchase method of
accounting.
On January 21, 1997, Berry acquired the outstanding stock of PackerWare
Corporation, a Kansas corporation, for aggregate consideration of
approximately $28.1 million by way of a merger of PackerWare with a newly-
formed, wholly-owned subsidiary of Berry (with PackerWare being the surviving
corporation). The purchase was primarily financed through the Credit
Facility (see Note 3). The operations of PackerWare are included in Berry's
operations since the acquisition date using the purchase method of
accounting.
On May 13, 1997, Berry Design, a newly-formed wholly-owned subsidiary of
Berry, acquired substantially all of the assets and assumed certain
liabilities of Virginia Design Packaging Corp. ("Virginia Design") for
approximately $11.1 million. The purchase was financed through the Credit
Facility (see Note 3). The operations of Berry Design are included in
Berry's operations since the acquisition date using the purchase method of
accounting.
F-24
<PAGE>
2. ACQUISITIONS (CONTINUED)
On August 29, 1997, Berry acquired the outstanding common stock of Venture
Packaging for aggregate consideration of $43.7 million by way of a merger of
Venture Packaging with a newly formed subsidiary of Berry (with Venture
Packaging being the surviving corporation). The purchase was primarily
financed through the Credit Facility (see Note 3). Additionally, preferred
stock and warrants were issued to certain selling shareholders of Venture
Packaging. The operations of Venture Packaging are included in Berry's
operations since the acquisition date using the purchase method of
accounting.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Container Industries, PackerWare,
Virginia Design and Venture Packaging acquisitions occurred on December 29,
1996.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
JUNE 28, 1997 JUNE 28, 1997
---------------------------------------------------------
(In Thousands)
<S> <C> <C>
Net sales $ 67,117 $ 133,184
Loss before income taxes (2,797) (7,164)
Net loss (3,361) (7,256)
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would
have occurred had the acquisitions been consummated at the above date, nor
are they necessarily indicative of future operating results. Further, the
information gathered on the acquired companies is based upon unaudited
internal financial information and reflects only pro forma adjustments for
additional interest expense and amortization of the excess of the cost over
the underlying net assets acquired, net of the applicable income tax effect.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 27,
1998 1997
----------------------------------------------
<S> <C> <C>
(In Thousands)
Holding 12.50% Senior Secured Notes $105,000 $105,000
Berry 12.25% Senior Subordinated Notes 100,000 100,000
Term loans 56,206 58,300
Revolving line of credit 22,187 25,654
Nevada Industrial Revenue Bonds 4,500 5,000
Iowa Industrial Revenue Bonds 5,400 5,400
South Carolina Industrial Development Bonds 6,650 6,985
Capital lease obligation 420 547
Debt discount (508) (551)
-------------- --------------
299,855 306,335
Less current portion of long-term debt 12,313 7,619
-------------- --------------
$287,542 $298,716
============== ==============
</TABLE>
The current portion of long-term debt at June 27, 1998 consists of $10.6
million of quarterly installments on the term loans, $1.5 million of repayments
on the industrial bonds and the monthly principal payments related to a capital
lease obligation.
Concurrent with the PackerWare acquisition, Berry entered into a financing
and security agreement with NationsBank, N.A. (the "Credit Agreement") for a
senior secured line of credit in an aggregate principal amount of $60.0
million (the "Credit Facility"). As a result of the acquisition of assets of
Virginia Design and the acquisition of Venture Packaging, the Credit Facility
was amended and increased to $127.2 million. The indebtedness under the
Credit Facility is guaranteed by Holding and Berry's subsidiaries.
The Credit Facility provided the Company with a $50.0 million revolving line
of credit, subject to a borrowing base formula, a $58.3 million term loan
facility and an $18.9 million standby letter of credit facility to support
Berry's and its subsidiaries' obligations under the Nevada and Iowa
Industrial Revenue Bonds and the South Carolina Industrial Development Bonds.
Berry borrowed all amounts available under the term loan facility to finance
the PackerWare, Virginia Design and Venture Packaging acquisitions. Based on
the borrowing formula as of June 27, 1998, Berry had approximately $19.4
million of additional available credit under the revolving line of credit.
3. LONG-TERM DEBT (CONTINUED)
The Credit Facility matures on January 21, 2002 unless previously terminated
by Berry or by the lenders upon an Event of Default as defined in the Credit
Agreement. The term loan facility requires periodic quarterly payments,
varying in amount, through the maturity of the facility.
Interest on borrowings on the Credit Facility will be based on the lender's
base rate plus .5% or LIBOR plus 2.0%, at Berry's option.
The Credit Facility contains various covenants which include, among other
things: (i) maintenance of certain financial ratios and compliance with
certain financial tests and limitations, (ii) limitations on the issuance of
additional indebtedness, and (iii) limitations on capital expenditures.
F-25
<PAGE>
4. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes financial information of Holding's wholly-owned
subsidiary, Berry Plastics Corporation, and its subsidiaries.
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 27,
1998 1997
-------------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS
Current assets $ 65,930 $ 62,824
Property and equipment - net of
accumulated depreciation 105,260 108,218
Other noncurrent assets 42,466 44,480
Current liabilities 47,386 42,158
Noncurrent liabilities 193,528 205,172
Equity (deficit) (27,259) (31,808)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales $ 69,586 $ 56,929 $ 136,317 $ 105,936
Cost of goods sold 50,768 43,771 100,016 82,167
Income before income taxes 2,888 1,380 4,571 1,413
Net income 2,875 1,439 4,546 1,316
</TABLE>
F-26
<PAGE>
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosure About Segments of an Enterprise and Related Information"
(FAS 131). FAS 131 establishes requirements for reporting information about
operating segments in annual and interim reports and is effective for the
Company in 1998, but need not be applied to interim financial statements
in the initial year of application. FAS 131 may require a change in the
Company's financial reporting; however, the extent of the change, if any,
has not been determined.
6. SUBSEQUENT TRANSACTION
On July 2, 1998, NIM Holdings Limited, a newly formed wholly-owned subsidiary
of Berry and a company incorporated in England and Wales ("NIM Holdings"),
acquired all of the outstanding capital stock of Norwich Injection Moulders
Limited, a company incorporated in England and Wales ("NIM"), for aggregate
consideration of approximately $14.0 million. The purchase was financed
through an amendment to the Credit Facility to increase the amount of funds
available thereunder.
F-27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate or Articles of Incorporation of the Company and each of the
Guarantors (except Norwich), in each case as amended, provide that the Company
and the Guarantors shall indemnify their respective directors to the fullest
extent permitted under the DGCL, Kansas General Corporation Code, Ohio General
Corporation Law, South Carolina Business Corporation Act and the laws of
England and Wales (collectively, the "Corporation Law"), as applicable.
The Corporation Law provides for indemnification by the Company and each of the
Guarantors of their respective directors and officers. In addition, the By-
laws of each of the Company and each Guarantor require the respective company
to indemnify its current or former directors and officers to the fullest extent
permitted by the applicable Corporation Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
2.1Asset Purchase Agreement dated February 12, 1992, among the Company, Berry
Iowa, Berry Carolina, Inc., Genpak Corporation, a New York corporation, and
Innopac International Inc., a public Canadian corporation (filed as Exhibit
10.1 to the Registration Statement on Form S-1 filed on February 24, 1994 (the
"Form S-1") and incorporated herein by reference)
2.2Asset Purchase Agreement dated December 24, 1994, between the Company and
Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form S-1 and incorporated
herein by reference)
2.3Asset Purchase Agreement dated March 1, 1995, among Berry Sterling, Sterling
Products, Inc. and the stockholders of Sterling Products, Inc. (filed as
Exhibit 2.3 to the Annual Report on Form 10-K filed on March 31, 1995 (the
"1994 Form 10-K") and incorporated herein by reference)
2.4Asset Purchase Agreement dated December 21, 1995, among Berry Tri-Plas,
Tri-Plas, Inc. and Frank C. DeVore (filed as Exhibit 2.4 to the Annual Report
on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated
herein by reference)
2.5Asset Purchase Agreement dated January 23, 1996, between the Company and
Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K and
incorporated herein by reference)
2.6Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, by
and among Holding, BPC Mergerco, Inc. ("Mergerco") and the other parties
thereto (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July
3, 1996 (the "Form 8-K") and incorporated herein by reference)
2.7Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, by
and among Holding, Mergerco, Chase Venture Capital Associates, L.P. ("CVCA")
and The Northwestern Mutual Life Insurance Company ("Northwestern") (filed as
Exhibit 2.2 to the Form 8-K and incorporated herein by reference)
2.8Agreement and Plan of Merger dated as of June 18, 1996, by and between
Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K and incorporated
herein by reference)
2.9Certificate of Merger of Mergerco with and into Holding, dated as of June
18, 1996 (filed as Exhibit 2.9 to the Registration Statement on Form S-4 filed
on July 17, 1996 (the "1996 Form S-4") and incorporated herein by reference)
2.10Agreement and Plan of Reorganization dated as of January 14, 1997 (the
"PackerWare Reorganization Agreement"), among the Company, PackerWare
Acquisition Corporation, PackerWare Corporation and the shareholders of
PackerWare (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on
February 4, 1997 (the "1997 8-K") and incorporated herein by reference)
2.11Amendment to the PackerWare Reorganization Agreement dated as of January
20, 1997 (filed as Exhibit 2.2 to the 1997 8-K and incorporated herein by
reference)
2.12Asset Purchase Agreement dated as of January 17, 1997, among the Company,
Container Industries and the shareholders of Container Industries (filed as
Exhibit 2.12 to the Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 (the "1996 Form 10-K") and incorporated herein by reference)
2.13Agreement and Plan of Reorganization dated as of January 14, 1997, as
amended on January 20, 1997, among the Company, PackerWare Acquisition
Corporation, PackerWare Corporation and the Shareholders of PackerWare
Corporation (filed as Exhibits 2.1 and 2.2 to the Current Report on Form 8-K
filed February 3, 1997 and incorporated herein by reference)
2.14Asset Purchase Agreement dated May 13, 1997, among the Company, Berry
Design, Virginia Design Packaging Corp. and the shareholders of Virginia Design
Packaging Corp. (filed as Exhibit 2.14 to the Annual Report on Form 10-K for
the fiscal year ended December 27, 1997 (the "1997 Form 10-K") and incorporated
herein by reference)
*2.15Agreement for the Sale and Purchase of the Entire Issued Share Capital of
Norwich Injection Moulders Limited dated July 2, 1998, among the Company, NIM
Holdings Limited and the persons listed on Schedule 1 thereto
3.1Amended and Restated Certificate of Incorporation of Holding (filed as
Exhibit 3.1 to the 1996 Form S-4 and incorporated herein by reference)
3.2By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and incorporated
herein by reference)
3.3Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the
Form S-1 and incorporated herein by reference)
3.4By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and
incorporated herein by reference)
3.5Certificate of Incorporation of Berry Iowa (filed as Exhibit 3.5 to the Form
S-1 and incorporated herein by reference)
3.6By-laws of Berry Iowa (filed as Exhibit 3.6 to the Form S-1 and incorporated
herein by reference)
3.7Certificate of Incorporation of Berry Tri-Plas (filed as Exhibit 3.7 to the
Form S-1 and incorporated herein by reference)
3.8By-laws of Berry Tri-Plas (filed as Exhibit 3.8 to the Form S-1 and
incorporated herein by reference)
3.9Certificate of Amendment to the Certificate of Incorporation of Berry Tri-
Plas (filed as Exhibit 3.9 to the 1996 Form 10-K and incorporated herein by
reference)
3.10Certificate of Designation, Preferences, and Rights of Series B Cumulative
Preferred Stock of Holding (filed as Exhibit 3.10 to the 1997 Form 10-K and
incorporated herein by reference)
*3.11Certificate of Incorporation of Berry Sterling
*3.12By-laws of Berry Sterling
*3.13Certificate of Incorporation of AeroCon
*3.14By-laws of AeroCon
*3.15Articles of Incorporation of PackerWare
*3.16By-laws of PackerWare
*3.17Certificate of Incorporation of Berry Design
*3.18By-laws of Berry Design
*3.19Certificate of Incorporation of Venture Holdings
*3.20By-laws of Venture Holdings
*3.21Articles of Incorporation of Venture Midwest
*3.22Code of Regulations of Venture Midwest
*3.23Articles of Incorporation for a Statutory Close Corporation of Venture
Southeast
*3.24By-laws of Venture Southeast
*3.25Memorandum of Association of NIM Holdings
*3.26Articles of Association of NIM Holdings
*3.27Memorandum of Association of Norwich
*3.28Articles of Association of Norwich
4.1Form of Indenture between the Company and United States Trust Company of New
York, as Trustee (including the form of Note and Guarantees as Exhibits A and B
thereto respectively) (filed as Exhibit 4.1 to the Form S-1 and incorporated
herein by reference)
4.2Warrant Agreement between Holding and United States Trust Company of New
York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and incorporated
herein by reference)
4.3Indenture dated as of June 18, 1996, between Holding and First Trust of New
York, National Association, as Trustee (the "Trustee"), relating to Holding's
Series A and Series B 12.5% Senior Secured Notes Due 2006 (filed as Exhibit 4.3
to the 1996 Form S-4 and incorporated herein by reference)
4.4Pledge, Escrow and Disbursement Agreement dated as of June 18, 1996, by and
among Holding, the Trustee and First Trust of New York, National Association,
as Escrow Agent (filed as Exhibit 4.4 to the 1996 Form S-4 and incorporated
herein by reference)
4.5Holding Pledge and Security Agreement dated as of June 18, 1996, between
Holding and First Trust of New York, National Association, as Collateral Agent
(filed as Exhibit 4.5 to the 1996 Form S-4 and incorporated herein by
reference)
4.6Registration Rights Agreement dated as of June 18, 1996, by and among
Holding and DLJ (filed as Exhibit 4.6 to the 1996 Form S-4 and incorporated
herein by reference)
4.7BPC Holding Corporation 1996 Stock Option Plan (filed as Exhibit 4.7 to the
1996 Form 10-K and incorporated herein by reference)
4.8Form of Nontransferable Performance-Based Incentive Stock Option Agreement
(filed as Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by
reference)
*4.9Indenture dated as of August 24, 1998 among the Company, the Guarantors and
United States Trust Company of New York, as trustee
*4.10Registration Rights Agreement dated as of August 24, 1998 by and among the
Company, the Guarantors and DLJ
*5 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of such
firm) regarding the legality of the securities being offered
*8 Opinion of O'Sullivan Graev & Karabell, LLP regarding the material United
States Federal income tax consequences to the holders of the securities being
offered
*10.1Second Amended and Restated Financing and Security Agreement dated as of
July 2, 1998, as amended, by and among the Company, NIM Holdings, Norwich,
Fleet Capital Corporation, General Electric Capital Corporation, Heller
Financial, Inc. and NationsBank, N.A.
10.2Employment Agreement dated December 24, 1990, as amended, between the
Company and Martin R. Imbler ("Imbler") (filed as Exhibit 10.9 to the Form S-1
and incorporated herein by reference)
10.3Amendment to Imbler Employment Agreement dated November 30, 1995 (filed as
Exhibit 10.6 to the 1995 Form 10-K and incorporated herein by reference)
10.4Amendment to Imbler Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.4 to the 1996 Form S-4 and incorporated herein by reference)
10.5Employment Agreement dated December 24, 1990, as amended, between the
Company and R. Brent Beeler ("Beeler") (filed as Exhibit 10.10 to the Form S-1
and incorporated herein by reference)
10.6Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as
Exhibit 10.8 to the 1995 Form 10-K and incorporated herein by reference)
10.7Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.7 to the 1996 Form S-4 and incorporated herein by reference)
10.8Employment Agreement dated December 24, 1990, as amended, between the
Company and James M. Kratochvil ("Kratochvil") (filed as Exhibit 10.12 to the
Form S-1 and incorporated herein by reference)
10.9Amendment to Kratochvil Employment Agreement dated November 30, 1995 (filed
as Exhibit 10.12 to the 1995 Form 10-K and incorporated herein by reference)
10.10Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.13 to the 1996 Form S-4 and incorporated herein by reference)
10.11Employment Agreement dated as of January 1, 1993, between the Company and
Ira G. Boots ("Boots") (filed as Exhibit 10.13 to the Form S-1 and incorporated
herein by reference)
10.12Amendment to Boots Employment Agreement dated November 30, 1995 (filed as
Exhibit 10.14 to the 1995 Form 10-K and incorporated herein by reference)
10.13Amendment to Boots Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.16 to the 1996 Form S-4 and incorporated herein by reference)
10.14Financing Agreement dated as of April 1, 1991, between the City of
Henderson, Nevada Public Improvement Trust and the Company (including exhibits)
(filed as Exhibit 10.17 to the Form S-1 and incorporated herein by reference)
*10.15Letter of Credit of NationsBank, N.A. dated April 1, 1997
10.16Purchase Agreement dated as of June 12, 1996, between Holding and DLJ
relating to the 12.5% Senior Secured Notes due 2006 (filed as Exhibit 10.22 to
the 1996 Form S-4 and incorporated herein by reference)
10.17Stockholders Agreement dated as of June 18, 1996, among Holding, Atlantic
Equity Partners International II, L.P., CVCA and the other parties thereto
(filed as Exhibit 10.23 to the 1996 Form S-4 and incorporated herein by
reference)
10.18Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to CVCA (Warrant No. 1) (filed as Exhibit 10.24 to the 1996 Form S-4 and
incorporated herein by reference)
10.19Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to CVCA (Warrant No. 2) (filed as Exhibit 10.25 to the 1996 Form S-4 and
incorporated herein by reference)
10.20Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to The Northwestern Mutual Life Insurance Company (Warrant No. 3) (filed
as Exhibit 10.26 to the 1996 Form S-4 and incorporated herein by reference)
10.21Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to The Northwestern Mutual Life Insurance Company (Warrant No. 4) (filed
as Exhibit 10.27 to the 1996 Form S-4 and incorporated herein by reference)
10.22Amended and Restated Stockholders Agreement dated June 18, 1996, among
Holding and certain stockholders of Holding (filed as Exhibit 10.28 to the 1996
Form S-4 and incorporated herein by reference)
10.23Second Amended and Restated Management Agreement dated June 18, 1996,
between First Atlantic Capital, Ltd. and the Company (filed as Exhibit 10.29 to
the 1996 Form S-4 and incorporated herein by reference)
10.24Warrant to purchase Class B Non-Voting Common Stock of BPC Holding
Corporation, dated August 29, 1997, issued to Willard J. Rathbun (filed as
Exhibit 10.30 to the 1997 Form 10-K and incorporated herein by reference)
10.25Warrant to purchase Class B Non-Voting Common Stock of BPC Holding
Corporation, dated August 29, 1997, issued to Craig Rathbun (filed as Exhibit
10.31 to the 1997 Form 10-K and incorporated herein by reference)
*10.26Purchase Agreement dated August 19, 1998 among the Company, the
Guarantors and DLJ
*21List of Subsidiaries
*23.1Consent of O'Sullivan Graev & Karabell, LLP (to be included as part of its
opinion filed as Exhibit 5 hereto)
**23.2Consent of Ernst & Young LLP, independent auditors
**24Powers of Attorney (see page II-8 through II-22)
*25Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New York, as Trustee
(separately bound)
**27Financial Data Schedule
*99.1Form of Letter of Transmittal
*99.2Form of Notice of Guaranteed Delivery
*99.3Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
*99.4Form of Letter to Clients
__________
*To be filed by amendment.
** Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors S-1
Schedule I - Condensed Financial Information of Registrant S-2
Schedule II - Valuation and Qualifying Accounts S-6
Schedules other than the above have been omitted because they are either not
applicable or the required information has been disclosed in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrants
pursuant to the Corporation Law, the Certificate of Incorporation and By-laws,
or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(a)To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b)To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(c)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of that time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BERRY PLASTICS CORPORATION
By:/S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of BERRY PLASTICS CORPORATION, do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
----------- ------- ------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -----------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -----------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -----------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Ira G. Boots Director
- -----------------------------------
Ira G. Boots September 29, 1998
/s/ David M. Clarke Director
- -----------------------------------
David M. Clarke September 29, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
/s/ Lawrence G. Graev Director
- -----------------------------------
Lawrence G. Graev September 29, 1998
<S> <C> <C>
/s/ Donald J. Hofmann Director
- -----------------------------------
Donald J. Hofmann September 29, 1998
/s/ Mathew J. Lori Director
- -----------------------------------
Mathew J. Lori September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BPC HOLDING CORPORATION
By:/S/ MARTIN R. IMBLER
Martin R. Imbler
President
POWER OF ATTORNEY
We, the undersigned directors and officers of BPC HOLDING CORPORATION, do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- ------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President and Director (Principal Executive
- ------------------------------------ Officer)
Martin R. Imbler September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- ------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ David M. Clarke Director
- ------------------------------------
David M. Clarke September 29, 1998
/s/ Lawrence G. Graev Director
- ------------------------------------
Lawrence G. Graev September 29, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
/s/ Donald J. Hofmann Director
- ------------------------------------
Donald J. Hofmann September 29, 1998
<S> <C> <C>
/s/ Joseph S. Levy Director
- ------------------------------------
Joseph S. Levy September 29, 1998
/s/ Mathew J. Lori Director
- ------------------------------------
Mathew J. Lori September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BERRY IOWA CORPORATION
By:/S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of BERRY IOWA CORPORATION, do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- --------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- --------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- --------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- --------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BERRY TRI-PLAS CORPORATION
By:/S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of BERRY TRI-PLAS CORPORATION, do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BERRY STERLING CORPORATION
By:/S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of BERRY STERLING CORPORATION, do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
AEROCON, INC.
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of AEROCON, INC., do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Chairman of the Board of Directors
(Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
PACKERWARE CORPORATION
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of PACKERWARE CORPORATION, do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
BERRY PLASTICS DESIGN CORPORATION
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of BERRY PLASTICS DESIGN
CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R.
IMBLER, or either of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto; and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
VENTURE PACKAGING, INC.
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of VENTURE PACKAGING, INC., do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
VENTURE PACKAGING MIDWEST, INC.
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of VENTURE PACKAGING MIDWEST, INC.,
do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorneys and agents, or either of
them, may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
VENTURE PACKAGING SOUTHEAST, INC.
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of VENTURE PACKAGING SOUTHEAST,
INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R.
IMBLER, or either of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto; and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Roberto Buaron Chairman of the Board of Directors September 29, 1998
- -------------------------------------
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive Officer and
- -------------------------------------
Martin R. Imbler Director (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil Executive Vice President, Chief Financial
- -------------------------------------
James M. Kratochvil Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer) September 29, 1998
/s/ Joseph S. Levy Director
- -------------------------------------
Joseph S. Levy September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
NIM HOLDINGS LIMITED
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of NIM HOLDINGS LIMITED, do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Martin R. Imbler Chairman of the Board of Directors
- -------------------------------------
Martin R. Imbler (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil
- -------------------------------------
James M. Kratochvil Director (Principal Financial and
Accounting Officer) September 29, 1998
/s/ Trevor D. Johnson Sales and Marketing Director
- -------------------------------------
Trevor D. Johnson September 29, 1998
/s/ Alan R. Sandell Managing Director
- -------------------------------------
Alan R. Sandell September 29, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29th day of September, 1998.
NORWICH INJECTION MOULDERS LIMITED
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of NORWICH INJECTION MOULDERS
LIMITED, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R.
IMBLER, or either of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto; and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature TITLE Date
------------- ----------- ---------
<S> <C> <C>
/s/ Martin R. Imbler Chairman of the Board of Directors
- -------------------------------------
Martin R. Imbler (Principal Executive Officer) September 29, 1998
/s/ James M. Kratochvil
- -------------------------------------
James M. Kratochvil Director (Principal Financial and
Accounting Officer) September 29, 1998
/s/ Trevor D. Johnson Sales and Marketing Director
- -------------------------------------
Trevor D. Johnson September 29, 1998
/s/ Alan R. Sandell Managing Director
- -------------------------------------
Alan R. Sandell September 29, 1998
</TABLE>
<PAGE>
BPC HOLDING CORPORATION
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATMENT SCHEDULES
We have audited the consolidated financial statements of BPC Holding
Corporation as of December 27, 1997 and December 28, 1996, and for each of the
three years in the period ended December 27, 1997, and have issued our report
thereon dated February 13, 1998 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedules listed
in Item 21(b) of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audit.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Indianapolis, Indiana
February 13, 1998
S-1
<PAGE>
BPC HOLDING CORPORATION
(PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996
------------------- -------------------
(IN THOUSANDS)
Assets
<S> <C> <C>
Cash $ 708 $ 389
Other assets (principally investment in subsidiary) (31,808) (29,177)
Assets held in trust 18,933 30,188
Intangible assets 4,281 4,789
Due from Berry Plastics Corporation 8,095 2,804
Other - 277
-------- ----------
Total assets $ 209 $ 9,270
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities $ 510 $ 704
Accrued dividends 3,674 1,116
Long-term debt 105,000 105,000
-------- ----------
Total liabilities 109,184 106,820
Preferred stock 16,509 11,216
Class A common stock 4 4
Class B common stock 2 2
Class C common stock - -
Treasury stock (22) (22)
Additional paid-in capital 49,374 51,681
Warrants 3,511 3,511
Retained earnings (deficit) (178,353) (163,942)
--------- ----------
Total stockholders' equity (deficit) (108,975) (97,550)
--------- ----------
Total liabilities and stockholders' equity (deficit) $ 209 $ 9,270
========= ==========
</TABLE>
S-2
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
DECEMBER 27, 1997 December 28, 1996 December 30, 1995
------------------ ----------------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Operating expenses 220 3,304 (150)
Other expense 11,560 6,294 -
--------- --------- ---------
Income (loss) before income taxes and equity
Income (loss) before income taxes and equity
in net income of subsidiary (11,780) (9,598) 150
Equity in net income (loss) of subsidiary (2,631) 5,989 6,183
--------- --------- ---------
Income (loss) before income taxes (14,411) (3,609) 6,333
Income taxes 0 (262) -
--------- --------- ---------
Net income (loss) (14,411) (3,347) 6,333
Preferred stock dividends (2,558) (1,116) -
--------- --------- ---------
Net income (loss) attributable to common $ (16,969) $ (4,463) $ 6,333
shareholders ========= ========= =========
</TABLE>
S-3
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------
December 27, 1997 December 28, 1996 December 30, 1995
------------------- ------------------- ------------------
(In thousands)
<S> <C> <C> <C>
Net income (loss) $ (14,411) $ (3,347) $ 6,333
Adjustments to reconcile net loss provided by
operating activities:
Net loss (income) of subsidiary 2,631 (5,989) (6,183)
Amortization and non cash interest 726 441 -
Interest funded by assets held in trust 11,256 5,412 -
Non-cash compensation - 358 (215)
Changes in operating assets and liabilities (208) 427 66
---------- --------- ---------
Net cash provided by (used for) operating
activities (6) (2,698) 1
Net cash provided by investing activities - - -
Net cash provided by financing activities:
Exercise of management stock options - 1,130 -
Proceeds from senior secured notes - 105,000 -
Proceeds from issuance of common and preferred
stock and warrants 325 67,369 -
Rollover investments and share repurchases - (125,219) -
Assets held in trust - (35,600) -
Net payments to warrant holders - (4,502) -
Debt issuance costs - (5,069) -
Other - (22) (1)
---------- --------- ---------
Net cash from financing activities 325 3,087 -
---------- --------- ---------
Net increase in cash and cash equivalents 319 389 -
Cash and cash equivalents at beginning of year 389 - -
---------- --------- ---------
Cash and equivalents at end of year $ 708 $ 389 $ -
========== ========= =========
</TABLE>
S-4
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1)Basis of Presentation. In the parent company-only financial statements,
Holding's investment in subsidiaries is stated at cost plus equity in
undistributed earnings of subsidiaries since date of acquisition. The parent
company-only financial statements should be read in conjunction with Holding's
consolidated financial statements, which are included beginning on page F-1.
(2)GUARANTEE. Berry had approximately $201.3 million and $111.0 million of
long-term debt outstanding at December 27, 1997 and December 28, 1996,
respectively. Under the terms of the debt agreements, Holding has guaranteed
the payment of all principal and interest.
S-5
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance
Description Beginning Costs and Other Accounts- Deductions- at end
of Period Expenses Describe Describe of year
----------------- ------------ ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 27, 1997:
Allowance for doubtful accounts $ 618 $ 325 $ 358 (2) $ 263 (1) $ 1,038
======= ======= ======= ======= ========
Year ended December 28, 1996:
Allowance for doubtful accounts $ 737 $ 322 $ - $ 441 (1) $ 618
======= ======= ======= ======= ========
Year ended December 30, 1995:
Allowance for doubtful accounts $ 503 $ 216 $ 299 (2) $ 281 (1) $ 737
======= ======= ======= ======= ========
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Primarily relates to purchase of accounts receivable and related allowance
through acquisitions.
S-6
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Historical Financial Data" and "Experts" and to the use of our report
dated February 13, 1998 in the Registration Statement (Form S-4)
and related Prospectus of Berry Plastics Corporation for the
registration of $25,000,000 of 12{1}/{4}% Series C Senior Subordinated
Notes due 2004.
/s/ Ernst & Young LLP
Indianapolis, Indiana
September 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-27-1997 JAN-02-1999
<PERIOD-END> DEC-27-1997 JUN-27-1998
<CASH> 2688 2680
<SECURITIES> 0 0
<RECEIVABLES> 29423 34944
<ALLOWANCES> 1038 993
<INVENTORY> 29458 27508
<CURRENT-ASSETS> 63532 66604
<PP&E> 174291 179335
<DEPRECIATION> 66073 74075
<TOTAL-ASSETS> 239444 231171
<CURRENT-LIABILITIES> 42669 47841
<BONDS> 306335 299855
0 0
16509 16655
<COMMON> 6 6
<OTHER-SE> (125490) (129224)
<TOTAL-LIABILITY-AND-EQUITY> 239444 231171
<SALES> 226953 136317
<TOTAL-REVENUES> 0 0
<CGS> 180249 100016
<TOTAL-COSTS> 210754 120741
<OTHER-EXPENSES> 226 0
<LOSS-PROVISION> 325 320
<INTEREST-EXPENSE> 32237 17441
<INCOME-PRETAX> (14273) (1720)
<INCOME-TAX> 138 26
<INCOME-CONTINUING> (14411) (1746)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14411) (1746)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
