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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
<TABLE>
<S> <C> <C>
BERRY PLASTICS CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 35-1813706
(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)
PACKERWARE CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 N/A
(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)
Delaware 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)
Delaware 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 N/A
(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)
England and Wales 3089 N/A
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
KNIGHT PLASTICS, INC.
(Exact name of registrant as specified in charter)
Delaware 3089 35-2056610
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
_______________
CPI HOLDING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 34-1820303
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
CARDINAL PACKAGING, INC.
(Exact name of registrant as specified in charter)
Ohio 3089 34-1396561
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
NORWICH ACQUISITION LIMITED
(Exact name of registrant as specified in charter)
England and Wales 3089 N/A
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
BERRY PLASTICS ACQUISITION CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 N/A
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
101 Oakley Street
Evansville, Indiana 47710
(812) 424-2904
(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:
James M. Lurie, 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. [ ]
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 SPECIFICIALLY 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.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
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, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, dated October 29, 1999
PROSPECTUS
BERRY PLASTICS CORPORATION
OFFER TO EXCHANGE UP TO $25,000,000 OF ITS
121/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2004
FOR ANY AND ALL OUTSTANDING
121/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2004
------------------------------------------------------------------------
| |
| THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, |
| ON NOVEMBER __, 1999, UNLESS EXTENDED |
| |
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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 121/4% Series C Senior Subordinated Notes due 2004 (the "New
Notes") of the Issuer for each $1,000 principal amount of the issued and
outstanding 121/4% 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 April 15, 1999 and will be
payable in cash semi-annually in arrears on October 15 and April 15 of each
year, commencing October 15, 1999. Interest will be payable on the Old Notes
accepted for exchange to, but not including, October 15, 1999.
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 Delaware 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., a Delaware
corporation and wholly owned subsidiary of Venture Holdings ("Venture Midwest"),
Venture Packaging Southeast, Inc., a Delaware 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"), Norwich Injection Moulders Limited,
a company organized under the laws of England and Wales and wholly owned
subsidiary of NIM Holdings ("Norwich"), Knight Plastics, Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("Knight Plastics"), CPI
Holding Corporation, a Delaware corporation and wholly owned subsidiary of the
Company ("CPI Holding"), Cardinal Packaging, Inc., an Ohio corporation and
wholly owned subsidiary of CPI Holding ("Cardinal"), Norwich Acquisition
Limited, a company organized under the laws of England and Wales and wholly
owned subsidiary of Norwich ("Norwich Acquisition") and Berry Plastics
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
the Company ("Berry Acquisition" and, collectively with Holding, Berry Iowa,
Berry Tri-Plas, Berry Sterling, AeroCon, PackerWare, Berry Design, Venture
Holdings, Venture Midwest, Venture Southeast, NIM Holdings, Norwich, Knight
Plastics, CPI Holding, Cardinal and Norwich Acquisition 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 121/4% Senior
Subordinated Notes due 2004 (the "1994 Notes") and the $75 million of the
Company's 11% Senior Subordinated Notes due 2007 (the "1999 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) and the Nevada Bonds (as defined herein). The 1994 Notes and the 1999
Notes constitute all of the indebtedness of Berry that is PARI PASSU with the
Notes. 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 July 3, 1999, the
aggregate amount of outstanding Senior Indebtedness of Berry would have been
$89.0 million, the aggregate amount of outstanding total indebtedness of Berry
would have been $290.5 million, including the 1994 Notes, and the indebtedness
of the Guarantors senior to the Note Guarantees would have been $395.5 million.
As of July 3, 1999, all indebtedness of the Company other than the Senior
Indebtedness was PARI PASSU in right of payment to the Notes, and there was no
indebtedness subordinated to the Notes. The Indenture (as defined herein) will
permit Berry and its subsidiaries to incur additional indebtedness, including
Senior Indebtedness, subject to certain limitations. The Indenture also provides
that Berry 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 Berry of dividends to pay its obligations, including its
obligations on its Note Guarantee. Under the terms of the Credit Facility, Berry
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 -- Holding relies on
dividends from us to meet its debt obligations and may not be able to satisfy
its obligations under its Guarantee of the Notes."
CONTINUED ON NEXT PAGE.
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SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
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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 OCTOBER 29, 1999.
<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 (as defined herein). 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."
<PAGE>
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.
----------------------------------
Certain of the names and logos of our products referenced in this
Prospectus are our trademarks. Each trade name, trademark or servicemarks of any
other company appearing in this Prospectus is the property of its holder.
i
<PAGE>
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.
ii
<PAGE>
PROSPECTUS SUMMARY
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,
"BERRY," "WE," "US," "OUR" AND SIMILAR TERMS 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
BERRY IS THE 52 OR 53 WEEK PERIOD ENDING ON THE SATURDAY CLOSEST TO DECEMBER 31.
ALL REFERENCES IN THIS PROSPECTUS TO "FISCAL 1994," "FISCAL 1995," "FISCAL
1996," "FISCAL 1997" AND "FISCAL 1998" REFER TO THE FISCAL YEARS OF BERRY AND
HOLDING ENDED ON JANUARY 1, 1994, DECEMBER 31, 1994, DECEMBER 30, 1995, DECEMBER
28, 1996, DECEMBER 27, 1997 AND JANUARY 2, 1999, RESPECTIVELY. ALSO, UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE INFORMATION CONTAINED IN THIS PROSPECTUS GIVES
PRO FORMA EFFECT TO THE ACQUISITION BY US OF NORWICH INJECTION MOULDERS LIMITED,
THE KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC., AND
CARDINAL PACKAGING, INC. AS OF THE BEGINNING OF THE PERIOD STATED FOR INCOME
STATEMENT DATA AND AT THE DATE STATED FOR BALANCE SHEET DATA.
THE COMPANY
We are the nation's leading manufacturer and supplier of plastic
injection-molded aerosol overcaps, drink cups and rigid thinwall open-top
containers for a wide variety of end-use markets. We are also a leading
manufacturer and supplier of plastic injection-molded semi-disposable
housewares. In addition, with sales of over two billion aerosol overcaps in
fiscal 1998, we believe that we are the largest supplier of plastic aerosol
overcaps in the world. In our plastic packaging business, we focus primarily on
three markets: aerosol overcaps, rigid thinwall open-top containers and drink
cups. Our housewares business produces home products such as dinnerware,
tumblers and garden items. We concentrate on manufacturing high-quality items
sold to image-conscious marketers of consumer and industrial products. With over
1,000 proprietary molds, superior color matching capabilities, sophisticated
multi-color printing techniques and nationwide plant locations, we consistently
produce and deliver mass quantities of high-quality products on a cost-efficient
basis.
Our total net sales among our product categories is as follows:
FISCAL
------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
PLASTIC PACKAGING PRODUCTS:
Aerosol overcaps ........ $ 38.0 $ 43.6 $ 49.7 $ 47.1 $ 49.1
Rigid open-top containers 61.6 71.1 80.8 111.5 145.9
Drink cups .............. 17.3 14.1 37.6 39.9
Other ................... 6.5 8.7 6.5 13.3 15.3
PLASTIC HOUSEWARES PRODUCTS .. 17.5 21.6
-------- -------- -------- -------- --------
Total net sales .............. $ 106.1 $ 140.7 $ 151.1 $ 227.0 $ 271.8
-------- -------- -------- -------- --------
We supply aerosol overcaps to a wide variety of customers and for a wide
variety of products, including such well-known brand names as Faultless starch,
Gillette personal care products, Pam cooking spray, Pledge furniture polish,
Raid insect repellants, Rustoleum and Sherwin-Williams paints and Sure
deodorant. Similarly, our containers are used for packaging a broad spectrum of
consumer and commercial products, including Arch (Olin) pool chemicals, Elmer's
home repair products, Hershey's cocoa, McDonald's children's meals, Milliken
adhesives, Pillsbury cookie dough and promotional containers for a variety of
customers, including the National Football League, Walt Disney and
Warner-Brothers. Our drink cups are sold to fast food and family-dining
restaurants, convenience stores, stadiums and retail stores. Our largest drink
cup customers are Circle K, Coca-Cola, McDonald's, Pepsi-Cola and Steak 'n
Shake. Our housewares products are primarily seasonal, semi-disposable
housewares and lawn and garden items such as plates, bowls, pitchers, tumblers
and flower pots. Our largest housewares customer, Wal-Mart, named us their
housewares "Supplier of the Year" for 1998.
COMPETITIVE STRENGTHS
We believe that we are a strong competitor in our industry for the
following reasons:
o SUCCESSFUL INTEGRATION OF NUMEROUS STRATEGIC ACQUISITIONS. We have
historically acquired businesses that we believe will improve our
financial performance in the long-term and, in some cases, provide us
with a new or complementary product line. We have successfully closed
ten acquisitions since
1
<PAGE>
1992. Our acquired businesses had aggregate pre-acquisition revenues
of about $239 million. We believe that our acquisitions have
strengthened our core businesses, as well as opened up new product
lines and markets for us. Moreover, we believe that we have materially
reduced the manufacturing and overhead costs of the companies that we
acquired by introducing high technology manufacturing processes,
closing excess facilities and taking advantage of economies of scale.
o HIGH-CAPACITY, STATE-OF-THE-ART PRODUCTION CAPABILITIES. We operate
over 300 injection molding machines in 12 locations in the United
States and one location in Europe. These machines, many of which are
high-speed, specialized machines, range in clamp tonnage from 80 to
825 tons. Our wide range of state-of-the-art molding machines and
national distribution system allow us to economically mass produce
high-quality products. In addition, we believe that our post-molding
capabilities are among the most modern and extensive in the industry.
These capabilities include printing, labeling, assembly, packing and
distribution.
o FULL PRODUCT LINES AND STRONG MARKET POSITION. A substantial majority
of our sales are in product categories in which we are the nation's
largest supplier. We use over 1,000 active molds, providing our
customers with a wide range of products from which to choose. For a
majority of our customers we are the sole or largest supplier of
plastic injection-molded products. We believe that our extensive
product lines, market experience, product quality and focus on
customer satisfaction allow us to maintain our strong position in our
key markets.
o LARGE, DIRECT SALES FORCE. Our sales force is comprised of over 40
dedicated professionals and is among the largest in-house sales forces
in our industry. Our sales force is focused on working both with
customers and with our internal production and product design
personnel to develop customized packaging. We believe that the size of
our sales force allows us to maintain close working relationships with
our customers.
o IN-HOUSE PRODUCT DESIGN AND GRAPHIC ARTS CAPABILITIES. We have an
in-house staff of 16 product development engineers and 22 graphic
artists. These professionals work closely with customers to develop
new products and designs. We also believe that our customized designs
often help our customers differentiate their products in the
marketplace and improve their product's performance. We believe that
these capabilities have given us a significant competitive advantage
in certain high-margin niche container product markets where the
ability to produce sophisticated and colorful graphics is crucial to a
product's success.
o DEDICATION TO SERVICE AND QUALITY. As a result of our dedication to
service and quality, we have received several awards from our top ten
customers including, in 1998, Wal-Mart's "Supplier of the Year" award
in its housewares division and SC Johnson Wax's "Supplier Quality
Achievement Award." In addition, four of our plants are ISO 9000
certified. Our remaining nine facilities are working to obtain their
ISO 9000 certification. ISO 9000 certification is only given to
companies that meet the requirements of a quality management system
established by the International Standardization Organization.
o LARGE, DIVERSE CUSTOMER BASE. We sell our plastic packaging and
housewares products to over 7,000 customers who are engaged in a
variety of businesses. We believe that this provides us with a stable
client base that is not materially affected by particular end-use
market fluctuations. We also believe that we are the single-source or
largest supplier of plastic aerosol overcaps, containers and drink
cups to a majority of our customers. Our top ten customers represented
only about 18% of our fiscal 1998 net sales on a pro forma basis. Our
largest customer represented only about 4% of our fiscal 1998 net
sales on a pro forma basis. However, intense competition could result
in our products losing market share or having to reduce our prices,
either of which have a material adverse effect on our business and
results of operation
2
<PAGE>
GROWTH STRATEGY
Our goal is to maintain and enhance our market position and leverage our
core strengths to increase profitability. Our strategy to achieve this goal
includes the following elements:
o PURSUE STRATEGIC ACQUISITIONS IN OUR CORE BUSINESSES. We have
successfully closed ten acquisitions since 1992. We will continue to
pursue strategic acquisitions that we believe will provide added value
to our core businesses.
o DESIGN AND INTRODUCE INNOVATIVE NEW PRODUCTS TO PENETRATE NEW MARKETS.
We intend to grow our product lines and increase market share by
producing new products. For example, we recently developed a complete
line of pool chemical containers specifically designed for Arch. We
also introduced a 16 oz. insulated coffee mug and lid, with enhanced
functionality and styling, in 1999 and a single-serve soft ice cream
dispensing container that was recently accepted for use by Healthy
Choice.
o EMPHASIZE OUTSTANDING PRODUCT QUALITY AND CUSTOMER SERVICE. Through
our dedication to product quality and service, we intend to grow our
base business through growth in the marketplace and by gaining
business from our competitors. Our field sales, production and support
staff meet with customers to understand their needs and improve our
product offerings and services. Each of our customers has designated
sales and customer service representatives responsible for their
individual needs. Sophisticated technology is an ongoing part of our
traditional quality assurance activities. We extensively test parts
for size, color, strength and material quality using statistical
process control techniques.
Our address is 101 Oakley Street, Evansville, Indiana 47710. Our telephone
number is (812) 424-2904.
ACQUISITIONS
CARDINAL
Cardinal, which is headquartered in Streetsboro, Ohio, operates three
manufacturing locations and is the nation's leading producer and marketer of
plastic containers for ice cream and other frozen desserts. Cardinal also sells
containers for other consumer products, such as refrigerated dairy products and
non-dairy foods. Cardinal has filling equipment in many of its customers' plants
and provides the services needed to operate this equipment. By providing its
customers with both containers and the filling machine equipment, Cardinal
significantly increases customer retention.
In July 1999, we acquired Cardinal for about $72.0 million, including
related acquisition costs. For the year ended November 30, 1998, Cardinal
reported net sales of $54.0 million. As in our nine previous acquisitions, we
believe that we can lower Cardinal's costs by consolidating plants, purchasing
resin in greater volume, using larger, more cost-efficient injection-molding
equipment and improving Cardinal's systems.
1998 ACQUISITIONS
In July 1998, we acquired Norwich Injection Moulders Limited for about $14
million. Norwich, which is headquartered in Norwich, England, manufactures and
markets plastic injection-molded overcaps and closures for the European market.
For the year ended October 31, 1997, Norwich reported net sales of about $13.4
million. Norwich provides us with a European production platform that allows us
to better serve our global overcap customers and to introduce our other product
lines in Europe.
3
<PAGE>
In October 1998, we acquired the Knight Engineering and Plastics Division
of Courtaulds Packaging Inc. for about $18 million. Knight, which is
headquartered in Woodstock, Illinois, manufactures and markets plastic
injection- molded aerosol overcaps. We believe that this acquisition enhanced
our aerosol overcap business and better positioned us to meet the needs of our
domestic customers. For the year ended March 31, 1998, Knight reported net sales
of $23.8 million. Since the acquisition, we have significantly reduced Knight's
manufacturing and operating costs, principally by closing one of its two
manufacturing plants.
1997 ACQUISITIONS
During 1997 we completed four acquisitions, including PackerWare
Corporation and Venture Packaging, Inc. PackerWare, which is headquartered in
Lawrence, Kansas, is a major producer of drink cups and housewares. For the year
ended October 31, 1996, PackerWare reported net sales of $42.8 million. The
acquisition of PackerWare enabled us to enter the housewares business and
strengthened our position in the plastic drink cup market. Venture Packaging,
which is headquartered in Monroeville, Ohio, reported net sales of $42.3 million
for the year ended September 30, 1996 and is one of the nation's largest
producers of plastic injection-molded containers for the food and dairy markets.
4
<PAGE>
THE EXCHANGE OFFER
REGISTRATION RIGHTS AGREEMENT.......... The Old Notes were sold by us on August
24, 1998 to Donaldson, Lufkin &
Jenrette Securities Corporation (the
"Initial Purchaser"), who placed the
Old Notes with institutional investors.
In connection therewith, Berry, 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.
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. We 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
October , 1999, 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, 1999. Interest will be
payable on the Old Notes accepted for
exchange to, but not including,
October 15, 1999.
CONDITIONS TO THE EXCHANGE OFFER....... The Exchange Offer is subject to
certain customary conditions, which
may be waived by Berry. We reserve
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 us, 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 Berry.
Each
5
<PAGE>
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
Berry), 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
-- 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 We will accept for exchange any and
NEW NOTES.............................. 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......................... United States Trust Company of New
York is serving as Exchange Agent in
connection with the Exchange Offer.
See "The Exchange Offer -- Exchange
Agent."
6
<PAGE>
USE OF PROCEEDS........................ There will be no cash proceeds to us
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.
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."
THE NEW NOTES.......................... $25 million in aggregate principal
amount at maturity of 12 1/4% Series C
Senior Subordinated Notes due 2004.
MATURITY DATE.......................... April 15, 2004.
INTEREST PAYMENT DATES................. October 15 and April 15 of each year,
commencing on October 15, 1999.
MANDATORY REDEMPTION................... We are 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 Notes
will be redeemable at any time at our
option, 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 us 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."
7
<PAGE>
RANKING................................ The New Notes will be unsecured senior
subordinated obligations of Berry,
will rank PARI PASSU with the 1994
Notes and the 1999 Notes and will be
subordinate in right of payment to all
Senior Indebtedness of Berry, 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 Berry consists of
borrowings under the Credit Facility
and the Nevada Bonds. Senior
Indebtedness of the Guarantors
consists of their joint and several
guarantee of the obligations of Berry
under the Credit Facility and
obligations with respect to the Nevada
Bonds and, in the case of Holding, the
1996 Notes. As of July 3, 1999, the
aggregate amount of outstanding Senior
Indebtedness of Berry would have been
$89.0 million, the aggregate amount of
outstanding total indebtedness of the
Company, including the 1994 Notes and
the 1999 Notes, would have been $290.5
million, and the indebtedness of the
Guarantors senior to the Note
Guarantees would have been $395.5
million. As of July 3, 1999, all
indebtedness of the Company other than
the Senior Indebtedness was PARI PASSU
in right of payment to the New Notes,
and there was 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 Berry or any
Guarantor. See "Description of Notes."
8
<PAGE>
RISK FACTORS
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER, INCLUDING HIGHLY LEVERAGED CONDITION, OPERATING RESTRICTIONS,
GROWTH AND RISKS RELATED TO ACQUISITIONS, LIMITED ABILITY OF HOLDING TO PERFORM
UNDER NOTE GUARANTEE, HISTORICAL NET LOSSES, SUBORDINATION OF THE NOTES AND NOTE
GUARANTEES, UNSECURED STATUS OF NOTES, RANKING OF NOTES WITH 1994 NOTES AND THE
1999 NOTES, FLUCTUATING INTEREST EXPENSE ON SENIOR INDEBTEDNESS, FRAUDULENT
CONVEYANCE RISK, POSSIBLE ADVERSE EFFECT OF INCREASE IN RESIN PRICES, RELIANCE
ON CERTAIN SUPPLIER, CONTROLLING STOCKHOLDERS, COMPETITION, ENVIRONMENTAL
MATTERS, POTENTIAL LACK OF FUNDING FOR CHANGE OF CONTROL OFFER, LACK OF A PUBLIC
MARKET FOR THE NEW NOTES, CONSEQUENCES OF FAILURE TO EXCHANGE, NECESSITY TO
COMPLY WITH EXCHANGE OFFER PROCEDURES AND BLUE SKY RESTRICTIONS ON RESALE OF NEW
NOTES.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary financial data for Holding and
its subsidiaries. The summary historical financial data for fiscal 1994, fiscal
1995, fiscal 1996, fiscal 1997 and fiscal 1998 come from Holding's audited
consolidated financial statements. Holding's and its subsidiaries' audited
consolidated financial statements as of and for fiscal 1997 and fiscal 1998 and
the audited consolidated statements of operations and cash flows for fiscal 1996
are included in this prospectus. The summary unaudited pro forma financial data
give effect to our acquisitions of Cardinal, Knight and Norwich, and issuance of
the 1999 Notes and the Notes. The summary unaudited pro forma financial data are
not necessarily indicative of the operating results or the financial position
that would have been achieved had the events given effect therein been
consummated and should not be construed as representative of future operating
results or financial position.
<TABLE>
<CAPTION>
PRO FORMA
26 WEEKS
FISCAL PRO FORMA ENDED
--------- --------- --------- --------- --------- FISCAL JULY 3,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS STATEMENT
DATA:
Net sales ................................ $ 106,141 $ 140,681 $ 151,058 $ 226,953 $ 271,830 $ 352,670 $ 188,317
Cost of goods sold ....................... 73,997 102,484 110,110 180,249 199,227 265,079 136,189
--------- --------- --------- --------- --------- --------- ---------
Gross margin ............................. 32,144 38,197 40,948 46,704 72,603 87,591 52,128
Operating expenses ....................... 15,160 17,670 23,679 30,505 44,001 55,851 30,079
--------- --------- --------- --------- --------- --------- ---------
Operating income ......................... 16,984 20,527 17,269 16,199 28,602 31,740 22,049
Other expenses(1) ........................ 184 127 302 226 1,865 1,861 778
Interest expense, net (2) ................ 10,972 13,389 20,075 30,246 34,556 45,604 22,174
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary charge ................. 5,828 7,011 (3,108) (14,273) (7,819) (15,725) (903)
Income taxes (benefit) ................... 11 678 239 138 (249) 90 482
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
charge ............................... 5,817 6,333 (3,347) (14,411) (7,570) (15,815) (1,385)
Extraordinary charge(3) .................. 3,652 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ........................ $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (7,570) $ (15,815) $ (1,385)
--------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED OTHER DATA:
Adjusted EBITDA(4) ....................... $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 77,526 $ 42,964
Adjusted EBITDA margin(5) ................ 24.9% 22.4% 23.0% 17.7% 22.0% 22.0% 22.8%
Cash provided by operating
activities ........................... 15,556 12,969 14,426 14,154 34,131 47,745 20,876
Cash used for investing activities ....... (9,495) (25,385) (14,639) (102,102) (52,120) (133,059) (90,258)
Cash provided by financing
activities ........................... 2,184 11,124 2,370 80,444 17,619 84,944 79,943
Depreciation and amortization(6) ......... 8,176 9,536 11,331 19,026 24,830 32,496 16,350
Capital expenditures ..................... 9,118 11,247 13,581 16,774 22,595 28,759 15,666
Ratios of earnings to fixed
charges (7) .............................. 1.5x 1.5x -- -- -- -- --
BERRY PLASTICS DATA:
Cash interest expense, net ..................... $ 9,795 $ 12,439 $ 12,854 $ 17,187 $ 20,569 $ 31,243 $ 14,699
<S> <C> <C> <C>
Ratio of Adjusted EBITDA to cash interest expense, net........................................... 2.9x 2.5x 2.9x
Ratio of net debt to Adjusted EBITDA............................................................. 3.6x 3.8x --
AT JULY 3, 1999
--------- ---------
HISTORICAL PRO FORMA
--------- ---------
<S> <C> <C>
BERRY PLASTICS CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................................................................. $ 2,622 $ 2,622
Working capital........................................................................................... 12,597 24,620
Total assets.............................................................................................. 254,331 336,453
Total long-term debt, including current portion........................................................... 215,484 290,484
Stockholders' equity (deficit)............................................................................ (17,456) (17,456)
</TABLE>
10
<PAGE>
(1) Other expenses consist of loss on disposal of property and equipment for the
respective periods.
(2) Includes non-cash interest expense of $1,178 in fiscal 1994, $950 in fiscal
1995, $1,212 in fiscal 1996, $2,005 in fiscal 1997, $1,765 in fiscal 1998,
$2,140 in pro forma fiscal 1998 and $1,061 for the pro forma 26 weeks ended
July 3, 1999.
(3) During 1994, an extraordinary charge of $3.7 million was recognized as a
result of the retirement of debt concurrently with the issuance of the 1994
Notes.
(4) 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, our 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. The following table reconciles operating income to EBITDA
and Adjusted EBITDA for each respective period:
<TABLE>
<CAPTION>
PRO PRO FORMA
FISCAL FORMA 26 WEEKS
-------- -------- -------- -------- -------- FISCAL ENDED
1994 1995 1996 1997 1998 1998 JULY 3, 1999
-------- -------- -------- -------- -------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income ....................................... $ 16,984 $ 20,527 $ 17,269 $ 16,199 $ 28,602 $ 31,740 $ 22,049
Depreciation and amortization .......................... 8,176 9,536 11,331 19,026 24,830 32,496 16,350
-------- -------- -------- -------- -------- -------- ------------
EBITDA ................................................. 25,160 30,063 28,600 35,225 53,432 64,236 38,399
One-time expenses:
1996 transaction compensation expenses .......... -- -- 2,762 -- -- -- --
Plant shutdown expenses ......................... -- -- 907 848 2,559 2,559 576
Acquisition integration expenses ................ 116 867 692 3,267 1,525 1,525 1,091
Litigation expenses related to drink cup patent . -- -- 650 100 631 631 --
Corporate expenses:
Non-cash compensation expenses (benefit) ........ 358 (214) 358 -- 749 749 197
Management fees and expenses .................... 746 853 749 828 872 872 437
Pro Forma adjustments relating to the acquisitions:
Raw material savings ............................ 3,368 1,256
Plant consolidations ............................ 1,906 508
Tooling consolidation ........................... 416 --
Discontinued sales .............................. (340) --
Expense reductions (i.e. legal, management fees) 766 500
Staff reductions ................................ 838 --
-------- -------- -------- -------- -------- -------- ------------
Adjusted EBITDA ........................................ $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 77,526 $ 42,964
-------- -------- -------- -------- -------- -------- ------------
</TABLE>
(5) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net
sales.
(6) Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt premium/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 debt (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 by $2,883 in fiscal
1996, by $13,932 in fiscal 1997, by $7,042 in fiscal 1998, by $14,948 in pro
forma fiscal 1998 and by $1,644 for the pro forma twenty-six weeks ended
July 3, 1999.
11
<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.
WE HAVE A SIGNIFICANT AMOUNT OF DEBT.
We have now and will continue to have a large amount of debt. We may also
incur additional debt from time to time to finance acquisitions or capital
expenditures or for other purposes subject to the restrictions in our credit
facility and the indentures governing the Notes, the 1994 Notes and the 1999
Notes. See "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Certain Indebtedness" and "Description of Notes."
Our high degree of debt has important consequences for us, including the
following:
o It may be more difficult for us to satisfy our
obligations under the Notes;
o Our ability to obtain additional financing, if necessary,
for working capital, capital expenditures, acquisitions or
other purposes may be impaired or such financing may not
be available on favorable terms;
o We will need a substantial portion of our cash flow to pay
the principal and interest on our debt, including debt
that we may incur in the future;
o Payments on our debt will reduce the funds that would
otherwise be available for our operations and future
business opportunities;
o A substantial decrease in our net operating cash flows
could make it difficult for us to meet our debt service
requirements and force us to modify our operations;
o We may be more highly leveraged than our competitors,
which may place us at a competitive disadvantage; and
o We may be more vulnerable to a downturn in our business or
the economy generally.
If we are unable to service our debt or obtain additional financing, as
needed, our business and financial condition would be materially adversely
affected.
WE MAY NOT BE ABLE TO SERVICE OR REFINANCE OUR DEBT.
Our ability to pay principal and interest on the Notes and to satisfy our
other obligations will depend upon:
o Our future financial and operating performance, which
performance will be affected by prevailing economic
conditions and financial, business and other factors,
certain of which are beyond our control; and
o The future availability of revolving credit borrowings
under our credit facility or any successor facility, the
availability of which is dependent or may depend on, among
other things, our complying with certain covenants and
meeting certain specified borrowing base prerequisites.
See "Description of Certain Indebtedness - The Credit
Facility."
Based on our current and expected levels of operations, we expect that our
operating cash flow and borrowings under our credit facility should be
sufficient for us to meet our operating expenses, to make necessary capital
expenditures and to service our debt requirements as they become due. However,
our operating results and borrowings under our credit facility may not be
sufficient to service our debt, including the Notes. If we cannot service our
debt, we will be forced to take actions such as reducing or delaying
acquisitions and/or capital
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expenditures, selling assets, restructuring or refinancing our debt (which could
include the Notes), or seeking additional equity capital or bankruptcy
protection. We cannot assure you that any of these remedies can be effected on
satisfactory terms, if at all.
RESTRICTIVE DEBT COVENANTS IN OUR INDENTURES AND CREDIT FACILITY MAY ADVERSELY
AFFECT US.
The indenture governing the Notes will restrict, among other things, our
ability to:
o incur additional debt;
o pay dividends;
o redeem capital stock;
o create liens, dispose of certain assets, engage in
mergers;
o make contributions, loans or advances; and
o enter into certain transactions with affiliates.
The Credit facility and the indenture governing the 1994 Notes (the "1994
Indenture") and the Indenture governing the 1999 Notes (the "1999 Indenture")
contain similar restrictions. If our cash flow and existing working capital are
insufficient to fund our expenditures or to service our debt, including the
Notes, the 1994 Notes, the 1999 Notes and borrowings under the Credit Facility,
we would have to raise additional funds through capital contributions from
Holding, or by refinancing all or a part of our debt or by a sale of assets or
subsidiaries. The restrictions contained in the indentures governing the Notes,
the 1994 Notes and the 1999 Notes and the Credit Facility, in combination with
our high level of debt, could severely limit our ability to raise such
additional funds, respond to changing market and economic conditions, provide
for capital expenditures or take advantage of business opportunities that may
arise. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness" and "Description of Notes."
OUR ACQUISITION STRATEGY MAY BE UNSUCCESSFUL.
As part of our growth strategy, we plan to pursue the acquisition of other
companies, assets and product lines that either complement or expand our
existing business. We continually evaluate potential acquisition opportunities,
particularly those that could be material in size and scope. Acquisitions
involve a number of special risks and factors, including:
o the focus of management's attention to the assimilation of
the acquired companies and their employees and on the
management of expanding operations;
o the incorporation of acquired products into our product
line;
o the increasing demands on our operational systems;
o adverse effects on our reported operating results;
o the amortization of acquired intangible assets; and
o the loss of key employees and the difficulty of presenting
a unified corporate image.
We may be unable to make appropriate acquisitions because of competition
for the specific acquisition. In pursuing acquisitions, we compete against other
plastic product manufacturers, some of which are larger than we are and have
greater financial and other resources than we have. We compete for potential
acquisitions based on a number of factors, including price, terms and
conditions, size and ability to offer cash, stock or other forms of
consideration. In addition, the negotiation of potential acquisitions may
require members of management to divert their time and resources away from our
operations.
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THE INTEGRATION OF ACQUIRED BUSINESSES MAY RESULT IN SUBSTANTIAL COSTS, DELAYS
OR OTHER PROBLEMS.
We may not be able to successfully integrate our acquisitions without
substantial costs, delays or other problems. We will have to continue to expend
substantial managerial, operating, financial and other resources to integrate
our businesses. The costs of such integration could have an adverse effect on
short-term operating results. Such costs include non-recurring acquisition costs
including accounting and legal fees, investment banking fees, recognition of
transaction-related obligations and various other acquisition-related costs.
In addition, the rapid pace of our acquisitions of other businesses may
adversely affect our efforts to integrate acquisitions and manage those
acquisitions profitably. We may seek to recruit additional managers to
supplement the incumbent management of the acquired businesses, but we may not
have the ability to recruit additional candidates with the necessary skills.
Once we acquire a business, we are faced with risks, including:
o the possibility that it will be difficult to integrate
the operations into our other operations;
o the possibility that we have acquired substantial
undisclosed liabilities;
o the risks of entering markets or offering services for
which we have no prior experience; and
o the potential loss of customers as a result of changes in
management.
We may not be successful in overcoming these risks.
HOLDING HAS EXPERIENCED CONSOLIDATED NET LOSSES, AND EXPECTS TO CONTINUE TO DO
SO.
Holding has not generated enough revenue on a consolidated basis to make a
profit. Consolidated earnings have been insufficient to cover fixed charges by
$2.9 million for fiscal 1996, by $13.9 million for fiscal 1997 and by $7.0
million for fiscal 1998. 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 our acquisitions. These net losses were $3.3
million for fiscal 1996, $14.4 million for fiscal 1997, and $7.6 million for
fiscal 1998. Holding expects that it will continue to experience consolidated
net losses for the foreseeable future.
HOLDING RELIES ON DIVIDENDS FROM US TO MEET ITS DEBT OBLIGATIONS AND MAY NOT BE
ABLE TO SATISFY ITS OBLIGATIONS UNDER ITS GUARANTEE OF THE NOTES.
Holding is a holding company and is entirely dependent on our paying it
dividends to pay its obligations, including its obligations under its Guarantee.
Under the terms of our credit facility, there are severe restrictions on our
ability to declare dividends to Holding. In addition, the indenture governing
the $105 million aggregate principal amount of Holding's 12 1/2 % Senior Secured
Notes due 2006 (the "1996 Notes") limits the ability of Holding to make certain
payments, including payments under its Guarantee. Accordingly, absent a
substantial increase in our operating results and a refinancing of the 1996
Notes or an equity offering, we do not expect Holding to be able to perform
under its Guarantee.
In addition, without a substantial increase in our net income above
historical levels, we anticipate that we will be unable to generate sufficient
cash flow to permit a dividend to Holding under the limitations placed on us by
our debt indentures in an amount sufficient to meet Holding's interest payment
obligations under the 1996 Notes. We must pay the interest obligations of the
1996 Notes in cash beginning December 15, 2001. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR SENIOR DEBT, WHICH
BEARS INTEREST AT FLUCTUATING RATES, AND POSSIBLY OUR FUTURE INDEBTEDNESS.
Under the indenture, payments on the Notes will be subordinated to the
prior payment of all of our Senior Indebtedness, totaling $89.0 million on July
3, 1999. Our Senior Indebtedness currently includes borrowings under the Credit
Facility and the Nevada Bonds (which bear interest at a variable rate, require
annual principal payments of $0.5 million on April 1, and mature in April 2007).
As of July 3, 1999, $35.8 million was available for
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borrowing under the Credit Facility (subject to applicable borrowing base
limitations), and there was no debt subordinated to the Notes. See "Description
of Certain Other Indebtedness--The Credit Facility." The indenture permits us to
incur additional senior debt under our credit facility provided that certain
conditions are met. See "Description of Notes."
By reason of such subordination, in the event of our insolvency,
liquidation, reorganization, dissolution or winding up, or in the event that the
senior debt is otherwise accelerated, holders of senior debt must be paid in
full before we may pay you. In such event, there may be insufficient assets
remaining to satisfy claims. In addition, we will not be permitted to make any
payment with respect to the Notes or our other senior subordinated debt for a
substantial period of time if defaults under the Credit Facility or certain
other senior debt exist and are continuing and certain other conditions are
satisfied. The Notes rank PARI PASSU with the 1994 Notes and the 1999 Notes and
PARI PASSU with, or senior to, all other future subordinated debt of Berry. In
addition, the Guarantees are subordinated to all existing and future senior debt
of each Guarantor, including the guarantees under the Credit Facility, and, in
the case of Holding, the 1996 Notes.
In addition, Berry Plastics' and the Guarantors' respective obligations
under the Credit Facility and the Nevada Bonds bear interest at rates that may
be expected to fluctuate over time. Accordingly, a substantial increase in
interest rates could adversely affect our ability to service our debt
obligations, including our obligations with respect to the Notes.
THE NOTES ARE NOT SECURED BY ANY OF OUR ASSETS.
The Notes and Guarantees are unsecured obligations of Berry and the
Guarantors, respectively. The indenture will permit us to incur certain secured
debt, including debt under the Credit Facility, which is secured by a lien on
substantially all of the assets of Berry and the Guarantors. The holders of any
secured debt will have a claim prior to the holders of the Notes with respect to
any assets pledged by us as security for such debt. Upon an event of default
under the credit facility, the lender would be entitled to foreclose on the
assets of Berry and the Guarantors. In such event, the assets of Berry and the
Guarantors remaining after repayment of such secured debt may be insufficient to
satisfy our obligations with respect to the Notes.
WE HAVE $100 MILLION IN PRINCIPAL AMOUNT OF NOTES OUTSTANDING THAT WILL BE PAID
BEFORE THE NOTES IN THE EVENT OF CERTAIN ASSETS SALES.
The 1994 Notes have a priority upon the payment of proceeds pursuant to
certain asset sales. See "Description of Notes--Repurchase at the Option of
Holders--Asset Sales."
WE DO NOT HAVE FIRM CONTRACTS WITH PLASTIC RESIN SUPPLIERS.
We source plastic resin primarily from major industry suppliers, such as
Dow Chemical, Chevron, Mobil and Equistar. We have long-standing relationships
with certain of these suppliers but have not entered into a firm supply contract
with any of our resin vendors. We may not be able to arrange for other sources
of resin in the event of an industry-wide general shortage of resins used by us,
or a shortage or discontinuation of certain types of grades of resin purchased
from one or more of our suppliers.
IF MARKET CONDITIONS DO NOT PERMIT US TO PASS ON THE COST OF PLASTIC RESINS TO
OUR CUSTOMERS ON A TIMELY BASIS, IF AT ALL, OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS WILL SUFFER.
To produce our products we use various plastic resins, which in fiscal
1998 cost us about $62 million, or 31% of our total cost of goods sold. In order
for us to do well financially we must pass this cost on to our customers in a
timely manner. Plastic resins are subject to cyclical price fluctuations,
including those arising from supply shortages and changes in the prices of
natural gas, crude oil and other petrochemical intermediates from which resins
are produced. Historically, we have been able to pass on increases in resin
prices to our customers over a period of time. However, we may not be able to
continue to do so on a timely basis, if at all, or there could be a significant
increase in resin prices, which would have a material adverse effect on our
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."
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WE ARE CONTROLLED BY A SMALL GROUP OF STOCKHOLDERS.
Atlantic Equity Partners International II, L.P., a Delaware limited
partnership, owns about 54% (on a voting common stock equivalent basis) of
Holding's outstanding voting capital stock. As such, subject to the terms of our
Stockholders Agreement, Atlantic Equity Partners International II has the
ability to elect all of the members of BPC Holding's board of directors and can
determine the outcome of any corporate transaction or other matter submitted to
the stockholders of Holding or Berry for approval, including mergers,
consolidations and the sale of Berry Plastics or all or substantially all of our
assets. See "Certain Transactions--Stockholders Agreements." Atlantic Equity
Associates International II, L.P., a Delaware limited partnership, is the sole
general partner of Atlantic Equity Partners International II. Roberto Buaron,
the Chairman and a director of Berry Plastics, is the sole shareholder of Buaron
Holdings Ltd. Buaron Holdings is the sole general partner of Atlantic Equity
Associates International II. Through his affiliations with Buaron Holdings and
Atlantic Equity Associates International II, Mr. Buaron may be deemed to control
Atlantic Equity Partners International II.
Including the shares of capital stock owned by Atlantic Equity Partners
International II, all executive officers and directors of Berry as a group
beneficially own about 96.3% (on a voting common stock equivalent basis) of
Holding's outstanding voting capital stock.
WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS AND MAY BE ADVERSELY AFFECTED BY
NEW ENVIRONMENTAL LAWS OR THE COSTS OF COMPLIANCE WITH ANY SUCH LAWS.
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. We are 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
that we produce. If such prohibitions or restrictions were widely adopted, they
could have a material adverse effect on us. Furthermore, a decline in consumer
preference for plastic products due to environmental considerations could have a
negative effect on our business. In addition, certain of our 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 we have not been required historically to make
significant capital expenditures in order to comply with applicable
environmental laws and regulations, we cannot predict with any certainty our
future capital expenditure requirements because of continually changing
compliance standards and environmental technology. Furthermore, violations or
contaminated sites that we do not know about (including contamination caused by
prior owners and operators of such sites) could result in additional compliance
or remediation costs or other liabilities. We do not have insurance coverage for
environmental liabilities and do not anticipate obtaining such coverage in the
future. See "Business--Environmental Matters and Governmental Regulation."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE.
In the event of certain change of control events, we will be required,
subject to certain conditions, to offer to purchase all outstanding Notes, 1994
Notes and 1999 Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest and any liquidated damages to the date of
repurchase. In addition, Holding will also be required, subject to certain
conditions, to offer to purchase all outstanding 1996 Notes at a purchase price
equal to 101% of the principal amount thereof (or 101% of $105,000,000), plus
accrued interest to the date of repurchase. There can be no assurance that we
will have sufficient funds available to make the required purchases. Moreover,
the Credit Facility and the indenture governing the 1996 Notes 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
indenture governing the 1996 Notes, the indenture governing the Notes may offer
little, if any, protection to you in the event of a change of control. If we
failed to purchase Notes tendered upon a change of control it would constitute
an event of default under the indenture. 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
debt of Berry under the Credit Facility is senior debt, which, as of July 3,
1999, on a pro forma basis giving effect to the acquisition of Cardinal and a
$20.0 million concurrent increase in the Credit Facility, could have been as
much as $132.5 million under the borrowing base calculation. The subordination
provisions contained in the Indenture will prohibit us (if the holders of senior
debt issue a notice to us 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 debt accelerate the maturity of the senior debt). We
could, in the future enter
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into certain transactions, including acquisitions, refinancings or other
recapitalizations or highly leveraged transactions, that would not result in a
change of control but would increase the amount of debt outstanding or otherwise
affect our capital structure or credit ratings or otherwise adversely affect
holders of the Notes. See "Description of Certain Indebtedness" and "Description
of Notes--Repurchase at the Option of Holders--Change of Control."
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
We face intense competition in the sale of our products. We compete with
several companies, 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. Many of our competitors have financial and other
resources that are substantially greater than ours. Our customers may opt to
purchase a different production type of product, such as those made by
thermoforming. We may not be able to compete successfully with respect to any of
the foregoing factors. Competition could result in our products losing market
share or our having to reduce our prices, either of which would have a material
adverse effect on our business and results of operations.
UNDER SPECIFIC CIRCUMSTANCES, THE NOTES AND GUARANTEES MAY BE VOIDED.
Federal and state statutes allow courts, under specific circumstances, to
void the Notes and the Guarantees and require you to return payments received
from us or the Guarantors. If a court of competent jurisdiction in a suit by an
unpaid creditor or a representative of creditors (such as a trustee in
bankruptcy or a debtor-in-possession) were to find that, at the time of the
incurrence of the debt represented by the Notes and the Guarantees, Berry or a
Guarantor:
o was insolvent or was rendered insolvent by reason of
such incurrence;
o was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital;
o intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured;
o intended to hinder, delay or defraud its creditors; or
o incurred the debt for less than reasonably equivalent
value or fair consideration;
then such court could, among other things:
o void all or a portion of our or such Guarantor's
obligations to the holders of the Notes, the effect of
which could be that you might not be repaid in full;
and/or
o subordinate our or such Guarantor's obligations to the
holders of the Notes to other existing and future debt of
Berry or such Guarantor, as the case may be, the effect of
which would be to entitle such other creditors to be paid
in full before any payment could be made to you.
The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, we would be
considered insolvent if:
o the sum of our debts, including contingent liabilities,
was greater than all of our assets at a fair valuation or
if the present fair saleable value of our assets was less
than the amount that would be required to pay the probable
liabilities on our existing debts, including contingent
liabilities, as they become absolute and matured; or
o we could not pay our debts as they became due.
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LACK OF A PUBLIC MARKET FOR THE NEW NOTES
The New Notes will constitute a new class of securities with no
established trading market. We do 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. We have 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, Berry'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. We do not currently anticipate that we will
register the Old Notes under the Securities Act. In addition, any trading market
for the Old Notes not exchanged for New Notes will be adversely affected to the
extent that Old Notes are tendered and accepted in the Exchange Offer. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, we believe 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 Berry 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 Berry). Berry 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. The method of delivery of the 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.
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Neither the Company, the Exchange Agent nor any other person shall incur any
liability for failure to notify Holders of defects or irregularities with
respect to tenders of Old Notes. 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. We do 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.
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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. We 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 we subsequently sold) and Iowa Falls, Iowa.
In March 1995, Berry Sterling, a newly formed, wholly owned subsidiary of
Berry, acquired substantially all of the assets of Sterling Products, Inc. (the
"Sterling Products Acquisition"), a producer of injection molded plastic drink
cups and lids. We believe that the Sterling Products Acquisition gave us
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. We believe that the
Tri-Plas Acquisition gave us an immediate presence in the polypropylene
container product line, which is mainly used for food and "hot fill"
applications.
In January 1996, we 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, we 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, we acquired
Venture Packaging, Inc. of Monroeville, Ohio. See "Summary of Prospectus
- --Acquisitions."
1998 ACQUISITIONS
In July 1998, we acquired Norwich Injection Moulders Limited for about $14
million. Norwich, which is headquartered in Norwich, England, manufactures and
markets plastic injection-molded overcaps and closures for the European market.
For the year ended October 31, 1997, Norwich reported net sales of about $13.4
million. Norwich provides us with a European production platform that allows us
to better serve our global overcap customers and to introduce our other product
lines in Europe.
In October 1998, we acquired the Knight Engineering and Plastics Division
of Courtaulds Packaging Inc. for about $18 million. Knight Plastics, which is
headquartered in Woodstock, Illinois, manufactures and markets plastic
injection-molded aerosol overcaps. We believe that this acquisition enhanced our
aerosol overcap business and better positioned us to meet the needs of our
domestic customers. For the year ended March 31, 1998, Knight Plastics reported
net sales of $23.8 million. Since the acquisition, we have significantly reduced
its manufacturing and operating costs, principally by closing one of its two
manufacturing plants.
1999 ACQUISITION
In July 1999, we acquired Cardinal for about $72.0 million, including
related acquisition costs. Cardinal which is headquartered in Streetsboro, Ohio,
operates three manufacturing locations and is the nation's leading producer and
marketer of plastic containers for ice cream and other frozen desserts. For the
year ended November 30, 1998, Cardinal reported net sales of $54.0 million. As
in our nine previous acquisitions, we believe that we can lower Cardinal's costs
by consolidating plants, purchasing resin in greater volume, using larger, more
cost-efficient injection-molding equipment and improving Cardinal's operating
systems.
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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 the Northwestern Mutual Life Insurance Company
(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, (i) 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, (ii) 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 (constituting approximately 19% of the post-merger common
stock of the surviving corporation) and (iii) each share of common stock and
preferred stock and each warrant of Mergerco was converted into one share of
common stock, one share of preferred stock and one warrant of the surviving
corporation, respectively. 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 and was determined based on arms'-length negotiations with the
new investors. 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."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by Berry on August 24, 1998 to the Initial
Purchaser, who placed the Old Notes with institutional investors. In connection
therewith, Berry, the Guarantors and the Initial Purchaser entered into the
Registration Rights Agreement, pursuant to which Berry and the Guarantors
agreed, for the benefit of the Holders of the Old Notes, that Berry 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 Berry 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, Berry 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 Berry or any other person
who has obtained a properly completed bond power from the registered holder.
Berry 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, Berry
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" Berry 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 Berry 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). Berry 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) Berry 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
Berry 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 Berry or an affiliate of
Berry, Berry 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.
Berry and the Guarantors will
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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) Berry 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) Berry 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, Berry 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, Berry 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) Berry 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) Berry 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 Berry 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 Berry 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
Berry 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 further
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.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, Berry 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. Berry 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. Berry has fixed the close of business on
September , 1999 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. Berry 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.
Berry shall be deemed to have accepted validly tendered Old Notes when, as
and if Berry 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. Berry 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
September , 1999, unless Berry, 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, Berry 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.
Berry 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 Berry to constitute a
material change, Berry will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
Berry will extend the Exchange Offer for a period of five to 10
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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 Berry may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, Berry 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 April 15, 1999. Interest will be
payable on the Old Notes accepted for exchange to, but not including, April 15,
1999.
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 Berry will constitute a
binding agreement between such Holder and Berry 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 September , 1999, to all Holders of Old Notes known to Berry 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 Berry 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 BERRY.
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.
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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 Berry, evidence
satisfactory Berry 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
Berry in its sole discretion, which determination will be final and binding.
Berry reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Berry's acceptance of which would, in the opinion of counsel
for Berry, be unlawful. Berry also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. Berry'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 Berry shall determine. Although
Berry intends to notify Holders of defects or irregularities with respect to
tenders of Old Notes, neither Berry, 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
Berry 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 Berry, 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 Berry. 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 Berry), 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
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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 Berry 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
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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, Berry 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 Berry to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to Berry; or
(c) any governmental approval has not been obtained, which
approval Berry shall deem necessary for the consummation of the Exchange
Offer.
If Berry determines in its sole discretion that any of the conditions are
not satisfied, Berry 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, Berry will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders, and
Berry 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
The United States Trust Company of New York 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:
To: United States Trust Company of New York, as Exchange Agent
BY REGISTERED OR CERTIFIED BY FACSIMILE: BY HAND BEFORE 4:30 P.M.:
MAIL: (212) 780-0592 United States Trust Company
United States Trust Company of Attention: of New York
New York Customer Service 111 Broadway
P.O. Box 843 New York, New York 10006
Cooper Station Attention: Lower Level
New York, New York 10276 Corporate Trust Window
Attention: Corporate Trust
Services
CONFIRM BY BY OVERNIGHT COURIER AND BY
TELEPHONE TO: HAND AFTER 4:30 P.M. ON THE
(800) 548-6565 EXPIRATION DATE:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
28
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Berry. 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 Berry
and our affiliates.
Berry 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. Berry, 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 Berry. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
Berry 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 Berry'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.
29
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of Holding
and its subsidiaries at July 3, 1999 and the pro forma capitalization of Holding
and its subsidiaries as of such date after giving effect to acquisition of
Cardinal and the issuance of the 1999 Notes. You should read the information in
the table below in conjunction with the historical consolidated financial
statements of Holding and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AT JULY 3, 1999
----------------------
HISTORICAL PRO FORMA
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
BERRY CORPORATION:
Revolving credit facility ................................... $ 23,835 $ 23,835
Term loans .................................................. 61,151 61,151
Nevada Bonds ................................................ 4,000 4,000
Capital lease obligations ................................... 740 740
1994 Notes .................................................. 100,000 100,000
1998 Notes .................................................. 25,000 25,000
1999 Notes .................................................. -- 75,000
Debt premium ................................................ 758 758
---------- ----------
Total Berry long-term debt, including current
portion ..................................................... 215,484 290,484
HOLDING:
1996 Notes .................................................. 105,000 105,000
---------- ----------
Total consolidated long-term debt, including current portion 320,484 395,484
Total stockholders' equity (deficit) ............................. (120,667) (120,667)
---------- ----------
Total capitalization ....................................... $ 199,817 $ 274,817
========== ==========
</TABLE>
30
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statement of
operations and condensed consolidated balance sheet of Holding (collectively,
the "Pro Forma Statements") give effect to (1) our acquisition of Cardinal and
issuance of the 1999 Notes (2) our acquisitions of Knight and Norwich (the 1998
Acquisitions) and (3) our issuance of the Notes and the application of the
proceeds therefrom as if the transactions had occurred as of the beginning of
the respective periods for the pro forma statement of operations data and other
pro forma data, and, in the case of the 1999 Notes and our acquisition of
Cardinal, as if the transactions had occurred on July 3, 1999 for the pro forma
balance sheet data. Fiscal year data reflect Cardinal's financial data for its
fiscal year ended November 30, 1998. Six month period data reflect Cardinal's
financial data for its period ended May 31, 1999. 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.
HOLDING
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
CARDINAL PRO FORMA
ACQUISITION FOR THE
AND 1999 1998 ACQUISITIONS
HOLDING NOTES ACQUISITIONS AND 1999 OFFERING
HISTORICAL ADJUSTMENTS ADJUSTMENTS NOTES ADJUSTMENTS PRO FORMA
------------ ----------- -------------- -------------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales ....................... $ 271,830 $ 53,971 $ 26,869 $ 352,670 $ -- $ 352,670
Cost of goods sold .............. 199,227 43,066 22,786 265,079 -- 265,079
------------ ----------- -------------- -------------- ----------- ---------
Gross margin .................... 72,603 10,905 4,083 87,591 -- 87,591
Operating expenses .............. 44,001 8,166(1) 3,684(6) 55,851 -- 55,851
------------ ----------- -------------- -------------- ----------- ---------
Operating income ................ 28,602 2,739 399 31,740 -- 31,740
Other expenses (income) ......... 1,865 (6) 2 1,861 -- 1,861
Interest expense, net ........... 34,556 8,625(2) 1,697(7) 44,878 726(11) 45,604
------------ ----------- -------------- -------------- ----------- ---------
Income (loss) before income taxes (7,819) (5,880) (1,300) (14,999) (726) (15,725)
Income taxes (benefit) .......... (249) --(3) 339(8) 90 -- 90
------------ ----------- -------------- -------------- ----------- ---------
Net income (loss) ............... $ (7,570) $ (5,880) $ (1,639) $ (15,089) $ (726) $ (15,815)
============ =========== ============== ============== =========== =========
OTHER DATA:
Depreciation and amortization ... $ 24,830 $ 5,880(4) $ 1,838(9) $ 32,496 $ -- $ 32,496
BERRY DATA:
Cash interest expense, net ...... $ 20,569 $ 8,250(5) $ 1,670(10) $ 30,489 $ 753 $ 31,243
Total interest expense, net ..... 21,835 8,625 1,697 32,157 726(11) 32,883
</TABLE>
31
<PAGE>
BPC HOLDING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
26 WEEKS ENDED JULY 3, 1999
CARDINAL
ACQUISITION
AND 1999
HOLDING NOTES
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
Net sales ............................... $159,852 $ 28,465 $ 188,317
Cost of goods sold ...................... 112,782 23,407 136,189
-------- -------- ---------
Gross margin ............................ 47,070 5,058 52,128
Operating expenses ...................... 25,828 4,251(1) 30,079
-------- -------- ---------
Operating income ........................ 21,242 807 22,049
Other expenses .......................... 778 -- 778
Interest expense, net ................... 17,860 4,314(2) 22,174
-------- -------- ---------
Income (loss) before income taxes ....... 2,604 (3,507) (903)
Income taxes ............................ 482 -- 482
-------- -------- ---------
Net income (loss) ....................... $ 2,122 $ (3,507) $ (1,385)
======== ======== =========
OTHER DATA:
Depreciation and amortization ........... $ 14,110 $ 3,372(4) $ 16,350
BERRY DATA:
Cash interest expense, net .............. $ 10,574 4,125(5) $ 14,699
Total interest expense, net ............. 11,196 4,314 15,510
32
<PAGE>
BPC HOLDING CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL 26 WEEKS
YEAR ENDED ENDED
JANUARY 2, 1999 JULY 3, 1999
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CARDINAL ACQUISITION AND ISSUANCE OF 1999 NOTES ADJUSTMENTS:
(1)Actual operating expenses ......................................... $ 6,291 $ 3,119
Add amortization of goodwill resulting from the acquisition ....... 1,875 1,132
--------------- ---------------
Adjusted operating expenses ....................................... $ 8,166 $ 4,251
=============== ===============
(2)Actual interest expense ........................................... $ 3,384 $ 1,400
Deduct interest on extinguished debt .............................. (3,384) (1,400)
Add incremental interest expense .................................. 8,625 4,314
--------------- ---------------
Adjusted interest expense ......................................... $ 8,625 $ 4,314
=============== ===============
(3)Actual provision for income taxes ................................. $ 439 $ 202
Adjust taxes for the acquisition .................................. (439) (202)
--------------- ---------------
Adjusted income tax expense ....................................... $ -- $ --
=============== ===============
(4)Actual depreciation and amortization acquisition ....................$ 3,953 $ 2,240
Add amortization of goodwill resulting from the acquisition ....... 1,875 1,132
--------------- ---------------
Adjusted depreciation and amortization ............................ $ 5,828 $ 3,372
=============== ===============
(5)Actual net cash interest expense .................................. $ 3,170 $ 1,292
Deduct interest on extinguished debt .............................. (3,170) (1,292)
Add incremental cash interest ..................................... 8,250 4,125
--------------- ---------------
Adjusted net cash interest expense ................................ $ 8,250 $ 4,125
=============== ===============
NORWICH AND KNIGHT PLASTICS 1998 ACQUISITION ADJUSTMENTS:
<S> <C>
(6)Actual operating expenses ......................................... $ 3,350
Add amortization of goodwill resulting from the acquisitions ...... 334
---------------
Adjusted operating expenses ....................................... $ 3,684
===============
(7)Actual interest expense ........................................... $ 48
Add incremental interest expense from the acquisitions ............ 1,649
---------------
Adjusted interest expense ......................................... $ 1,697
===============
(8)Actual provision for income taxes ................................. $ 196
Adjust taxes for the acquisitions ................................. 143
---------------
Adjusted tax expense .............................................. $ 339
===============
(9)Actual depreciation and amortization .............................. $ 1,504
Add amortization of goodwill resulting from the acquisitions ...... 334
---------------
Adjusted depreciation and amortization ............................ $ 1,838
===============
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED
JANUARY 2, 1999
---------------
(DOLLARS IN THOUSANDS)
<S> <C>
(10)Actual net cash interest expense.................................. $ 48
Add incremental net cash interest expense from acquisitions........ 1,622
---------------
Adjusted net cash interest expense................................. $ 1,670
===============
OFFERING ADJUSTMENTS:
(11)Adjustment of net interest expense:
Interest on the Notes.............................................. $ 2,041
Interest on debt reduction......................................... (1,288)
Amortization of premium on Notes................................... (159)
Amortization of deferred financing costs associated with the
offering of the Notes........... 132
---------------
Change in net interest expense..................................... $ 726
===============
</TABLE>
34
<PAGE>
BPC HOLDING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AT JULY 3, 1999
--------------------------------------------------
CARDINAL
ACQUISITION
AND 1999
HOLDING NOTES
HISTORICAL ADJUSTMENTS(1) PRO FORMA
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 2,993 $ 31 $ 3,024
Accounts receivable ..................................... 40,842 6,910 47,752
Inventories ............................................. 32,314 8,043 40,357
Other current assets .................................... 2,658 628 3,286
--------------- --------------- ---------------
Total current assets ................................. 78,807 15,612 94,419
Assets held in trust ....................................... 252 -- 252
Property and equipment ..................................... 120,271 31,956 152,227
Intangible assets .......................................... 55,950 34,596 90,546
Other assets ............................................... 3,129 112 3,241
--------------- --------------- ---------------
Total assets ......................................... $ 258,409 $ 82,276 $ 340,685
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ....................... $ 20,297 -- $ 20,297
Accounts payable ........................................ 20,664 4,205 24,869
Accrued liabilities ..................................... 26,075 157 26,232
--------------- --------------- ---------------
Total current liabilities ............................ 67,036 4,362 71,398
Long-term debt:
Industrial revenue bonds (Nevada) ....................... 4,000 -- 4,000
Term loans .............................................. 61,151 -- 61,151
Revolving line of credit ................................ 23,835 -- 23,835
Capital lease obligations ............................... 740 -- 740
1994 Notes .............................................. 100,000 -- 100,000
1998 Notes .............................................. 25,000 -- 25,000
1999 Notes .............................................. -- 75,000 75,000
1996 Notes .............................................. 105,000 -- 105,000
Debt premium ............................................ 758 -- 758
Less: current portion .................................. (20,297) -- (20,297)
--------------- --------------- ---------------
Total long-term debt ................................. 300,187 75,000 375,187
Other liabilities .......................................... 11,853 2,914 14,767
--------------- --------------- ---------------
Total liabilities .................................... 379,076 82,276 461,352
Stockholders' equity:
Total stockholders' equity (deficit) ................. (120,667) -- (120,667)
--------------- --------------- ---------------
Total liabilities and stockholders' equity (deficit) . $ 258,409 $ 82,276 $ 340,685
=============== =============== ===============
</TABLE>
35
<PAGE>
BPC HOLDING CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) The aggregate purchase price of the Cardinal acquisition is expected to be
$72,000 (including $2,500 of fees and expenses related to the
acquisition). In addition, debt issuance costs associated with the 1999
Notes were $3,000. The preliminary allocation of the purchase price to
historical assets and liabilities of Cardinal was as follows:
AT JULY 3, 1999
-----------------------
(Dollars in thousands)
Net assets at predecessor historical costs... $ 19,814
Elimination of intangible assets............. (14,743)
Extinguishment of debt....................... 33,065
Decrease in other liabilities................ 2,268
Deferred debt issuance costs................. 3,000
Excess of cost over net assets acquired...... 31,596
-----------------------
$ 75,000
=======================
36
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected financial data of Holding and its subsidiaries as
of and for the five fiscal years ended January 2, 1999 are derived from the
consolidated financial statements of Holding that have been audited by Ernst &
Young LLP, independent auditors. The following selected consolidated financial
data for the 26 weeks ended June 27, 1998 and July 3, 1999 are derived from the
unaudited condensed consolidated financial statements of Holding and, in our
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data. Operating results
for the 26 weeks ended July 3, 1999 are not necessarily indicative of the
results that may be achieved for Holding's fiscal year ending January 1, 2000.
You should read this selected financial data 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>
TWENTY-SIX WEEKS
FISCAL ENDED
-------- -------- --------- --------- --------- --------- ---------
JUNE 27, JULY 3,
1994 1995 1996 1997 1998 1998 1999
-------- -------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ..................................... $106,141 $140,681 $ 151,058 $ 226,953 $ 271,830 $ 136,317 $ 159,852
Cost of goods sold ............................ 73,997 102,484 110,110 180,249 199,227 100,016 112,782
-------- -------- --------- --------- --------- --------- ---------
Gross margin .................................. 32,144 38,197 40,948 46,704 72,603 36,301 47,070
Operating expenses ............................ 15,160 17,670 23,679 30,505 44,001 20,725 25,828
-------- -------- --------- --------- --------- --------- ---------
Operating income .............................. 16,984 20,527 17,269 16,199 28,602 15,576 21,242
Other expenses(1) ............................. 184 127 302 226 1,865 430 778
Interest expense, net (2) ..................... 10,972 13,389 20,075 30,246 34,556 16,866 17,860
-------- -------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary charge ........................ 5,828 7,011 (3,108) (14,273) (7,819) (1,720) 2,604
Income taxes (benefit) ........................ 11 678 239 138 (249) 26 482
-------- -------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
charge ...................................... 5,817 6,333 (3,347) (14,411) (7,570) (1,746) 2,122
Extraordinary charge(3) ....................... 3,652 -- -- -- -- -- --
-------- -------- --------- --------- --------- --------- ---------
Net income (loss) ........................... $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (7,570) $ (1,746) $ 2,122
======== ======== ========= ========= ========= ========= =========
Preferred stock dividends ................... $ -- $ -- $ 1,116 $ 2,558 $ 3,551 $ 1,783 $ 1,962
Common stock dividends ...................... 50,000 -- -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital ............................... $ 13,393 $ 13,012 $ 15,910 $ 20,863 $ 4,762 $ 18,763 $ 11,771
Fixed assets .................................. 38,103 52,441 55,664 108,218 120,005 105,260 120,721
Total assets .................................. 91,790 103,465 145,798 239,444 255,317 231,171 258,409
Total debt .................................... 112,287 111,676 216,046 306,335 323,298 299,855 320,484
Stockholders' equity (deficit) ................ (38,838) (32,484) (97,550) (108,975) (120,357) (112,563) (120,667)
OTHER DATA:
Adjusted EBITDA(4) ............................ $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 30,066 $ 37,653
Adjusted EBITDA margin ........................ 24.9% 22.4% 23.0% 17.7% 22.0% 22.1% 23.6%
Cash provided by operating activities ......... 15,556 12,969 14,426 14,154 34,131 14,380 16,136
Cash used for investing activities ............ (9,495) (25,385) (14,639) (102,102) (52,120) (7,759) (13,053)
Cash provided by (used for) financing
activities .................................. 2,184 11,124 2,370 80,444 17,619 (6,629) (2,402)
Depreciation and amortization(5) .............. 8,176 9,536 11,331 19,026 24,830 11,783 14,110
Capital expenditures .......................... 9,118 11,247 13,581 16,774 22,595 7,854 13,461
Ratio of earnings to fixed charges(6) ......... 1.5x 1.5x -- -- -- -- 1.1x
</TABLE>
(1)Other expenses consist of loss on disposal of property and equipment for the
respective periods.
(2)Includes non-cash interest expense of $1,178 in fiscal 1994, $950 in fiscal
1995, $1,212 in fiscal 1996, $2,005 in fiscal 1997, $1,765 in fiscal 1998 and
$884 and $872 for the thirteen weeks ended June 27, 1998 and July 3, 1999.
(3)During 1994, an extraordinary charge of $3.7 million was recognized as a
result of the retirement of debt concurrently with the issuance of the 1994
Notes.
37
<PAGE>
(4)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, our 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.
The following table reconciles operating income to EBITDA and Adjusted EBITDA
for each respective period:
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
FISCAL ENDED
-------- -------- --------- --------- --------- --------- ---------
JUNE 27, JULY 3,
1994 1995 1996 1997 1998 1998 1999
-------- -------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income ........................................ $ 16,984 $ 20,527 $ 17,269 $ 16,199 $ 28,602 $ 15,576 $ 21,242
Depreciation and amortization ........................... 8,176 9,536 11,331 19,026 24,830 11,783 14,110
-------- -------- --------- --------- --------- --------- ---------
EBITDA .................................................. 25,160 30,063 28,600 35,225 53,432 27,359 35,352
One-time expenses related to acquisitions:
1996 transaction compensation expenses ........ -- -- 2,762 -- -- -- --
Acquisition integration expenses .............. 116 867 692 3,267 1,525 1,035 1,091
Plant shutdown expenses ....................... -- -- 907 848 2,559 1,328 576
Litigation expenses related to drink cup patent -- -- 650 100 631 -- --
Corporate expenses:
Non-cash compensation expenses (benefit) ...... 358 (214) 358 -- 749 (91) 197
Management fees and expenses .................. 746 853 749 828 872 435 437
-------- -------- --------- --------- --------- --------- ---------
Adjusted EBITDA ......................................... $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 30,066 $ 37,653
======== ======== ========= ========= ========= ========= =========
</TABLE>
(5)Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt premium/discount amortization which
are included in interest expense.
(6)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 debt (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 by $2,883 in fiscal
1996, by $13,932 in fiscal 1997, by $7,042 in fiscal 1998 and by $2,046 for
the 26 weeks ended June 27, 1998.
38
<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.
RESULTS OF OPERATIONS
26 WEEKS ENDED JULY 3, 1999
COMPARED TO 26 WEEKS ENDED JUNE 27, 1998
NET SALES. Net sales increased $23.6 million, or 17%, to $159.9 million
for the 26 weeks ended July 3, 1999 from $136.3 million for the 26 weeks ended
July 27, 1998 with an approximate 2% decrease in net selling prices due
primarily to contractual decreases associated with lower raw material costs.
Plastic packaging product net sales increased $19.6 million from the 26 weeks
ended July 27, 1998. Within this segment, the addition of Norwich and Knight
provided net sales for the 26 weeks ended July 3, 1999 of $7.3 million and $9.6
million, respectively. In addition, overcaps sales, excluding Knight, increased
$2.1 million. Drink cup sales for the 26 weeks ended July 3, 1999 were $3.0
million off the 26 weeks ended July 27, 1998 due to a $3.5 million promotion
during the 26 weeks ended July 27, 1998. Container sales increased $0.1 million
from the 26 weeks ended July 27, 1998 despite the Company's decision to exit
certain low margin business. Custom sales, including tooling, increased $3.4
million from the 26 weeks ended July 27, 1998 with a large promotion in the 26
weeks ended July 3, 1999. Plastic housewares product sales for the 26 weeks
ended July 27, 1998 increased $4.0 million from the 26 weeks ended July 3, 1999
due to strong internal growth including several new products.
GROSS MARGIN. Gross margin increased by $10.8 million to $47.1 million
(29% of net sales) for the 26 weeks ended July 3, 1999 from $36.3 million (27%
of net sales) from the 26 weeks ended July 27, 1998. This increase of 30%
includes the combined impact of the added Norwich and Knight sales volume,
acquisition integration, productivity improvement initiatives, and the cyclical
impact of lower raw material costs compared to the 26 weeks ended July 27, 1998.
A major focus continues to be the consolidation of products and business of
recent acquisitions to the most efficient tooling, providing customers with
improved products and customer service. As part of the integration, we closed
the Anderson, South Carolina facility in 1998 with the majority of the business
being transferred to the Charlotte, North Carolina plant. In addition, we closed
the Arlington Heights, Illinois facility, which was acquired in the Knight
acquisition, in 1999 with the majority of the business being transferred to the
Woodstock, Illinois plant. Also, significant productivity improvements have been
made, including the addition of state-of-the-art injection molding equipment,
molds and printing equipment at several of our facilities.
OPERATING EXPENSES. Selling expenses increased by $1.5 million to $8.6
million for the 26 weeks ended July 3, 1999 from $7.1 million for the 26 weeks
ended July 27, 1998 principally as a result of expanded sales coverage and
increased marketing expenses. General and administrative expenses increased by
$3.1 million to $11.9 million for the 26 weeks ended July 3, 1999 from $8.8
million for the prior 26 weeks ended July 27, 1998. The increase is primarily
attributable to the Norwich and Knight acquisitions and increased accrued bonus
expenses. One-time transition expenses for the 26 weeks ended July 3, 1999
include $0.6 million related to the shutdown of the Anderson and Arlington
Heights facilities and $1.1 million related to acquisitions. One-time transition
expenses for 26 weeks ended July 27, 1998 were $1.1 million related to
acquisitions and $1.3 million related to the Anderson plant consolidation.
INTEREST EXPENSE. Interest expense increased $0.6 million to $18.0 million
for the 26 weeks ended July 3, 1999 compared to $17.4 million for the 26 weeks
ended July 27, 1998 primarily due to additional borrowings to support the
Norwich Moulders and Knight acquisitions.
INCOME TAX. Our income tax expense was $0.5 million for the 26 weeks ended
July 3, 1999. We continue to operate in a net operating loss carryforward
position for Federal income tax purposes.
NET INCOME (LOSS). Net income for the 26 weeks ended July 3, 1999 of $2.1
million improved $3.8 million from a net loss of $1.7 million for the 26 weeks
ended June 27, 1999 for the reasons discussed above.
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YEAR ENDED JANUARY 2, 1999
COMPARED TO YEAR ENDED DECEMBER 27, 1997
NET SALES. Net sales increased 19.8% to $271.8 million in 1998, up $44.9
million from $227.0 million in 1997, despite an approximate 2% decrease in net
selling price due mainly to competitive market conditions. Container sales
increased $34.5 million in 1998, primarily due to the continued market strength
of base products and the acquisition of Venture Packaging. Net sales in the
drink cup product line increased $2.3 million in 1998 as a result of a large
promotion. Net sales for aerosol overcaps increased about $2.0 million due to
the acquisition of Knight.
Housewares net sales increased $4.0 million or 23% in 1998 due primarily
to new products and strong market demands. The acquisition of Norwich also
brought us into the U.K. market, primarily closures product sales, which
provided an additional $7.3 million of net sales in 1998. Other product lines,
including custom molded products and custom mold building, decreased $5.2
million due to large custom programs that occurred in 1997.
GROSS MARGIN. Gross margin increased $25.9 million, or 55.5%, from $46.7
million (20.6% of net sales) in 1997 to $72.6 million (26.7% of net sales) in
1998. The increase in gross margin was primarily attributed to increased sales
volume as described above, acquisition integration, productivity improvements
and lower raw material costs. A major focus during 1998 was the consolidation of
products and business of the subsidiaries that we acquired in 1997 to the most
efficient tooling, providing customers with the best product and customer
service. As part of the integration, we closed the Anderson, South Carolina
facility, which was acquired in the acquisition of Venture, in 1998. The
majority of the business was transferred to our Charlotte, North Carolina plant.
Also, 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 our facilities.
OPERATING EXPENSES. Operating expenses during 1998 were $44.0 million
(16.2% of net sales), compared with $30.5 million (13.4% of net sales) for 1997.
Sales related expenses, including the cost of expanded sales coverage and higher
product development and marketing expenses, increased $3.5 million, almost all a
result of our 1997 acquisitions. General and administrative expenses increased
$7.8 million in 1998 primarily as a result of acquisitions made in 1997 and
1998, increased patent litigation expenses and increased employee profit sharing
expense. Intangible amortization increased from $2.2 million in 1997 to $4.1
million for 1998, primarily as a result of the amortization of goodwill ascribed
to acquired companies in 1997 and 1998. Other expense was $4.1 million for 1998
and 1997. Our 1997 acquisitions resulted in start-up related expenses of $3.2
million in 1997 and $1.3 million in 1998. The assets acquired with the
acquisition of PackerWare included a facility in Reno, Nevada that was closed in
1997. Expenses related to the closing of the Reno facility were $0.5 million in
1997 and $0.2 million in 1998. Plant closing expenses related to the Winchester,
Virginia facility resulted in expenses of $0.4 million for 1997. The closing of
the Anderson, South Carolina facility resulted in 1998 expenses of $2.4 million.
INTEREST EXPENSE AND INCOME. Net interest expense, including amortization
of deferred financing costs for 1998 was $34.6 million (12.7% of net sales)
compared to $30.2 million (13.3% of net sales) in 1997, an increase of $4.3
million. This increase is attributed to interest on borrowings related to the
1997 and 1998 acquisitions offset partially by principal reductions. Cash
interest paid in 1998 was $33.2 million as compared to $29.9 million for 1997.
Interest income for 1998 was $1.0 million, down from $2.0 million in 1997, which
is attributable to an additional year of interest payments on the 1996 Notes
from the escrow account.
INCOME TAXES. During fiscal 1998, we recorded a benefit of $0.2 million in
federal and state income tax, primarily due to a carryback claim, compared to an
expense of $0.1 million for fiscal 1997. We continue to operate in a net
operating loss carryforward position for federal income tax purposes.
NET LOSS. We recorded a net loss of $7.6 million in 1998 compared to a
$14.4 million net loss in 1997 for the reasons stated above.
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
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<PAGE>
continued market strength of base products and the acquisitions of Venture
Packaging, Virginia Design and Container Industries. Net sales in the drink cup
product line increased $23.8 million in 1997 as a result of the acquisition of
PackerWare and a strong increase in existing drink cup business. Net sales of
aerosol overcaps were relatively flat, decreasing about $2.6 million. The
acquisition of PackerWare also brought us 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 attributable to increased sales
volume as described above. The gross margin as a percent of net sales derived
from our 1997 acquisitions was about 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 our facilities. These productivity
improvements were offset by increased resin prices in 1997 and the transition
expenses of our 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 business acquisitions that we made in 1997 ($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 recapitalization of Holding. 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 our 1997 acquisitions.
Other expenses increased $2.6 million from $1.6 million for 1996 to $4.1
million in 1997. Our 1997 acquisitions resulted in a charge of $3.2 million in
1997 for start-up related expenses. The acquisition of PackerWare included a
facility in Reno, Nevada, which was closed in 1997. Expenses related to the
closing of the Reno facility were $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 acquisition of Tri-Plas 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 recapitalization of
Holding, which occurred in June 1996. The recapitalization of Holding 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 recapitalization of
Holding.
INCOME TAXES. During fiscal 1997, we incurred $0.1 million in federal and
state income tax compared to $0.2 million for fiscal 1996. We continue to
operate in a net operating loss carryforward position for federal income tax
purposes.
NET LOSS. We 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.
INCOME TAX MATTERS
Holding has unused operating loss carryforwards of $26.0 million for
federal income tax purposes which begin to expire in 2010. Alternative minimum
tax credit carryforwards of about $2.8 million are available to Holding
indefinitely to reduce future years' federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
We have a credit facility for a senior secured line of credit. Giving
effect to the $20.0 million increase in our credit facility in connection with
the Cardinal acquisition, the credit facility provides for aggregate borrowings
up to a maximum of about $142.9 million including: (1) a $70.0 million revolving
line of credit, subject to a
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borrowing base formula; (2) a (pound)1.5 million revolving line of credit,
subject to a borrowing base; (3) a $58.6 million term loan facility; (4) a
(pound)3.8 million term loan facility; and (5) a $5.6 million standby letter of
credit to support our and our subsidiaries' obligations under the Nevada Bonds.
The debt under the Credit Facility is guaranteed by our parent, Holding, and our
subsidiaries. The credit facility requires us to comply with specified financial
ratios and tests, including a minimum Tangible Capital Funds (as defined in the
credit facility) test, maximum leverage ratio, interest coverage ratio, debt
service coverage ratio and a fixed charge coverage ratio. At April 3, 1999, our
credit facility required us to have Tangible Capital Funds of not less than
$22.5 million and a maximum leverage ratio of 4.0 to 1.0. In addition, the
interest ratio could not be less than 2.0 to 1.0, the debt service ratio could
not be less than 1.5 to 1.0 and the fixed charge coverage ratio could not be
less than 1.0 to 1.0. The requirements of these tests may change on a quarterly
basis. These covenants were waived as of July 3, 1999, as a result of the
Cardinal acquisition. See "Description of Certain Indebtedness--The Credit
Facility".
The 1994 Indenture, the 1996 Indenture, the 1999 Indenture and the
Indenture restrict our ability to incur additional debt and contain other
provisions that could limit our liquidity. At July 3, 1999, on a pro forma basis
giving effect to the acquisition of Cardinal and a $20.0 million concurrent
increase in the credit facility, we had unused borrowing capacity under the
credit facility's borrowing base of $35.8 million, which is not considered
additional indebtedness under the 1994 Indenture, 1996 Indenture, 1999 Indenture
or the Indenture. Any additional debt above the borrowing base requires approval
from the credit facility's lenders.
Net cash provided by operating activities was $34.1 million in 1998 as
compared to $14.2 million in 1997. The increase was primarily the result of a
decreased consolidated net loss in 1998 and additional depreciation and
amortization as the result of acquisitions in 1997 and 1998. Net cash provided
by operating activities was $16.1 million for the 26 weeks ended July 3, 1999,
an increase of $1.7 million from the 26 weeks ended June 27, 1998. The increase
is primarily the result of improved operating performance with income before
depreciation and amortization increasing $6.1 million from the 26 weeks ended
June 27, 1998. Net working capital charges (defined as accounts receivable,
inventories, prepaid expenses, other receivables, accounts payable and accrued
expenses) decreased net cash $4.8 million from the 26 weeks ended June 17, 1998
due to our growth.
Capital expenditures in 1998 were $22.6 million, an increase of $5.8
million from $16.8 million in 1997. Included in capital expenditures during 1998
was $6.2 million relating to the addition of a new warehouse, production systems
and offices necessary to support production operating levels throughout Berry.
Capital expenditures also included investment of $11.7 million for molds, $2.2
million for molding and printing machines, and $2.5 million for miscellaneous
accessory equipment and systems. The capital expenditure budget for 1999 is
expected to be $25.8 million, including about $8.1 million for building and
systems which includes a major plant renovation, $10.5 million for molds, $4.2
million for molding and printing machines, and $3.0 million for miscellaneous
accessory equipment. Capital expenditures for the 26 weeks ended July 3, 1999
included $5.5 million for molds, $0.7 million for molding and printing machines,
$4.4 million for buildings and systems, and $2.9 million for accessory equipment
and systems.
Net cash provided by financing activities was $17.6 million in 1998 as
compared to $80.4 million in 1997. The $62.8 million decrease can be attributed
primarily to a $52.4 million decrease in borrowings to finance acquisitions. Net
cash used by financing activities was $2.4 million for the 26 weeks ended July
3, 1999, representing a decrease of $4.2 million from the 26 weeks ended June
27, 1998. This decrease can be attributed to a decrease in borrowings from the
revolving line of credit as a result of the improved operating performance noted
above.
Increased working capital needs occur whenever we experience strong
incremental demand or a significant rise in the cost of raw material,
particularly plastic resin. However, we anticipate that our cash interest,
working capital and capital expenditure requirements for 1999 will be satisfied
through a combination of funds generated from operating activities and cash on
hand, together with funds available under our credit facility. Management bases
such belief on historical experience and the substantial funds available under
our credit facility. However, we cannot predict our future results of
operations.
The indentures governing the 1994 Notes, the 1999 Notes and the Notes
restrict, and the Credit Facility prohibits, our 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 net income of Berry, we anticipate that we will be
unable to generate sufficient net income to permit a dividend to Holding in an
amount sufficient to meet Holding's interest payment obligations under the 1996
Notes. Interest on the 1996 Notes is payable semi-annually on June 15 and
December 15 of each year. However, 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
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thereof. After June 15, 2001 or in the event that Holding does not pay interest
in additional notes, management anticipates that such interest obligations will
only be met by refinancing the 1996 Notes or raising capital through equity
offerings. We can not assure you that then-current market conditions would
permit Holding to consummate a refinancing or equity offering. In addition, we
have now and will continue to have a large amount of debt which may limit our or
Holding's ability to consummate a refinancing or equity offering.
At July 3, 1999, our cash balance was $3.0 million and, on a pro forma
basis giving effect to the acquisition of Cardinal and a $20 million concurrent
increase in our credit facility, we had unused borrowing capacity under our
credit facility's borrowing base of about $35.8 million.
GENERAL ECONOMIC CONDITIONS AND INFLATION
We face various economic risks ranging from an economic downturn adversely
impacting our primary markets to market fluctuations in plastic resin prices. In
the short-term, rapid increases in the cost of resin may not be 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 over a period of time. In
addition, we believe that our sensitivity to economic downturns in our primary
markets is less significant due to our diverse customer base and our ability to
provide a wide array of products to numerous end markets.
We believe that we are not affected by inflation except to the extent that
the economy in general is thereby affected. Should inflationary pressures drive
costs higher, we believe that general industry competitive price increases would
sustain operating results, although we can not assure you that this will be the
case.
IMPACT OF YEAR 2000
We have been modifying or replacing portions of our software since 1991 so
that our computer systems will function properly with respect to dates in the
Year 2000 and thereafter. Because we commenced this process early, the costs
incurred to address this issue in any single year have not been significant. Our
current business applications are Year 2000 compliant. Acquired businesses are
converted to our applications for Year 2000 compliance and consistency in
applications and reporting. Except for Cardinal, the most recent acquired
business, Knight Plastics, was converted to our applications on March 1, 1999.
We plan to convert Cardinal to our applications by November 1999.
However, we are currently in the process of replacing our current business
software with another Year 2000 compliant package. This replacement is not due
to any Year 2000 issues, but is needed to accommodate the changes that we have
experienced in our business due to acquisitions in recent years. The anticipated
cost of this conversion is about $2.5 million. The accounting phase of this
conversion was completed for all plants in January 1999. The remaining phases
are scheduled to be completed by the end of 1999.
We believe that we have an effective program in place to resolve all
internal Year 2000 issues. An inventory of computer based systems has been
compiled and verified through testing and supplier verification. All identified
non-compliant equipment and software will be corrected before December 1999. The
current estimated cost for this resolution is $110,000. These systems include
personal computers, postage machines, plant automation and telephone system
components.
The major Year 2000 risk that we face is the Year 2000 readiness of
external suppliers of goods and services. We could have material disruption in
our ability to produce and deliver product should there be major disruptions in
the economy or failure of key suppliers. While it is impossible to account for
the effectiveness of every supplier's Year 2000 efforts, the following steps are
in the process of being completed:
o We are identifying key suppliers, which include suppliers
of raw material, banking, transportation, service, and
utility providers and surveying these suppliers as to
their Year 2000 status;
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o We are identifying which suppliers are not compliant or
at risk; and
o We are engaging in risk assessment and contingency
planning for these key suppliers.
We have identified 304 "key suppliers" that we have surveyed to determine
their Year 2000 status. The following is a summary of this survey as of October
22, 1999.
Number of
Supplier Response Suppliers
----------------- ---------
o Fully Year 2000 203
compliant
o Compliant by third 30
quarter 1999
o Compliant by fourth 34
quarter 1999
o Second request for 32
information
o No response 4
o Company will not 1
respond
We are in the process of following up with all companies that were to be
compliant by the third and fourth quarter of 1999 to determine their current
status. By the end of November 1999, we will have completed our survey and put
into place any contingency plans.
The amount of potential liability and lost revenue due to Year 2000 issues
cannot be reasonably estimated at this time. We will continue to work throughout
the year to minimize any Year 2000 risks.
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BUSINESS
We are the nation's leading manufacturer and supplier of plastic
injection- molded aerosol overcaps, drink cups and rigid thinwall open-top
containers for a wide variety of end-use markets. We are also a leading
manufacturer and supplier of plastic injection-molded semi-disposable
housewares. In addition, with sales of over two billion aerosol overcaps in
fiscal 1998, we believe that we are the largest supplier of plastic aerosol
overcaps in the world. In our plastic packaging business, we focus primarily on
three markets: aerosol overcaps, rigid thinwall open-top containers and drink
cups. Our housewares business produces home products such as dinnerware,
tumblers and garden items. We concentrate on manufacturing high-quality items
sold to image-conscious marketers of consumer and industrial products. With over
1,000 proprietary molds, superior color matching capabilities, sophisticated
multi- color printing techniques and nationwide plant locations, we consistently
produce and deliver mass quantities of high-quality products on a cost-efficient
basis.
Our total net sales among our product categories is as follows:
FISCAL
------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- ------
(DOLLARS IN MILLIONS)
PLASTIC PACKAGING
PRODUCTS:
Aerosol overcaps......... $ 38.0 $ 43.6 $ 49.7 $ 47.1 $ 49.1
Rigid open-top...........
containers............... 61.6 71.1 80.8 111.5 145.9
Drink cups............... 17.3 14.1 37.6 39.9
Other.................... 6.5 8.7 6.5 13.3 15.3
PLASTIC HOUSEWARES PRODUCTS: 17.5 21.6
------- ------- ------- ------- ------
Total net sales............. $ 106.1 $ 140.7 $ 151.1 $ 227.0 $271.8
------- ------- ------- ------- ------
We supply aerosol overcaps to a wide variety of customers and for a wide
variety of products, including such well-known brand names as Faultless starch,
Gillette personal care products, Pam cooking spray, Pledge furniture polish,
Raid insect repellants, Rustoleum and Sherwin-Williams paints and Sure
deodorant. Similarly, our containers are used for packaging a broad spectrum of
consumer and commercial products, including Arch (Olin) pool chemicals, Elmer's
home repair products, Hershey's cocoa, McDonald's children's meals, Milliken
adhesives, Pillsbury cookie dough and promotional containers for a variety of
customers, including the National Football League, Walt Disney and Warner
Brothers. Our drink cups are sold to fast food and family-dining restaurants,
convenience stores, stadiums and retail stores. Our largest drink cup customers
are Circle K, Coca-Cola, McDonald's, Pepsi-Cola and Steak 'n Shake. Our
housewares products are primarily seasonal, semi-disposable housewares and lawn
and garden items such as plates, bowls, pitchers, tumblers and flower pots. Our
largest housewares customer, Wal-Mart, named us their housewares "Supplier of
the Year" for 1998.
COMPETITIVE STRENGTHS
We believe that we are a strong competitor in our industry for the
following reasons:
o SUCCESSFUL INTEGRATION OF NUMEROUS STRATEGIC ACQUISITIONS. We have
historically acquired businesses that we believe will improve our
financial performance in the long-term and, in some cases, provide
us with a new or complementary product line. We have successfully
closed ten acquisitions since 1992. Our acquired businesses had
aggregate pre-acquisition revenues of about $239 million. We
believe that our acquisitions have strengthened our core
businesses, as well as opened up new product lines and markets for
us. Moreover, we believe that we have materially reduced the
manufacturing and overhead costs of the companies that we acquired
by introducing high technology manufacturing processes, closing
excess facilities and taking advantage of economies of scale.
o HIGH-CAPACITY, STATE-OF-THE-ART PRODUCTION CAPABILITIES. We operate
over 300 injection molding machines in 12 locations in the United
States and one location in Europe. These machines, many of
which are high-speed, specialized machines, range in clamp tonnage
from 80 to 825 tons. Our wide range of state-of-the-art molding
machines and national distribution system allow us to economically
mass produce high-quality products. In addition, we believe that our
post-molding capabilities are among the most modern and extensive in
the industry. These capabilities include printing, labeling, assembly,
packing and distribution.
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o FULL PRODUCT LINES AND STRONG MARKET POSITION. A substantial majority
of our sales are in product categories in which we are the nation's
largest supplier. We use over 1,000 active molds, providing our
customers with a wide range of products from which to choose. For a
majority of our customers we are the sole or largest supplier of
plastic injection-molded products. We believe that our extensive
product lines, market experience, product quality and focus on
customer satisfaction allow us to maintain our strong position in our
key markets.
o LARGE, DIRECT SALES FORCE. Our sales force is comprised of over 40
dedicated professionals and is among the largest in-house sales forces
in our industry. Our sales force is focused on working both with
customers and with our internal production and product design
personnel to develop customized packaging. We believe that the size of
our sales force allows us to maintain close working relationships with
our customers.
o IN-HOUSE PRODUCT DESIGN AND GRAPHIC ARTS CAPABILITIES. We have an
in-house staff of 16 product development engineers and 22 graphic
artists. These professionals work closely with customers to develop
new products and designs. We also believe that our customized designs
often help our customers differentiate their products in the
marketplace and improve their product's performance. We believe that
these capabilities have given us a significant competitive advantage
in certain high-margin niche container product markets where the
ability to produce sophisticated and colorful graphics is crucial to a
product's success.
o DEDICATION TO SERVICE AND QUALITY. As a result of our dedication to
service and quality, we have received several awards from our top
ten customers including, in 1998, Wal-Mart's "Supplier of the Year"
award in its housewares division and SC Johnson Wax's "Supplier
Quality Achievement Award." In addition, four of our plants are ISO
9000 certified. Our remaining nine facilities are working to obtain
their ISO 9000 certification. ISO 9000 certification is only given
to companies that meet the requirements of a quality management
system established by the International Standardization
Organization.
o LARGE, DIVERSE CUSTOMER BASE. We sell our plastic packaging and
housewares products to over 7,000 customers who are engaged in a
variety of businesses. We believe that this provides us with a
stable client base that is not materially affected by particular
end-use market fluctuations. We also believe that we are the
single-source or largest supplier of plastic aerosol overcaps,
containers and drink cups to a majority of our customers. Our top
ten customers represented only about 18% of our fiscal 1998 net
sales on a pro forma basis. Our largest customer represented only
about 4% of our fiscal 1998 net sales on a pro forma basis.
GROWTH STRATEGY
Our goal is to maintain and enhance our market position and leverage our
core strengths to increase profitability. Our strategy to achieve this goal
includes the following elements:
o PURSUE STRATEGIC ACQUISITIONS IN OUR CORE BUSINESSES. We have
successfully closed ten acquisitions since 1992. We will continue to
pursue strategic acquisitions that we believe will provide added value
to our core businesses.
o DESIGN AND INTRODUCE INNOVATIVE NEW PRODUCTS TO PENETRATE NEW MARKETS.
We intend to grow our product lines and increase market share by
producing new products. For example, we recently developed a complete
line of pool chemical containers specifically designed for Arch. We
also introduced a 16 oz. insulated coffee mug and lid, with enhanced
functionality and styling, in 1999 and a single-serve soft ice cream
dispensing container that was recently accepted for use by Healthy
Choice.
o EMPHASIZE OUTSTANDING PRODUCT QUALITY AND CUSTOMER SERVICE. Through
our dedication to product quality and service, we intend to grow
our base business through growth in the marketplace and by gaining
business from our competitors. Our field sales, production, and
support staff meet with customers to
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understand their needs and improve our product offerings and services.
Each of our customers has designated sales and customer service
representatives responsible for their individual needs. Sophisticated
technology is an ongoing part of our traditional quality assurance
activities. We extensively test parts for size, color, strength and
material quality using statistical process control techniques.
PLASTIC PACKAGING PRODUCTS
AEROSOL OVERCAPS
We believe that we are the worldwide leader in the production of aerosol
overcaps. About 20% of the U.S. market consists of marketers who produce
overcaps for use on their own products. We believe that a portion of these
in-house producers will outsource the manufacture of aerosol overcaps in order
to reduce their inventory of manufacturing assets and to focus on their core
businesses. We believe that these companies will look to outsource the
manufacture of overcaps to high technology, low cost manufacturers, such as
Berry.
The aerosol overcaps that we produce are used in a wide variety of
consumer goods including spray paints, household and personal care products,
insecticides and numerous other commercial and consumer products. Most U.S.
manufacturers and contract fillers of aerosol products purchase some portion of
their needs from us. In fiscal 1998, no single aerosol overcap customer
accounted for more than 3% of our total net sales.
We believe that, over the years, Berry has developed several significant
competitive advantages including the following:
o a reputation for outstanding quality;
o short lead-time requirements to fill customer orders;
o long-standing relationships with major customers;
o the ability to quickly and accurately reproduce over 3,500
colors;
o proprietary packing technology that minimizes freight cost and
warehouse space;
o high-speed, low-cost molding and decorating capability; and
o a broad product line of proprietary molds.
We received a "Supplier Quality Achievement Award" in 1998 from SC Johnson
Wax. We continue to develop new products in the plastic aerosol overcap market,
including the "spray-thru" line of aerosol overcaps, such as that used for
Pledge furniture polish.
Major competitors in this market include Dubuque Plastics, Cobra and
Transcontainer. In addition, a number of companies, including several of our
customers (e.g., S.C. Johnson and Reckitt & Colman), currently produce plastic
aerosol overcaps for their own use.
RIGID OPEN-TOP CONTAINERS
We produce six different types of containers, classified as follows:
o thinwall;
o child-resistant;
o pry-off;
o dairy;
o polypropylene; and
o industrial.
We believe that we are the leading U.S. manufacturer in thinwall, child-
resistant, pry-off and frozen dessert containers. We consider industrial
containers to be a market with little differentiation between products and an
absence of higher margin niches. The following table describes each of our six
container product lines:
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<PAGE>
<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION SIZE OF CONTAINER USES OF PRODUCT
- --------------- --------------------------------------------- ------------------- ------------------------------------
<S> <C> <C> <C>
Thinwall Thinwalled, multi-purpose containers with or 6 oz. to 2 gallons Food, promotional products, toys
without handles and lids and a wide variety of other uses
Child-resistant Containers that meet Consumer Product Safety 2 lbs. to 2 gallons
Commission standards for child safety Pool and other chemicals
Pry-off Containers having a tight lid-fit and 4 oz. to 2 gallons Building products, adhesives, other
requiring an opening device industrial uses
Dairy Thinwall containers in traditional dairy 6 oz. to 1.25 gallons, Cultured dairy products including
market sizes and styles Multi-pack yogurt, cottage cheese, sour cream
and dips, frozen desserts
Polypropylene Usually clear containers in round, oblong or 6 oz. to 5 lbs.
rectangular shapes Food, deli, sauces, salads
Industrial Thick-walled, larger pails designed to 2.5 to 5 gallons Building products, chemicals,
accommodate heavy loads paints, other industrial uses
</TABLE>
The largest uses for our containers are for food products, building
products, chemicals and dairy products. We have a diverse customer base for our
container lines, and no single container customer exceeded 3% of our total net
sales in fiscal 1998.
We believe that we offer the broadest product line among U.S.-based
injection-molded plastic container manufacturers. Our 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, we offer sophisticated printing
capabilities, an in-house graphic arts department, low cost manufacturing
capability with 12 plants strategically located throughout the U.S. and a
dedication to high-quality products and customer service. Our product engineers,
located in most of our facilities, work with customers to design and
commercialize new containers.
We seek to develop niche container products and new applications for our
products by taking advantage of our state-of-the-art decorating and graphic arts
capabilities and dedication to service and quality. We believe that these
capabilities have given us a significant competitive advantage in certain
high-margin niche container product markets where the ability to produce
sophisticated and colorful graphics is crucial to the product's success.
Examples of these products are popcorn containers for new movie promotions and
professional and college sporting and entertainment events. In order to identify
new applications for existing products, we rely extensively on our national
sales force. Once opportunities are identified, the sales force works with our
product design engineers to satisfy customers' needs.
In the non-industrial container market, our strongest competitors include
Airlite, Sweetheart, Landis and Polytainers. We also produce industrial pails
for a market that is dominated by large volume competitors such as Letlea,
Plastican, NAMPAC and Ropak. We do not participate heavily in this market due to
its generally lower margins. We intend to selectively participate in the
industrial container market when higher margin opportunities, equipment
utilization or customer requirements make participation an attractive option.
DRINK CUPS
We believe that we are the leading provider of injection-molded plastic
drink cups in the United States. As beverage producers, convenience stores and
fast food restaurants increase their marketing efforts for larger sized drinks,
we believe that the plastic drink cup market will expand because of plastic's
desirability over paper for larger drink cups. We produce injection-molded
plastic cups that range in size from 12 to 64 ounces. Our primary markets are
fast food and family-dining restaurants, convenience stores, stadiums, and
retail stores. Virtually all of our cups
48
<PAGE>
are decorated, often as promotional items, and we are known in the industry for
our innovative, state-of-the-art graphics capability.
We have historically supplied a full line of traditional straight-sided
and drive-through style drink cups from 12 to 64 ounces with disposable and
reusable lids primarily to fast food and convenience store chains. With the
acquisition of PackerWare, we expanded our presence in this market while
diversifying into the stadium and family-dining restaurant markets. The 64 ounce
cup, which has been highly successful with convenience stores, is one of our
fastest growing drink cups. Our major competitors in the drink cup market
include Packaging Resources Incorporated, Pescor Plastics and WNA (formerly Cups
Illustrated).
CUSTOM MOLDED PRODUCTS AND CLOSURES PRODUCTS
We also make custom molded products by using molds provided by our
customers as the model. Typically, the low cost of entry in the custom molded
products market creates an open marketplace in which many companies can compete.
Rather than pursue the overall custom molded products market, we focus our
custom molding efforts on those customers who value our mold and product design
expertise, superior color matching abilities and sophisticated multi-color
printing capabilities. The majority of our custom business requires specialized
equipment and expertise.
We entered the closures market as a result of our acquisition of Norwich
in July 1998. We only sell closure products in the United Kingdom. The primary
closure product that we sell is a foil sealed milk cap. Demand for this product
has increased in recent years as the U.K.'s milk market is using more plastic
containers. Through Norwich, we offer a broad product line that includes
dispensing, tamper evident and custom molded closures.
PLASTIC HOUSEWARES PRODUCTS
Our participation in the multi-billion dollar plastic housewares market is
focused on producing and selling seasonal (spring and summer) semi-disposable
plastic housewares (e.g., plates, bowls, pitchers and tumblers) and plastic lawn
and garden products (primarily outdoor flower pots). We sell virtually all of
our products in this market through major national retail marketers and national
chain stores including Wal-Mart and Target. PackerWare is a recognized brand
name in these markets and our PackerWare branded products are often co-branded
by our customers.
Historically, our PackerWare subsidiary has provided high-quality products
to consumers at a relatively modest price that is consistent with the pricing
targets of our retail marketers. We believe that outstanding service and ability
to deliver products with timely combination of color and design further enhance
our position in this market. We received an award as the "Supplier of the Year"
in 1998 by Wal-Mart in its housewares division.
MARKETING AND SALES
We reach our large and diversified base of over 7,000 customers primarily
through our direct field sales force of over 40 professionals. These field sales
representatives are focused on individual product lines, but are encouraged to
sell all of our products to serve the needs of our customers. We believe that a
direct field sales force is able to focus on target markets and customers, with
the added benefit of permitting us to control pricing decisions centrally. We
also use the services of manufacturing representatives to assist our direct
sales force.
We believe that we produce a high level of customer satisfaction. Highly
skilled customer service representatives are located in each of our facilities
to support the national field sales force. In addition, telemarketing
representatives, marketing managers and sales/marketing executives oversee
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 promoting the benefits
that our Graphic Arts department with computer-assisted graphic design
capabilities and in-house production of photopolymer printing plates can offer
our customers. Our centralized color matching and materials blending department
uses a computerized spectrophotometer to ensure that colors produced match those
requested by customers.
49
<PAGE>
MANUFACTURING
GENERAL
We manufacture our products using a plastic injection molding process. In
this process, plastic resin, in the form of small pellets, is fed into an
injection molding machine. The injection molding machine melts the plastic resin
and injects it into a multi-cavity steel mold, which forces the plastic resin to
take the final shape of the product. After they solidify, which generally takes
between five and 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). We believe that our molding and decorating capabilities
are among the best in the industry.
Our 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. We package large volume products using state-of-the-art
robotic packaging processes. This technology enables us to deliver a higher
quality product (due to reduced breakage) and lowers warehousing and shipping
costs (due to more efficient use of space). At each of our plants we have
complete tooling maintenance capability to support our molding and decorating
operations. We historically have made, and intend to continue to make,
significant capital investments in plant and equipment because of our objectives
to grow, to improve productivity, to maintain competitive advantages, and to
maintain the large base of equipment and other assets necessary for our
business.
PRODUCT DEVELOPMENT
Our full-time product engineers use three-dimensional
computer-aided-design technology to design and modify new products and prepare
mold drawings. Engineers use an in-house model shop that includes a
thermoforming machine to produce prototypes and sample parts. They simulate the
molding environment by running prototype molds in a small injection molding
machine dedicated to the research and development of new products. Production
molds are then designed and outsourced for production by various companies in
the U.S. and Canada with whom we have extensive experience and established
relationships. Our engineers oversee the mold-building process from start to
finish.
QUALITY ASSURANCE
Each of our plants uses Total Quality Management philosophies. These
philosophies include the use of statistical process control and extensive
involvement of employees to increase productivity. This team approach to
problem- solving increases employee participation and provides necessary
training at all levels. Four of our plants have ISO 9000 certification, which
certifies compliance by a company in meeting the requirements of a quality
management system established by the International Standardization Organization.
Our Evansville plant was certified in 1994, our Henderson plant was certified in
1995, our Iowa Falls plant was certified in 1996 and our Lawrence plant was
certified in 1998. We are pursuing ISO certification in all of our other
facilities. Extensive testing of parts for size, color, strength and material
quality using statistical process control techniques and sophisticated
technology is also an ongoing part of our traditional quality assurance
activities.
SYSTEMS
We use a fully integrated computer software system at our plants that is
capable of producing complete financial and operational reports. This accounting
and control system may be expanded to add new features and/or locations as we
grow. In addition, we have 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
Plastic resin is the most important raw material that we purchase. We
purchased about $62 million of resin in fiscal 1998 (excluding specialty
resins), of which 70% was high density polyethylene, 12% linear low density
polyethylene and 18% polypropylene. Our purchasing strategy is to buy from only
high-quality, dependable suppliers, such as Dow, Union Carbide, Chevron,
Phillips, Equistar, and Mobil. Although we do not have any supply contracts with
our key suppliers, we believe that we have maintained outstanding relationships
with these key suppliers over the past several years and expect that such
relationships will continue into the foreseeable future.
50
<PAGE>
Based on our experience, we believe that adequate quantities of plastic resins
will be available, but we cannot assure you of that. See "Risk Factors--We do
not have firm contracts with plastic resin supplies."
EMPLOYEES
We have about 2,800 employees. None of our employees 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 acquisition of Venture and was our only plant
with a collective bargaining agreement during 1998.
PATENTS AND TRADEMARKS
We have numerous patents and trademarks on our products. None of the
patents or trademarks are considered by management to be material to our
business. See "Legal Proceedings" below.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
Our past and present operations and the past and present ownership and
operations of real property by Berry 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. We believe
that we are in substantial compliance with applicable environmental laws and
regulations. However, we cannot predict whether we will incur liability in the
future under environmental statutes and regulations with respect to
non-compliance with environmental laws, contamination of sites formerly or
currently owned or operated by us (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 issued a Notice of Violation dated June 23, 1998 to Venture
alleging that its 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 the reporting years 1994 and
1995. This matter has since been closed by the Ohio Environmental Protection
Agency. No fines or penalties were assessed.
Like any manufacturer, we 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 regulates the material content of direct-
contact food containers and packages, including certain thinwall containers that
we manufacture. We use approved resins and pigments in our direct contact food
products and believe we are in material compliance with all such applicable FDA
regulations.
The plastics industry, including Berry, also is 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
our products, high-density polyethylene, is recyclable, and, accordingly, we
believe that the legislation promulgated to date and such initiatives to date
have not affected us negatively. It is possible that any future legislative or
regulatory efforts or future initiatives may affect us adversely. Beginning
January 1, 1995, legislation in Oregon, California and Wisconsin requires
products packaged in rigid plastic containers to comply with standards intended
to encourage recycling and to increase the use of recycled materials. Although
the regulations vary by state, the principal requirement is typically the use of
recycled plastic 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 these 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 this requirement. However, non-food containers are
still required to comply.
51
<PAGE>
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, was in compliance for the 1997 calendar year. However, in January
1998, California formally 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. In order to facilitate
individual customer compliance with these regulations, we provide our customers
with the option to purchase containers that are lower weight.
52
<PAGE>
PROPERTIES
The following table sets forth our principal facilities:
LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED
- ------------------ ------- -------------- ---------------- ----------------
Lawrence, KS...... 19.3 423,000 Manufacturing Owned
Evansville, IN.... 13.4 420,000 Headquarters and Owned
Manufacturing
Ontario, CA....... 10.0 200,000 Manufacturing Leased (expires
August 2003)
Henderson, NV..... 12.0 168,000 Manufacturing Owned
Charlotte, NC..... 32.0 148,000 Manufacturing Owned
Streetsboro, OH... 12.0 140,000 Manufacturing Owned
Monroeville, OH... 19.0 112,000 Manufacturing Owned
Minneapolis, MN... 3.0 110,000 Manufacturing Leased (expires
December 1999)
Suffolk, VA....... 14.0 102,000 Manufacturing Owned
Iowa Falls, IA.... 14.0 101,000 Manufacturing Owned
Woodstock, IL..... 11.7 98,000 Manufacturing Owned
Norwich, England.. 5.0 44,000 Manufacturing Owned
York, PA.......... 10.0 40,000 Manufacturing Leased (expires
December 2001)
We believe that our property and equipment are well-maintained, in good
operating condition and adequate for our present needs.
LEGAL PROCEEDINGS
We are party to various legal proceedings involving routine claims which
are incidental to our business. Although our legal and financial liability with
respect to such proceedings cannot be estimated with certainty, we believe that
any ultimate liability would not be material to our financial condition.
Berry and/or our subsidiary Berry Sterling have been litigating two
lawsuits that involve United States Patent No. Des. 362,368 (the "368" Patent).
This 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. for
infringement of this patent Pescor Plastics filed counterclaims seeking a
declatory judgement of invalidity and non-infringement, and damages under the
Lanham Act. On December 28, 1995, Berry Sterling filed suit against Packaging
Resources Incorporated in United States District Court, Southern District of
New York, for infringement of this patent and seeking, among other equitable
relief damages in an unspecified amount. 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 declatory judgement that its "Drive-N-Go" cup
does not infringe this patent. Packaging Resources has not specified the amount
of damages sought. On February 25, 1998, after trial, a jury rendered a verdict
in Berry Sterling's action against Pescor Plastics. The jury found the 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 patent and awarded Berry Sterling damages of $1.2 million, but
this award was not included in the judgement 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 judgement and the denial
by the Court. On April 29, 1998, Berry Sterling filed a Notice of Appeal of the
Court's judgement and the denial of its motion to set aside the jury's verdict.
Oral argument for the appeal took place on January 5, 1999.
53
<PAGE>
On August 30, 1999, the United States Court of Appeals for the Federal
Circuit (the "Federal Circuit") decided Berry Sterling's appeal in the Pescor
Plastics case. The Federal Circuit affirmed the jury's finding that the '368
Patent owned by Berry Sterling was invalid. The Federal Circuit also affirmed
in part and reversed in part the jury's finding of a Lanham Act violation,
reducing the amount of the damages award against Berry Sterling from $150,000
to $7,490. The stipulated final judgement against Berry Sterling (included cost
and applicable interest) in the Pescor case is $24,171.26.
Pursuant to the terms of a Stipulation and Order executed by Berry
Sterling and Packaging Resources Incorporated, the Packaging Resources case will
be taken off the suspense calendar and restored to the Court's active docket.
Based on the invalidity of the '368 Patent, Packaging Resources is seeking to
dismiss Berry Sterling's patent infringement claim in that case. Packaging
Resources also currently intends to pursue its counterclaim's against Berry
Sterling alleging violation of the Lanham Act, tortious interference with
Packaging Resource's prospective business advantage and consumer fraud.
54
<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 our parent, Holding
and its subsidiaries:
<TABLE>
<CAPTION>
NAME AGE TITLE ENTITY
- ------------------------------------ ----- ------------------------------------------- -----------------
<S> <C> <C> <C>
Roberto Buaron(1)(4)................ 52 Chairman and Director Berry and Holding
Martin R. Imbler(1)(4).............. 51 President, Chief Executive Officer Berry
and Director
President and Director Holding
Ira G. Boots........................ 45 Executive Vice President - Operations and Berry
Director
James M. Kratochvil................. 42 Executive Vice President, Chief Financial Berry
Officer, Treasurer and Secretary
Executive Vice President - Chief Financial Holding
Officer and Secretary
R. Brent Beeler..................... 46 Executive Vice President, Sales and Berry
Marketing
Randy Hobson........................ 32 Vice President - Sales and Marketing Berry
Ruth Richmond....................... 36 Vice President - Planning and Berry
Administration and Assistant Secretary
David Weaver........................ 36 Vice President and Plant Manager - Berry
Lawrence
Fredrick A. Heseman................. 46 Vice President and Plant Manager - Berry
Evansville
Bruce J. Sims....................... 49 Vice President - Sales and Marketing, Berry
Housewares
George A. Willbrandt................ 54 Vice President - Sales and Marketing Berry
Lawrence G. Graev(2)(3)............. 54 Director Berry and Holding
Joseph S. Levy(2)(3)................ 31 Vice President, Assistant Secretary and Berry and Holding
Director
Donald J. Hofmann, Jr.(1)(2)(3)(4).. 41 Director Berry and Holding
Mathew J. Lori...................... 35 Director Berry and Holding
David M. Clarke..................... 48 Director Berry 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 Berry.
(4) Member of the Compensation Committee of Berry.
ROBERTO BUARON has been Chairman and a Director of Berry 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., 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 Berry 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.
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<PAGE>
IRA G. BOOTS has been Executive Vice President-Operations, and a Director
of Berry 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 Berry Plastics, Inc. 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 Berry in December 1997. He
formerly served as Vice President, Chief Financial Officer and Secretary of
Berry since 1991, and as Treasurer of Berry 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 Berry Plastics,
Inc. 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 Berry since December 1990. Mr. Beeler was employed by Berry
Plastics, Inc. from October 1988 to December 1990 as Vice President, Sales and
Marketing.
RANDY HOBSON has been Vice President-Sales and Marketing of Berry since
June 1998. Mr. Hobson was Marketing Manager-Containers for Berry from November
1997 to June 1998. Prior to that, he was a Regional Sales Manager from 1992 to
November 1997. Mr. Hobson joined Berry Plastics, Inc. in 1988.
RUTH RICHMOND has been Assistant Secretary of Holding and Berry since
April 1998. Ms. Richmond has been Vice President-Planning and Administration of
Berry 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 Berry Plastics, Inc. in 1986.
DAVID WEAVER has been Vice President and Plant Manager-Lawrence of Berry
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 Berry Plastics, Inc.
FREDRICK A. HESEMAN was promoted to Vice President and Plant
Manager-Evansville of Berry 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 Berry Plastics, Inc. from June 1987 to December 1990 as
Engineering Manager.
BRUCE J. SIMS has been Vice President-Sales and Marketing, Housewares of
Berry since January 1997. Prior to the acquisition of PackerWare, 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
Berry 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.
LAWRENCE G. GRAEV has been a Director of Berry 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.
JOSEPH S. LEVY has been Vice President and Assistant Secretary of Berry
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
Capital, Ltd. since December 1994. From 1991 to December 1994, Mr. Levy was an
Associate at First Atlantic.
DONALD J. HOFMANN, JR. has been a Director of Holding and Berry 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.,
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<PAGE>
the equity investment arm of Manufacturers Hanover. Mr. Hofmann is also a
director of Advanced Accessory Systems, LLC, a manufacturer of towing and rack
systems and related accessories for automobiles.
MATHEW J. LORI has been a Director of Holding and Berry 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.
DAVID M. CLARKE has been a Director of Holding and Berry 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.
A 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 Berry has an Audit Committee and
a Compensation Committee. In each case, the Audit Committees oversee the
activities of the independent auditors and internal controls. The Stock Option
Committee administers the Holding 1996 Stock Option Plan. The Compensation
Committee makes recommendations to the Board of Directors of Berry concerning
salaries and incentive compensation for our officers and employees.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by Berry
to our Chief Executive Officer and our four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for services
rendered in all capacities to Berry during fiscal 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION SECURITIES
FISCAL ----------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION(1)
- ------------------------------ ------ -------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Martin R. Imbler........................... 1998 $327,397 $ 46,697 -- $1,650
President and Chief Executive Officer 1997 307,396 87,623 -- 1,520
1996 292,078 128,993 8,472 595,848
Ira G. Boots............................... 1998 176,631 39,024 -- 1,650
Executive Vice President - Operations 1997 151,691 72,868 -- 1,520
1996 145,735 94,205 5,214 239,335
James M. Kratochvil........................ 1998 142,483 30,413 -- 1,650
Executive Vice President, Chief Financial 1997 119,459 56,307 -- 1,520
Officer, Treasurer and Secretary 1996 112,614 72,796 3,259 120,427
R. Brent Beeler............................ 1998 145,218 32,621 -- 1,650
Executive Vice President - Sales and 1997 125,973 60,554 -- 1,520
Marketing 1996 121,108 72,796 3,259 120,427
George A. Willbrandt...................... 1998 182,823 39,024 -- 1,650
Vice President - Sales and Marketing 1997 214,788 -- -- 11,303
1996 182,077 100,000 -- 201,420
</TABLE>
- ------------------------
(1) Amounts shown reflect contributions by us under our 401(k) plan and
payments made under a one-time deferred bonus award plan. See "Certain
Transactions -- Management." "
The following table provides information on the number of exercisable and
unexercisable management stock options held by the Named Executive Officers at
January 2, 1999.
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL YEAR-END MONEY OPTIONS AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE(2)
- -------------------------------------------- ---------------------------- --------------------------------
<S> <C> <C>
Martin R. Imbler............................ 5,083/3,389 $355,810/237,230
Ira G. Boots................................ 3,128/2,086 218,960/146,020
James M. Kratochvil......................... 1,955/1,304 136,850/91,280
R. Brent Beeler............................. 1,955/1,304 136,850/91,280
George A. Willbrandt........................ 780/520 54,600/36,400
</TABLE>
DiRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of
Directors of Holding or Berry, but directors are reimbursed for out-of-pocket
expenses incurred in connection with their duties as directors.
- ------------------------
(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 of Holding at January 2, 1999.
(2) All options granted to management of Berry Plastics are exercisable for
shares of Class B Nonvoting Common Stock, par value $.01 per share, of
Holding.
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<PAGE>
EMPLOYMENT AGREEMENTS
We have an employment agreement with Mr. Imbler that expires on June 30,
2001. Base compensation under the agreement for fiscal 1998 was $327,397. The
agreement also provides for an annual performance bonus of $50,000 to $175,000
based upon Berry's attainment of certain financial targets. We may terminate Mr.
Imbler's employment for "cause" or upon a "disability" (as such terms are
defined in the agreement). If we terminate Mr. Imbler "without cause" (as
defined in the agreement) Mr. Imbler is entitled to receive, among other things,
the greater of one year's salary or 1/12 of one year's salary for each year (not
to exceed 24 years in the aggregate) of employment with Berry. The agreement
also contains customary noncompetition, nondisclosure and nonsolicitation
provisions.
We also have employment agreements with each of Messrs. Boots, Kratochvil,
Beeler and Willbrandt each of which expires on June 30, 2001. The agreements
provided for fiscal 1998 base compensation of $176,631 for Mr. Boots, $142,483
for Mr. Kratochvil, $145,218 for Mr. Beeler and $182,823 for Mr. Willbrandt.
Salaries are subject in each case to annual adjustment at the discretion of the
Compensation Committee of our Board of Directors. The agreements entitle each
executive to participate in all other incentive compensation plans established
for executive officers of Berry. We may terminate each agreement for "cause" or
a "disability" (as such terms are defined in the agreements). If we terminate an
executive's employment without "cause" (as defined in the agreements), the
agreements require that we pay certain amounts to the terminated executive,
including (1) 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 Berry (other than Mr. Willbrandt, who would receive one year's salary), and
(2) certain benefits under applicable incentive compensation plans. Each
agreement also includes customary noncompetition, nondisclosure and
nonsolicitation provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We established the Compensation Committee comprised of Messrs. Buaron,
Imbler and Hofmann, in October 1996. The annual salary and bonus paid to Messrs.
Imbler, Boots, Kratochvil, Beeler and Willbrandt for fiscal 1998 were determined
by the Compensation Committee in accordance with their respective employment
agreements. All other compensation decisions with respect to officers of Berry
are made by Mr. Imbler pursuant to policies established in consultation with the
Compensation Committee.
We are party to an Amended and Restated Management Agreement with First
Atlantic Capital, Ltd. pursuant to which First Atlantic Capital provides us 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, we paid First Atlantic Capital fees and expenses
of $835,000 for fiscal 1998, $771,200 for fiscal 1997, and $787,600 for fiscal
1996. In connection with the recapitalization of Holding in 1996, the Management
Agreement was amended to provide for a fee for services rendered in connection
with certain transactions equal to the lesser of (1) 1% of the total transaction
value and (2) $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 recapitalization of Holding in 1996, Holding paid a fee of
$1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic
Capital for advisory services, including originating, structuring and
negotiating the transaction. In January 1997, First Atlantic Capital received
advisory fees of about $287,500 for originating, structuring and negotiating the
acquisition of PackerWare and about $28,700 for providing similar services in
connection with the acquisition of Container Industries. In May 1997, First
Atlantic Capital received advisory fees of about $117,900 for originating,
structuring and negotiating the acquisition of Virginia Design. In August 1997,
First Atlantic Capital received advisory fees of about $531,600 for providing
services in the acquisition of Venture Packaging. First Atlantic Capital
received advisory fees of about $140,000 in July 1998 for originating,
structuring and negotiating the acquisition of Norwich. In October 1998, First
Atlantic Capital received advisory fees of about $180,000 for providing services
in the acquisition of Knight Plastics. Upon completion of the Cardinal
acquisition, First Atlantic received advisory fees of about $695,000 for
services provided with respect to the acquisition. See "Certain Transactions."
Mr. Buaron, the Chairman and a director of Holding and Berry, is the
Chairman and Chief Executive Officer of First Atlantic Capital. Mr. Graev is a
director of First Atlantic Capital. As an officer and the sole stockholder of
First Atlantic Capital, Mr. Buaron is entitled to receive any bonuses paid and
any dividends declared by First Atlantic Capital 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 Capital in connection with the
recapitalization of Holding or any of the fees paid with respect to the
acquisitions described above. First Atlantic Capital is engaged by Atlantic
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<PAGE>
Equity Partners International II to provide certain financial and management
consulting services for which it receives annual fees. First Atlantic Capital
and Atlantic Equity Partners International II have completely distinct ownership
and equity structures. See "Certain Transactions."
Atlantic Equity Partners, L.P., a stockholder of Holding prior to the
consummation of the recapitalization of Holding in 1996, received about $67.6
million from the sale of its common stock in Holding and warrants to purchase
common stock. First Atlantic is engaged by Atlantic Equity Partners to provide
certain financial and management consulting services for which it receives
annual fees. First Atlantic and Atlantic Equity Partners have completely
distinct ownership and equity structures. Atlantic Equity Associates, L.P., a
Delaware limited partnership, is the sole general partner of Atlantic Equity
Partners. Mr. Buaron is the sole shareholder of Buaron Capital Corporation.
Buaron Capital is the managing and sole general partner of Atlantic Equity
Associates. By virtue of their direct and indirect ownership interests in
Atlantic Equity Partners, Mr. Levy is entitled to receive $178,000 and Buaron
Capital is entitled to receive $4,672,000 from the proceeds from the sale of
equity interests in Holding. See "Certain Transactions."
In connection with the recapitalization of Holding in 1996, Mr. Imbler, a
director of Berry and Holding, received about $5.9 million, Douglas E. Bell, a
former director of Berry, received about $2.5 million, Mr. Boots, a director of
Berry, received about $2.4 million, and Messrs. Beeler and Kratochvil, officers
of Berry, each received about $1.3 million from their sale of certain equity
interests in Holding. In connection with the offering in April 1994 of the 1994
Notes (the "1994 Transaction"), we paid a $50.0 million dividend on our 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 recapitalization of Holding,
such bonuses were paid to Messrs. Imbler, Bell, and Boots. Mr. Imbler received a
bonus in the amount of $594,000. Messrs. Bell and Boots each received bonuses of
$238,000. See "Certain Transactions."
In connection with the recapitalization of Holding in 1996, Chase
Securities Inc., an affiliate of Chase Venture Capital Associates 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 Atlantic Equity Partners International II,
Chase Venture Capital Associates and certain other equity investors
(collectively, the "Common Stock Purchasers") and the sale of $15.0 million of
Holding's Preferred Stock to Chase Venture Capital Associates. Chase Manhattan
Investment Holdings, Inc., an affiliate of Chase Securities and Messrs. Hofmann
and Lori, received about $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 Berry and its
subsidiaries are entitled to participate in the Holding 1996 Stock Option Plan.
This Stock Option Plan provides for the grant of both "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, 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 Stock Option Plan is 51,620. The Stock 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
Stock Option Plan. The Stock Option Committee selects which of Berry' 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 Stock Option Plan.
The exercise price of incentive stock options granted by Holding under the
Stock 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
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<PAGE>
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 Stock Option Plan are nontransferable except by
will and the laws of descent and distribution. Options granted under the Stock
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 Stock Option Plan, as of July 3, 1999, there were outstanding
options to purchase an aggregate of 50,354 shares of Class B Nonvoting Common
Stock to 67 employees of Berry, at an exercise price between $100 and $122 per
share. Of that amount, options to purchase an aggregate of 21,504 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, 3,259 to each of Messrs. Beeler and Kratochvil, and 1,300 to Mr.
Willbrandt.
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PRINCIPAL STOCKHOLDERS
All of our outstanding capital stock is owned by Holding. The following
table sets forth certain information regarding the ownership of the capital
stock of Holding with respect to the following:
o each person known by Holding to own beneficially more than 5% of the
outstanding shares of any class of its voting capital stock;
o each of Holding's directors;
o the Named Executive Officers; and
o 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>
PERCENTAGE
OF ALL
SHARES OF CLASSES OF
SHARES OF PERCENTAGE OF NONVOTING COMMON
VOTING VOTING COMMON STOCK(1) STOCK
NAME AND ADDRESS OF COMMON STOCK(1) COMMON ----------------------------------- (FULLY-
BENEFICIAL OWNER CLASS A CLASS B STOCK CLASS A CLASS B CLASS C DILUTED)
- ------------------------------ ------- ------- ------------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlantic Equity Partners
International II, L.P.(2) . -- 128,142 54.4% -- 3,385 11,470 22.3%
Chase Venture Capital
Associates, L.P.(3) ....... 52,000 5,623(4) 23.9 148,000 17,837(4) -- 34.8
BPC Equity, LLC(5) ........... 31,200 -- 13.2 88,800 -- -- 18.7
Roberto Buaron(6) ............ -- 128,142 54.4 -- 3,385 11,470 22.3
Martin R. Imbler ............. -- 3,629 1.5 -- 15,390(7) 664 3.1
Joseph S. Levy(8) ............ -- 42 * -- 118 14 *
Lawrence G. Graev(9) ......... -- -- -- -- -- -- --
Donald J. Hofmann, Jr..(10) .. 52,000 5,623(4) 23.9 148,000 17,837(4) -- 34.8
Mathew J. Lori(11) ........... 52,000 5,623(4) 23.8 148,000 17,837(4) -- 34.8
David M. Clarke(12) .......... 31,200 -- 13.2 88,800 -- -- 18.7
Ira G. Boots ................. -- 1,718 * -- 5,446(13) -- 1.1
James M. Kratochvil .......... -- 1,196 * -- 5,359(14) 391 1.1
R. Brent Beeler .............. -- 1,196 * -- 5,359(15) 391 1.1
George A. Willbrandt ......... -- 520 * -- 2,260(16) 170 *
All officers and directors
as a group. (16 persons) . 83,200 143,644 96.3 236,800 63,330 13,616 84.1
------- ------- ------------- ------- ------- ------- ----------
</TABLE>
- ----------------------------
* Less than one percent.
(1) Included in the amounts of common stock presented in this chart are
warrants to purchase shares of common stock of Holding. 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, and
1,000,000 shares of Preferred Stock, $.01 par value. Of the 2,500,000
shares of common stock of Holding, 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 preferred stock of Holding, 800,000
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, is the sole
general partner of Atlantic Equity Partners International II and as such
exercises voting and/or investment power over shares of capital stock
owned by Atlantic Equity Partners International II, including the shares
of common stock of Holding held by Atlantic Equity Partners International
II. Mr. Buaron is the sole shareholder of Buaron Holdings Ltd. Buaron
Holdings is the sole general partner of Atlantic Equity Associates
International II. As the general partner of Atlantic Equity Associates
International II, Buaron Holdings may be deemed to beneficially own the
shares of common stock of Holding held by Atlantic Equity Partners
International II. Buaron Holdings disclaims any beneficial ownership of
any shares of capital
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stock owned by Atlantic Equity Partners International II, including the
shares of common stock of Holding held by Atlantic Equity Partners
International II. Through his affiliation with Buaron Holdings and
Atlantic Equity Associates International II, Mr. Buaron controls the sole
general partner of Atlantic Equity Partners International II and therefore
has the authority to control voting and/or investment power over, and may
be deemed to beneficially own, the shares of common stock of Holding owned
by Atlantic Equity Partners International II. Mr. Buaron disclaims any
beneficial ownership of any of these 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 Chase
Venture Capital Associates that 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, including shares of common stock
of Holding 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 common stock of Holding
owned by Atlantic Equity Partners International II. Mr. Buaron is the
sole shareholder of Buaron Holdings. Buaron Holdings is the sole
general partner of Atlantic Equity Associates International II.
Atlantic Equity Associates International II is the sole general partner
of Atlantic Equity Partners International II and as such, exercises
voting and/or investment power over shares of capital stock owned by
Atlantic Equity Partners International II, including the shares of
common stock of Holding held by Atlantic Equity Partners International
II. Mr. Buaron, as the sole shareholder and Chief Executive Officer of
Buaron Holdings, controls the sole general partner of Atlantic Equity
Partners International II and therefore has voting and/or investment
power over, and may be deemed to beneficially own, the shares of common
stock of Holding held by Atlantic Equity Partners International II.
Mr. Buaron disclaims any beneficial ownership of the such shares.
(7) Includes 5,083 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 O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza,
New York, New York 10112.
(10) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor,
New York, New York 10017. Represents shares owned by Chase Venture
Capital Associates. 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 Chase Venture Capital Associates.
Mr. Hofmann disclaims any beneficial ownership of the shares of common
stock of Holding held by Chase Venture Capital Associates.
(11) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor,
New York, New York 10017. Represents shares owned by Chase Venture
Capital Associates. Mr. Lori is a Principal of Chase Capital Partners,
which is the private equity investment arm of Chase Manhattan
Corporation, which is an affiliate of Chase Venture Capital Associates.
Mr. Lori disclaims any beneficial ownership of the shares of common
stock of Holding held by Chase Venture Capital Associates.
(12) 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
common stock of Holding held by BPC Equity.
(13) Includes 3,128 options granted to Mr. Boots, which are currently
exercisable.
(14) Includes 1,955 options granted to Mr. Kratochvil, which are currently
exercisable.
(15) Includes 1,955 options granted to Mr. Beeler, which are currently
exercisable.
(16) Includes 780 options granted to Mr. Willbrandt, which are currently
exercisable.
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CERTAIN TRANSACTIONS
FIRST ATLANTIC
Pursuant to the Management Agreement between us and First Atlantic
Capital, First Atlantic Capital provides us 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. We paid First Atlantic fees
and expenses of about $835,000 for fiscal 1998, $771,200 for fiscal 1997 and
$787,600 for fiscal 1996 for these services. The management agreement also
provides for a fee for services rendered in connection with certain transactions
equal to the lesser of 1% of the total transaction value and $1,250,000 for any
such transaction consummated plus out-of-pocket expenses, whether or not
consummated. In connection with the recapitalization of Holding in 1996, Holding
paid a fee of about $1,250,000 plus reimbursement for out-of-pocket expenses to
First Atlantic Capital for advisory services. These services included
originating, structuring and negotiating the recapitalization of Holding. First
Atlantic Capital received advisory fees of about $287,500 for originating,
structuring and negotiating the acquisition of PackerWare and about $28,700 for
providing similar services in connection with the acquisition of Container
Industries. In May 1997, First Atlantic Capital received advisory fees of about
$117,900 for originating, structuring and negotiating the acquisition of
Virginia Design. In August 1997, First Atlantic Capital received advisory fees
of about $531,600 for providing services with respect to the acquisition of
Venture. First Atlantic Capital received advisory fees of about $140,000 in July
1998 for originating, structuring and negotiating the acquisition of Norwich,
and in October 1998 First Atlantic Capital received advisory fees of about
$180,000 for providing services with respect to the acquisition of Knight. First
Atlantic received advisory fees of about $695,000 for services provided with
respect to the Cardinal acquisition.
Mr. Buaron, the Chairman and a director of Holding and Berry, is the
Chairman and Chief Executive Officer of First Atlantic Capital. As an officer
and the sole stockholder of First Atlantic Capital, Mr. Buaron is entitled to
receive any bonuses paid and any dividends declared by First Atlantic Capital 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 Capital in
connection with the recapitalization of Holding in 1996 or any of the fees paid
with respect to the acquisitions described above. Mr. Graev is also a director
of First Atlantic Capital, and Mr. Levy is an officer of First Atlantic Capital.
First Atlantic Capital is engaged by Atlantic Equity Partners International II
to provide certain financial and management consulting services for which it
receives annual fees. First Atlantic Capital and Atlantic Equity Partners
International II have completely distinct ownership and equity structures.
Atlantic Equity Partners, L.P., a stockholder of Holding prior to the
consummation of the recapitalization of Holding in 1996, received about $67.6
million from the sale of its common stock in Holding and warrants to purchase
common stock. First Atlantic is engaged by Atlantic Equity Partners to provide
certain financial and management consulting services for which it receives
annual fees. First Atlantic and Atlantic Equity Partners have completely
distinct ownership and equity structures. Atlantic Equity Associates, L.P., is
the sole general partner of Atlantic Equity Partners. Mr. Buaron is the sole
shareholder of Buaron Capital, and Buaron Capital is the managing and sole
general partner of Atlantic Equity Associates. By virtue of their direct and
indirect ownership interests in Atlantic Equity Partners, Mr. Levy is entitled
to receive $178,000 and Buaron Capital is entitled to receive $4,672,000 from
the proceeds from the sale of equity interests in Holding.
THE 1996 TRANSACTION
On June 18, 1996, our parent, Holding, consummated the transaction
described below. BPC Mergerco, Inc. was organized by Atlantic Equity Partners
International II, Chase Venture Capital Associates, L.P., and other
institutional investors to acquire a majority of the outstanding capital stock
of Holding. Pursuant to a Stock Purchase and Recapitalization Agreement dated as
of June 12, 1996, certain of the Common Stock Purchasers purchased shares of
common stock of BPC Mergerco. In addition, pursuant to a Preferred Stock and
Warrant Purchase Agreement dated as of June 12, 1996, Chase Venture Capital
Associates and the Northwestern Mutual Life Insurance Company (the "Preferred
Stock Purchasers") purchased shares of preferred stock of BPC Mergerco and
warrants (the "1996 Warrants") to purchase shares of common stock of BPC
Mergerco. Immediately after the purchase of the common stock, the preferred
stock and the 1996 Warrants of BPC Mergerco, BPC Mergerco merged with and into
Holding, with Holding being the surviving corporation. Upon the consummation of
this merger, (1) each share of Class A Common Stock, $.00005 par value, and
Class B Common Stock, $.00005 par value, of Holding and certain previously 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, (2) all other classes of common
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<PAGE>
stock of Holding, a majority of which was held by members of management, were
converted into shares of common stock of the surviving corporation (constituting
about 19% of the post-merger common stock of the surviving corporation) and (3)
each share of common stock, each share of preferred stock and each 1996 Warrant
to purchase one share of common stock of Mergerco were converted into one share
of common stock, one share of preferred stock and one warrant to purchase one
share of common stock of the surviving corporation, respectively. 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 of the 1994 Notes 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 about $119.6 million in
cash. The shares of Class A Common Stock and Class B Common Stock that were
cashed out in the Merger were valued based on arms' length negotiations with the
new investors. In order to finance the recapitalization of Holding, including
the payment of related fees and expenses: (1) Holding issued the 1996 Notes for
net proceeds of about $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); (2) 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 about $7.1 million by certain members of
management and $3.0 million by an existing institutional shareholder); and (3)
Holding received an aggregate of about $0.9 million in connection with the
exercise of management stock options to purchase common stock of Holding.
In connection with the recapitalization of Holding, Atlantic Equity
Partners International II, Chase Venture Capital Associates, certain other
institutional investors and certain members of management entered into a
Stockholders Agreement pursuant to which certain stockholders, among other
things, (1) were granted certain registration rights and (2) under certain
circumstances, have the right to force a sale of Holding.
MANAGEMENT
In connection with the recapitalization of Holding in 1996, Mr. Imbler
received about $5.9 million, Mr. Bell received about $2.5 million, Mr. Boots
received about $2.4 million, and Messrs. Kratochvil and Beeler each received
about $1.3 million from their sale of certain equity interests in Holding. In
connection with the 1994 Transaction, we paid a $50.0 million dividend on our
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 recapitalization of Holding in
1996, bonuses were paid to Mr. Imbler in the amount of about $594,000, to Mr.
Bell in the amount of about $238,000, to Mr. Boots in the amount of about
$238,000, to Mr. Kratochvil in the amount of about $119,000 and to Mr. Beeler in
the amount of about $119,000.
STOCKHOLDERS AGREEMENTS
In connection with the recapitalization of Holding, Holding entered into a
Stockholders Agreement dated as of June 18, 1996 (the "Stockholders Agreement")
with the Common Stock Purchasers, certain Management Stockholders (as defined
herein) and, for limited purposes thereunder, the Preferred Stock Purchasers.
The Stockholders Agreement grants the Common Stock Purchasers rights and
obligations, including the following: (1) until the occurrence of 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) Atlantic Equity Partners International II will have the right
to designate three directors (who are currently Messrs. Graev, Imbler and Levy);
(C) Chase Venture Capital Associates will have the right to designate two
directors (who are currently Messrs. Hofmann and Lori); and (D) the
institutional holders (excluding Atlantic Equity Partners International II and
Chase Venture Capital Associates) will have the right to designate one director
(who is currently Mr. Clarke); (2) in the case of certain Common Stock
Purchasers, to subscribe for a proportional share of future equity issuances by
Holding; (3) under certain circumstances and in the case of Atlantic Equity
Partners International II or Chase Venture Capital Associates, 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 recapitalization of
Holding and (4) 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
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closing of the recapitalization of Holding. Provisions under the Stockholders
Agreement also (1) prohibits Holding from taking certain actions without the
consent of holders of a majority of voting stock held by Chase Venture Capital
Associates and the institutional holders other than Atlantic Equity Partners
International II (or, following the occurrence of certain events, the consent of
Atlantic Equity Partners International II), including certain transactions
between Holding and any subsidiary, on the one hand, and First Atlantic Capital
or any of its affiliates, on the other hand; (2) obligates 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 (3) restricts transfers of equity by the Common Stock
Purchasers, subject to certain exceptions (including transfers of up to 10% of
the equity (including warrants to purchase equity) held by each Common Stock
Purchaser on the date of the Stockholders Agreement). Pursuant to the
Stockholders Agreement, under certain circumstances the Preferred Stock
Purchasers (and their transferees) have tag-along rights with respect to the
1996 Warrants and the common stock of Holding 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 Atlantic Equity Partners International
II, Chase Venture Capital Associates and the specified institutional holders of
more than 50% of the aggregate amount of securities held by them immediately
following the closing of the 1996 Transaction.
The Stockholders Agreement grants specified registration rights to the
Common Stock Purchasers. Atlantic Equity Partners International II and Chase
Venture Capital Associates each have the right, on three occasions, to demand
registration, at Holding's expense, of their shares of common stock of Holding.
Under certain circumstances, a majority in interest of the institutional holders
(excluding Atlantic Equity Partners International II and Chase Venture Capital
Associates) have the right, on one occasion, to demand registration, at
Holding's expense, of their shares of common stock of Holding. The 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 common stock of Holding requested to be included by
them. All shares of common stock of Holding owned by the Common Stock Purchasers
requested to be included in a registration will be subject to cutbacks under
specified circumstances in connection with an underwritten public offering.
The provisions of the 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:
o the fifth anniversary of the closing of the
recapitalization of Holding in 1996, 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;
o the occurrence of such underwritten public offering that
occurs subsequent to such fifth anniversary of the closing
of the recapitalization of Holding in 1996;
o the twentieth anniversary of the closing of the
recapitalization of Holding in 1996; and
o a sale of Holding.
In addition, the 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 under specific circumstances.
Holding is also party to the Amended and Restated Stockholders Agreement
dated June 18, 1996 (the "Management Stockholders Agreement"), with Atlantic
Equity Partners International II and all management shareholders including,
among others, Messrs. Imbler, Boots, Kratochvil, Beeler, and Willbrandt
(collectively, the "Management Stockholders"). The Management Stockholders
Agreement contains provisions that:
o limit transfers of equity by the Management Stockholders;
o require the Management Stockholders to sell their shares
as designated by Holding or Atlantic Equity Partners II
upon the consummation of certain transactions;
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o grant the Management Stockholders certain rights of
co-sale in connection with sales by Atlantic Equity
Partners International II;
o grant Holding rights to repurchase capital stock from the
Management Stockholders upon the occurrence of certain
events; and
o require the Management Stockholders to offer shares to
Holding prior to any permitted transfer.
CHASE SECURITIES INC.
In connection with the recapitalization of Holding in 1996, Chase
Securities, an affiliate of Chase Venture Capital Associates and Messrs. Hofmann
and Lori, who are members of the Board of Directors of Holding and Berry,
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 Chase Venture Capital Associates. Chase
Manhattan Investment Holdings, Inc., an affiliate of Chase Securities and
Messrs. Hofmann and Lori, received about $13.6 million from the sale of equity
interests of Holding in the recapitalization of Holding.
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 us and to Holding in connection with certain matters, principally
relating to transactional, securities law, general corporate and litigation
matters.
TRANSACTIONS WITH AFFILIATES
The indentures governing the 1994 Notes, the 1996 Notes, the 1999 Notes,
the Notes, the Stockholders Agreement, and our credit facility restrict our and
our affiliates' ability to enter into transactions with affiliates, including
officers, directors and principal stockholders.
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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 1999 Notes and 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, and the Nevada 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.
BERRY 1999 NOTES
On July 6, 1999, Berry completed an offering of $75.0 million aggregate
principal amount of 11% Berry Plastics Corporation Senior Subordinated Notes due
2007. The 1999 Notes mature on July 15, 2007 and interest is payable
semi-annually on January 15 and July 15 of each year, commencing on January 15,
2000. The 1999 Notes are unconditionally guaranteed on a senior subordinated
basis by the Guarantors. Berry is not required to make mandatory redemption or
sinking fund payments with respect to the 1999 Notes. Subsequent to July 15,
2003, the 1999 Notes may be redeemed at the option of Berry, in whole or in
part, at redemption prices ranging from 105.5%
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in 2003 to 100% in 2006 and thereafter. Upon a change in control, as defined in
the 1999 Indenture, each holder of 1999 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 1999 Notes rank PARI PASSU with the 1994 Notes and the Notes and
PARI PASSU with or senior in right of payment to all existing and future
subordinated indebtedness of Berry. The 1999 Notes rank junior in right of
payment to all existing and future Senior Indebtedness of Berry, including
borrowings under the Credit Facility, and the Nevada Bonds.
The 1999 Indenture contains certain covenants which, among other things,
limit Berry and its subsidiaries' ability to incur debt, merge or consolidate,
sell, loose or transfer assets, make dividend payments and engage in transaction
with affiliates.
THE CREDIT FACILITY
We are party to a financing and security agreement (the "Security
Agreement") providing for up to $142.9 million of borrowings (the "Credit
Facility") including:
o a $70.0 million revolving line of credit, subject to a
borrowing base formula. At July 3, 1999, on a pro forma basis
giving effect to the acquisition of Cardinal and a $20.0
million concurrent increase, we had unused borrowing capacity
under our Credit Facility's revolving line of credit of about
$35.8 million;
o a (pound)1.5 million revolving line of credit, subject to a
borrowing base;
o a $58.6 million term loan facility;
o a (pound)3.8 million term loan facility; and
o a $5.6 million standby letter of credit facility to support
our and our subsidiaries' obligations under the Nevada Bonds.
The debt under our Credit Facility is guaranteed by Holding and
substantially all of our subsidiaries.
The Credit Facility matures on January 21, 2002 unless previously
terminated by us or by the lenders upon an Event of Default as defined in the
Credit Facility. The term loan facilities require periodic principal payments,
varying in amount through the maturity of the facility. Such periodic payments
will aggregate about $19.0 million for fiscal 1999 and about $19.9 million for
fiscal 2000. Interest on borrowings under the Credit Facility is based on
either:
o 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
o LIBOR (adjusted for reserves) plus an applicable margin of
2.0%, at our option. Following receipt of the quarterly
financial statements, the agent under our credit facility
has 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 Berry
and our 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:
o maintenance of certain financial ratios and compliance with
certain financial tests and limitations;
(a) Tangible capital funds must be greater than the
following amounts as of the end of the respective
fiscal quarter:
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3rd 1999 $92.0 million
4th 1999 $92.0 million
1st 2000 $92.0 million
2nd 2000 $103.5 million
3rd 2000 $103.5 million
4th 2000 $115.0 million
1st 2001 $115.0 million
2nd 2001 $128.5 million
all thereafter $142.0 million
(b) On a rolling four quarter basis, the Company's
leverage rates cannot exceed the following as of the
respective fiscal quarter:
3rd 1999 4.5 to 1.0
4th 1999 4.25 to 1.0
1st 2000 4.25 to 1.0
2nd 2000 3.75 to 1.0
3rd 2000 3.75 to 1.0
4th 2000 3.75 to 1.0
1st 2001 3.75 to 1.0
all thereafter 3.5 to 1.0
(c) On a rolling four quarter basis, the Company's
interest coverage ratio must exceed the following as
of the respective fiscal quarter
3rd 1999 2.0 to 1.0
all thereafter 2.5 to 1.0
(d) On a fiscal year basis, the Company must maintain
a fixed charged ratio of at least 1.0 at 1.0.
(e) The Company must maintain a debt service ratio of
at least 1.5 to 1.0 on a quarterly basis beginning in
the 3rd quarter of fiscal 1999.
o limitations on the issuance of additional debt; and
o limitations on capital expenditures.
NEVADA INDUSTRIAL REVENUE BONDS
We are party to a Financing Agreement with the City of Henderson, Nevada
Public Improvement Trust (the "Nevada Issuer"), pursuant to which we have 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 (3.0% at January 2, 1999
and 4.6% at December 27, 1997), 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 our Credit Facility and mature in
April 2007.
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DESCRIPTION OF NOTES
GENERAL
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Berry Plastics Corporation and not to any of its
subsidiaries as the word "Holding" refers to BPC Holding Corporation and not to
any of its subsidiaries.
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 the 1999 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 and the Nevada 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 and the Nevada
Bonds.
The terms of the Notes are identical in all material respects to the terms
of the 1994 Notes and the 1999 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 and the 1999
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.
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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:
YEAR PERCENTAGE
---- ----------
1999................................... 106.125%
2000................................... 104.083%
2001................................... 102.042%
2002 and thereafter.................... 100.000%
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
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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. At July 3, 1999, on a pro forma basis giving effect to
the acquisition of Cardinal and a $20.0 million concurrent increase in our
Credit Facility, the Credit Facility provided for borrowings up to $142.9
million. 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
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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
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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
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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.
The aggregate amount of Senior Indebtedness of the Company outstanding at
July 3, 1999 would have been approximately $89.0 million. As of July 3, 1999,
all Indebtedness of the Company other than the Senior Indebtedness was 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 at July 3, 1999 was approximately $290.5 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
July 3, 1999, all indebtedness of the Guarantors other than the Senior
Indebtedness was 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
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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
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(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
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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
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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
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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
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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,
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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
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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
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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.
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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
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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.
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"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 $142.9 million 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.
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"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, Norwich, Knight Plastics, Cardinal, CPI
Holding, Norwich Acquisition and Berry Acquisition 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
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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.
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"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.
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MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary prepared by O'Sullivan Graev & Karabell, LLP,
special counsel to the Company ("Special Counsel"), 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. The
following constitutes the opinion of Special Counsel, and based upon the
assumptions and subject to the qualifications and limitations set forth herein,
this summary fairly presents the material Federal income tax considerations
relevant to the exchange of Old Notes for New Notes pursuant to the Exchange
Offer and to the ownership of the Notes. 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
GENERAL AND, AS DISCUSSED, DOES NOT COVER THE TAX EFFECTS TO ALL INVESTORS IN
ALL SITUATIONS. 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.
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.
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)
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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 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 both a Change of Control giving rise to the right to
require repurchase will occur and such right will be exercised. 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." Under the Treasury Regulations discussed above, the Company believes
that the holder's right to require repurchase should not be taken into account
for purposes of calculating OID because a Change of Control and exercise of such
rights are not significantly more likely than not to occur. Treasury Regulations
also provide that the Company will be deemed to exercise its option to redeem
the Notes in a manner that minimizes the yield on the Notes. The Company may
redeem the Notes in certain circumstances, pursuant to the terms of the Notes.
See "Description of the Notes -- Optional Redemption." The Company believes
that, although its option to redeem could be deemed exercised for the purposes
of the OID regulations at certain dates, any such deemed exercise would not
result in OID because the original cost of the Notes would exceed any such
deemed redemption price. Therefore, there is no 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.
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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.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, we believe 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 Berry 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 Berry 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 Berry). Berry 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 January, 2000 (90 days from the date of this Prospectus), all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
Berry 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, Berry 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. Berry 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. Berry 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. Berry 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."
95
<PAGE>
EXPERTS
The consolidated financial statements of BPC Holding Corporation as of
December 27, 1997 and January 2, 1999, and for each of the three years in the
period ended January 2, 1999 and of Knight Engineering and Plastics Division of
Courtaulds Packaging Inc. as of and for the year ended March 31, 1998 included
elsewhere in this Registration Statement and Prospectus 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 on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of CPI Holding, Inc. as of November
30, 1998 and 1997, and for the years ended November 30, 1998 and 1997, and for
the period January 26, 1996 to November 30, 1996 included in this Registration
Statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Norwich for the years ended
October 31, 1997, 1996 and 1995 included in this Registration Statement have
been audited by Lovewell Blake, independent auditors, as stated in their report
appearing herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
96
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
BPC HOLDING AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors...................................................................................... F-3
Consolidated Balance Sheets at January 2, 1999 and December 27, 1997................................................ F-4
Consolidated Statements of Operations for the three years in the period ended January 2, 1999....................... F-6
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the three years in the
period ended January 2, 1999...................................................................................... F-7
Consolidated Statements of Cash Flows for the three years in the period ended January 2, 1999....................... F-8
Notes to Consolidated Financial Statements ......................................................................... F-9
BPC HOLDING UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at July 3, 1999 and January 2, 1999........................................... F-22
Condensed Consolidated Statements of Operations for the Thirteen and Twenty-Six Weeks ended
July 3, 1999 and June 27, 1998..............................F-24
Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended July 3, 1999 and June 27, 1998....... F-25
Notes to Condensed Consolidated Financial Statements................................................................ F-26
CPI HOLDING, INC. AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors...................................................................................... F-30
Consolidated Balance Sheets at November 30, 1998 and 1997........................................................... F-31
Consolidated Statements of Income for the three years in the period ended November 30, 1998......................... F-33
Consolidated Statements of Mandatorily Redeemable Preferred Stock and Shareholders' Equity for the three
years in the period ended November 30, 1998....................................................................... F-34
Consolidated Statements of Cash Flows for the three years in the period ended November 30, 1998..................... F-37
Notes to Consolidated Financial Statements ......................................................................... F-38
CPI HOLDING, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet at May 31, 1999................................................................ F-46
Condensed Consolidated Statements of Operations for the 26 weeks ended May 31, 1999 and 1998........................ F-48
Condensed Consolidated Statements of Cash Flows for the 26 weeks ended May 31, 1999 and 1998........................ F-49
Notes to Condensed Consolidated Financial Statements................................................................ F-50
KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC. AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors...................................................................................... F-52
Balance Sheet at March 31, 1998..................................................................................... F-53
Statement of Operations for the year ended March 31, 1998........................................................... F-54
Statement of Cash Flows for the year ended March 31, 1998........................................................... F-55
Notes to Financial Statements ...................................................................................... F-56
KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Balance Sheet at September 30, 1998....................................................................... F-58
Condensed Statements of Operations for the six months ended September 30, 1998 and 1997............................. F-59
Condensed Statements of Cash Flows for the six months ended September 30, 1998 and 1997............................. F-60
Notes to Condensed Financial Statements............................................................................. F-61
NORWICH INJECTION MOULDERS LIMITED AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors...................................................................................... F-62
Profit and Loss Account for the three years in the period ended October 31, 1997.................................... F-65
Balance Sheet at October 31, 1997, 1996, and 1995................................................................... F-66
Cash Flow Statement for the three years in the period ended October 31, 1997........................................ F-67
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Notes to the Accounts............................................................................................... F-68
NORWICH INJECTION MOULDERS LIMITED UNAUDITED INTERIM FINANCIAL STATEMENTS
Profit and Loss Accounts for the 6 months ended April 30, 1998 and 1997............................................. F-81
Balance Sheet at April 30, 1998..................................................................................... F-82
Cash Flow Statements for the 6 months ended April 30, 1998 and 1997................................................. F-83
Notes to the Accounts............................................................................................... F-84
</TABLE>
F-2
<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 January 2, 1999 and December 27, 1997, 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
January 2, 1999. These financial statements are the responsibility of Holding's
management. Our responsibility is to express an opinion on these financial
statements 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 January 2, 1999 and December 27, 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended January 2, 1999, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
February 19, 1999
F-3
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27,
1999 1997
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................... $ 2,318 $ 2,688
Accounts receivable (less allowance for doubtful
accounts of $1,651 at January 2, 1999 and $1,038 at December 27, 1997) ..... 29,951 28,385
Inventories:
Finished goods ........................................................... 23,146 22,029
Raw materials and supplies ............................................... 8,556 7,429
-------- --------
31,702 29,458
Prepaid expenses and other receivables ....................................... 1,665 1,834
Income taxes recoverable ..................................................... 577 1,167
-------- --------
Total current assets ............................................................... 66,213 63,532
Assets held in trust ............................................................... 6,679 19,738
Property and equipment:
Land ......................................................................... 7,769 5,811
Buildings and improvements ................................................... 38,960 33,891
Machinery, equipment and tooling ............................................. 141,054 122,991
Automobiles and trucks ....................................................... 1,386 1,241
Construction in progress ..................................................... 11,780 10,357
-------- --------
200,949 174,291
Less accumulated depreciation ................................................ 80,944 66,073
-------- --------
120,005 108,218
Intangible assets:
Deferred financing and origination fees, net ................................. 10,327 10,849
Covenants not to compete, net ................................................ 4,071 3,940
Excess of cost over net assets acquired, net ................................. 44,536 30,303
Deferred acquisition costs ................................................... 20 13
-------- --------
58,954 45,105
Deferred income taxes .............................................................. 2,758 2,049
Other .............................................................................. 708 802
-------- --------
Total assets ....................................................................... $255,317 $239,444
======== ========
</TABLE>
F-4
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27,
1999 1997
------------ --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ......................................................... $ 18,059 $ 16,732
Accrued expenses and other liabilities ................................... 10,863 7,162
Accrued interest ......................................................... 4,166 3,612
Employee compensation and payroll taxes .................................. 8,953 7,489
Income taxes ............................................................. 22 55
Current portion of long-term debt ........................................ 19,388 7,619
--------- ---------
Total current liabilities .................................................... 61,451 42,669
Long-term debt, less current portion ......................................... 303,910 298,716
Accrued dividends on preferred stock ......................................... 7,225 3,674
Deferred income taxes ........................................................ 497 --
Other liabilities ............................................................ 2,591 3,360
--------- ---------
375,674 348,419
STOCKHOLDERS' EQUITY (DEFICIT):
Series A Preferred Stock; 800,000 shares authorized;
600,000 shares issued and outstanding (net of discount
of $2,770 at January 2, 1999 and $3,062 at December 27, 1997) ......... 11,801 11,509
Series 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; 145,058 shares
issued and 144,546 shares outstanding ............................... 1 1
Nonvoting; 500,000 shares authorized; 58,612 shares
issued and 56,937 shares outstanding ................................ 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000 shares issued
and 16,833 shares outstanding ....................................... -- --
Treasury stock: 512 shares Class B Voting Common Stock;
1,675 shares Class B Nonvoting Common Stock; and 167 shares
Class C Nonvoting Common Stock ........................................ (280) (22)
Additional paid-in capital .............................................. 45,611 49,374
Warrants ................................................................ 3,511 3,511
Retained earnings (deficit) ............................................. (185,923) (178,353)
Accumulated other comprehensive income (loss) ........................... (83) --
--------- ---------
Total stockholders' equity (deficit) ......................................... (120,357) (108,975)
--------- ---------
Total liabilities and stockholders' equity (deficit) ......................... $ 255,317 $ 239,444
--------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
-------------- --------------- --------------
<S> <C> <C> <C>
Net sales .................................................. $ 271,830 $ 226,953 $ 151,058
Cost of goods sold ......................................... 199,227 180,249 110,110
--------- --------- ---------
Gross margin ............................................... 72,603 46,704 40,948
Operating expenses:
Selling ................................................ 14,780 11,320 6,950
General and administrative ............................. 19,308 11,505 13,769
Research and development ............................... 1,690 1,310 858
Amortization of intangibles ............................ 4,139 2,226 524
Other expenses ......................................... 4,084 4,144 1,578
--------- --------- ---------
Operating income ........................................... 28,602 16,199 17,269
Other expenses:
Loss on disposal of property and equipment ............. 1,865 226 302
--------- --------- ---------
Income before interest and taxes ........................... 26,737 15,973 16,967
Interest:
Expense ................................................ (35,555) (32,237) (21,364)
Income ................................................. 999 1,991 1,289
--------- --------- ---------
Loss before income taxes ................................... (7,819) (14,273) (3,108)
Income taxes (benefit) ..................................... (249) 138 239
--------- --------- ---------
Net loss ................................................... (7,570) (14,411) (3,347)
Preferred stock dividends .................................. (3,551) (2,558) (1,116)
Amortization of preferred stock discount ................... (292) (74) --
--------- --------- ---------
Net loss attributable to common shareholders ............... $ (11,413) $ (17,043) $ (4,463)
========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------------- ---------------------- TREASURY PAID-IN
CLASS A CLASS B CLASS C CLASS A CLASS B STOCK CAPITAL
--------- --------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995(1) ......... $ -- $ -- $-- $ -- $ -- $ (58) $ 960
Net loss ................................ -- -- -- -- -- -- --
Market value adjustment - warrants ...... -- -- -- -- -- -- (1,145)
Exercise of stock options ............... -- -- -- -- -- -- 1,130
Distribution on sale of equity interests -- -- -- -- -- 58 (1,424)
Proceeds from newly issued equity ....... 4 2 -- 14,571 -- -- 52,797
Payment of deferred compensation ........ -- -- -- -- -- -- 479
Issuance of private warrants ............ -- -- -- (3,511) -- -- --
Accrued dividends on preferred stock .... -- -- -- -- -- -- (1,116)
Amortization of preferred stock discount -- -- -- 156 -- -- --
Purchase treasury stock from management . -- -- -- -- -- (22) --
--------- --------- ---- --------- --------- --------- ---------
Balance at December 28, 1996 ............ 4 2 -- 11,216 -- (22) 51,681
--------- --------- ---- --------- --------- --------- ---------
Net loss ................................ -- -- -- -- -- -- --
Sale of stock to management ............. -- -- -- -- -- -- 325
Issuance of preferred stock ............. -- -- -- -- 5,000 -- --
Accrued dividends on preferred stock .... -- -- -- -- -- -- (2,558)
Amortization of preferred stock discount -- -- -- 293 -- -- (74)
--------- --------- ---- --------- --------- --------- ---------
Balance at December 27, 1997 ............ 4 2 -- 11,509 5,000 (22) 49,374
--------- --------- ---- --------- --------- --------- ---------
Net loss ................................ -- -- -- -- -- -- --
Sale of stock to management ............. -- -- -- -- -- -- 80
Purchase treasury stock from management . -- -- -- -- -- (258) --
Translation loss ........................ -- -- -- -- -- -- --
Accrued dividends on preferred stock .... -- -- -- -- -- -- (3,551)
Amortization of preferred stock discount -- -- -- 292 -- -- (292)
--------- --------- ---- --------- --------- --------- ---------
Balance at January 2, 1999 .............. $ 4 $ 2 $-- $ 11,801 $ 5,000 $ (280) $ 45,611
========= ========= ==== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
RETAINED INCOME INCOME
WARRANTS EARNINGS (LOSS) TOTAL (LOSS)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995(1) ......... $ 4,034 $ (37,420) $ -- $ (32,484) $ --
Net loss ................................ -- (3,347) -- (3,347) (3,347)
Market value adjustment - warrants ...... 9,399 (8,254) -- -- --
Exercise of stock options ............... -- -- -- 1,130 --
Distribution on sale of equity interests (13,433) (114,921) -- (129,720) --
Proceeds from newly issued equity ....... -- -- -- 67,374 --
Payment of deferred compensation ........ -- -- -- 479 --
Issuance of private warrants ............ 3,511 -- -- -- --
Accrued dividends on preferred stock .... -- -- -- (1,116) --
Amortization of preferred stock discount -- -- -- 156 --
Purchase treasury stock from management . -- -- -- (22) --
--------- --------- --------- --------- ---------
Balance at December 28, 1996 ............ 3,511 (163,942) -- (97,550) (3,347)
--------- --------- --------- --------- ---------
Net loss ................................ -- (14,411) -- (14,411) (14,411)
Sale of stock to management ............. -- -- -- 325 --
Issuance of preferred stock ............. -- -- -- 5,000 --
Accrued dividends on preferred stock .... -- -- -- (2,558) --
Amortization of preferred stock discount -- -- -- 219 --
--------- --------- --------- --------- ---------
Balance at December 27, 1997 ............ 3,511 (178,353) -- (108,975) (14,411)
--------- --------- --------- --------- ---------
Net loss ................................ -- (7,570) -- (7,570) (7,570)
Sale of stock to management ............. -- -- -- 80 --
Purchase treasury stock from management . -- -- -- (258) --
Translation loss ........................ -- -- (83) (83) (83)
Accrued dividends on preferred stock .... -- -- -- (3,551) --
Amortization of preferred stock discount -- -- -- -- --
--------- --------- --------- --------- ---------
Balance at January 2, 1999 .............. $ 3,511 $(185,923) $ (83) $(120,357) $ (7,653)
========= ========= ========= ========= =========
</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-7
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss .......................................................... $ (7,570) $ (14,411) $ (3,347)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation ............................................. 20,690 16,800 10,807
Non-cash interest expense ................................ 1,765 2,005 1,212
Amortization ............................................. 4,140 2,226 524
Interest funded by assets held in trust .................. 13,059 11,255 5,412
Non-cash compensation .................................... 600 -- 358
Write-off of deferred acquisition costs .................. -- 515 --
Loss on sale of property and equipment ................... 1,865 226 302
Deferred income taxes .................................... (709) -- 53
Changes in operating assets and liabilities:
Accounts receivable, net ........................... 4,413 (2,290) (1,716)
Inventories ........................................ (252) 2,767 (1,710)
Prepaid expenses and other receivables ............. 1,016 (137) 520
Other assets ....................................... (43) (225) (5)
Accounts payable and accrued expenses .............. (4,810) (4,516) 1,899
Income taxes payable ............................... (33) (61) 117
--------- --------- ---------
Net cash provided by operating activities ......................... 34,131 14,154 14,426
INVESTING ACTIVITIES
Additions to property and equipment ............................... (22,595) (16,774) (13,581)
Proceeds from disposal of property and equipment .................. 4,471 1,078 94
Acquisitions of businesses ........................................ (33,996) (86,406) (1,152)
--------- --------- ---------
Net cash used for investing activities ............................ (52,120) (102,102) (14,639)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ................................ 44,044 85,703 105,000
Payments on long-term borrowings .................................. (24,906) (2,821) (717)
Purchase of treasury stock from management ........................ (258) -- --
Exercise of management stock options .............................. -- -- 1,130
Proceeds from issuance of common stock ............................ 80 325 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 ............................................... (1,341) (2,763) (5,090)
--------- --------- ---------
Net cash provided by financing activities ......................... 17,619 80,444 2,370
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents .............. (370) (7,504) 2,157
Cash and cash equivalents at beginning of year .................... 2,688 10,192 8,035
--------- --------- ---------
Cash and cash equivalents at end of year .......................... $ 2,318 $ 2,688 $ 10,192
========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<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"), Venture Packaging, Inc.
("Venture Packaging") and its subsidiaries Venture Packaging Midwest, Inc. and
Venture Packaging Southeast, Inc., NIM Holdings Limited and its subsidiary
Norwich Injection Moulders Limited, and Knight Plastics, 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; Woodstock, Illinois; North Walsham, England;
Monroeville, Ohio; and Lawrence, Kansas.
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. In March 1998, Berry announced the consolidation of
its Anderson, South Carolina facility with other Company locations with the
majority of the business moving to the Charlotte, North Carolina and
Monroeville, Ohio facilities.
Holding's fiscal year is a 52/53 week period ending generally on the
Saturday closest to December 31. All references herein to "1998", "1997," and
"1996" relate to the fiscal years ended January 2, 1999, December 27, 1997, and
December 28, 1996, 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 two primary industry segments. The Company is a
manufacturer and marketer of plastic packaging, with sales concentrated in three
product groups within this market: plastic aerosol overcaps, rigid open-top
containers, and plastic drink cups. In addition, the Company is a manufacturer
in the retail housewares/lawn and garden market. 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 $62 million in 1998 (excluding
specialty resins). Dow Chemical Corporation is the principal supplier
(approximately 54%) of the Company's total resin material requirements. The
Company also uses other suppliers such as Union Carbide, Chevron, Phillips and
Equistar 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
F-9
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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.
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, 1996 Notes, 1998 Notes and
deferred financing fees are being amortized using the straight-line method over
the lives of the respective debt agreements.
Covenants not to compete are being amortized over the respective lives of
the 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.
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.
REVENUE RECOGNITION
Revenue from sales of products is recognized at the time product is
shipped to the customer.
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 1997 and 1996 financial statements have been
reclassified to conform with the 1998 presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On December 28, 1997, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130) which
establishes new rules for the reporting and display of comprehensive income and
its components (net income and "other comprehensive income"). Adoption of the
Statement had no impact on the Company's financial position.
F-10
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (FAS 131) which changes the basis on which public business
enterprises report information about operating segments. The Company has two
reportable segments: packaging products and housewares products. The Company's
packaging business consists of three primary market groups: plastic aerosol
overcaps, containers, and plastic drink cups. The Company's housewares business
consists of semi-disposable plastic housewares and plastic lawn and garden
products, sold primarily through major national retail marketers and national
chain stores.
The Company evaluates performance and allocates resources based on
operating income before depreciation and amortization of intangibles adjusted to
exclude (i) market value adjustment related to stock options, (ii) other
non-recurring or "one-time" expenses, (iii) management fees and reimbursed
expenses paid to First Atlantic and (iv) certain legal expenses associated with
unusual litigation ("Adjusted EBITDA"). The accounting policies of the
reportable segments are the same as those described in the summary of
significant accounting policies. The Company's reportable segments are business
units that offer different products to different markets.
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
------------ -------------- --------------
<S> <C> <C> <C>
Net sales:
Packaging products ............................................... $ 250,270 $ 209,433 $ 151,058
Housewares products .............................................. 21,560 17,520 --
Adjusted EBITDA:
Packaging products ............................................... 56,102 38,016 34,068
Housewares products .............................................. 3,662 2,253 --
Total assets:
Packaging products ............................................... 218,537 202,198 145,798
Housewares products .............................................. 36,780 37,246 --
Reconciliation of Adjusted EBITDA to loss before income taxes:
Adjusted EBITDA for reportable segments .......................... $ 59,764 $ 40,269 $ 34,068
Net interest expense ............................................. (34,556) (30,246) (20,075)
Depreciation ..................................................... (20,690) (16,800) (10,807)
Amortization ..................................................... (4,140) (2,226) (524)
Loss on disposal of property and equipment ....................... (1,865) (226) (302)
One-time expenses ................................................ (4,860) (4,216) (4,361)
Stock option market value adjustment ............................. (600) -- (358)
Management fees .................................................. (872) (828) (749)
--------- --------- ---------
Loss before income taxes ......................................... $ (7,819) $ (14,273) $ (3,108)
========= ========= =========
</TABLE>
NOTE 3. ACQUISITIONS
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.
F-11
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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.
On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of
Berry, acquired all of the capital stock of Norwich Moulders of Norwich, England
for aggregate consideration of approximately $14.0 million. The purchase was
primarily financed through the Credit Facility (see Note 9). The operations of
Norwich Moulders are included in Berry's operations since the acquisition date
using the purchase method of accounting.
On October 16, 1998, Knight Plastics, Inc. ("Knight"), a newly formed
wholly-owned subsidiary of Berry, acquired substantially all of the assets of
the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for
aggregate consideration of approximately $18.0 million. The purchase was
financed through the Credit Facility's revolving line of credit.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Container Industries, PackerWare, Virginia
Design, and Venture acquisitions occurred on December 31, 1995; and the Norwich
Moulders and Knight acquisitions occurred on December 29, 1996.
YEAR ENDED
----------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
----------- ------------- -------------
Net sales ................... $ 296,485 $ 298,679 $ 257,098
Loss before income taxes .... (8,924) (19,808) (9,932)
Net loss .................... (8,791) (20,178) (10,171)
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 dates,
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 effects.
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
JANUARY 2, DECEMBER 27,
1999 1997
------------ --------------
Deferred financing and origination fees .... $ 15,817 $ 14,578
Covenants not to compete ................... 6,233 4,598
Excess of cost over net assets acquired .... 49,197 32,464
Deferred acquisition costs ................. 20 13
Accumulated amortization ................... (12,313) (6,548)
-------- --------
$ 58,954 $ 45,105
======== ========
F-12
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
Excess of cost over net assets acquired increased due to the acquisitions
of Norwich Moulders and Knight to the extent the purchase price exceeded the
fair value of the net assets acquired.
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27,
1999 1997
------------- --------------
<S> <C> <C>
Holding 12.50% Senior Secured Notes ......................... $ 105,000 $ 105,000
Berry 12.25% Senior Subordinated Notes ...................... 125,000 100,000
Term loans .................................................. 71,243 58,300
Revolving line of credit .................................... 16,162 25,654
Nevada Industrial Revenue Bonds ............................. 4,500 5,000
Iowa Industrial Revenue Bonds ............................... -- 5,400
South Carolina Industrial Development Bonds ................. -- 6,985
Capital lease obligation payable through December 1999 ...... 561 547
Debt premium (discount), net ................................ 832 (551)
--------- ---------
323,298 306,335
Less current portion of long-term debt ...................... 19,388 7,619
--------- ---------
$ 303,910 $ 298,716
========= =========
</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 January 2, 1999 is $6.7 million.
The 1996 Notes rank senior in right of payment to all existing and future
subordinated debt of Holding, including Holding's subordinated guarantee of the
1994 Notes and 1998 Notes (as defined hereinafter) and PARI PASSU in right of
payment with all senior debt of Holding. The 1996 Notes are effectively
subordinated to all existing and future senior debt of Berry, including
borrowings under the Credit Facility and the Nevada Industrial Revenue Bond.
F-13
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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 net proceeds to Berry
from the sale of the 1994 Notes, after expenses, were $93.0 million. On August
24, 1998, Berry completed an additional offering of $25.0 million aggregate
principal amount of 12.25% Series B Senior Subordinated Notes due 2004 (the
"1998 Notes"). The net proceeds to Berry from the sale of the 1998 Notes, after
expenses, were $25.2 million. The 1994 Notes and 1998 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 and October 15, 1998 for the 1994 Notes
and 1998 Notes respectively. Holding and all of Berry's subsidiaries fully,
jointly, and severally, and unconditionally guarantee on a senior subordinated
basis the 1994 Notes and 1998 Notes. There are no nonguarantor subsidiaries.
Separate financial statements of guarantor subsidiaries have not been included
as management believes those financial statements would not be material to
investors.
Berry is not required to make mandatory redemption or sinking fund
payments with respect to the 1994 Notes and 1998 Notes. Subsequent to April 15,
1999, the 1994 Notes and 1998 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") and
the 1998 Transaction ("1998 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 and 1998 Notes rank PARI PASSU with or senior in right of
payment to all existing and future subordinated debt of Berry. The notes rank
junior in right of payment to all existing and future senior debt of Berry,
including borrowings under the Credit Facility and the Nevada Industrial Revenue
Bonds.
The 1994 Indenture and 1998 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 ?1.5 million (the "UK Revolver") and a term loan
facility of ?4.5 million (the "UK Term Loan"), each for NIM Holdings and
Norwich). The debt under the Credit Facility is guaranteed by Holding and
substantially all of its subsidiaries. The obligations of the Company and the
subsidiaries under the Credit Facility and the guarantees thereof are secured
primarily by all of the assets of such persons. 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, (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 $5.6 million standby letter of credit facility
to support the Company's and its subsidiaries' obligations under the Nevada
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. Also, the Credit Facility provided a term loan facility to
support the Company's and its subsidiaries' obligations under the South Carolina
Industrial Development Bonds. In August 1998, in conjunction with the closing
and sale of the Anderson, South Carolina Facility, the Bonds were paid by the
Company. The difference between the repayment of the development bonds and other
related liabilities and the net proceeds from the sale of the facility of
approximately $3.0 million has been financed with borrowings under the term loan
facility. The Company borrowed
F-14
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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 January 2, 1999, the
Company had unused borrowing capacity under the Credit Facility's revolving line
of credit of approximately $26.3 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. 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 (7.0% at January 2, 1999 and
8.0% at December 27, 1997). Following receipt of the quarterly financial
statements, the agent under the Credit Facility has 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
debt and (iii) limitations on capital expenditures.
NEVADA INDUSTRIAL REVENUE BONDS
The Nevada Industrial Revenue Bonds bear interest at a variable rate (3.0%
at January 2, 1999 and 4.6% at December 27, 1997), 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.
OTHER
Future maturities of long-term debt are as follows: 1999, $19,388; 2000,
$20,386; 2001, $16,105; 2002, $34,763; 2003, $500, and $231,324 thereafter.
Interest paid was $33,236, $29,927 and $19,744 for 1998, 1997 and 1996,
respectively. Interest capitalized was $777, $341 and $225 for 1998, 1997 and
1996, 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 $2,970 and $1,661 and related accumulated amortization of $1,468 and
$831 at January 2, 1999, and December 27, 1997, respectively. Capital lease
amortization is included in depreciation expense. Total rental expense for
operating leases was approximately $5,414, $3,332, and $2,344 for 1998, 1997,
and 1996, respectively.
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 JANUARY 2, 1999
---------------------------------
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1999............................................. $ 606 $ 3,834
2000............................................. -- 3,724
2001............................................. -- 3,422
2002............................................. -- 2,805
</TABLE>
F-15
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
<TABLE>
<CAPTION>
<S> <C>
2003............................................. -- 2,207
Thereafter....................................... -- 1,921
------- --------
606 $ 17,913
========
Less: amount representing interest............... 45
-------
Present value of net minimum lease payments...... $ 561
=======
</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 January 2, 1999 and December 27, 1997 are
as follows:
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27,
1999 1997
------------- --------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation ................................. $ 11,080 $ 11,073
Deferred tax assets:
Allowance for doubtful accounts ............................ 633 590
Inventory .................................................. 900 1,391
Compensation and benefit accruals .......................... 1,592 1,198
Insurance reserves ......................................... 436 338
Net operating loss carryforwards ........................... 10,012 8,372
Alternative minimum tax (AMT) credit carryforwards ......... 2,758 2,049
-------- --------
Total deferred tax assets ............................ 16,331 13,938
-------- --------
5,251 2,865
Valuation allowance ............................................ (2,493) (816)
-------- --------
Net deferred tax asset ......................................... $ 2,758 $ 2,049
======== ========
</TABLE>
Income tax expense consists of the following:
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
------------ ------------- --------------
<S> <C> <C> <C>
Current
Federal ........................... $ (493) $ -- $ --
Foreign ........................... 152 -- --
State ............................. 92 138 186
Deferred
Federal ........................... -- -- 69
State ............................. -- -- (16)
------- ------- -------
Income tax expense (benefit) ......... $ (249) $ 138 $ 239
------- ------- -------
</TABLE>
Holding has unused operating loss carryforwards of approximately $26.0
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 1998, 1997 and 1996 approximated $526, $47, and
$528 respectively.
F-16
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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
--------------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
------------ -------------- --------------
<S> <C> <C> <C>
Income tax expense (benefit) computed at statutory rate ......... $(2,658) $(4,853) $(1,057)
State income tax expense, net of federal benefit ................ 90 138 112
Amortization of goodwill ........................................ 339 285 --
Expenses not deductible for income tax purposes ................. 432 219 51
Change in valuation allowance ................................... 1,677 4,298 1,103
Other ........................................................... (129) 51 30
------- ------- -------
Income tax expense (benefit) .................................... $ (249) $ 138 $ 239
======= ======= =======
</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 $933,
$629, and $531 for 1998, 1997 and 1996, 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. 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. The Company's common stock shareholders who held common stock
immediately preceding the 1996 Transaction retained 78% of the common stock.
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
F-17
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
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.
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") as amended, whereby 51,620 shares have been
reserved for future issuance, Holding has granted options to certain officers
and key employees to acquire shares of Class B Nonvoting Common Stock. These
options are subject to various 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
F-18
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
on which the Board of Directors of Holding, in its sole discretion, determines.
Option prices range from $100 to $122 per share. Options granted under the
Option Plan typically expire after seven years and vest over a five-year period
with half of each person's award based on continued employment and half based on
the Company achieving financial performance targets.
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 at the grant date.
Information related to the Option Plan is as follows:
<TABLE>
<CAPTION>
JANUARY 2, 1999 DECEMBER 27, 1997
----------------------- ------------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Options outstanding,
beginning of year .............. 47,708 $ 101 43,393 $ 100
Options granted ................... 11,005 122 5,425 106
Options exercised ................. -- -- -- --
Options canceled .................. 7,984 100 (1,110) 100
------------ ------------
Options outstanding, end of
year ........................... 50,729 105 47,708 101
============ ============
Option price range at end of
year ........................... $100 - $122 $100 - $108
Options exercisable at end of
year ........................... 25,191 13,561
Options available for grant
at year end .................... 891 3,912
Weighted average fair value
of options granted during
year ........................... $ 122 $ 106
</TABLE>
The following table summarizes information about the options outstanding at
January 2, 1999:
WEIGHTED
NUMBER AVERAGE WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE NUMBER
EXERCISE AT JANUARY 2, CONTRACTUAL EXERCISE EXERCISABLE AT
PRICES 1999 LIFE PRICE JANUARY 2, 1999
- ----------- ------------- ----------- -------- ---------------
$100 - $122 50,729 3 years $105 25,191
Disclosure of pro forma financial information is required by Statement 123
as if the Company had accounted for its employee stock options using the fair
value method as defined by the Statement. The fair value for options granted by
the Company have been estimated at the date of grant using a Black Scholes
option pricing model with the following weighted average assumptions:
YEAR ENDED
----------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
---------- ----------- ------------
Risk-free interest rate ............ 6.4% 6.4% 6.5%
Dividend yield ..................... 0.0% 0.0% 0.0%
Volatility factor .................. .20 .07 .01
Expected option life ............... 4.0 years 4.0 years 5.0 years
F-19
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
For purposes of the pro forma disclosures, the estimated fair value of the
stock options are amortized to expense over the related vesting period. Because
compensation expense is recognized over the vesting period, the initial impact
on pro forma net loss may not be representative of compensation expense in
future years, when the effect of amortization of multiple awards would be
reflected in the Consolidated Statement of Operations. The Company's pro forma
net losses giving effect to the estimated compensation expense related to stock
options are as follows:
YEAR ENDED
----------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
---------- ----------- ------------
Net loss......................... $ (7,198) $ (14,594) $ (3,389)
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 advisory fees of approximately $140 and $180 in July
1998 and October 1998, respectively, for originating, structuring and
negotiating the Norwich Acquisition and the Knight Acquisition, respectively.
In consideration of financial advisory and management consulting services,
the Company paid First Atlantic fees and expenses of $835, $771 and $788 for
fiscal 1998, 1997, and 1996, 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 January 2, 1999,
except for the 1994 Notes and the 1996 Notes for which the fair value exceed the
carrying value by approximately $4.5 million and $4.2 million, respectively.
F-20
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
NOTE 12. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS)
The following summarizes consolidated financial information of Holding's
wholly- owned subsidiary, Berry Plastics Corporation and subsidiaries:
JANUARY 2, DECEMBER 27,
1999 1997
---------- ------------
CONSOLIDATED BALANCE SHEETS
Current assets ................................... $ 65,590 $ 62,824
Property and equipment - net of accumulated
depreciation ..................................... 120,005 108,218
Other noncurrent assets .......................... 58,716 44,480
Current liabilities .............................. 60,210 42,158
Noncurrent liabilities ........................... 210,093 205,172
Equity (deficit) ................................. (25,992) (31,808)
YEAR ENDED
-----------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
---------- ------------ ------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales ........................... $ 271,830 $ 226,954 $ 151,058
Cost of goods sold .................. 199,226 180,249 110,110
Income (loss) before income taxes ... 5,650 (2,493) 6,490
Net income (loss) ................... 5,899 (2,631) 5,989
The following summarizes parent company only financial information of
Berry:
JANUARY 2, DECEMBER 27,
1999 1997
---------- ------------
BALANCE SHEET
Current assets ................................... $ 28,579 $ 31,492
Property and equipment - net of accumulated
depreciation ..................................... 48,220 45,091
Investment in/due from subsidiaries .............. 120,230 87,613
Other noncurrent assets .......................... 15,629 14,111
Current liabilities .............................. 41,325 53,506
Noncurrent liabilities ........................... 197,325 156,609
Equity (deficit) ................................. (25,992) (31,808)
YEAR ENDED
-----------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
---------- ------------ ------------
STATEMENTS OF OPERATIONS
Net sales ........................... $ 140,856 $ 140,976 $ 108,253
Cost of goods sold .................. 91,763 101,769 75,861
Income (loss) before income taxes ... 5,650 (2,493) 6,490
Net income (loss) ................... 5,899 (2,631) 5,989
F-21
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
JULY 3, JANUARY 2,
1999 1999
---------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 2,993 $ 2,318
Accounts receivable (less allowance for doubtful
accounts of $1,507 at July 3, 1999 and $1,651
at January 2, 1999) .............................. 40,842 29,951
Inventories:
Finished goods ................................... 23,967 23,146
Raw materials and supplies ....................... 8,347 8,556
-------- ----------
32,314 31,702
Prepaid expenses and other receivables ............. 2,575 1,665
Income taxes recoverable ........................... 83 577
-------- ----------
Total current assets .................................. 78,807 66,213
Assets held in trust .................................. 252 6,679
Property and equipment:
Land ............................................... 7,762 7,769
Buildings and improvements ......................... 39,047 38,960
Machinery, equipment and tooling ................... 140,801 141,054
Automobiles and trucks ............................. 1,405 1,386
Construction in progress ........................... 21,766 11,780
-------- ----------
210,781 200,949
Less accumulated depreciation ...................... 90,510 80,944
-------- ----------
120,271 120,005
Intangible assets:
Deferred financing and origination fees, net ....... 9,765 10,327
Covenants not to compete, net ...................... 4,068 4,404
Excess of cost over net assets acquired, net ....... 41,971 44,536
Deferred acquisition costs ......................... 146 20
-------- ----------
55,950 59,287
Deferred income taxes ................................. 2,758 2,758
Other ................................................. 371 375
-------- ----------
Total assets .......................................... $258,409 $ 255,317
======== ==========
F-22
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1999 1999
--------- ----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ....................................... $ 20,664 $ 18,059
Accrued expenses and other liabilities ................. 8,590 9,944
Accrued interest ....................................... 3,795 4,166
Employee compensation and payroll taxes ................ 12,156 8,953
Income taxes ........................................... 1,534 941
Current portion of long-term debt ...................... 20,297 19,388
--------- ----------
Total current liabilities ................................. 67,036 61,451
Long-term debt, less current portion ...................... 300,187 303,910
Accrued dividends on preferred stock ...................... 9,188 7,225
Deferred income taxes ..................................... 472 497
Other liabilities ......................................... 2,193 2,591
--------- ----------
379,076 375,674
Stockholders' equity (deficit):
Series A Preferred Stock; 800,000 shares authorized;
600,000 shares issued and outstanding (net of
discount of $2,624 at July 3, 1999 and $2,770 at
January 2, 1999) ................................... 11,947 11,801
Series 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; 145,058 shares issued
and 144,546 shares outstanding ..................... 1 1
Nonvoting; 500,000 shares authorized; 58,612 shares issued
and 56,842 shares outstanding ...................... 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000 shares issued
and 16,833 shares outstanding ...................... -- --
Treasury stock: 512 shares Class B Voting Common
Stock; 1,770 shares Class B Nonvoting Common
Stock; and 167 shares Class C Nonvoting Common
Stock .............................................. (296) (280)
Additional paid-in capital ............................ 43,502 45,611
Warrants .............................................. 3,511 3,511
Retained earnings (deficit) ........................... (183,801) (185,923)
Accumulated other comprehensive loss .................. (536) (83)
--------- ----------
Total stockholders' equity (deficit) ...................... (120,667) (120,357)
--------- ----------
Total liabilities and stockholders' equity (deficit) ...... $ 258,409 $ 255,317
========= ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-23
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
-------- -------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales ......................... $ 82,392 $ 69,586 $ 159,852 $ 136,317
Cost of goods sold ................ 58,259 50,768 112,782 100,016
-------- -------- --------- ---------
Gross margin ...................... 24,133 18,818 47,070 36,301
Operating expenses:
Selling ....................... 4,323 3,487 8,553 7,112
General and administrative .... 5,845 4,400 11,883 8,799
Research and development ...... 633 347 1,175 743
Amortization of intangibles ... 1,275 828 2,550 1,708
Other ......................... 711 1,230 1,667 2,363
-------- -------- --------- ---------
Operating income .................. 11,346 8,526 21,242 15,576
Other income and expense:
Loss on disposal of property
and equipment ............... 169 297 778 430
-------- -------- --------- ---------
Income before interest and income
taxes .......................... 11,177 8,229 20,464 15,146
Interest:
Expense ....................... (8,736) (8,776) (18,022) (17,441)
Income ........................ 62 337 162 575
-------- -------- --------- ---------
Income (loss) before income taxes . 2,503 (210) 2,604 (1,720)
Income tax expense ................ 289 13 482 26
-------- -------- --------- ---------
Net income (loss) ................. 2,214 (223) 2,122 (1,746)
Preferred stock dividends ......... (998) (869) (1,962) (1,783)
Amortization of preferred stock
discount ........................ (73) (73) (146) (146)
-------- -------- --------- ---------
Net income (loss) attributable to
Common Stockholders ............... $ 1,143 $ (1,165) $ 14 $ (3,675)
======== ======== ========= =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-24
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
TWENTY-SIX WEEKS ENDED
----------------------
JULY 3, JUNE 27,
1999 1998
--------- ---------
(Unaudited)
OPERATING ACTIVITIES
Net income (loss) .................................... $ 2,122 $ (1,746)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation ................................... 11,560 10,075
Non-cash interest expense ...................... 872 884
Amortization ................................... 2,550 1,708
Interest funded by assets held in trust ........ 6,427 6,393
Loss on sale of property and equipment ......... 778 430
Changes in operating assets and liabilities:
Accounts receivable, net .................... (11,058) (5,565)
Inventories ................................. (636) 1,950
Prepaid expenses and other receivables ...... (910) 534
Other assets ................................ (126) (169)
Payables and accrued expenses ............... 4,557 (114)
--------- ---------
Net cash provided by operating activities ............ 16,136 14,380
INVESTING ACTIVITIES
Additions to property and equipment .................. (13,461) (7,854)
Proceeds from disposal of property and equipment ..... 408 95
--------- ---------
Net cash used for investing activities ............... (13,053) (7,759)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ................... 7,672 --
Payments on long-term borrowings ..................... (10,058) (6,524)
Payment of refinancing fees .......................... -- (46)
Purchase of stock from management .................... (16) (59)
--------- ---------
Net cash used for financing activities ............... (2,402) (6,629)
Effect of exchange rate changes on cash .............. (6) --
--------- ---------
Net increase (decrease) in cash and cash
equivalents .......................................... 675 (8)
Cash and cash equivalents at beginning of period ..... 2,318 2,688
--------- ---------
Cash and cash equivalents at end of period ........... $ 2,993 $ 2,680
========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-25
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
(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: Berry Iowa Corporation, Berry
Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare
Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc., Venture
Packaging Midwest, Inc., Venture Packaging Southeast, Inc., NIM Holdings Limited
("NIM Holdings"), Norwich Injection Moulders Limited ("Norwich Moulders"), and
Knight Plastics, 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
January 2, 1999.
Certain amounts on the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
2. ACQUISITIONS
On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of
Berry, acquired all of the capital stock of Norwich Moulders of Norwich, England
for aggregate consideration of approximately $14.0 million. The purchase was
primarily financed through Berry's credit facility (see Note 3). The operations
of Norwich Moulders are included in Berry's operations since the acquisition
date using the purchase method of accounting.
On October 16, 1998, Knight Plastics, Inc. ("Knight"), a newly formed
wholly-owned subsidiary of Berry, acquired substantially all of the assets of
the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for
aggregate consideration of approximately $18.0 million. The purchase was
financed through Berry's revolving line of credit.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Norwich Moulders and Knight acquisitions
occurred on December 28, 1997.
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
JUNE 27, 1998 JUNE 27, 1998
-------------------- ----------------------
Net sales ................. $ 78,976 $ 155,012
Loss before income taxes .. (646) (2,956)
Net loss .................. (717) (3,098)
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 effects.
F-26
<PAGE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
JULY 3, JANUARY 2,
1999 1999
-------- ------------
Holding 12.50% Senior Secured Notes ............... $105,000 $ 105,000
Berry 12.25% Senior Subordinated Notes ............ 125,000 125,000
Term loans ........................................ 61,151 71,243
Revolving line of credit .......................... 23,835 16,162
Nevada Industrial Revenue Bonds ................... 4,000 4,500
Capital leases .................................... 740 561
Debt premium, net ................................. 758 832
-------- ------------
320,484 323,298
Less current portion of long-term debt ............ 20,297 19,388
-------- ------------
$300,187 $ 303,910
======== ============
The current portion of long-term debt consists of $19.6 million of
quarterly installments on the term loans, a $0.5 million repayment of the
industrial bonds and the monthly principal payments related to capital lease
obligations.
The debt under our credit facility is guaranteed by BPC Holding and
substantially all of our subsidiaries. As of July 3, 1999, the credit facility
provided an aggregate commitment of about $119.7 million including (i) $50.0
million revolving line of credit (which was increased by $20.0 million
concurrently with the Cardinal acquisition - See Note 7), subject to a borrowing
base formula; (ii) (pound)1.5 million revolving line of credit, subject to a
borrowing base ("UK Revolver"); (iii) $56.0 million term loan facility; (iv)
(pound)3.6 million term loan facility ("UK Term Loan"); and (v) $5.6 million
standby letter of credit facility to support our and our subsidiaries'
obligations under our Nevada Industrial Revenue Bonds. At July 3, 1999, we had
unused borrowing capacity under our credit facility's revolving line of credit
of about $28.9 million.
The credit facility matures on January 21, 2002 unless previously
terminated by us or by the lenders upon an Event of Default as defined in the
Security Agreement. The term loan facilities require periodic principal
payments, varying in amount through the maturity of the facility. Such periodic
payments will aggregate about $19.0 million for fiscal 1999 and about $19.9
million for fiscal 2000. Interest on borrowings under the credit facility is
based on either 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 LIBOR (adjusted for reserves) plus an applicable margin of 2.0%, at
our option. Following receipt of the quarterly financial statements, the agent
under our credit facility has 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 Berry Plastics and our 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
debt, and (iii) limitations on capital expenditures.
4. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes financial information of Holding's wholly-owned
subsidiary, Berry Plastics Corporation, and its subsidiaries.
F-27
<PAGE>
JULY 3, JANUARY 2,
1999 1999
--------- ----------
CONSOLIDATED BALANCE SHEETS
Current assets ...................................... $ 78,436 $ 65,590
Property and equipment - net of accumulated
depreciation ...................................... 120,271 120,005
Other noncurrent assets ............................. 55,624 58,716
Current liabilities ................................. 65,839 60,210
Noncurrent liabilities .............................. 205,948 210,093
Equity (deficit) .................................... (17,456) (25,992)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------- -----------------------
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales ............................ $ 82,392 $ 69,586 $ 159,851 $ 136,317
Cost of goods sold ................... 58,259 50,768 112,782 100,016
Income before income taxes ........... 5,946 2,888 9,465 4,571
Net income ........................... 5,655 2,875 8,989 4,546
</TABLE>
The following summarizes parent company only financial information of
Berry:
JULY 3, JANUARY 2,
1999 1999
--------- ----------
CONSOLIDATED BALANCE SHEETS
Current assets ...................................... $ 40,328 $ 28,579
Property and equipment - net of accumulated
depreciation ........................................ 48,937 48,220
Investment in/due from subsidiaries ................. 122,100 120,230
Other noncurrent assets ............................. 14,947 15,629
Current liabilities ................................. 44,970 41,325
Noncurrent liabilities .............................. 198,798 197,325
Equity (deficit) .................................... (17,456) (25,992)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales .............................. $ 40,675 $ 37,263 $ 76,207 $ 72,408
Cost of goods sold ..................... 26,187 24,375 48,642 47,554
Income before income taxes ............. 5,946 2,888 9,465 4,571
Net income ............................. 5,655 2,875 8,989 4,546
</TABLE>
5. SEGMENT REPORTING
The Company has two reportable segments: plastic packaging products and
plastic housewares products. The Company's plastic packaging business consists
of three primary market groups: aerosol overcaps, containers, and plastic drink
cups. The Company's plastic housewares business consists of semi-disposable
plastic housewares and plastic lawn and garden products, sold primarily through
major national retail marketers and national chain stores.
The Company evaluates performance and allocates resources based on
operating income before depreciation and amortization of intangibles adjusted to
exclude (i) market value adjustment related to stock options, (ii) other
non-recurring or
F-28
<PAGE>
"one-time" expenses, (iii) management fees and reimbursed expenses paid to First
Atlantic Capital, Ltd. and (iv) certain legal expenses associated with unusual
litigation ("Adjusted EBITDA"). The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. The Company's reportable segments are business units that
offer different products to different markets.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------ ------------------------
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales:
Plastic packaging products ............. $ 75,279 $ 62,259 $ 140,443 $ 120,897
Plastic housewares products ............ 7,113 7,327 19,409 15,420
Adjusted EBITDA:
Plastic packaging products ............. 18,349 14,572 33,912 27,172
Plastic housewares products ............ 982 1,317 3,741 2,896
Reconciliation of Adjusted EBITDA to
income (loss) before income taxes:
Adjusted EBITDA for reportable
segments ............................. $ 19,331 $ 15,889 $ 37,653 $ 30,068
Net interest expense ................... (8,674) (8,439) (17,860) (16,866)
Depreciation ........................... (5,687) (5,187) (11,560) (10,075)
Amortization ........................... (1,275) (828) (2,549) (1,708)
Loss on disposal of property
and equipment ........................ (169) (297) (778) (430)
One-time expenses ...................... (711) (1,120) (1,667) (2,264)
Stock option market value
adjustment ........................... (94) (10) (198) (10)
Management fees ........................ (218) (218) (437) (435)
---------- ---------- ---------- ----------
Income (loss) before income
taxes ................................ $ 2,503 $ (210) $ 2,604 $ (1,720)
========== ========== ========== ==========
</TABLE>
6. COMPREHENSIVE INCOME
Comprehensive income (loss) was $1.7 million and $(0.2) million for the
thirteen weeks ended July 3, 1999 and June 27, 1998, respectively, and $1.6
million and $(1.7) million for the twenty-six weeks ended July 3, 1999 and June
27, 1998, respectively.
7. SUBSEQUENT EVENTS
On July 6, 1999, Berry acquired all of the outstanding capital stock of
CPI Holding Corporation, the parent company of Cardinal Packaging, Inc., for
aggregate consideration of approximately $72.0 million, including acquisition
related costs. The purchase was financed through the issuance by Berry of $75.0
million of 11% Senior Subordinated Notes.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CPI Holding, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of CPI
Holding, Inc. and Subsidiary as of November 30, 1998 and 1997, and the related
consolidated statements of income, mandatorily redeemable preferred stock and
shareholders' equity, and cash flows for the years ended November 30, 1998 and
1997 and for the period January 26, 1996 (Date of Acquisition) to November 30,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements 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 consolidated 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 consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CPI Holding, Inc. and
Subsidiary as of November 30, 1998 and 1997, and the results of their operations
and their cash flows for the years ended November 30, 1998 and 1997 and for the
period January 26, 1996 (Date of Acquisition) to November 30, 1996 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
June 11, 1999
F-30
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS (NOTE 4) 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 101,748 $ 18,624
Accounts receivable, less allowances of $163,000 and
$72,000 .......................................... 5,397,359 5,260,109
Inventories ........................................ 7,553,127 7,878,158
Prepaid expenses ................................... 579,064 455,492
Prepaid income taxes ............................... 428,019 50,600
Deferred income taxes (Note 7) ..................... 305,000 215,000
----------- -----------
Total current assets ............................. 14,364,317 13,877,983
----------- -----------
PROPERTY AND EQUIPMENT:
Land ............................................... 295,000 295,000
Building and improvements .......................... 3,597,818 3,526,034
Machinery and equipment ............................ 24,587,601 22,222,100
Molds .............................................. 12,486,433 10,720,280
----------- -----------
Total ............................................ 40,963,852 36,763,414
----------- -----------
Less accumulated depreciation and amortization ..... 9,271,295 5,670,397
----------- -----------
Property and equipment, net ........................ 31,692,557 31,093,017
----------- -----------
GOODWILL, less accumulated amortization of $1,078,511
in 1998 and $734,756 in 1997 ..................... 14,147,546 14,491,301
----------- -----------
OTHER ASSETS (Note 3) ................................. 1,004,109 1,267,964
----------- -----------
TOTAL ................................................. $61,208,529 $60,730,265
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
F-31
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4) .......... $ 4,060,780 $ 3,519,064
Current portion of long service executive
nonqualified pension (Note 5) ....................... 420,310 380,000
Accounts payable .................................... 2,595,014 2,922,093
Accrued liabilities ................................. 547,524 881,507
------------ ------------
Total current liabilities ......................... 7,623,628 7,702,664
LONG-TERM DEBT, less current portion (Note 4) .......... 28,388,825 28,132,857
LONG SERVICE EXECUTIVE NONQUALIFIED PENSION, less
current portion (Note 5) ............................ 544,424 968,000
DEFERRED INCOME TAXES (Note 7) ......................... 5,182,000 4,611,000
Total liabilities ................................. 41,738,877 41,414,521
------------ ------------
MANDATORILY REDEEMABLE PREFERRED STOCK (Note 9) ........ 18,761,668 17,171,325
------------ ------------
SHAREHOLDERS' EQUITY (Notes 4 and 10):
Common stock:
Class A (voting), $.01 par value, authorized
500,000 shares, 89,281.5 in 1998 and 90,114.8 in
1997 issued and outstanding ..................... 893 901
Class B (non-voting), $.01 par value, authorized
300,000 shares, 124,760 issued and outstanding .. 1,247 1,247
Class C (non-voting), $.01 par value, authorized
200,000 shares, 90,791.6 issued and outstanding . 908 908
Additional paid-in capital ........................ 883,848 2,392,768
ESOP receivable (Note 8) .......................... (113,912) (186,405)
Stock subscription receivable ..................... (65,000) (65,000)
------------ ------------
Total shareholders' equity ....................... 707,984 2,144,419
------------ ------------
TOTAL .................................................. $ 61,208,529 $ 60,730,265
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
F-32
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD
JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
(10 MONTHS)
<S> <C> <C> <C>
NET SALES ............................... $ 53,970,517 $ 54,387,787 $ 45,416,838
COST OF SALES ........................... 43,066,403 42,421,263 34,275,302
------------ ------------ ------------
GROSS PROFIT ............................ 10,904,114 11,966,524 11,141,536
------------ ------------ ------------
OPERATING EXPENSES:
Selling .............................. 3,087,033 3,113,293 2,790,338
General and administrative (Note 11) . 3,176,276 2,949,312 2,164,232
ESOP contribution (Note 8) ........... 26,720 30,999 209,780
------------ ------------ ------------
Total operating expenses .......... 6,290,029 6,093,604 5,164,350
------------ ------------ ------------
INCOME FROM OPERATIONS .................. 4,614,085 5,872,920 5,977,186
OTHER INCOME (EXPENSE):
Interest expense ..................... (3,383,736) (3,531,327) (3,188,345)
Miscellaneous, net ................... 5,602 (8,225) 1,500
------------ ------------ ------------
INCOME BEFORE INCOME TAXES .............. 1,235,951 2,333,368 2,790,341
INCOME TAXES (Note 7) ................... 438,700 797,000 1,056,000
------------ ------------ ------------
NET INCOME .............................. $ 797,251 $ 1,536,368 $ 1,734,341
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
F-33
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
MANDATORILY REDEEMABLE -----------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
-------- ------------ -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 1, 1997 .................... 141,134 $ 17,171,325 305,666 $ 3,056 $ 2,392,768
REDEMPTION OF STOCK:
Common stock ............................ (833) (8) (22,145)
Preferred stock ......................... (167) (20,347)
NET INCOME .................................... $ 797,251
TAX BENEFIT OF DIVIDENDS
PAID TO ESOP FOR
UNALLOCATED SHARES ...................... 26,664
REPAYMENT OF ESOP
RECEIVABLE ..............................
DIVIDENDS:
Paid ($8.75 per Class A Preferred Shares
outstanding) ......................... (700,000)
Increase in accumulated but not declared
dividends on mandatorily redeemable
preferred stock ..................... 2,310,690 (1,486,775) (823,915)
-------- ------------ -------- ------- ----------- ---------
BALANCE, NOVEMBER 30, 1998 .................... 140,967 $ 18,761,668 304,833 $ 3,048 $ 883,848 --
======== ============ ======== ======= =========== =========
<CAPTION>
SHAREHOLDERS' EQUITY
-------------------------------------------
STOCK TOTAL
ESOP SUBSCRIPTION SHAREHOLDERS'
RECEIVABLE RECEIVABLE EQUITY
---------- ------------ -------------
<S> <C> <C> <C>
BALANCE - DECEMBER 1, 1997 .................... $ (186,405) $ (65,000) $ 2,144,419
REDEMPTION OF STOCK:
Common stock ............................ (22,153)
Preferred stock .........................
NET INCOME .................................... 797,251
TAX BENEFIT OF DIVIDENDS
PAID TO ESOP FOR
UNALLOCATED SHARES ...................... 26,664
REPAYMENT OF ESOP
RECEIVABLE .............................. 72,493 72,493
DIVIDENDS:
Paid ($8.75 per Class A Preferred Shares
outstanding) .........................
Increase in accumulated but not declared
dividends on mandatorily redeemable
preferred stock ..................... (2,310,690)
---------- ------------ -------------
BALANCE, NOVEMBER 30, 1998 .................... $ (113,912) $ (65,000) $ 707,984
========== ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
(Continued)
F-34
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
MANDATORILY REDEEMABLE -----------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ---------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------- ------------ ------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 1, 1996 ........................... 140,867 $ 15,872,343 304,333 $3,043 $ 2,988,955
ISSUANCE OF STOCK:
Common stock .................................. 1,333 13 13,318
Preferred stock ................................ 267 26,668
NET INCOME ........................................... $ 1,536,368
TAX BENEFIT OF DIVIDENDS
PAID TO ESOP FOR
UNALLOCATED SHARES ............................. 70,000
REPAYMENT OF ESOP
RECEIVABLE .....................................
DIVIDENDS:
Paid ($11.97 per Class A Preferred Shares
outstanding ) ............................... (943,559)
Increase in accumulated but not
declared dividends on mandatorily redeemable
preferred stock ............................ 2,215,873 (609,505) (1,606,368)
------- ------------ ------- ------ ----------- -----------
BALANCE, NOVEMBER 30, 1997 ........................... 141,134 $ 17,171,325 305,666 $3,056 $ 2,392,768 --
======= ============ ======= ====== =========== ===========
<CAPTION>
SHAREHOLDERS' EQUITY
-------------------------------------------
STOCK TOTAL
ESOP SUBSCRIPTION SHAREHOLDERS'
RECEIVABLE RECEIVABLE EQUITY
---------- ------------ -------------
<S> <C> <C> <C>
BALANCE - DECEMBER 1, 1996 ........................... $ (360,000) $ (65,000) $ 2,566,998
ISSUANCE OF STOCK:
Common stock .................................. 13,331
Preferred stock ................................
NET INCOME ........................................... $ 1,536,368
TAX BENEFIT OF DIVIDENDS
PAID TO ESOP FOR
UNALLOCATED SHARES ............................. 70,000
REPAYMENT OF ESOP
RECEIVABLE ..................................... $ 173,595 173,595
DIVIDENDS:
Paid ($11.97 per Class A Preferred Shares
outstanding ) ...............................
Increase in accumulated but not
declared dividends on mandatorily redeemable
preferred stock ............................ (2,215,873)
---------- ------------ -------------
BALANCE, NOVEMBER 30, 1997 ........................... $ (186,405) $ (65,000) $ 2,144,419
========== ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
(Continued)
F-35
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
MANDATORILY REDEEMABLE ----------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------- ------------ ------- ------ -----------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF STOCK:
Class A Preferred ....................................... 80,000 $ 8,000,000
Class B Preferred ....................................... 60,000 6,000,000
Class A Common .......................................... 88,782 $ 888 $ 886,928
Class B Common .......................................... 124,760 1,248 1,246,352
Class C Common .......................................... 86,458 864 863,720
ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE
DEBT PAYMENTS ...........................................
ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS:
Class C Common .......................................... 4,333 43 43,289
Class B Preferred ....................................... 867 86,668
NET INCOME ....................................................
REDUCTION OF ESOP RECEIVABLE ..................................
DIVIDENDS:
Increase in accumulated but not
declared dividends on redeemable preferred stock .... 1,785,675 (51,334)
------- ----------- ------- ------ -----------
BALANCE, NOVEMBER 30, 1996 .................................... 140,867 $15,872,343 304,833 $3,043 $ 2,988,955
======= =========== ======= ====== ===========
<CAPTION>
SHAREHOLDERS' EQUITY
----------------------------------------------------------
STOCK TOTAL
RETAINED ESOP SUBSCRIPTION SHAREHOLDERS'
EARNINGS RECEIVABLE RECEIVABLE EQUITY
----------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
ISSUANCE OF STOCK:
Class A Preferred .......................................
Class B Preferred .......................................
Class A Common .......................................... $ 887,816
Class B Common .......................................... 1,247,600
Class C Common .......................................... 864,584
ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE
DEBT PAYMENTS ........................................... $ (540,000) (540,000)
ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS:
Class C Common .......................................... $ (21,666) 21,666
Class B Preferred ....................................... (43,334) (43,334)
NET INCOME .................................................... $ 1,734,341 1,734,341
REDUCTION OF ESOP RECEIVABLE .................................. 180,000 180,000
DIVIDENDS:
Increase in accumulated but not
declared dividends on redeemable preferred stock .... (1,734,341) (1,785,675)
----------- ---------- ------------ -------------
BALANCE, NOVEMBER 30, 1996 .................................... -- $ (360,000) $ (65,000) $ 2,566,998
=========== ========== ============ =============
</TABLE>
(Concluded)
F-36
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD
JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ------------
(10 MONTHS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 797,251 $ 1,536,368 $ 1,734,341
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 4,167,042 3,849,775 2,954,524
(Gain) loss on disposals of property and
equipment ................................................................ (5,602) 8,225 (1,500)
Deferred income taxes .................................................... 481,000 20,000 303,000
Tax benefit of dividends paid to ESOP .................................... 26,664 70,000
Change in operating assets and liabilities:
Accounts receivable .................................................... (137,250) 113,169 346,751
Inventories ............................................................ 325,031 344,427 (1,908,856)
Prepaid expenses, prepaid income taxes, and
deposits ............................................................. (444,735) 145,576 (388,988)
Accounts payable ....................................................... (327,079) (1,187,703) (501,026)
Accrued liabilities .................................................... (333,983) (241,057) 497,245
Income taxes payable ................................................... -- (203,900) 283,300
----------- ----------- ------------
Net cash provided by operating activities ................................... 4,548,339 4,454,880 3,318,791
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of stock of Cardinal Packaging, Inc. ...............................
along with land and buildings from a related
partnership, including acquisition costs and net
of cash received of $28,946 ............................................... -- -- (39,363,708)
Purchase of property and equipment .......................................... (4,207,586) (3,160,719) (2,882,380)
Proceeds from disposal of property and equipment ............................ 7,500 2,500 1,500
Investment in patents ....................................................... (9,540) -- --
----------- ----------- ------------
Net cash used in investing activities ....................................... (4,209,626) (3,158,219) (42,244,588)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred dividends paid .................................................... (700,000) (943,559) --
Repayment of ESOP receivable ................................................ 72,493 173,595 --
Proceeds from issuance of (payments for
redemption of):
Common Stock ............................................................. (22,153) 13,331 3,021,666
Mandatorily redeemable preferred stock ...................................... (20,347) 26,668 6,043,334
Proceeds from long-term debt ................................................ 4,190,822 2,508,745 30,993,349
Payments on long-term debt, and long service
executive nonqualified pension ........................................... (3,776,404) (3,112,774) (1,076,595)
----------- ----------- ------------
Net cash (used in) provided by financing activities ......................... (255,589) (1,333,994) 38,981,754
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................... 83,124 (37,333) 55,957
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................................... 18,624 55,957 --
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR ......................................... $ 101,748 $ 18,624 $ 55,957
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes ................................................................ $ 335,119 $ 925,942 $ 415,525
----------- ----------- ------------
Interest .................................................................... $ 3,776,313 $ 3,384,339 $ 2,240,510
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company received stock subscriptions of $65,000 in 1996
In conjunction with the acquisition in 1996, the Company recorded liabilities
to the former shareholders totaling $1,960,000 and issued preferred stock
valued at $8,000,000 in exchange for previously issued common shares of
Cardinal .................................................................
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
F-37
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD
JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
1. NATURE OF OPERATIONS AND ORGANIZATION
CPI Holding, Inc. ("CPI" or the "Company") was organized under the laws of
the State of Delaware for the purpose of acquiring an injection molding
manufacturer. On January 26, 1996, CPI acquired 100 percent of the common
stock of Cardinal Packaging, Inc. ("Cardinal"). The Company, through its
wholly-owned subsidiary, Cardinal, is a manufacturer of rigid thin-walled
polyethylene and polypropylene containers and sells its products to customers
located throughout the United States and Canada. The majority of the
Company's products are used in the frozen dessert and refrigerated product
industries in the form of premium round containers. In addition, the Company
provides containers for selected industrial customers and seasonal retailers.
The Company maintains ongoing credit evaluations of its customers and
generally does not require collateral. The Company provides reserves for
potential credit losses and such losses historically have not exceeded
management's estimates. The Company is headquartered in Streetsboro, Ohio.
Additional manufacturing facilities are located in Minneapolis, Minnesota and
Ontario, California.
CPI acquired, along with land and buildings previously owned by a related
partnership, 70 percent of the common stock of Cardinal for $39,392,654,
including acquisition costs. The remaining 30 percent of the common stock of
Cardinal was acquired from the Cardinal Packaging, Inc. Employee Stock
Ownership Plan ("ESOP") in exchange for 80,000 shares of CPI Class A
redeemable preferred stock valued at $8,000,000. In addition, and in
conjunction with the acquisition, the Company entered into an agreement to
pay the sellers $2,460,000 (which includes imputed interest of $500,000) in
monthly payments through January 2001 (see Note 5).
The total purchase price, including acquisition costs, has been allocated to
the assets acquired and liabilities assumed based on their estimated fair
values, except for the portion related to the ESOP's ownership which is
accounted for at historical costs, using the purchase method of accounting.
In addition, goodwill was reduced by $745,000 because of the deferred tax
asset recorded for the future tax benefits of the long service executive
nonqualified pension payments (See Note 7). Accordingly, the amounts recorded
for this acquisition were as follows:
Current Assets, including $28,946 of cash .................... $12,435,461
Property ..................................................... 30,557,656
Other assets ................................................. 1,743,858
-----------
Total assets acquired .................................... 44,736,975
Liabilities assumed .......................................... 11,355,378
-----------
Net assets acquired .......................................... 33,381,597
Goodwill ..................................................... 15,226,057
-----------
Total purchase price, including acquisition costs ............ $48,607,654
===========
As a result of the acquisition in 1996, the inventory on January 26, 1996 was
increased by $296,712 based on the fair market value of the acquired inventory
at the date of acquisition. Cost of sales for the period January 26, 1996 (date
of acquisition) to November 30, 1996 includes $296,712 related to this
adjustment.
F-38
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION--The consolidated financial statements
include the accounts of CPI and its wholly-owned subsidiary. All significant
intercompany balances and transactions are eliminated in consolidation.
USE OF ESTIMATES--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the
financial statement date and the reported amounts of revenues and expenses
for the reporting period. Actual amounts could differ from those estimates.
REVENUE RECOGNITION--Sales and cost of sales are recognized upon shipment of
product.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments with original maturities of three months or less, when purchased,
to be cash equivalents.
INVENTORIES--Inventories are valued at the lower of cost, using the first-in,
first-out basis, or market. Inventories consist of the following at November
30:
1998 1997
---------- ----------
Raw materials ..................... $2,433,849 $1,700,765
Finished Good ..................... 5,119,278 6,177,393
---------- ----------
Total ............................. $7,553,127 $7,878,158
========== ==========
PROPERTY AND EQUIPMENT--Property and equipment is stated at cost. Additions,
renewals and betterments are capitalized; maintenance and repairs, which do
not extend the useful life of the asset, are expensed as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from ten to 40 years for buildings,
related building improvements and leasehold improvements, 12 to 15 years for
manufacturing machinery and equipment, seven years for molds, five years for
office furniture and fixtures, and three years for vehicles. Equipment under
capitalized leases is amortized over the terms of the leases, which do not
exceed the estimated useful life of the leased equipment.
GOODWILL AND INTANGIBLE ASSETS--The Company's intangible assets consist of
goodwill, deferred financing costs, and patent costs. Amortization is
recorded over the estimated economic lives. Goodwill is amortized over 40
years. Deferred financing costs are amortized over the terms of the related
loans with the amortization included in interest expense. Patent costs are
amortized over 17 years, beginning when the patent approval is obtained.
The Company evaluates the unamortized cost of these intangible assets to
determine if the carrying amount exceeds the recoverable amount and to record
an impairment loss, if necessary. This determination is based on an
evaluation of such factors as the occurrence of a significant event, a
significant change in the environment in which the business operates or,
primarily for goodwill, the expected undiscounted future net cash flows.
INCOME TAXES--Deferred income taxes are recognized for the expected future
tax consequences of events that have been recognized in the financial
statements or tax returns. Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
various assets and liabilities using enacted rates in effect for the year in
which the differences are expected to reverse.
NEW ACCOUNTING PRONOUNCEMENTS--In 1998, Cardinal adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," and SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". SFAS No. 130 established
standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. SFAS No.
131 requires that a public business enterprise report financial and
F-39
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
descriptive information about its reportable operating segments such as a
measure of segment profit or loss, certain specific revenue and expense
items, and segment assets. SFAS No. 132 standardized the disclosure
requirements for pensions and other postretirement benefits. The adoption of
these statements did not have a material impact on the Company's financial
statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. The Company has not
completed its evaluation of this statement but does not anticipate a material
impact on the financial statements from the adoption of this accounting
standard.
RECLASSIFICATIONS--Certain reclassifications were made to the 1996 and 1997
financial statements to conform to the presentation used in the 1998
financial statements.
3. OTHER ASSETS
Other assets consist of the following at November 30:
1998 1997
---------- ----------
Deferred financing costs, less accumulated
amortization of $607,139 in 1998 and
$392,855 in 1997 .............................. $ 892,861 $1,107,145
Deposits ......................................... 65,106 115,062
Patents, less accumulated amortization of
$18,566 in 1998 and $15,711 in 1997 ........... 46,142 39,457
Miscellaneous .................................... -- 6,300
---------- ----------
Total ...................................... $1,004,109 $1,267,964
========== ==========
4. LONG-TERM DEBT
Long-term debt consists of the following as of November 30:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Note payable to financial institution with quarterly
principal payments at scheduled amounts, plus interest at
a variable rate (7.8125 percent as of November 30,1998),
due March 1, 2001 ........................................ $10,500,000 $13,500,000
Note payable to financial institution with quarterly
principal payments at scheduled amounts beginning in 2001,
plus interest at a variable rate (8.3125 percent as of
November 30,1998), due March 1, 2001 ..................... 10,000,000 10,000,000
Revolving credit facility payable to financial institution
with interest at a variable rate (7.8125 percent as of
November 30,1998), due March 1, 2003 ..................... 7,002,522 5,615,116
Capital expansion note payable to financial institution
with quarterly interest payments at a variable rate
(8.3125 percent as of November 30, 1998), fifteen equal
quarterly principal payments, plus interest, beginning
September 1, 1999, due March 2003 ........................ 4,681,646 1,886,980
</TABLE>
F-40
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ESOP loan to bank with semi-annual principal payments of
$90,000, plus monthly interest (6.5875 percent as of
November 30, 1998) at 85 percent of the bank's prime rate,
through January 2000; collateralized by the common stock
of the Company ........................................... 113,912 186,405
Note payable to financing company with monthly principal
and interest payments of $3,690, through October 1999;
interest at 6.755 percent a year, collateralized by
specific equipment ....................................... 39,252 79,399
Other notes payable to banks paid off in 1998 ........... -- 3,481
Capital lease obligations for equipment, payable to
various banks and leasing companies in aggregate monthly
principal and interest payments of $20,583 through July
2000; interest at 6.75 percent to 10.85 percent a year;
collateralized by equipment with an aggregate net book
value of $810,344 and $1,454,135 as of November 30, 1998
and November 30, 1997, respectively ...................... 112,273 380,540
----------- -----------
Total .................................................... 32,449,605 31,651,921
Less current portion ..................................... 4,060,780 3,519,064
----------- -----------
Amount due after one year ................................ $28,388,825 $28,132,857
=========== ===========
</TABLE>
The notes payable, revolving credit facility, and capital expansion note are
collateralized by substantially all of the assets of the Company. The credit
agreement includes financial covenants with respect to capital expenditure
limits; rent payments under operating leases; earnings before depreciation,
amortization, interest and income taxes; and fixed charge and interest
coverage ratios. As of November 30, 1998, the Company has violated certain of
these covenants related to minimum EBITDA, as defined, fixed charges coverage
ratio, interest coverage ratio, and maximum capital expenditures, for which
the lender has waived the covenant violations.
At November 30, 1998, required annual principal payments on long-term debt
are:
YEAR ENDING NOVEMBER 30,
1999........................................ $4,060,780
2000........................................ 5,765,206
2001........................................ 6,248,439
2002........................................ 6,248,439
2003........................................ 10,126,741
-----------
Total....................................... $32,449,605
===========
F-41
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum lease payments under capital leases, included above, as of
November 30, 1998 are as follows:
YEAR ENDING NOVEMBER 30,
1999........................................ $109,337
2000........................................ 7,080
--------
Total minimum lease payments................ 116,417
Less amount representing interest........... 4,144
--------
Present value of capital lease obligations
included with long-term debt at November
30, 1998................................. $112,273
========
5. LONG SERVICE EXECUTIVE NONQUALIFIED PENSION AND CONSULTING AGREEMENTS
Under the terms of the purchase agreement for the common stock of Cardinal,
the Company agreed to make payments to the previous shareholders of $41,000 a
month through January 2001 for long service executive nonqualified pension
payments. These future payments have been recorded as a liability at their
net present value. In addition, the Company paid $20,000 a year to the
previous shareholders under a consulting agreement from February 1996 through
January 1998. Consulting expense was $3,333 for 1998, $20,000 for 1997, and
$16,660 for the period January 26, 1996 to November 30, 1996.
At November 30, 1998, future payments under the long service executive
nonqualified pension agreement are as follows:
YEAR ENDING NOVEMBER 30,
1999........................................ $492,000
2000........................................ 492,000
2001........................................ 82,000
---------
Total Payments.............................. 1,066,000
Less amount representing interest (at 9.25
percent).................................. 101,266
---------
Present value of long service executive
nonqualified pension...................... 964,734
Current portion............................. 420,310
---------
Noncurrent portion.......................... $544,424
=========
6. OPERATING LEASES
The Company leases specific equipment, vehicles, and its Minneapolis,
Minnesota and Ontario, California office and plant facilities under operating
leases from unrelated parties. These leases expire at various dates through
November 2003.
Total rent expense, including month-to-month rentals, was $1,588,000 for
1998, $1,538,000 for 1997.
Future minimum lease payments under noncancellable operating leases as of
November 30, 1998 are:
YEAR ENDING NOVEMBER 30,
1999........................................ $1,479,200
2000........................................ 1,218,900
2001........................................ 999,300
2002........................................ 945,300
2003........................................ 855,600
----------
Total....................................... $5,498,300
==========
F-42
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The provision (benefit) for income taxes consists of:
1998 1997 1996
--------- --------- -----------
(10 MONTHS)
Federal:
Current .................. $(122,300) $ 649,000 $ 618,000
Deferred ................. 267,000 31,000 245,000
State and local:
Current .................. 80,000 128,000 135,000
Deferred ................. 214,000 (11,000) 58,000
--------- --------- -----------
Total ....................... $ 438,700 $ 797,000 $ 1,056,000
========= ========= ===========
The consolidated tax provision differs from the tax provision computed at the
statutory United States tax rate of approximately 34 percent for the
following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- -----------
<S> <C> <C> <C>
Tax provision at statutory federal rate . $ 420,000 $ 785,000 $ 949,000
Amortization of goodwill ............... 117,000 136,000 114,000
Dividends paid to Employee Stock
Ownership Plan
on allocated shares ................. (163,000) (189,000) --
State and local income taxes ........... 294,000 117,000 193,000
Other .................................. (229,300) (52,000) (200,000)
--------- --------- -----------
Total ............................ $ 438,700 $ 797,000 $ 1,056,000
========= ========= ===========
</TABLE>
The tax benefit of the deductible portion of the Class A preferred dividends
paid on the unallocated shares held by the ESOP that were utilized by the
ESOP to make debt payments was charged directly to retained earnings.
The approximate tax effect of each type of temporary difference that gave
rise to the Company's deferred tax assets and liabilities as of November 30,
is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current deferred income tax assets (liabilities):
Inventories ..................................... $ 73,000 $ 53,000
(Prepaid) accrued state income taxes ............ 6,000 (13,000)
Accrued liabilities ............................. 4,000 3,000
Long service executive nonqualified pension -
current ....................................... 160,000 145,000
Allowance for doubtful accounts ............... 62,000 27,000
----------- -----------
305,000 215,000
----------- -----------
Noncurrent deferred income tax assets (liabilities):
Basis of property ............................... (5,878,000) (5,509,000)
Long service executive nonqualified pension -
noncurrent ...................................... 206,000 367,000
Net operating loss carryforward ................. 102,000
Alternative minimum tax credit carryforwards .... 388,000 531,000
----------- -----------
(5,182,000) (4,611,000)
----------- -----------
Net deferred income tax liability .................. $(4,877,000) $(4,396,000)
=========== ===========
</TABLE>
F-43
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE STOCK OWNERSHIP PLAN
In 1988, Cardinal established an employee stock ownership plan. On December
14, 1989, the ESOP used $1,800,000 of proceeds from a bank loan to purchase
30 percent of Cardinal's common stock. In conjunction with the acquisition of
Cardinal by CPI in which the ESOP exchanged its 30 percent investment in
Cardinal for a 22 percent investment in CPI, the Company assumed the
remaining bank obligation of $720,000 at January 26, 1996. As of November 30,
1998, $113,912 remains outstanding on this loan. As a result of the Company
assuming the bank obligation, the Company also recorded a loan receivable
from the ESOP, which is reported as a reduction of shareholders' equity. The
Company is obligated to make contributions to the ESOP that are used by the
ESOP to pay the loan principal and interest to the bank. Shares of stock
acquired by the ESOP are allocated to each eligible employee in amounts based
on the employee's compensation. Company contributions charged to expense were
$26,720 in 1998, $30,999 in 1997 and $209,780 for the period January 26, 1996
to November 30, 1996. The Company paid Class A preferred dividends of
$700,000 in 1998 and $943,559 in 1997 to the ESOP. The ESOP used a portion of
the dividends to make the required principal payments.
9. MANDATORILY REDEEMABLE PREFERRED STOCK
MANDATORILY REDEEMABLE PREFERRED STOCK--The Company is authorized to issue
100,000 nonvoting shares of Class A redeemable preferred stock and 100,000
non-voting shares of Class B redeemable preferred stock, each with a par
value of $.01 per share. There are 80,000 shares of Class A redeemable
preferred stock outstanding as of November 30, 1998 and 1997. There are
60,966.69 shares of Class B redeemable preferred stock outstanding as of
November 30, 1998 and 61,133.36 shares outstanding as of November 30, 1997,
including 866.68 shares issued under Executive Stock Agreements described in
Note 10. Accumulating dividends accrue daily at 8.75 percent of the
liquidation value ($100 per share) plus any accumulated dividends on the
Class A redeemable preferred stock. Accumulating dividends accrue at 10
percent of the liquidation value ($100 per share) plus any accumulated
dividends on the Class B redeemable preferred stock. Unpaid accumulating
dividends are deemed to be accumulated dividends for purposes of calculating
the accumulating and nonaccumulating dividends. Nonaccumulating dividends
accrue daily at 10 percent of the liquidation value plus any accumulated
dividends on the Class A redeemable preferred stock only. Unpaid
nonaccumulating dividends are not deemed to be accumulated dividends for
purposes of calculating the accumulating and nonaccumulating dividends.
Accumulating dividends were $1,483,077 for the year ended November 30, 1998
and $1,385,329 for the year ended November 30, 1997. The nonaccumulating
dividends were $827,613 for the year ended November 30, 1998 and $830,544 for
the year ended November 30, 1997. These amounts have been recorded as an
increase in the redeemable preferred stock and as a reduction of retained
earnings and of additional paid-in capital in the accompanying consolidated
statements of mandatorily redeemable preferred stock and shareholders'
equity. As of November 30, 1998, the unpaid accumulating dividends were
$2,331,161 and the unpaid nonaccumulating dividends were $2,331,864.
On June 30, 2003, the Company shall redeem all outstanding shares of the
Class A and Class B redeemable preferred stock for the aggregate liquidation
value plus all unpaid dividends. The aggregate liquidation value and unpaid
dividends of the Class A and Class B redeemable preferred stock is
$18,761,668 as of November 30, 1998 and $17,171,325 as of November 30, 1997.
The Class A redeemable preferred stock is convertible at the shareholders'
option into Class A common stock at any time based on the liquidation value
of the shares to be converted at the then current conversion price.
10. COMMON STOCK
The authorized shares of stock and the number of shares outstanding as of
November 30, 1998 and 1997 are as follows:
COMMON STOCK--The Company has three classes of common stock of which Class A
is voting and Class B and C are non-voting.
Holders of Class B common stock are entitled to convert such shares into the
same number of shares of Class A or Class C common stock at any time.
F-44
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Holders of Class C common stock are entitled to convert such shares into the
same number of shares of Class A common stock upon the occurrence of a
Conversion Event as defined in the Company's Certificate of Amendment to
Certificate of Incorporation. Class C common stock includes 4,333.2 shares
issued under Executive Stock Agreements described below, as of November 30,
1998 and 1997.
EXECUTIVE STOCK AGREEMENTS--The Company has entered into agreements with
certain members of its management under which shares of Class B redeemable
preferred stock and Class C common stock have been issued. The Company has
notes receivable aggregating $65,000 from manager shareholders for the
purchase of one-half of their shares at November 30, 1998 and 1997. These
notes bear interest at 8.25 percent a year and are reported as stock
subscriptions receivable as a reduction of shareholders' equity. One-half of
the shares of common stock and one-half of the shares of redeemable preferred
stock vest immediately and the remaining shares vest upon the payment in full
of the receivables plus any accrued interest. In the event a shareholder
manager ceases to be employed by the Company, the Company and certain
shareholders have the right to repurchase all or a portion of these shares
from the individual at the fair value of the vested shares and the lower of
the fair value of shares or the original cost of the unvested shares held as
of the date of termination.
11. RELATED PARTY TRANSACTIONS
The following amounts were paid to shareholders of the Company:
1998 1997 1996
-------- -------- ----------
Management fees ........ $200,000 $200,000 $ 200,000
Transaction costs ...... -- -- 1,285,000
-------- -------- ----------
Total ............. $200,000 $200,000 $1,485,000
======== ======== ==========
The management fees are included in general and administrative expense in the
accompanying statements of income. The transaction costs were capitalized as
of the acquisition date.
* * * * * *
F-45
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
<TABLE>
<CAPTION>
MAY 31, 1999
------------
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 31
Accounts receivable (less allowance for doubtful accounts of
$156) ........................................................ 6,910
Inventories:
Finished goods .............................................. 5,705
Raw materials and supplies .................................. 2,338
------------
8,043
Prepaid expenses and other receivables ......................... 323
Deferred income taxes .......................................... 305
------------
Total current assets ................................................ 15,612
Property and equipment:
Land ........................................................... 295
Buildings and improvements ..................................... 3,499
Machinery, equipment and tooling ............................... 37,407
Automobiles and trucks ......................................... 54
Construction in progress ....................................... 1,914
------------
43,169
Less accumulated depreciation .................................. 11,213
------------
31,956
Intangible assets:
Deferred financing and origination fees, net ................... 786
Excess of cost over net assets acquired, net ................... 13,957
------------
14,743
Other ............................................................... 112
------------
Total assets ........................................................ $ 62,423
============
</TABLE>
F-46
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(In Thousands of Dollars)
MAY 31, 1999
(UNAUDITED)
------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ........................................... $ 4,205
Accrued expenses and other liabilities ..................... 157
Current portion of long-term debt .......................... 4,987
------------
Total current liabilities ....................................... 9,349
Long-term debt, less current portion ............................ 28,078
Deferred income taxes ........................................... 5,182
------------
42,609
Mandatorily Redeemable Preferred Stock .......................... 19,348
Stockholders' equity:
Class A Common Stock (voting); $.01 par value:
500,000 shares authorized; 89,281.5 shares issued and
outstanding ............................................. 1
Class B Common Stock (non-voting); $.01 par value:
300,000 shares authorized; 124,760 shares issued and
outstanding ............................................. 1
Class C Common Stock (non-voting); $.01 par value: 200,000
shares authorized; 90,791.6 shares issued and outstanding 1
Additional paid-in capital ................................. 349
Retained earnings .......................................... 293
Less: ESOP receivable ..................................... (114)
Stock subscription receivable ......................... (65)
------------
Total stockholders' equity ...................................... 466
------------
Total liabilities and stockholders' equity ...................... $ 62,423
============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-47
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED
---------------------------
MAY 31, 1999 MAY 31, 1998
------------ ------------
(UNAUDITED)
Net sales ........................................ $ 28,465 $ 26,418
Cost of goods sold ............................... 23,407 21,247
------------ ------------
Gross margin ..................................... 5,058 5,171
Operating expenses:
Selling ...................................... 1,447 1,550
General and administrative ................... 1,310 1,296
Amortization of intangibles .................. 301 311
Other ........................................ 61 43
------------ ------------
Operating income ................................. 1,939 1,971
Interest expense ............................. 1,400 1,639
------------ ------------
Income before income taxes ....................... 539 332
Income tax expense ............................... 202 114
------------ ------------
Net income ....................................... $ 337 $ 218
============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-48
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------
MAY 31, MAY 31,
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income ............................................... $ 337 $ 218
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation ........................................ 1,942 1,746
Amortization ........................................ 298 307
Deferred income taxes ............................... -- 28
Changes in operating assets and liabilities:
Accounts receivable, net ........................ (1,513) (1,399)
Inventories ..................................... (490) 723
Prepaid expenses and other receivables .......... 684 (210)
Other assets .................................... (1) 38
Payables and accrued expenses ................... 1,219 101
---------- ----------
Net cash provided by operating activities ................ 2,476 1,552
INVESTING ACTIVITIES
Additions to property and equipment ...................... (2,205) (2,594)
---------- ----------
Net cash used for investing activities ................... (2,205) (2,594)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ....................... 1,460 3,299
Payments on long-term borrowings ......................... (1,809) (1,876)
Proceeds (payments) from Preferred equity ................ 7 (348)
---------- ----------
Net cash provided by (used for) financing activities ..... (342) 1,075
Effect of exchange rate changes on cash
---------- ----------
Net increase (decrease) in cash and cash equivalents ..... (71) 33
Cash and cash equivalents at beginning of period ......... 102 19
---------- ----------
Cash and cash equivalents at end of period ............... $ 31 $ 52
========== ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
F-49
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of CPI
Holding, Incorporated and its subsidiary, Cardinal Packaging, Incorporated (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information. 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 CPI Holding, Incorporated ("Holding") and its wholly-owned subsidiary,
Cardinal Packaging, Incorporated ("Cardinal").
2. LONG-TERM DEBT
Long-term debt consists of the following:
MAY 31,
1999
-------
Note payable to financial institution with quarterly principal
payments at scheduled amounts, plus interest at a variable rate, due
March 1, 2000 ....................................................... $ 9,000
Note payable to financial institution with quarterly principal
payments at scheduled amounts beginning in 2001, plus interest at a
variable rate, due March 1, 2003 .................................... 10,000
Revolving credit facility payable to financial institution with
interest at a variable rate, due March 1, 2003 ...................... 8,117
Capital expansion note payable to financial institution with
quarterly interest payments at a variable rate, fifteen equal
quarterly principal payments, plus interest, beginning September 1,
1999, due March 2003 ................................................ 5,000
ESOP loan to bank with semi-annual principal payments of $90, plus
monthly interest at 85 percent of the bank's prime rate, through
January 2000; collateralized by the common stock of the Company ..... 114
Note payable to financing company with monthly principal and interest
payments of $4, through October 1999; interest at 6.755 percent a
year, collateralized by specific equipment .......................... 18
Capital lease obligations for equipment, payable to various banks and
leasing companies in aggregate monthly principal and interest
payments of $20 through July 2000; interest at 6.75 percent to 10.85
percent a year; collateralized by specific equipment ................ 57
Long service executive nonqualified pension agreements payable to the
previous shareholders. The pension agreements are payable at $41 per
month through January 2001 and are recorded at their net present
value with a discount rate of 9.25 percent .......................... 759
-------
33,065
Less current portion of long-term debt .............................. 4,987
-------
$28,078
=======
F-50
<PAGE>
CPI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT (CONTINUED)
The current portion of long-term debt consists of $4.5 million of
principal payments outlined in the table above, and $0.4 million of payments
related to the Long service executive nonqualified pension agreement.
The notes payable, revolving credit facility, and capital expansion note
are collateralized by substantially all of the assets of the Company. The credit
agreement includes financial covenants with respect to capital expenditure
limits; rent payments under operating leases; earnings before depreciation,
amortization, interest and income taxes; and fixed charge and interest coverage
ratios.
3. CARDINAL PACKAGING, INCORPORATED SUMMARY FINANCIAL INFORMATION
The following summarizes parent company only financial information of
Holding:
MAY 31,
1999
-------
CONSOLIDATED BALANCE SHEETS
Current assets ............................................. $ 7
Investment in subsidiary ................................... 19,807
Other noncurrent assets .................................... --
Current liabilities ........................................ --
Noncurrent liabilities ..................................... --
Equity (deficit) ........................................... 19,814
26 WEEKS ENDED
----------------
MAY 31, MAY 31,
1999 1998
------ ------
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales ................................................ $ -- $ --
Cost of goods sold ....................................... -- --
Income before income taxes ............................... 539 332
Net income ............................................... 337 218
4. SEGMENT REPORTING
The Company has one reportable segment of plastic packaging products.
F-51
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Knight Engineering & Plastics
Division of Courtaulds Packaging Inc.
We have audited the accompanying balance sheet of Knight Engineering & Plastics
Division of Courtaulds Packaging Inc. (the Division) as of March 31, 1998 and
the related statement of operations, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Division at March 31, 1998,
and the results of its operations and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
May 19, 1999
F-52
<PAGE>
KNIGHT ENGINEERING & PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
BALANCE SHEET
MARCH 31, 1998
ASSETS
Current assets
Cash .......................................................... $ 719,004
Accounts receivable, less allowance for doubtful accounts of
$52,061 ..................................................... 3,625,898
Inventories:
Finished goods ............................................. 586,035
Raw materials and supplies ................................. 1,192,082
-----------
1,778,117
Prepaid expenses .............................................. 195,799
-----------
Total current assets ............................................. 6,318,818
Property and equipment
Land and improvements ......................................... 877,410
Buildings and improvements .................................... 5,754,664
Machinery, equipment and tooling .............................. 21,102,328
Construction in progress ...................................... 2,085,286
-----------
29,819,688
Less accumulated depreciation ................................. 16,348,730
-----------
13,470,958
Goodwill, net of accumulated amortization of $854,972 ............ 2,402,064
-----------
$22,191,840
===========
LIABILITIES AND DIVISION EQUITY
Current liabilities
Note payable, parent .......................................... $ 3,477,089
Accounts payable .............................................. 2,336,323
Accrued expenses and other liabilities ........................ 2,493,482
-----------
Total current liabilities ........................................ 8,306,894
Division equity .................................................. 13,884,946
-----------
$22,191,840
===========
SEE ACCOMPANYING NOTES.
F-53
<PAGE>
KNIGHT ENGINEERING & PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
Net sales ................................................. $ 23,836,485
Cost of goods sold ........................................ 21,058,181
Gross margin .............................................. 2,778,304
Operating expenses:
Selling, general and administrative ..................... 3,219,902
Amortization of intangibles ............................. 162,852
------------
Operating income (loss) ................................... (604,450)
Other income (expense):
Gain on disposal of property and equipment .............. 41,400
Interest income ......................................... 3,590
Interest (expense), parent .............................. (261,325)
------------
Division (loss) ........................................... $ (820,785)
============
SEE ACCOMPANYING NOTES.
F-54
<PAGE>
KNIGHT ENGINEERING & PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1998
OPERATING ACTIVITIES
Division loss ................................................... $ (820,785)
Adjustments to reconcile division loss to net cash provided by
operating activities:
Depreciation ................................................. 1,702,511
Amortization ................................................. 162,852
Gain on sale of property and equipment ....................... (41,400)
Changes in operating assets and liabilities:
Accounts receivable, net .................................. (168,875)
Inventories ............................................... 67,937
Prepaid expenses .......................................... 253,840
Accounts payable and accrued expenses ..................... 1,009,378
-----------
Net cash provided by operating activities ....................... 2,165,458
INVESTING ACTIVITIES
Purchases of machinery and equipment ............................ (1,530,295)
Division equity contribution from parent ........................ 261,000
Proceeds from disposal of property and equipment ................ 41,400
-----------
Net cash used in investing activities ........................... (1,227,895)
FINANCING ACTIVITIES
Net payments on note payable, parent ............................ (456,893)
-----------
Net cash used in financing activities ........................... (456,893)
-----------
Net increase in cash ............................................ 480,670
Cash at beginning of year ....................................... 238,334
-----------
Cash at end of year ............................................. $ 719,004
===========
SEE ACCOMPANYING NOTES.
F-55
<PAGE>
KNIGHT ENGINEERING & PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Knight Engineering
and Plastics Division of Courtaulds Packaging Inc., a West Virginia Corporation
(the Division). Courtaulds Packaging, Inc. (Parent) is owned by Courtaulds PLC,
a public limited company organized under the laws of England and Wales. The
Division was not a legal entity and operated as a component of a larger
business. The Division's financial statements includes only assets, liabilities
and results of operations which comprise the specific division. The balance
sheet and statement of operations, which have been prepared from the historical
accounting records of the Division, include all revenues and costs directly
attributable to the Division's business, including costs of facilities,
employees and related support functions. The Division has not been charged for
the cost of certain functions and services performed by the Parent or other
related entities on behalf of the Division. Similarly, the Division has not been
allocated any income tax expense or benefit during the year ended March 31,
1998. Management believes that the impact of costs performed by Parent and other
related entities on behalf of the Division would not be significant to the
accompanying financial statements.
The Division manufactures and markets plastic packaging products, primarily
proprietary and custom molded plastic overcaps and closures. During the year
ended March 31, 1998, the Division operated manufacturing facilities located in
Woods tock and Arlington Heights, Illinois. The Division's customers are located
principally throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 fifty years.
GOODWILL
The cost 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
the Division. These costs are being amortized over 20 years.
The Division 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.
REVENUE RECOGNITION
Revenue from sales of products is recognized at the time product is shipped to
the customer.
RETIREMENT PLANS
During the year ended March 31, 1998, the Division had two defined contribution
benefit plans, a retirement and a employee thrift plan. The Plans covered
substantially all the Division's employees. The retirement plan provides for an
annual employer contribution of 4% of gross wages. The employee thrift plan
provides for a 75% to a 100% annual match on employee deferrals of up to 6%. The
plans expenses were approximately $291,000 for the year ended March 31, 1998.
F-56
<PAGE>
KNIGHT ENGINEERING & PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
The taxable income of the Division was included in the tax returns of Courtaulds
Packaging Inc. As such, separate income tax returns were not prepared or filed
for the Division.
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 may differ from those estimates.
3. NOTE PAYABLE, PARENT
At March 31, 1998, the Division had a note payable to Courtaulds Packaging Inc.
The note was used to fund the Division's working capital requirements with no
stated maturity. Interest was charged to the Division at a rate of approximately
7%.
4. SALES INFORMATION
For the year ended March 31, 1998, 38% of the Division's revenues were derived
from three customers. The accounts receivables related to these customers at
March 31, 1998 was approximately $560,000.
5. LEASES
The Division leases certain warehouse buildings under a month to month lease
arrangements. Rent expense for the year ended March 31, 1998 was approximately
$145,000.
6. RELATED PARTY TRANSACTIONS
The Division has engaged in business transactions with a related party, Thatcher
Tubes, Inc., throughout the year. Thatcher Tubes is a fully consolidated
subsidiary of Courtaulds Packaging Inc. During the year ended March 31, 1998,
the Division had sales of approximately $1,845,000 to Thatcher. In addition, the
related accounts receivable balance at March 31, 1998 was approximately
$354,000.
7. SUBSEQUENT EVENT
On October 16, 1998, a newly formed, wholly-owned subsidiary of Berry Plastics
Corporation acquired substantially all of the assets of the Division for
aggregate consideration of approximately $18 million.
F-57
<PAGE>
KNIGHT ENGINEERING AND PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
CONDENSED BALANCE SHEET
(In Thousands of Dollars)
SEPTEMBER 30,
1998
---------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 790
Accounts receivable (less allowance for doubtful
accounts of $50) ........................................ 2,785
Inventories:
Finished goods .......................................... 522
Raw materials and supplies .............................. 1,256
---------------
1,778
Prepaid expenses and other receivables ..................... 199
---------------
Total current assets ......................................... 5,552
Property and equipment:
Land ....................................................... 877
Buildings and improvements ................................. 6,059
Machinery, equipment and tooling ........................... 22,456
Construction in progress ................................... 2,620
---------------
32,012
Less accumulated depreciation .............................. 18,678
---------------
13,334
Goodwill (net of accumulated amortization of $936) ........... 2,321
---------------
$ 21,207
===============
LIABILITIES AND DIVISION EQUITY Current liabilities:
Notes payable, parent ...................................... $ 3,186
Accounts payable ........................................... 2,443
Accrued expenses and other liabilities ..................... 2,024
---------------
Total current liabilities .................................... 7,653
Division equity .............................................. 13,554
---------------
$ 21,207
===============
SEE ACCOMPANYING NOTES.
F-58
<PAGE>
KNIGHT ENGINEERING AND PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
SIX-MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(Unaudited)
Net sales .................................... $ 11,893 $ 11,721
Cost of goods sold ........................... 10,596 11,097
------------- -------------
Gross margin ................................. 1,297 624
Operating expenses:
Selling, general and administrative ...... 1,377 1,244
Amortization of intangibles .............. 81 81
------------- -------------
Operating income (loss) ...................... (161) (701)
Other income and expense:
Gain on sale of property and
equipment ................................ -- 9
Interest expense, parent ................. (169) (226)
Interest income .......................... -- 2
------------- -------------
Division loss ................................ $ (330) $ (916)
============= =============
SEE ACCOMPANYING NOTES.
F-59
<PAGE>
KNIGHT ENGINEERING AND PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Division loss ........................................ $ (330) $ (916)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation .................................... 918 1,030
Amortization .................................... 81 81
Gain on sale of property and equipment .......... -- (9)
Changes in operating assets and liabilities:
Accounts receivable, net ...................... 841 257
Inventories ................................... -- 115
Prepaid expenses and other receivables ........ (4) 153
Payables and accrued expenses ................. (363) (313)
------------- -------------
Net cash provided by operating activities ............ 1,143 398
INVESTING ACTIVITIES
Additions to property and equipment .................. (781) (59)
Proceeds from disposal of property and equipment ..... -- 9
Division equity contribution from parent ............. -- 133
------------- -------------
Net cash provided by (used in) investing
activities ........................................ (781) 83
FINANCING ACTIVITIES
Net payments on note payable, parent ................. (291) (286)
------------- -------------
Net cash used in financing activities ................ (291) (286)
------------- -------------
Net increase in cash and cash equivalents ............ 71 195
Cash and cash equivalents at beginning of period ..... 719 238
------------- -------------
Cash and cash equivalents at end of period ........... $ 790 $ 433
============= =============
</TABLE>
SEE ACCOMPANYING NOTES.
F-60
<PAGE>
KNIGHT ENGINEERING AND PLASTICS
DIVISION OF COURTAULDS PACKAGING INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Knight Engineering
and Plastics Division of Courtaulds Packaging Inc., a West Virginia Corporation
(the Division) and have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Courtaulds Packaging,
Inc. (Parent) is owned by Courtauld PLC, a public limited company organized
under the laws of England and Wales. The Division was not a legal entity and
operated as a component of a larger business. The Division's financial statement
includes only assets, liabilities and results of operations which comprise the
specific division. The balance sheet and statement of operations, which have
been prepared from the historical accounting records of the Division, include
all revenues and costs directly attributable to the Division's business,
including costs of facilities, employees and related support functions. The
Division has not been charged for the cost of certain functions and services
performed by the Parent or other related entities on behalf of the Division.
Similarly, the Division has not been allocated any income tax expense or
benefit. Management believes that the impact of costs performed by Parent and
other related entities on behalf of the Division would not be significant to the
accompanying financial statements.
2. NOTE PAYABLE, PARENT
At September 30, 1998, the Division had a note payable to Courtaulds Packaging
Inc. The note was used to fund the Division's working capital requirements with
no stated maturity. Interest was charged to the Division at a rate of
approximately 7%.
3. SUBSEQUENT EVENT
On October 16, 1998, a newly formed, wholly-owned subsidiary of Berry Plastics
Corporation acquired substantially all of the assets of the Division for
aggregate consideration of approximately $18 million.
F-61
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
DIRECTORS
J E Barlow (Chairman)
A R Sandell (Managing)
T D Johnson
SECRETARY REGISTERED OFFICE
Mrs. J Barlow Stanford Tuck Road
North Walsham
Norfolk
AUDITORS
Lovewell Blake
Chartered Accountants
102 Prince of Wales Road
Norwich
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31ST OCTOBER 1997
The directors present herewith the audited accounts for the year ended 31st
October 1997.
DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare accounts that give a true and fair
view of the state of affairs of the company and of the profit or loss for its
financial year. In doing so the directors are required to:
o select suitable accounting policies and apply them consistently;
o make judgements and estimates that are reasonable and prudent;
o state whether applicable accounting standards have been followed,
o subject to any material departures disclosed and explained in the
accounts;
o prepare the accounts on the going concern basis unless it is
inappropriate
o to presume that the company will continue in business.
The directors are responsible for maintaining proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
REVIEW OF ACTIVITIES
The company's main activities are unchanged since last year and are principally
those of the production of plastic goods by injection moulding.
In the opinion of the directors the company will be able to maintain its present
level of turnover for the foreseeable future.
The profit for the year has been added to the balance on the profit and loss
account.
F-62
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
REPORT OF THE DIRECTORS (CONTINUED)
DIRECTORS
The directors named above held office throughout the year.
In accordance with the articles of association T D Johnson will retire at the
annual general meeting and, being eligible, offers himself for re-election.
The interests of the directors of the company at 31st October 1997 in the shares
of the company, according to the register required to be kept by Section 325 of
the Companies Act 1985 were as follows:
31ST OCTOBER 31ST OCTOBER 31ST OCTOBER 1995
1997 ORDINARY 1996 ORDINARY ORDINARY SHARES
SHARES SHARES -----------------------
FULLY PAID FULLY PAID FULLY PAID PARTLY PAID
------------- ------------- ---------- -----------
J E Barlow........... 60 60 11 49
A R Sandell.......... 29 29 -- 29
T D Johnson.......... 11 11 -- 11
MARKET VALUE OF INTEREST IN LAND
In the opinion of the directors, the current open market value on an existing
use basis of the freehold land and buildings exceeds the net book value as shown
in the balance sheet at the 31st October 1997 by (pound)80,711.
CLOSE COMPANY PROVISIONS
The company is a close company within the provisions of the Income and
Corporation Taxes Act 1988.
AUDITORS
A resolution to re-appoint Lovewell Blake will be proposed at the annual general
meeting.
By order of the board
J BARLOW
Secretary
North Walsham 22nd December 1997
F-63
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE DIRECTORS OF
NORWICH INJECTION MOULDERS LIMITED
To the Directors of
Norwich Injection Moulders Limited
We have audited the balance sheets of Norwich Injection Moulders Limited
as at 31st October 1997, 31st October 1996 and 31st October 1995, and the
related profit and loss accounts and cash flow statements for each of the three
years in the period ended 31st October 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing
standards which do not differ in any significant respect from United States
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 evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Norwich Injection Moulders
Limited at 31st October 1997, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended 31st October
1997 in conformity with accounting principles generally accepted in the United
Kingdom which differ in certain respects from those generally accepted in the
United States (see Note 24 of Notes to the Accounts).
/S/ LOVEWELL BLAKE
Chartered Accountants
Norwich, England
22nd December 1997 in respect of accounts
to 31st October 1997
31st January 1997 in respect of accounts
to 31st October 1996
11th March 1996 in respect of accounts
to 31st October 1995
except for Note 24 Differences between
United Kingdom and United States
Generally Accepted Accounting Principles
as to which the date is 18th May 1999
F-64
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
31ST OCTOBER 31ST OCTOBER 31ST OCTOBER
NOTES 1997 1996 1995
----- ------------ ------------ ------------
(pound) (pound) (pound)
<S> <C> <C> <C> <C>
Turnover ........................... 2 8,117,742 7,308,368 5,046,307
Change in stock of finished goods .. 5,908 26,405 15,783
------------ ------------ ------------
8,123,650 7,334,773 5,062,090
Other operating income ............. 3 21,738 6,823 3,749
------------ ------------ ------------
8,145,388 7,341,596 5,065,839
Raw materials and consumables ...... 3,772,741 3,521,241 2,270,368
Other external charges ............. 677,847 616,428 468,515
Staff costs ........................ 4 1,510,732 1,421,872 1,073,648
Depreciation ....................... 6 441,666 338,363 293,657
Other operating charges ............ 537,182 482,605 432,372
Interest payable and similar charges 7 103,769 120,943 128,526
------------ ------------ ------------
7,043,937 6,501,452 4,666,086
------------ ------------ ------------
Profit on ordinary activities before
taxation ......................... 8 1,101,451 840,144 399,753
Tax on profit on ordinary activities 9 261,160 4,618 98,035
------------ ------------ ------------
Profit on ordinary activities after
taxation ......................... * 840,291 835,526 301,718
Balance 1st November 1996 .......... 2,209,809 1,374,283 1,072,565
------------ ------------ ------------
Balance 31st October 1997 .......... 3,050,100 2,209,809 1,374,283
============ ============ ============
</TABLE>
There are no movements in shareholders funds other than the increase to the
retained profits for the years ended 31st October 1997, 31st October 1996 and
31st October 1995.
There were no recognized gains or losses other than the profit of (pound)840,291
in the year ended 31st October 1997, (pound)835,526 in the year ended 31st
October 1996 and (pound)301,718 in the year ended 31st October 1995.
*A summary of the significant adjustments to the profit on ordinary activities
after taxation (net income) that would be required if US Generally Accepted
Accounting Principles were to be applied instead of those generally accepted in
the United Kingdom is set out in Note 24 of Notes to the Accounts.
F-65
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
BALANCE SHEET
<TABLE>
<CAPTION>
31ST OCTOBER 31ST OCTOBER 31ST OCTOBER
NOTES 1997 1996 1995
----- ------------- ------------- -------------
(pound) (pound) (pound)
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets ........... 10 3,839,712 3,507,176 2,978,664
CURRENT ASSETS
Stock and work in progress 11 342,324 313,971 231,064
Debtors ................... 12 1,622,209 1,582,819 1,234,573
Bank balances ............. 510,081 560,087 --
Cash in hand .............. 464 338 669
------------- ------------- -------------
2,475,078 2,457,215 1,466,306
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR ....... 13 2,384,216 2,696,054 1,783,404
NET CURRENT
ASSETS/(LIABILITIES) ...... 90,862 (238,839) (317,098)
------------- ------------- -------------
TOTAL ASSETS LESS
CURRENT LIABILITIES ....... 3,930,574 3,268,337 2,661,566
CREDITORS - AMOUNTS FALLING
DUE AFTER MORE THAN ONE
YEAR ...................... 14 880,374 1,058,428 1,098,041
PROVISIONS FOR LIABILITIES
AND CHARGES
DEFERRED TAXATION ......... 15 -- -- 189,227
------------- ------------- -------------
3,050,200 2,209,909 1,374,298
============= ============= =============
CAPITAL AND RESERVES
Called up share capital ... 16 100 100 15
Profit and loss account ... 3,050,100 2,209,809 1,374,283
------------- ------------- -------------
3,050,200 2,209,909 1,374,298
============= ============= =============
</TABLE>
JE BARLOW - Director AR SANDELL - Director
The statutory accounts for the year to 31st October 1997 were approved by the
board of directors on 22nd December 1997. The statutory accounts for the year to
31st October 1997 were approved by the board of directors on 31st January 1997.
The statutory accounts for the year to 31st October 1997 were approved by the
board of directors on 27th February 1996.
o A summary of the significant adjustments to capital and reserves
(shareholders funds) that would be required if US Generally Accepted
Accounting Principles were to be applied instead of those generally
accepted in the United Kingdom is set out in Note 24 of Notes to the
Accounts.
F-66
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
CASH FLOW STATEMENT
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
31ST OCTOBER 31ST OCTOBER 31ST OCTOBER
NOTES 1997 1996 1995
----- ------------ ------------ ------------
(pound) (pound) (pound)
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES ....... 20 1,520,397 1,443,181 781,305
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE ................................ 21 (84,576) (122,884) (126,426)
TAXATION .................................. (193,817) (70,214) (50,052)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT .............................. 21 (980,793) (635,844) (924,113)
------------ ------------ ------------
CASH INFLOW BEFORE USE OF LIQUID
RESOURCES AND FINANCING ................. 261,211 614,239 (319,286)
FINANCING - DECREASE IN DEBT .............. 21 (251,086) (9,654) 379,110
- CALLS ON SHARE CAPITAL .......... 21 -- 85 --
------------ ------------ ------------
INCREASE IN CASH IN THE YEAR .............. 22 10,125 604,760 59,824
============ ============ ============
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
INCREASE IN CASH IN THE YEAR .............. 10,125 604,760 59,824
CASH OUTFLOW/(INFLOW) FROM
DECREASE/INCREASE IN DEBT AND LEASE
FINANCING ................................. 21 251,086 9,564 (379,110)
------------ ------------ ------------
MOVEMENT IN NET DEBT IN THE PERIOD ........ 261,211 614,324 (319,286)
NET DEBT AT 1ST NOVEMBER .................. (921,849) (1,536,173) (1,216,887)
------------ ------------ ------------
NET DEBT AT 31ST OCTOBER .................. 22 (660,638) (921,849) (1,536,173)
============ ============ ============
</TABLE>
The significant differences between the cashflow statement presented above and
that required under US Generally Accepted Accounting Principles are set out in
Note 24 of Notes to the Accounts.
F-67
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACCOUNTING POLICIES
(A) BASIS OF ACCOUNTING
The accounts are prepared under the historical cost basis of accounting and
in accordance with applicable UK accounting standards.
(B) DEPRECIATION
Depreciation is provided on fixed assets at rates sufficient to write off, on
a straight line basis, the cost of the assets over their expected useful
lives. It is the company's policy to maintain its freehold property to such a
standard that its residual disposal value will at least equal its book value
and accordingly no provision for depreciation has been made. The principal
annual rates used for this purpose which are consistent with those of last
year are:
Freehold land and buildings Not depreciated
Leasehold property expenditure Over period of the lease
Plant and machinery 10% - 50%
Motor vehicles 20% - 25%
Loose tools Written off on a usage basis
(C) STOCK AND WORK IN PROGRESS
Stock and work in progress are stated at the lower of cost and net realisable
value. In general cost is determined on a first in first out basis and
includes transport and handling costs. In the case of work in progress cost
includes all direct expenditure and production overheads based on the normal
level of activity. Net realisable value is the price at which stock can be
sold in the normal course of business after allowing for the costs of
realisation and, where appropriate, the cost of conversion from their
existing state to a finished condition. Provision is made where necessary for
obsolete, slow moving and defective stock.
(D) FINANCE LEASE AND HIRE PURCHASE CONTRACTS
Assets held under finance leases, other than hire purchase contracts, are
capitalized at their fair value and are depreciated over either the lease
term, or the useful working life of the asset, whichever is the shorter.
Fair value is usually the cost at which the company could have purchased the
asset.
Future rental payments due during the primary lease period are shown as
creditors.
The difference between the total primary lease payments and the fair value of
the asset is treated as a finance charge and is charged to the profit and
loss account on a straight line basis over the primary lease period.
Secondary lease rentals are charged to profit and loss account in the period
in which they are paid.
Assets held under hire purchase contracts are capitalized at their fair value
and are depreciated over their useful working life on the same basis as set
out in note 1(b).
F-68
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(E) OPERATING LEASES
Operating lease rentals are charged to profit and loss account in the period
in which they are incurred.
(F) DEFERRED TAXATION
Provision is made for deferred taxation where, in the opinion of the
directors, it is likely to be payable in the foreseeable future.
(G) PENSION SCHEME
The company operates defined contribution schemes. The assets of the schemes
are held separately from those of the company in independently administered
funds. The charge in the profit and loss accounts represents the
contributions payable by the company to the funds for the year.
(H) FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into sterling at
the rates of exchange ruling on the balance sheet date. Transactions in
foreign currencies are recorded at the rate ruling at the date of the
transaction. Significant differences arising due to exchange fluctuations
have been reflected in the profit and loss account.
2. TURNOVER
The contribution to turnover and profit before taxation arises from the
production of plastic goods by injection moulding.
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
Geographical analysis of turnover
United Kingdom .......................... 7,890,743 7,160,110 4,887,260
Rest of Europe .......................... 226,999 148,258 159,047
--------- --------- ---------
8,117,742 7,308,368 5,046,307
========= ========= =========
3. OTHER OPERATING INCOME
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
Training grants ............................ 500 2,589 3,700
Interest received (gross) .................. 21,238 4,234 49
--------- --------- ---------
21,738 6,823 3,749
========= ========= =========
F-69
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
4. EMPLOYEE INFORMATION
The average number of persons employed by the company during the year
including directors is analyzed below:
1997 1996 1995
--------- --------- ---------
Manufacturing and packing ............... 57 52 42
Selling and administration .............. 18 17 16
Former employees ........................ 2 2 2
--------- --------- ---------
77 71 60
========= ========= =========
1997 1996 1995
----------- ----------- -----------
(pound) (pound) (pound)
Staff costs:
Wages and salaries paid
to the company's
employees ........................... 1,313,859 1,264,343 926,530
Pensions to former
employees ........................... 14,905 14,905 14,905
Social security costs ............... 139,201 107,619 98,325
Pension contributions ............... 42,767 35,005 33,888
----------- ----------- -----------
1,510,732 1,421,872 1,073,648
=========== =========== ===========
5. DIRECTORS' EMOLUMENTS
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
Management remuneration ................... 271,217 363,153 206,546
Pension contributions ..................... 15,818 16,043 15,449
Taxable benefits .......................... 27,301 28,608 29,403
--------- --------- ---------
314,336 407,804 251,398
========= ========= =========
The directors' emoluments disclosed above (excluding pension contributions)
include amounts paid to:
(pound) (pound) (pound)
--------- --------- ---------
The Highest Paid Director............... 106,903 137,910 86,398
Retirement benefits in respect of the three directors are accruing under a
defined contribution scheme. The contributions paid in respect of the highest
paid director were (pound)5,488 ((pound)5,583 in the year ended 31st October
1996 anD (pound)5,365 in the year ended 31st October 1995).
F-70
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
6. DEPRECIATION
The charge for the year is made up as under:
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
The charge for the year is made up as under:
Depreciation of tangible fixed assets
Owned assets ................................. 342,082 193,832 143,785
Assets held under finance lease
and hire purchase contracts .................. 116,103 169,931 151,738
------- ------- -------
458,185 363,763 295,523
Profit on sale of tangible fixed
assets ....................................... (16,519) (25,400) (1,866)
------- ------- -------
441,666 338,363 293,657
======= ======= =======
7. INTEREST PAYABLE AND SIMILAR CHARGES
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
Bank loan and overdraft ...................... 63,718 69,425 80,945
Finance leases and hire purchase
contracts expiring within five years ...... 40,051 51,518 47,581
------- ------- -------
103,769 120,943 128,526
======= ======= =======
8. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The profit on ordinary activities before taxation is stated after charging
the following amounts:
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
Hire of equipment ................................ 55,698 71,616 72,385
Rent of land and buildings ....................... 22,080 22,127 28,203
Auditors remuneration ............................ 3,000 3,000 2,750
F-71
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
9. TAX ON PROFIT ON ORDINARY ACTIVITIES
1997 1996 1995
------- ------- --------
(pound) (pound) (pound)
Corporation tax for the year at 30% (1996 30%,
1995 25%)
Taxation payable .............................. 261,163 193,845 70,043
Overprovision in previous year ................ (3) -- --
Decrease in provision for deferred
tax ........................................ -- (189,227) 27,992
------- ------- --------
261,160 4,618 98,035
======= ======= ========
F-72
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
EXPENDITURE
ON SHORT
FREEHOLD LEASEHOLD PLANT AND MOTOR
TOTAL PROPERTY PROPERTY MACHINERY VEHICLES
---------- --------- ---------- ---------- --------
(pound) (pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C>
COST
1st November 1994 .......................... 3,211,137 921,157 298 2,167,594 122,088
Additions .................................. 843,420 269,790 -- 546,130 27,500
Disposals .................................. (109,265) -- -- (85,375) (23,890)
---------- --------- -------- ---------- --------
31st October 1995 .......................... 3,945,292 1,190,947 298 2,628,349 125,698
Additions .................................. 967,725 1,719 -- 933,038 32,968
Disposals .................................. (168,686) -- -- (137,011) (31,675)
---------- --------- -------- ---------- --------
31st October 1995 .......................... 4,744,331 1,192,666 298 3,424,376 126,991
Additions .................................. 900,630 26,623 -- 779,975 94,032
Disposals .................................. (365,688) -- -- (276,915) (88,773)
---------- --------- -------- ---------- --------
31st October 1995 .......................... 5,279,273 1,219,289 298 3,927,436 132,250
========== ========= ======== ========== ========
DEPRECIATION
1st November 1994 .......................... 729,236 -- 225 696,176 32,835
Disposals .................................. (58,131) -- -- (46,677) (11,454)
Charge for the year ........................ 295,523 -- 12 265,347 30,146
---------- --------- -------- ---------- --------
31st October 1995 .......................... 966,628 -- 237 914,846 51,545
Disposals .................................. (93,236) -- -- (70,136) (23,100)
Charge for the year ........................ 363,763 -- 12 334,547 29,204
---------- --------- -------- ---------- --------
31st October 1996 .......................... 1,237,155 -- 249 1,179,257 57,649
Disposals .................................. (255,779) -- -- (193,173) (62,606)
Charge for the year ........................ 458,185 -- 12 431,284 26,889
---------- --------- -------- ---------- --------
31st October 1997 .......................... 1,439,561 -- 261 1,417,368 21,932
========== ========= ======== ========== ========
NET BOOK AMOUNT
31st October 1997 .......................... 3,839,712 1,219,289 37 2,510,068 110,318
========== ========= ======== ========== ========
31st October 1996 .......................... 3,507,176 1,192,666 49 2,245,119 69,342
========== ========= ======== ========== ========
31st October 1995 .......................... 2,978,664 1,190,947 61 1,713,503 74,153
========== ========= ======== ========== ========
31st October 1994 .......................... 2,481,901 921,157 73 1,471,418 89,253
========== ========= ======== ========== ========
</TABLE>
Details of fixed assets held under finance leases and hire purchase
contracts, which are included in the relevant headings in the table above,
are as follows:
1997 1996 1995
------- --------- -------
(pound) (pound) (pound)
Net book value at 31st October 1997 ...... 808,682 1,080,707 954,467
======= ========= =======
F-73
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
11. STOCK AND WORK IN PROGRESS
The amounts attributable to the different categories are as follows:
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
Raw materials ............... 200,506 200,719 129,345
Packing materials ........... 9,698 11,492 15,035
Finished goods .............. 87,466 81,558 61,156
Work in progress ............ 44,654 20,202 25,528
------- ------- -------
342,324 313,971 231,064
======= ======= =======
12. DEBTORS
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
Trade debtors ............... 1,595,311 1,562,039 1,219,983
Loans ....................... -- -- 160
Prepayments ................. 26,898 20,780 14,430
--------- --------- ---------
1,622,209 1,582,819 1,234,573
========= ========= =========
13. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
<S> <C> <C>
Bank overdraft (see note (a) below) .......... -- 60,005 105,009
Bank loan (see note (b) below) ............... 36,664 36,664 36,664
--------- --------- ---------
Bank loan and overdraft ...................... 36,664 96,669 141,673
Trade creditors .............................. 1,578,688 1,743,509 1,044,690
Corporation tax payable 1st August 1998
(1996 - 1st August 1997, 1995
- 1st August 1996) ........................ 261,163 193,820 70,189
Taxation and social security payments ........ 163,762 130,944 142,640
Hire purchase obligations (see note (c) below) 254,145 327,177 297,128
Accruals ..................................... 89,794 203,935 87,084
--------- --------- ---------
2,384,216 2,696,054 1,783,404
========= ========= =========
</TABLE>
(a) Secured by a fixed and floating charge over the other assets of the
company.
(b) Secured by a mortgage on the freehold premises.
(c) Secured on the assets concerned.
F-74
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
14. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1997 1996 1995
--------- --------- ---------
(pound) (pound) (pound)
Bank loan bearing interest at various rates
repayable by quarter installments
(see note (a) below) ................... 705,742 742,406 779,070
(see note (b) below) ................... 174,632 316,022 318,971
--------- --------- ---------
880,374 1,058,428 1,098,041
========= ========= =========
(a) Secured by a mortgage on the freehold
premises
(b) Secured on the assets concerned .....
The bank loan above analyzed by due dates
of repayment
Repayable between one and two years ..... 36,664 36,664 36,664
Repayable between two and five years .... 109,992 109,992 109,992
Repayable after more than five years by
installments ............................ 559,086 595,750 632,414
--------- --------- ---------
705,742 742,406 779,070
========= ========= =========
15. DEFERRED TAXATION
<TABLE>
<CAPTION>
1997 1996 1995
PROVIDED UNPROVIDED PROVIDED UNPROVIDED PROVIDED UNPROVIDED
-------- ---------- -------- ---------- -------- ----------
(pound) (pound) (pound) (pound) (pound) (pound)
Accelerated capital
<S> <C> <C> <C>
Allowances ............. -- 373,364 -- 316,866 189,227 --
======== ========== ======== ========== ======== ==========
</TABLE>
16. SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
<S> <C> <C> <C>
AUTHORIZED
Ordinary shares of(pound)1 each ........................... 100 100 100
------- ------- -------
CALLED UP SHARE CAPITAL
Shares issued at(pound)1 each (1997:100, 1996:100, 1995:11) 100 100 11
Shares issued at 5p each (1997:nil, 1996:nil, 1995:89) .... -- -- 4
------- ------- -------
100 100 15
======= ======= =======
</TABLE>
17. LEASING COMMITMENTS
The company leases land and building in Norwich. At 31st October 1997 the
lease has an unexpired term of two years, at a rental of (pound)22,080.
F-75
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
18. CAPITAL EXPENDITURE
1997 1996 1995
------- ------- -------
(pound) (pound) (pound)
Authorized and contracted for .................... 43,652 -- 175,108
======= ======= =======
19. CONTROLLING INTEREST
Mr. J E Barlow owns 60% of the issued share capital of the company and, as
such, controls the company.
20. NOTES TO CASHFLOW STATEMENT
Reconciliation of operating profit to net cash inflow from operating
activities.
1997 1996 1995
---------- ---------- --------
(pound) (pound) (pound)
Operating profit ........................ 1,101,451 840,144 399,753
Depreciation ............................ 441,666 338,363 293,657
Interest payable and similar charges .... 103,769 120,943 128,526
Interest received ....................... (21,238) (4,234) --
Increase in stocks ...................... (28,353) (82,907) (59,607)
Increase in debtors ..................... (39,390) (348,246) (290,978)
(Decrease)/Increase in creditors ........ (37,508) 579,118 309,954
---------- ---------- --------
Net cash inflow from operating activities 1,520,397 1,443,181 781,305
========== ========== ========
21. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
(pound) (pound) (pound)
<S> <C> <C> <C>
Interest received .............................. 21,238 4,234 --
Interest paid .................................. (63,598) (73,625) (81,245)
Interest element of finance lease rental payments (42,216) (53,493) (45,181)
------- -------- --------
NET CASH (OUTFLOW) FOR RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE ........ (84,576) (122,884) (126,426)
======= ======== ========
</TABLE>
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- --------
(pound) (pound) (pound)
<S> <C> <C> <C>
Purchase of tangible fixed assets ............... (1,107,221) (736,694) (977,113)
Proceeds from the sale of fixed assets .......... 126,428 100,850 53,000
---------- -------- --------
NET CASH (OUTFLOW) FOR
CAPITAL EXPENDITURE AND FINANCIAL) INVESTMENT . (980,793) (635,844) (924,113)
========== ======== ========
</TABLE>
F-76
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
21. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
(CONTINUED)
FINANCING
1997 1996 1995
-------- -------- --------
(pound) (pound) (pound)
Loans advanced to company .................. -- -- 250,000
Loans repaid by company .................... (36,664) (36,664) (29,466)
Hire purchase advances to company .......... 137,700 386,953 453,296
Hire purchase and finance lease repayments . (352,122) (359,853) (294,720)
Calls on share capital ..................... -- 85 --
-------- -------- --------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ... (251,086) (9,479) (379,110)
======== ======== ========
22. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
AT AT
1ST NOVEMBER CASH OTHER 31ST OCTOBER
1994 FLOWS CHANGES 1995
-------------- -------------- ------------- ---------------
(pound) (pound) (pound) (pound)
<S> <C> <C> <C>
Cash in hand, at bank ..................... 131 538 -- 669
Overdraft ................................. (164,295) 59,286 -- (105,009)
---------- ---------- ---------- ----------
(164,164) 59,824 -- (104,340)
Hire purchase and finance leases .......... (457,523) (158,576) -- (616,099)
Debt due within one year .................. (25,600) 29,466 (40,530) (36,664)
Debt due after one year ................... (569,600) (250,000) 40,530 (779,070)
---------- ---------- ---------- ----------
(1,216,887) (319,286) -- (1,536,173)
========== ========== ========== ==========
AT AT
1ST NOVEMBER CASH OTHER 31ST OCTOBER
1995 FLOWS CHANGES 1996
-------------- -------------- ------------- ---------------
(pound) (pound) (pound) (pound)
Cash in hand, at bank ..................... 669 559,756 -- 560,425
Overdraft ................................. (105,009) 45,004 -- (60,005)
---------- ---------- ---------- ----------
(104,340) 604,760 -- 500,420
Hire purchase and finance leases .......... (616,099) (27,100) -- (643,199)
Debt due within one year .................. (36,664) 36,664 (36,664) (36,664)
Debt due after one year ................... (779,070) -- 36,664 (742,406)
---------- ---------- ---------- ----------
(1,536,173) 614,324 -- (921,849)
========== ========== ========== ==========
</TABLE>
F-77
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
22. ANALYSIS OF CHANGES IN NET DEBT (CONTINUED)
<TABLE>
<CAPTION>
AT AT
1ST NOVEMBER CASH OTHER 31ST OCTOBER
1996 FLOWS CHANGES 1997
-------------- -------------- ------------- ---------------
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
Cash in hand, at bank ..................... 560,425 (49,880) -- 510,545
Overdraft ................................. (60,005) 60,005 -- --
-------- -------- -------- --------
500,420 10,125 -- 510,545
Hire purchase and finance leases .......... (643,199) 214,422 -- (428,777)
Debt due within one year .................. (36,664) 36,664 (36,664) (36,664)
Debt due after one year ................... (742,406) -- 36,664 (705,742)
-------- -------- -------- --------
(921,849) 261,211 -- (660,638)
======== ======== ======== ========
</TABLE>
23. COMPANIES ACT 1985
These financial statements do not comprise the Company's statutory accounts
within the meaning of section 240 of the Companies Act 1985 of Great
Britain. Statutory accounts for the years ended 31st October 1997, 1996 and
1995, on which the auditors' reports were unqualified, have been delivered
to the Registrar of Companies for England and Wales.
24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.
The company's accounts are prepared in accordance with accounting principles
generally accepted in the United Kingdom ("UK GAAP") which differ from
United States generally accepted accounting principles ("US GAAP"). The
significant differences applicable to the company are summarized below.
DEPRECIATION OF FREEHOLD PROPERTY
Under UK GAAP, the company does not depreciate its freehold property. Under
US GAAP, depreciation would be provided.
FINANCE LEASES AND HIRE PURCHASE CONTRACTS
Under UK GAAP, the finance charge relating to finance (capital) leases and
hire purchase contracts is charged to the profit and loss account on a
straight line basis. Under US GAAP, such finance charges would be charged to
income over the period of the lease so as to provide a constant rate of
interest on the remaining balance of the capital obligation. It is
considered that the difference between the two methods in this case does not
have a material effect on either the balance sheets as at 31st October 1995,
31st October 1996 and 31st October 1997 or the reported results for the
years then ended.
F-78
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
DEFERRED TAXATION
Under UK GAAP, provision for deferred taxation is only made where in the
opinion of the directors it is likely to be payable in the foreseeable
future.
Under US GAAP, deferred taxation is computed for all temporary differences
between the tax and book bases of assets and liabilities. Deferred tax
assets are recognized to the extent their realisation is more likely than
not.
The following is a summary of the significant adjustments to income and
shareholders' funds which would be required if US GAAP were to be applied
instead of UK GAAP.
INCOME
<TABLE>
<CAPTION>
YEAR ENDED 31ST YEAR ENDED 31ST YEAR ENDED 31ST
OCTOBER 1997 OCTOBER 1996 OCTOBER 1995
----------------- ---------------- ----------------
(pound) (pound) (pound)
<S> <C> <C> <C>
Profit on ordinary activities after taxation as
reported in the profit and loss account .................... 840,291 835,526 301,718
Adjustments
Depreciation ............................................... (22,160) (21,627) (21,593)
Deferred taxation - methodology ............................ (73,260) (250,215) (9,789)
- on above adjustments ................... 6,648 6,488 6,478
---------- ---------- ----------
Net income as adjusted to accord with
US GAAP Net income ......................................... 751,519 570,172 276,814
========== ========== ==========
SHAREHOLDERS' FUNDS
YEAR ENDED 31ST YEAR ENDED 31ST YEAR ENDED 31ST
OCTOBER 1997 OCTOBER 1996 OCTOBER 1995
----------------- ---------------- ----------------
(pound) (pound) (pound)
Capital and reserves as reported ................................. 3,050,200 2,209,909 1,374,298
Adjustments
Fixed assets
Tangible assets-freehold property depreciation ................... (97,427) (75,267) (53,640)
Deferred taxation - methodology ....................... (361,320) (288,060) (37,845)
- on above adjustments .............. 29,228 22,580 16,092
---------- ---------- ----------
Shareholders' funds as adjusted to accord
with US GAAP ............................................... 2,620,681 1,869,162 1,298,905
========== ========== ==========
</TABLE>
STATEMENT OF CASH FLOWS
The statement of cash flows prepared under UK GAAP presents substantially the
same information as that required under US GAAP but it differs with regard to
the classification of items within it and as regards the definition of cash
under UK GAAP and cash and cash equivalents under US GAAP.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital
expenditure and financial investment and financing. US GAAP require only
three categories of cash flow activity to be reported, operating, investing
and financing. Cash flows from
F-79
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
taxation and returns on investments and servicing shown under UK GAAP would
be included within operating activities under US GAAP. Capital expenditure
and financial investment would be included within investing activities under
US GAAP.
Under UK GAAP, cash is defined as cash in hand and deposits repayable on
demand less bank overdrafts repayable on demand. Under US GAAP, cash and cash
equivalents would not include bank overdrafts but would include cash deposits
repayable within three months at their inception.
The categories of cash flows under US GAAP can be summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED 31ST YEAR ENDED 31ST YEAR ENDED 31ST
OCTOBER 1997 OCTOBER 1996 OCTOBER 1995
------------------ ------------------ ------------------
(pound) (pound) (pound)
<S> <C> <C> <C>
Cash inflow from operating activities .................... 1,242,004 1,250,083 604,827
Cash outflow on investing activities ..................... (980,793) (635,844) (924,113)
Cash outflow from financing activities ................... (251,086) (9,479) 379,110
(Decrease)/Increase in cash and cash equivalents ......... (49,880) 559,756 538
Cash and cash equivalents
At 1st November .................................... 560,425 669 131
At 31st October .................................... 510,545 560,425 669
</TABLE>
F-80
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS
ENDED ENDED
30 APRIL 1998 30 APRIL 1997
--------------- ---------------
(pound) (pound)
<S> <C> <C>
Turnover ................................................. 4,294,764 3,954,620
Change in stock of finished goods ........................ (8,941) (5,726)
---------- ----------
4,285,823 4,948,894
Other operating income ................................... 11,663 10,707
---------- ----------
4,297,486 3,959,601
Raw materials and consumables ............................ 1,813,051 1,735,182
Other external charges ................................... 272,590 316,745
Staff costs .............................................. 812,776 731,892
Depreciation ............................................. 251,990 201,514
Other operating charges .................................. 405,219 434,945
Interest payable and similar charges ..................... 47,096 53,500
---------- ----------
3,602,722 3,473,778
Profit on ordinary activities before taxation ............ 694,754 485,823
Tax on profit on ordinary activities ..................... 225,798 115,140
---------- ----------
Profit on ordinary activities after taxation ............. 468,956 370,683
Balance 1st November ..................................... 3,050,100 2,209,809
---------- ----------
Balance 30th April ....................................... 3,519,056 2,580,492
========== ==========
</TABLE>
There are no movements in shareholders funds other than the increase to
the retained profits for the six month periods ended 30th April 1998 and 30th
April 1997.
There were no recognized gains or losses other than the profit of
(pound)468,956 in the six months ended 30th April 1998, and (pound)370,683 in
the six months ended 30th April 1997.
* A summary of the significant adjustments to the profit on ordinary activities
after taxation (net income) that would be required if US Generally Accepted
Accounting Principles were to be applied instead of those generally accepted
in the United Kingdom is set out in the Notes to the Accounts.
F-81
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
BALANCE SHEET
30 APRIL 1998
---------------
(pound)
FIXED ASSETS
Tangible Assets .......................................... 3,907,483
CURRENT ASSETS
Stock and work in progress ............................... 307,332
Debtors .................................................. 1,651,367
Cash at bank and in hand ................................. 886,682
---------
2,845,381
CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR .......... 2,240,635
---------
NET CURRENT ASSETS/(LIABILITIES) ......................... 604,746
---------
NET ASSETS LESS CURRENT LIABILITIES ...................... 4,512,229
CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR . 993,073
PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED TAXATION ........................................ --
---------
3,519,156
=========
CAPITAL AND RESERVES*
Called up share capital .................................. 100
Profit and loss account .................................. 3,519,056
---------
3,519,156
---------
* A summary of the significant adjustments to capital and reserves (shareholders
funds) that would be required if US Generally Accepted Accounting Principles
were to be applied instead of those generally accepted in the United Kingdom
is set out in the Notes to the Accounts.
F-82
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
CASH FLOW STATEMENT
<TABLE>
<CAPTION>
6 MONTHS ENDED 6 MONTHS ENDED
30TH APRIL 1998 30TH APRIL 1997
----------------- ----------------
(pound) (pound)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES ........................................... 887,585 585,484
RETURNS ON INVESTMENTS AND SERVING OF FINANCE ................................. (35,433) (42,793)
TAXATION ...................................................................... -- --
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT .................................. (319,771) (422,933)
-------- --------
Cash inflow before use of liquid resources and financing ...................... 532,381 119,758
FINANCING - Decrease in debt .................................................. (156,244) (159,666)
-------- --------
INCREASE/(DECREASE) IN CASH IN THE PERIOD ..................................... 376,137 (39,908)
======== ========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD ..................................... 376,137 (39,908)
Cash outflow/(inflow) from decrease/increase in debt and lease financing ...... 156,244 159,666
-------- --------
MOVEMENT IN THE NET DEBT IN THE PERIOD ........................................ 532,381 119,758
NET DEBT AT 1ST NOVEMBER ...................................................... (660,638) (921,849)
-------- --------
NET DEBT AT 30TH APRIL ........................................................ (128,257) (802,091)
======== ========
</TABLE>
The significant differences between the cashflow statement presented
above and that required under the US Generally Accepted Accounting Principles
are set out in Note 4 of the Notes to the Accounts.
F-83
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACCOUNTING POLICIES
The accounts are prepared under the historical cost basis of accounting
and in accordance with applicable UK accounting standards.
2. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
1998 1997
--------- ---------
(pound) (pound)
Bank loan (see note (a) below) ............... 36,664 36,664
--------- ---------
Bank loan and overdraft ...................... 36,664 36,664
Trade creditor ............................... 1,544,442 1,747,629
Corporation tax payable 1st August ........... 261,163 193,820
Taxation and social security payments ........ 187,366 172,042
Hire purchase obligations (see (b) below) .... 211,000 211,000
--------- ---------
2,240,635 2,361,155
========= =========
(a) Secured by a mortgage on a freehold premises.
(b) Secured on the assets concerned.
3. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1998 1997
--------- ---------
(pound) (pound)
Bank loan bearing interest at various
rates repayable by quarterly
installments (see note (a) below) ........ 687,410 724,074
Hire purchase obligations ................ 79,865 290,865
Corporation Tax .......................... 225,798 115,140
--------- ---------
993,073 1,130,079
========= =========
(a) Secured by a mortgage on the freehold premises.
(b) Secured on the assets concerned.
1998 1997
------- -------
(pound) (pound)
The bank loan above analyzed by due
dates of repayment
Repayable between one and two years .......... 36,664 36,664
Repayable between two and five years ......... 109,992 109,992
Repayable after more than five years
by installments ............................ 540,754 577,418
------- -------
687,410 724,074
======= =======
4. DIFFERENCE BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.
The company's accounts are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP") which differ
from United States generally accepted accounting principles ("US GAAP"). The
significant differences applicable to the company are summarized below.
F-84
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
DEPRECIATION OF FREEHOLD PROPERTY
Under UK GAAP, the company does not depreciate its freehold property.
Under US GAAP, depreciation would be provided.
FINANCE LEASES AND HIRE PURCHASE CONTRACTS
Under UK GAAP, the finance charge relating to finance (capital) leases and
hire purchase contracts is charged to the profit and loss account on a straight
line basis. Under US GAAP, such finance charges would be charged to income over
the period of the lease so as to provide a constant rate of interest on the
remaining balance of the capital obligation. It is considered that the
difference between the two methods in this case does not have a material effect
on either the balance sheets as at 30th April 1997 and 30th April 1998 or the
reported results for the six month periods then ended.
DEFERRED TAXATION
Under UK GAAP, provision for deferred taxation is only made where in the
opinion of the directors it is likely to be payable in the foreseeable future.
Under US GAAP, deferred taxation is computed for all temporary differences
between the tax and book bases of assets and liabilities. Deferred tax assets
are recognized to the extent their realization is more likely than not.
The following is a summary of the significant adjustments to income and
shareholders' funds which would be required if US GAAP were to be applied
instead of UK GAAP.
<TABLE>
<CAPTION>
INCOME
6 MONTHS ENDED 6 MONTHS ENDED
30TH APRIL 1998 30TH APRIL 1997
----------------- -----------------
(pound) (pound)
<S> <C> <C>
Profit on ordinary activities after taxation as reported
on the profit and loss account ..................................... 468,956 370,683
Adjustments
Depreciation ......................................................... (11,080) (10,814)
Deferred taxation - methodology ...................................... (37,420) (36,630)
- an above adjustments ............................. 3,324 3,244
---------- ----------
Net income as adjusted to accord with US GAAP Net income ............. 423,780 326,483
========== ==========
SHAREHOLDERS' FUNDS
6 MONTHS ENDED 6 MONTHS ENDED
30TH APRIL 1998 30TH APRIL 1997
----------------- -----------------
(pound) (pound)
Capital and reserves as reported ..................................... 3,519,156 2,580,592
Adjustments
Fixed Assets
Tangible Assets - freehold property depreciation ..................... (108,507) (86,347)
Deferred taxation - methodology ........................ (397,950) (324,690)
- on above adjustments ............... 32,550 25,904
---------- ----------
Shareholders' funds as adjusted to accord with US GAAP ............... 3,045,249 2,195,459
========== ==========
</TABLE>
F-85
<PAGE>
NORWICH INJECTION MOULDERS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
STATEMENT OF CASH FLOWS
The statement of cash flows prepared under UK GAAP presents substantially
the same information as that required under US GAAP but it differs with regard
to the classification of items within it and as regards the definition of cash
under UK GAAP and cash and cash equivalents under US GAAP.
Under UK GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditure and financial investment and financing. US GAAP require only three
categories of cash flow activity to be reported, operating, investing and
financing. Cash flows from taxation and returns on investments and servicing
shown under UK GAAP would be included within operating activities under US GAAP.
Capital expenditure and financial investment would be included within investing
activities under US GAAP.
Under UK GAAP, cash is defined as cash in hand and deposits repayable on
demand less bank overdrafts repayable on demand. Under US GAAP, cash and cash
equivalents would not include bank overdrafts but would include cash deposits
repayable within three months at their inception.
The categories of cash flows under US GAAP can be summarized as follows:
<TABLE>
<CAPTION>
6 MONTHS ENDED 6 MONTHS ENDED
30TH APRIL 1998 30TH APRIL 1997
----------------- -----------------
(pound) (pound)
<S> <C> <C>
Cash inflow from operating activities ..................... 676,633 501,630
Cash outflow on investing activities ...................... (319,771) (422,933)
Cash outflow from financing activities .................... (156,244) (159,666)
(Decrease)/Increase in cash and cash equivalents .......... 376,137 (39,908)
Cash and cash equivalents
At 1st November .................................. 510,545 500,420
At 30th April .................................... 886,682 460,512
</TABLE>
F-86
<PAGE>
================================================================================
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, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, 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 ......................
Summary of Prospectus ......................
Risk Factors ...............................
Company History ............................
The Exchange Offer .........................
Capitalization .............................
Pro Forma Condensed Consolidated
Financial Statements ....................
Selected Historical Financial Data .........
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ...........................
Business ...................................
Management .................................
Principal Stockholders .....................
Certain Transactions .......................
Description of Certain Indebtedness ........
Description of Notes .......................
Material Federal Income Tax
Considerations ..........................
Plan of Distribution .......................
Legal Matters ..............................
Experts ....................................
Index to Financial Statements ...........F-1
$25,000,000
BERRY PLASTICS CORPORATION
12 1/4% SERIES C SENIOR SUBORDINATED NOTES
DUE 2004
-----------------
PROSPECTUS
-----------------
, 1999
================================================================================
<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
2.1 Asset 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 (Registration No.
33-75706) (the "Form S-1") and incorporated herein by reference)
2.2 Asset 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)
2.3 Asset 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)
2.4 Asset 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)
2.5 Asset 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)
2.6 Stock 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)
2.7 Preferred 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)
2.8 Agreement 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)
II-1
<PAGE>
2.9 Certificate 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 (Registration No.
333-08313) (the "1996 Form S-4") and incorporated herein by
reference)
2.10 Agreement 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)
2.11 Amendment 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)
2.12 Asset 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)
2.13 Agreement 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)
2.14 Asset 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)
2.15 Agreement 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
2.16 Stock Purchase Agreement dated June 18, 1999 among the Company, CPI
Holding, Cardinal and the Shareholders of CPI Holding (filed as
Exhibit 2.1 to the Current Report on Form 8-K filed on July 21,
1999 and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of Holding (filed
as Exhibit 3.1 to the 1996 Form S-4 and incorporated herein by
reference)
3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and
incorporated herein by reference)
3.3 Certificate of Incorporation of the Company (filed as Exhibit 3.3
to the Form S-1 and incorporated herein by reference)
3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and
incorporated herein by reference)
3.5 Certificate of Incorporation of Berry Iowa (filed as Exhibit 3.5 to
the Form S-1 and incorporated herein by reference)
3.6 By-laws of Berry Iowa (filed as Exhibit 3.6 to the Form S-1 and
incorporated herein by reference)
3.7 Certificate of Incorporation of Berry Tri-Plas (filed as Exhibit
3.7 to the Form S-1 and incorporated herein by reference)
3.8 By-laws of Berry Tri-Plas (filed as Exhibit 3.8 to the Form S-1 and
incorporated herein by reference)
3.9 Certificate 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)
II-2
<PAGE>
3.10 Certificate 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)
3.11 Certificate of Incorporation of Berry Sterling
3.12 By-laws of Berry Sterling
3.13 Certificate of Incorporation of AeroCon
3.14 By-laws of AeroCon
3.15 Articles of Incorporation of PackerWare
3.16 By-laws of PackerWare
3.17 Certificate of Incorporation of Berry Design
3.18 By-laws of Berry Design
3.19 Certificate of Incorporation of Venture Holdings
3.20 By-laws of Venture Holdings
3.21 Articles of Incorporation of Venture Midwest
3.22 Code of Regulations of Venture Midwest
3.23 Articles of Incorporation for a Statutory Close Corporation of
Venture Southeast
3.24 By-laws of Venture Southeast
3.25 Memorandum of Association of NIM Holdings
3.26 Articles of Association of NIM Holdings
3.27 Memorandum of Association of Norwich
3.28 Articles of Association of Norwich
3.29 Certificate of Incorporation of Knight Plastics
3.30 By-laws of Knight Plastics
4.1 Form 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)
4.2 Warrant 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)
4.3 Indenture 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
II-3
<PAGE>
4.4 Pledge, 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)
4.5 Holding 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)
4.6 Registration 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)
4.7 BPC Holding Corporation 1996 Stock Option Plan (filed as Exhibit
4.7 to the 1996 Form 10-K and incorporated herein by reference)
4.8 Form of Nontransferable Performance-Based Incentive Stock Option
Agreement (filed as Exhibit 4.7 to the 1996 Form 10-K and
incorporated herein by reference)
4.9 Indenture dated as of August 24, 1998 among the Company, the
Guarantors and United States Trust Company of New York, as trustee
4.10 Registration 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
10.1 Second 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.
10.2 Employment 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)
10.3 Amendment to Imbler Employment Agreement dated November 30, 1995
(filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated
herein by reference)
10.4 Amendment to Imbler Employment Agreement dated June 30, 1996 (filed
as Exhibit 10.4 to the 1996 Form S-4 and incorporated herein by
reference)
10.5 Employment 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)
10.6 Amendment to Beeler Employment Agreement dated November 30, 1995
(filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated
herein by reference)
10.7 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed
as Exhibit 10.7 to the 1996 Form S-4 and incorporated herein by
reference)
10.8 Employment 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)
10.9 Amendment to Kratochvil Employment Agreement dated November 30,
1995 (filed as Exhibit 10.12 to the 1995 Form 10-K and incorporated
herein by reference)
II-4
<PAGE>
10.10 Amendment to Kratochvil Employment Agreement dated June 30, 1996
(filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated
herein by reference)
10.11 Employment 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)
10.12 Amendment to Boots Employment Agreement dated November 30, 1995
(filed as Exhibit 10.14 to the 1995 Form 10-K and incorporated
herein by reference)
10.13 Amendment to Boots Employment Agreement dated June 30, 1996 (filed
as Exhibit 10.16 to the 1996 Form S-4 and incorporated herein by
reference)
10.14 Financing 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)
10.15 Letter of Credit of NationsBank, N.A. dated April 16, 1997
10.16 Purchase 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)
10.17 Stockholders 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)
10.18 Warrant 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)
10.19 Warrant 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)
10.20 Warrant 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)
10.21 Warrant 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)
10.22 Amended 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)
10.23 Second 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)
10.24 Warrant 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)
10.25 Warrant 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)
II-5
<PAGE>
10.26 Purchase Agreement dated August 19, 1998 among the Company, the
Guarantors and DLJ
*10.27 Purchase Agreement dated July 6, 1999 among the Company, the
Guarantors, DLJ and Chase Securities Inc.
10.28 Indenture dated as of July 6, 1999 among the Company, the
Guarantors and United States Trust Company of New York , as trustee
(filed as Exhibit 10.27 of the S-4 of the Company filed on August
20, 1999 and incorporated herein by reference).
10.29 Registration Rights Agreement dated as of July 6, 1999 by and among
the Company, the Guarantors, DLJ and Chase Securities, Inc. (filed
as Exhibit 10.28 to the S-4 of the Company filed on August 20, 1999
and incorporated herein by reference).
21 List of Subsidiaries
***23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of
its opinion filed as Exhibit 5 hereto)
*23.2 Consent of Ernst & Young LLP, independent auditors
*23.3 Consent of Deloitte & Touche LLP, independent auditors
*23.4 Consent of Lovewell Blake, independent auditors
**24 Powers of Attorney
25 Form 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)
**27 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letter to Clients
- -------------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
(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.
II-6
<PAGE>
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
II-7
<PAGE>
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.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BPC HOLDING CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
____________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
* President and Director
____________________________ (Principal Executive Officer) October 29, 1999
Martin R. Imbler
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
* (Principal Financial and
____________________________ Accounting Officer) October 29, 1999
James M. Kratochvil
*
____________________________ Director October 29, 1999
David M. Clarke
*
____________________________ Director October 29, 1999
Lawrence G. Graev
*
____________________________ Director October 29, 1999
Donald J. Hofmann
*
____________________________ Director October 29, 1999
Joseph S. Levy
II-9
<PAGE>
*
____________________________ Director October 29, 1999
Mathew J. Lori
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BERRY IOWA CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BERRY TRI-PLAS CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BERRY STERLING CORPORATION
By: /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
AEROCON, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
President, Chief Executive
Officer and Chairman of the
* Board of Directors
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
PACKERWARE CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
PACKERWARE CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BERRY PLASTICS DESIGN CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
VENTURE PACKAGING, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
VENTURE PACKAGING MIDWEST, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
VENTURE PACKAGING SOUTHEAST, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
___________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
NIM HOLDINGS LIMITED
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
* Chairman of the Board of
___________________________ Directors (Principal
Martin R. Imbler Executive Officer) October 29, 1999
*
___________________________ Director (Principal Financial
James M. Kratochvil and Accounting Officer) October 29, 1999
*
___________________________
Trevor D. Johnson Sales and Marketing Director October 29, 1999
*
___________________________ Managing Director October 29, 1999
Alan R. Sandell
*
___________________________ Director October 29, 1999
Ira G. Boots
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
NORWICH INJECTION MOULDERS LIMITED
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
* Chairman of the Board of
___________________________ Directors (Principal
Martin R. Imbler Executive Officer) October 29, 1999
*
___________________________ Director (Principal Financial
James M. Kratochvil and Accounting Officer) October 29, 1999
*
___________________________ Sales and Marketing Director October 29, 1999
Trevor D. Johnson
*
___________________________ Managing Director October 29, 1999
Alan R. Sandell
*
___________________________ Director October 29, 1999
Ira G. Boots
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
KNIGHT PLASTICS, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
*
___________________________ Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
* Officer and Director
__________________________ (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
* Treasurer and Secretary
___________________________ (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
*
___________________________ Director October 29, 1999
Joseph S. Levy
*By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
CPI HOLDING CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ ROBERTO BUARON Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
Officer and Director
/s/ MARTIN R. IMBLER (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
/s/ JAMES M. KRATOCHVIL (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
/s/ JOSEPH S. LEVY Director October 29, 1999
Joseph S. Levy
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
CARDINAL PACKAGING, INC.
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ ROBERTO BUARON Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
Officer and Director
/s/ MARTIN R. IMBLER (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
/s/ JAMES M. KRATOCHVIL (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
/s/ JOSEPH S. LEVY
Joseph S. Levy Director October 29, 1999
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
NORWICH ACQUISITION LIMITED
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
Chairman of the Board of
/s/ MARTIN R. IMBLER Directors (Principal
Martin R. Imbler Executive Officer) October 29, 1999
/s/ JAMES M. KRATOCHVIL Director (Principal Financial
James M. Kratochvil and Accounting Officer) October 29, 1999
/s/ TREVOR D. JOHNSON
Trevor D. Johnson Sales and Marketing Director October 29, 1999
/s/ ALAN R. SANDELL
Alan R. Sandell Managing Director October 29, 1999
/s/ IRA G. BOOTS
Ira G. Boots Director October 29, 1999
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
October, 1999.
BERRY PLASTICS ACQUISITION CORPORATION
By: /s/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ ROBERTO BUARON Chairman of the Board of
Roberto Buaron Directors October 29, 1999
President, Chief Executive
Officer and Director
/s/ MARTIN R. IMBLER (Principal Executive
Martin R. Imbler Officer) October 29, 1999
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
/s/ JAMES M. KRATOCHVIL (Principal Financial and
James M. Kratochvil Accounting Officer) October 29, 1999
/s/ JOSEPH S. LEVY
Joseph S. Levy Director October 29, 1999
II-27
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
The Stockholders and Board of Directors
BPC Holding Corporation
We have audited the consolidated financial statements of BPC Holding Corporation
as of January 2, 1999 and December 27, 1997, and for each of the three years in
the period ended January 2, 1999, and have issued our report thereon dated
February 19, 1999 (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
audits.
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 19, 1999
S-1
<PAGE>
BPC HOLDING CORPORATION
(PARENT COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANt
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27,
1999 1997
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash ......................................................... 622 $ 708
Other assets (principally investment in subsidiary) .......... (25,992) (31,808)
Assets held in trust ......................................... 6,679 18,933
Intangible assets ............................................ 3,704 4,281
Due from Berry Plastics Corporation .......................... 8,095 8,095
Other ........................................................ -- --
--------- ---------
Total assets ................................................. $ (6,892) $ 209
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities .......................................... $ 1,240 $ 510
Accrued dividends ............................................ 7,225 3,674
Long-term debt ............................................... 105,000 105,000
--------- ---------
Total liabilities ............................................ 113,465 109,184
Preferred stock .............................................. 16,801 16,509
Class A common stock ......................................... 4 4
Class B common stock ......................................... 2 2
Class C common stock ......................................... -- --
Treasury stock ............................................... 280 (22)
Additional paid-in capital ................................... 45,611 49,374
Warrants ..................................................... 3,511 3,511
Retained earnings (deficit) .................................. (185,923) (178,353)
--------- ---------
Total stockholders' equity (deficit) ......................... (120,357) (108,975)
--------- ---------
Total liabilities and stockholders' equity (deficit) ......... $ (6,892) $ 209
========= =========
</TABLE>
S-2
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
------------ ---------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales ............................................ $ -- $ -- $ --
Cost of goods sold ................................... -- -- --
-------- -------- --------
Gross profit ......................................... -- -- --
Operating expenses ................................... 749 220 3,304
Interest expense, net ................................ 12,720 11,560 6,294
-------- -------- --------
Loss before income taxes and equity in net
income (loss) of subsidiary ........................ (13,469) (11,780) (9,598)
Equity in net income (loss) of subsidiary ............ 5,899 (2,631) 5,989
-------- -------- --------
Loss before income taxes ............................. (7,570) (14,411) (3,609)
Income taxes ......................................... -- -- (262)
-------- -------- --------
Net loss ............................................. (7,570) (14,411) (3,347)
Preferred stock dividends ............................ (3,551) (2,558) (1,116)
Amortization of preferred stock discount ............. (292) (74) --
-------- -------- --------
Net loss attributable to common shareholders ......... $(11,413) $(17,043) $ (4,463)
======== ======== ========
</TABLE>
S-3
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------
JANUARY 2, DECEMBER 27, DECEMBER 28,
1999 1997 1996
------------ -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss) ........................................................ $ (7,570) $ (14,411) $ (3,347)
Adjustments to reconcile net loss provided by operating activities:
Net loss (income) of subsidiary ................................. (5,899) 2,631 (5,989)
Amortization and non cash interest .............................. 500 726 441
Interest funded by assets held in trust ......................... 12,221 11,256 5,412
Non-cash compensation ........................................... -- -- 358
Changes in operating assets and liabilities ..................... 840 (208) 427
--------- --------- ---------
Net cash provided by (used for) operating
activities ............................................................ 92 (6) (2,698)
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 ..... 80 325 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 ................................................................. (258) -- (22)
--------- --------- ---------
Net cash from financing activities ....................................... (178) 325 3,087
--------- --------- ---------
Net increase in cash and cash equivalents ................................ (86) 319 389
Cash and cash equivalents at beginning of year ........................... 708 389 --
--------- --------- ---------
Cash and equivalents at end of year ...................................... $ 622 $ 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 $218.1 million and $201.3 million of
long-term debt outstanding at January 2, 1999 and December 27, 1997,
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>
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE YEAR
----------------- ------------ ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1999:
Allowance for doubtful accounts ............. $1,038 $ 875 $ 280(2) $ 542(1) $1,651
====== ====== ====== ====== ======
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
====== ====== ====== ====== ======
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Primarily relates to purchase of accounts receivable and related allowance
through acquisitions. (1)
S-6
EXHIBIT 10.27
EXECUTION COPY
================================================================================
BERRY PLASTICS CORPORATION
BPC HOLDING CORPORATION
BERRY PLASTICS ACQUISITION CORPORATION
BERRY IOWA CORPORATION
BERRY STERLING CORPORATION
BERRY TRI-PLAS CORPORATION
AEROCON, INC.
PACKERWARE CORPORATION, a Kansas corporation
PACKERWARE CORPORATION, a Delaware corporation
BERRY PLASTICS DESIGN CORPORATION
VENTURE PACKAGING, INC.
VENTURE PACKAGING MIDWEST, INC., an Ohio corporation
VENTURE PACKAGING MIDWEST, INC., a Delaware corporation
VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation
VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation
NIM HOLDINGS LIMITED
NORWICH INJECTION MOULDERS LIMITED
NORWICH ACQUISITION LIMITED
KNIGHT PLASTICS, INC.
$75,000,000
11% Series A Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
June 29, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
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$75,000,000
11% Series A Senior Subordinated Notes due 2007
of Berry Plastics Corporation
PURCHASE AGREEMENT
June 29, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Each of Berry Plastics Corporation, a Delaware corporation (the
"COMPANY"), BPC Holding Corporation, a Delaware corporation ("HOLDING"), Berry
Plastics Acquisition Corporation, a Delaware corporation, Berry Iowa
Corporation, a Delaware corporation, Berry Sterling Corporation, a Delaware
corporation, Berry Tri-Plas Corporation, a Delaware corporation, AeroCon, Inc.,
a Delaware corporation, PackerWare Corporation, a Kansas corporation, PackerWare
Corporation, a Delaware corporation, Berry Plastics Design Corporation, a
Delaware corporation, Venture Packaging, Inc., a Delaware corporation, Venture
Packaging Midwest, Inc., an Ohio corporation, Venture Packaging Midwest, Inc., a
Delaware corporation, Venture Packaging Southeast, Inc., a South Carolina
corporation, Venture Packaging Southeast, a Delaware corporation, NIM Holdings
Limited, a company organized under the laws of England and Wales, Norwich
Injection Moulders Limited, a company organized under the laws of England and
Wales, Knight Plastics, Inc., a Delaware corporation, and Norwich Acquisition
Limited, a company organized under the laws of England and Wales (collectively
with Holding, the "GUARANTORS" which term, as used herein, shall, at and after
the Closing Date (as defined herein), include all successor entities, CPI
Holding Corporation, a Delaware corporation ("CPI") and Cardinal Packaging,
Inc., an Ohio corporation ("CARDINAL PACKAGING")), agree with you as follows:
1. ISSUANCE OF SECURITIES. The Company proposes to issue and sell to
Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc.
(each an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS")
$75,000,000 in aggregate principal amount of 11% Series A Senior Subordinated
Notes due 2007 (the "SERIES A NOTES"). The Series A Notes and the Series B Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "NOTES." The Notes will be guaranteed (the "NOTE GUARANTEES") by
each of the Guarantors. The Notes are to be issued pursuant to the provisions of
an indenture
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(the "INDENTURE") to be dated July 6, 1999, among the Company, the Guarantors
and United States Trust Company of New York, as trustee (the "TRUSTEE").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
The offering of the Series A Notes is being made in connection with
the acquisition (the "ACQUISITION") by the Company of CPI, pursuant to that
certain Stock Purchase Agreement dated June 18, 1999 (the "ACQUISITION
Agreement"), among the Company, CPI, Cardinal Packaging and the shareholders of
CPI.
The Series A Notes will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "ACT"). The Company has prepared a preliminary offering
memorandum (the "PRELIMINARY OFFERING MEMORANDUM"), dated June 18, 1999 and a
final offering memorandum, dated June 29, 1999 (the "OFFERING MEMORANDUM"),
relating to Holding, the Company and its subsidiaries, the Notes and the Note
Guarantees.
Upon original issuance thereof, and until such time as the same is
no longer required under the applicable requirements of the Act, the Series A
Notes (and all securities issued in exchange therefor or in substitution
thereof) shall bear the following legend:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT, (b) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (c) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY AND THE GUARANTORS SO
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REQUEST), (2) TO THE COMPANY, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING."
You have advised the Company that you will make offers (the "EXEMPT
RESALES") of the Series A Notes purchased by you hereunder on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons (each, a "144A PURCHASER") whom you reasonably believe to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBS") and (ii)
persons permitted to purchase the Series A Notes in offshore transactions in
reliance upon Regulation S under the Act (each, a "REGULATION S PURCHASER")
(such persons specified in clauses (i) and (ii) being referred to herein as the
"ELIGIBLE PURCHASERS").
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date (as defined
herein), in substantially the form of EXHIBIT A hereto, for so long as such
Series A Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the Guarantors will agree to file with the Securities and
Exchange Commission (the "COMMISSION") within 45 days of the Closing Date and
under the circumstances set forth therein, (i) a registration statement under
the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Company's
11% Series B Senior Subordinated Notes due 2007 (the "SERIES B NOTES") to be
offered in exchange for the Series A Notes (such offer to exchange being
referred to as the "REGISTERED EXCHANGE OFFER") and (ii) under the circumstances
set forth in the Registration Rights Agreement, a shelf registration statement
pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT" and,
together with the Exchange Offer Registration Statement, the "REGISTRATION
STATEMENTS") relating to the resale by certain holders of the Series A Notes,
and to use their best efforts to cause such Registration Statements to be
declared effective within the time periods set forth in the Registration Rights
Agreement. This Agreement, the Indenture, the Notes, the Note Guarantees, the
Registration Rights Agreement and the Acquisition Agreement are hereinafter
referred to collectively as the "OPERATIVE DOCUMENTS." As used in this Purchase
Agreement (this "AGREEMENT"), the term
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"SUBSIDIARY" shall mean any subsidiary of the Company before the Acquisition
and, at and after the Closing Date, shall mean any Subsidiary of the Company
immediately after the Acquisition.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to the
terms and conditions contained herein, the Company agrees to issue and sell to
the Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company the principal amount of Series A Notes set
forth opposite the name of such Initial Purchaser on Schedule A hereto at a
purchase price equal to 97% of the principal amount thereof ( the "PURCHASE
Price").
3. DELIVERY AND PAYMENT. Delivery to you of and payment for the
Series A Notes shall be made at 9:00 A.M., New York City time, on July 6, 1999
(the "CLOSING DATE") at the offices of O'Sullivan Graev & Karabell, LLP, 30
Rockefeller Plaza, New York, New York 10112, or such other time or place as you
shall reasonably designate.
One or more Series A Notes in definitive global form, registered in
the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
having an aggregate amount corresponding to the aggregate amount of the Series A
Notes sold pursuant to Exempt Resales to QIBs and Regulation S Purchasers
(collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the
Initial Purchasers (or as the Initial Purchasers direct), against payment by the
Initial Purchasers of the Purchase Price, by wire transfer of immediately
available funds to such account or accounts as the Company shall specify,
provided that the Company shall give at least two business days' prior written
notice to the Initial Purchasers of the information required to effect such wire
transfers. The Global Note shall be made available to the Initial Purchasers for
inspection not later than 9:30 A.M. on the business day immediately preceding
the Closing Date.
4. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the Company
and the Guarantors hereby agrees with you as follows:
(a) To advise you promptly and, if requested by you, confirm
such advice in writing, (i) of the issuance by any state securities
commission of any stop order suspending the qualification or exemption
from qualification of any Series A Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by the
Commission or any state securities commission or other regulatory
authority and (ii) of the happening of any event which makes any statement
of a material fact made in the Preliminary Offering Memorandum or the
Offering Memorandum untrue or which requires the making of any additions
to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company and
the Guarantors shall use their reasonable best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of the Series A Notes under any state securities or Blue Sky
laws, and, if at any time any state securities commission issues an order
suspending the qualification or exemption of the
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Series A Notes, the Company and the Guarantors shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish to you without charge as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The
Company and the Guarantors consent to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto, required pursuant to this Agreement by you in connection with the
Exempt Resales.
(c) Not to amend or supplement the Offering Memorandum prior
to the Closing Date unless you shall previously have been advised of, and
shall not have reasonably objected to, such amendment or supplement within
a reasonable time, but in any event not longer than five business days
after being furnished a copy of such amendment or supplement. The Company
and the Guarantors shall promptly prepare, upon any reasonable request by
you, any amendment or supplement to the Preliminary Offering Memorandum
and the Offering Memorandum that may be necessary or advisable in
connection with Exempt Resales.
(d) If, in connection with any Exempt Resales or market making
transactions after the date of this Agreement and prior to the
consummation of the Registered Exchange Offer, any event shall occur that,
in the judgment of the Company and the Guarantors or in the judgment of
counsel to you, makes any statement of a material fact in the Offering
Memorandum untrue or that requires the making of any additions to or
changes in the Offering Memorandum in order to make the statements in the
Offering Memorandum, in the light of the circumstances at the time that
the Offering Memorandum is delivered to prospective Eligible Purchasers,
not misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with all applicable laws, the Company and the
Guarantors shall promptly notify you of such event and prepare an
appropriate amendment or supplement to the Offering Memorandum so that (i)
the statements in the Offering Memorandum as amended or supplemented will,
in the light of the circumstances at the time that the Offering Memorandum
is delivered to prospective Eligible Purchasers, not be misleading and
(ii) the Offering Memorandum will comply with applicable law.
(e) To cooperate with you and your counsel in connection with
the qualification of the Series A Notes for offer and sale by you and by
dealers under the state securities or Blue Sky laws of such jurisdictions
as you may request (PROVIDED, HOWEVER, that neither the Company nor any
Guarantor shall be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action
that would subject it to general consent to service of process in any
jurisdiction in which it is not now so subject). The Company and the
Guarantors will continue such qualification in effect so long as required
by law for distribution of the Series A Notes
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and will file such consents to service of process or other documents as
may be necessary in order to effect such qualification.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, to pay all
costs, expenses, fees and taxes incident to and in connection with: (i)
the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Offering Memorandum (including, without
limitation, financial statements and exhibits) and all amendments and
supplements thereto, (ii) the preparation, printing (including, without
limitation, word processing and duplication costs) and delivery of this
Agreement, the Indenture, the Registration Rights Agreement, all
preliminary and final Blue Sky Memoranda and all other agreements,
memoranda, correspondence and other documents printed and delivered in
connection herewith and with the Exempt Resales, (iii) the issuance and
delivery by the Company and the Guarantors of the Notes and the Note
Guarantees, (iv) the qualification of the Notes and the Note Guarantees
for offer and sale under the securities or Blue Sky laws of the several
states (including, without limitation, the reasonable fees and
disbursements of your counsel relating to such registration or
qualification), (v) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with the
Exempt Resales, (vi) the preparation of certificates for the Notes and the
Note Guarantees (including, without limitation, printing and engraving
thereof), (vii) the fees, disbursements and expenses of the Company's and
the Guarantors' counsel and accountants, (viii) all expenses and listing
fees in connection with the application for quotation of the Series A
Notes in the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System - PORTAL ("PORTAL"), (ix) the rating of the
Notes by rating agencies, if any, (x) all fees and expenses (including
fees and expenses of counsel) of the Company and the Guarantors in
connection with approval of the Notes by DTC for "book-entry" transfer and
(xii) the performance by the Company and the Guarantors of their other
obligations under this Agreement and the other Operative Documents to
which they are a party.
(g) To use the proceeds from the sale of the Series A Notes in
the manner described in the Offering Memorandum under the caption "USE OF
PROCEEDS."
(h) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of
the Notes.
(i) Prior to the Closing Date, to furnish to you, as soon as
they have been prepared, a copy of any unaudited interim consolidated
financial statements of Holding or the Company for any period subsequent
to the period covered by the financial statements appearing in the
Offering Memorandum.
(j) To use its best efforts to do and perform all things
required to be done and performed under this agreement by it prior to or
after the Closing Date and to
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satisfy all conditions precedent on its part to the delivery of the Series
A Notes and the Note Guarantees.
(k) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes in a manner
that would require the registration under the Act of the sale to you or
the Eligible Purchasers of Series A Notes.
(l) For so long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
Act"), to make available to any Eligible Purchaser or beneficial owner of
Notes in connection with any sale thereof and any prospective purchaser of
such Notes from such Eligible Purchaser or beneficial owner, the
information required by Rule 144A(d)(4) under the Act.
(m) To comply with its agreements in the Registration Rights
Agreement, and all agreements set forth in the representation letters of
the Company and the Guarantors to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(n) To cause the Registered Exchange Offer to be made in the
appropriate form, as contemplated by the Registration Rights Agreement, to
permit registration of the Series B Notes and note guarantees thereof to
be offered in exchange for the Series A Notes and Note Guarantees and to
comply with all applicable federal and state securities laws in connection
with the Registered Exchange Offer.
(o) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL.
(p) For so long as any of the Notes are outstanding, to
deliver without charge to the Initial Purchasers, promptly upon their
becoming available, copies of (i) all reports or other publicly available
information that the Company or any of the Guarantors shall mail or
otherwise make available to its securityholders and (ii) all reports,
financial statements and proxy or information statements filed by the
Company or any of the Guarantors with the Commission or any national
securities exchange and such other publicly available information
concerning Holding, the Company or its Subsidiaries, including, without
limitation, press releases.
(q) Neither Holding, the Company nor any of its Subsidiaries
will take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of the
Guarantors to facilitate the sale or resale of the Notes. Except as
permitted by the Act, the Company and the Guarantors will not distribute
any preliminary offering memorandum, offering memorandum or other offering
material in connection with the offering and sale of the Notes.
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(r) To cause CPI and Cardinal Packaging to become parties to
this Agreement by executing the signature pages hereto immediately after
the consummation of the Acquisition.
(s) To comply with the agreements in the Indenture, the
Registration Rights Agreement and each other Operative Document.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS.
Each of the Company and the Guarantors represents and warrants to you that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum (and each supplement and amendment thereto) have been prepared
in connection with the Exempt Resales. The Preliminary Offering Memorandum
and the Offering Memorandum do not, and any supplement or amendment
thereto will not, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this paragraph (a) shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any
supplement or amendment to either of them) made in reliance upon and in
conformity with information relating to you furnished to the Company and
the Guarantors in writing by you expressly for use therein. The Company
and the Guarantors acknowledge for all purposes under this Agreement that
the statements set forth in the stabilization legend and the third,
fourth, sixth and ninth paragraphs under the caption "Plan of
Distribution" in the Preliminary Offering Memorandum and the Offering
Memorandum (or any amendment or supplement) constitute the only written
information furnished to the Company and the Guarantors by each of the
Initial Purchasers expressly for use in the Preliminary Offering
Memorandum and the Offering Memorandum (or any amendment or supplement
thereto).
(b) Each of Holding, the Company and the Subsidiaries is a
duly organized and validly existing corporation in good standing under the
laws of its jurisdiction of incorporation, has the requisite corporate
power and authority to own, lease and operate its properties and to
conduct its business as it is currently being conducted and described in
the Offering Memorandum, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction where the ownership, leasing
or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
singly or in the aggregate, have a material adverse effect on the
properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of Holding, the Company and the
Subsidiaries taken as a whole (a "MATERIAL ADVERSE EFFECT").
(c) Each of the Company and the Guarantors has all necessary
corporate power and authority to execute and deliver this Agreement, the
Notes and the Acquisition Agreement (in the case only of the Company), the
Note Guarantees (in the
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case only of the Guarantors), the Indenture and the Registration Rights
Agreement, to perform its obligations under this Agreement, the Indenture,
the Acquisition Agreement and the Registration Rights Agreement and to
authorize, issue, sell and deliver the Notes and the Note Guarantees, as
the case may be, as contemplated by this Agreement.
(d) This Agreement has been duly authorized and validly
executed and delivered by the Company and each of the Guarantors and
constitutes a legal, valid and binding agreement of the Company and each
of the Guarantors, enforceable against each of them in accordance with its
terms (assuming the due execution and delivery hereof by you), subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws in effect from time to time with respect to
creditors' rights generally and to principles of equity, whether at law or
in equity and except as rights to indemnity and contribution thereunder
may be limited by federal and state securities laws and public policy
considerations underlying such laws.
(e) The issuance and sale of the Series A Notes has been duly
authorized by the Company, and all legally required corporate proceedings
by the Company in connection with the issuance and sale of the Series A
Notes have been taken; each of the Series A Notes, when issued and
delivered to and paid for by the Initial Purchasers in accordance with
this Agreement (assuming the due authentication thereof by the Trustee),
will be a legal, valid and binding obligation of the Company entitled to
the benefits provided by the Indenture, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws in effect from
time to time with respect to creditors' rights generally and to principles
of equity, whether at law or in equity and except as rights to indemnity
and contribution thereunder may be limited by federal and state securities
laws and public policy considerations underlying such laws.
(f) The Company has all requisite power to authorize and issue
the Series B Notes; the issuance of the Series B Notes has been duly
authorized by the Company and all legally required corporate proceedings
by the Company in connection with the issuance of the Series B Notes have
been taken; each of the Series B Notes, when and if issued and delivered
in accordance with the terms of the Registration Rights Agreement and the
Indenture, will be validly executed, issued and delivered and (assuming
the due authentication thereof by the Trustee) will be a legal, valid and
binding obligation of the Company entitled to the benefits provided by the
Indenture, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws in effect from time to time with respect to creditors'
rights generally and to principles of equity, whether at law or in equity
and except as rights to indemnity and contribution thereunder may be
limited by federal and state securities laws and public policy
considerations underlying such laws.
(g) The Note Guarantee to be endorsed on the Series A Notes by
each Guarantor has been duly authorized by such Guarantor and, on the
Closing Date, will
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have been duly executed and delivered by each such Guarantor and will
conform to the description thereof in the Offering Memorandum. When the
Series A Notes have been issued, executed and authenticated in accordance
with the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, the Note Guarantee of each
Guarantor endorsed thereon will constitute valid and legally binding
obligations of such Guarantor, enforceable against such Guarantor in
accordance with its terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganizations, moratorium and similar laws in effect from time to time
with respect to creditors' rights generally and to principles of equity
whether at law or in equity.
(h) The note guarantee to be endorsed on the Series B Notes by
each Guarantor has been duly authorized by such Guarantor and all legally
required corporate proceedings by such Guarantor in connection with the
issuance of such note guarantees have been taken; the note guarantees,
when issued, will have been duly executed and delivered by each such
Guarantor and will conform to the description thereof in the Offering
Memorandum. When the Series B Notes have been issued, executed and
authenticated in accordance with the terms of the Registered Exchange
Offer and the Indenture, the note guarantee of each Guarantor endorsed
thereon will constitute valid and legally binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with its terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganizations, moratorium
and similar laws in effect from time to time with respect to creditors'
rights generally and to principles of equity whether at law or in equity.
(i) The Indenture has been duly authorized by the Company and
each Guarantor and, on the Closing Date, will have been duly executed by
the Company and each Guarantor and will conform to the description thereof
in the Offering Memorandum. When the Indenture has been duly executed and
delivered, the Indenture will be a valid and legally binding agreement of
the Company and each Guarantor, enforceable against each of them in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws in
effect from time to time with respect to creditors' rights generally and
to principles of equity, whether at law or in equity and except as rights
to indemnity and contribution thereunder may be limited by federal and
state securities laws and public policy considerations underlying such
laws.
(j) The Registration Rights Agreement has been duly authorized
by the Company and each Guarantor and, on the Closing Date, will have been
duly executed by the Company and each Guarantor and will conform to the
description thereof in the Offering Memorandum. When the Registration
Rights Agreement has been duly executed and delivered, the Registration
Rights Agreement will be a valid and legally binding agreement of the
Company and each Guarantor, enforceable against each of them in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
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conveyance, reorganization, moratorium and similar laws in effect from
time to time with respect to creditors' rights generally and to principles
of equity, whether at law or in equity and except as rights to indemnity
and contribution thereunder may be limited by federal and state securities
laws and public policy considerations underlying such laws.
(k) The Acquisition Agreement has been duly authorized,
executed and delivered by the Company. The Acquisition Agreement is a
valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws in effect from time to time with respect to creditors'
rights generally and to principles of equity, whether at law or in equity
and except as rights to indemnity and contribution thereunder may be
limited by federal and state securities laws and public policy
considerations underlying such laws.
(l) On the Closing Date, the entities listed on Schedule B
hereto will be the only Subsidiaries, direct or indirect, of the Company.
All of the issued and outstanding shares of capital stock of, or other
ownership interests in, each Subsidiary have been or, in the case of CPI
and Cardinal Packaging, on the Closing Date will be duly and validly
authorized and issued. All of the shares of capital stock of, or other
ownership interests in, each Subsidiary are or, in the case of CPI and
Cardinal Packaging, on the Closing Date will be owned, directly or through
Subsidiaries, by the Company. All such shares of capital stock are or, in
the case of CPI and Cardinal Packaging, on the Closing Date will be fully
paid and nonassessable, and are owned free and clear of any security
interest, mortgage, pledge, claim, lien or encumbrance (each, a "LIEN")
other than those Liens created pursuant to the Credit Facility (as defined
in the Offering Memorandum). There are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments of
sale or Liens related to or entitling any person to purchase or otherwise
to acquire any shares of the capital stock of, or other ownership interest
in, any Subsidiary.
(m) Except as set forth on Schedule C hereto, neither Holding,
the Company nor any of the Subsidiaries is in violation of its respective
charter or bylaws or in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust or
other contract, lease or other instrument to which Holding, the Company or
any of the Subsidiaries is a party or by which any of them is bound, or to
which any of the property or assets of Holding, the Company or any of the
Subsidiaries is subject. To the knowledge of the Company and the
Guarantors, there exists no condition which, with notice, the passage of
time or otherwise, would constitute a default under any such document or
instrument.
(n) The execution and delivery of this Agreement, the
Indenture, the Registration Rights Agreement, the Acquisition Agreement,
the Notes and the Note Guarantees, the issuance and sale of the Notes and
the Note Guarantees, the performance
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of this Agreement, the Indenture, the Registration Rights Agreement and
the Acquisition Agreement, compliance by the Company and the Guarantors
with the provisions hereof and thereof and of the Notes and the Note
Guarantees (in each case, to the extent the Company or such Guarantor is a
party thereto), the consummation of each of the transactions contemplated
hereby and thereby, in each case, as applicable, will not result in a
breach or violation of any of the respective charters or bylaws of
Holding, the Company or any of the Subsidiaries or any of the terms or
provisions of, or constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) a Lien with respect to, any bond, note,
debenture or other evidence of indebtedness or any indenture, mortgage,
deed of trust or other agreement or instrument to which Holding, the
Company or any of the Subsidiaries is a party or by which it or any of
them is bound, or to which any properties of Holding, the Company or any
of the Subsidiaries is or may be subject, or contravene any order of any
court or governmental agency or body having jurisdiction over Holding, the
Company or any of the Subsidiaries or any of their properties, or violate
or conflict with any statute, rule or regulation or administrative or
court decree applicable to Holding, the Company or any of the
Subsidiaries, or any of their respective properties.
(o) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, pending against
or affecting Holding, the Company or any of the Subsidiaries, or any of
their respective properties, which is required to be disclosed and is not
so disclosed, in the Preliminary Offering Memorandum or the Offering
Memorandum, or which would result, singly or in the aggregate, in a
Material Adverse Effect or which would materially and adversely affect the
consummation of this Agreement or the transactions contemplated hereby,
and to the best knowledge of the Company and the Guarantors, no such
proceedings are contemplated or threatened.
(p) To the best knowledge of the Company and the Guarantors,
no action has been taken and no statute, rule or regulation or order has
been enacted, adopted or issued by any governmental agency or body which
prevents the issuance of the Notes or the Note Guarantees, prevents or
suspends the use of any Offering Memorandum or suspends the sale of the
Notes or the Note Guarantees, in any jurisdiction referred to in Section
4(e) hereof; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued with
respect to Holding, the Company or any of the Subsidiaries which would
prevent or suspend the issuance or sale of the Notes or the Note
Guarantees, or the use of any Preliminary Offering Memorandum or Offering
Memorandum in any jurisdiction referred to in Section 4(e) hereof; no
action, suit or proceeding is pending against or, to the best knowledge of
the Company and the Guarantors, threatened against or affecting Holding,
the Company or any of the Subsidiaries before any court or arbitrator or
any governmental body, agency or official, domestic or foreign, which, if
adversely determined, would materially interfere with or adversely affect
the issuance of the Notes or the Note Guarantees, or in any manner draw
into question the validity of this Agreement, the Indenture, the
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<PAGE>
Registration Rights Agreement, the Acquisition Agreement, the Notes or the
Note Guarantees; and every request of the Commission or any securities
authority or agency of any jurisdiction for additional information (to be
included in the Preliminary Offering Memorandum or Offering Memorandum or
otherwise) has been complied with.
(q) Except as set forth in the Offering Memorandum, Holding,
the Company and the Subsidiaries are in compliance with all applicable
existing federal, state and local laws and regulations relating to
protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material ("ENVIRONMENTAL
Laws"), except where the failure to comply would not have a Material
Adverse Effect. The term "Hazardous Material" means (a) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (b) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as
amended, (c) any petroleum or petroleum product, (d) any polychlorinated
biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material, waste or substance.
(r) Neither Holding, the Company nor any of the Subsidiaries
has violated any federal, state or local law relating to discrimination in
the hiring, promotion or pay of employees or any applicable wage or hour
laws, nor any provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") or the rules and regulations promulgated thereunder, nor
has Holding, the Company or any of the Subsidiaries engaged in any unfair
labor practice, which in each case would result, singly or in the
aggregate, in a Material Adverse Effect. There is (i) no significant
unfair labor practice complaint pending against Holding, the Company or
any of the Subsidiaries or, to the best knowledge of the Company and the
Guarantors, threatened against any of them before the National Labor
Relations Board or any state or local labor relations board, and no
significant grievance or significant arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against
Holding, the Company or any of the Subsidiaries or, to the best knowledge
of the Company and the Guarantors, threatened against any of them, (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Holding, the Company or any of the Subsidiaries or, to the best knowledge
of the Company and the Guarantors, threatened against Holding, the Company
or any of the Subsidiaries and (iii) to the best knowledge of the Company
and the Guarantors, no union representation question exists with respect
to the employees of Holding, the Company or any of the Subsidiaries and no
union organizing activities are taking place, except (with respect to any
matter specified in clause (i), (ii) or (iii) above, singly or in the
aggregate) such as could not have a Material Adverse Effect.
(s) Except (i) as would not result, singly or in the
aggregate, in a Material Adverse Effect, and (ii) for the liens created
pursuant to (A) the Credit Facility (as defined in the Offering
Memorandum), (B) the Nevada Industrial Revenue Bonds (as defined in the
Offering Memorandum), (C) the Pledge, Escrow and Disbursement Agreement
dated June 18, 1996, among Holding, First Trust of New York, National
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Association ("FIRST TRUST"), as trustee, and First Trust, as escrow agent,
and (D) the Holding Pledge and Security Agreement dated June 18, 1996
between Holding and First Trust, as collateral agent, Holding, the Company
and each of the Subsidiaries has good and marketable title, free and clear
of all Liens (except Liens for taxes not yet due and payable), to all
property and assets reflected in the Company's consolidated financial
statements at and for the fiscal year ended January 2, 1999.
(t) The firms of accountants that have certified or shall
certify the applicable financial statements and supporting schedules of
Holding, the Company and the Subsidiaries as part of the Preliminary
Offering Memorandum and the Offering Memorandum are independent public
accountants, as required by the Act and the Exchange Act. The consolidated
historical and PRO FORMA financial statements, together with related
schedules and notes, set forth in the Preliminary Offering Memorandum and
the Offering Memorandum comply as to form in all material respects with
the requirements of the Act. Such historical financial statements fairly
present in all material respects the financial position of Holding, the
Company and the Subsidiaries at the respective dates indicated and the
results of operations and cash flows for the respective periods indicated,
in accordance with generally accepted accounting principles in the United
States ("GAAP") consistently applied throughout such periods (other than
as set forth on Schedule D hereto). Such PRO FORMA financial statements
have been prepared on a basis consistent with such historical statements,
except for the PRO FORMA adjustments specified therein, and give effect to
assumptions made on a reasonable basis. The other financial and
statistical information and data included in the Preliminary Offering
Memorandum and the Offering Memorandum, historical and PRO FORMA, are, in
all material respects, prepared on a basis consistent with such financial
statements and the books and records of Holding, the Company and the
Subsidiaries, as the case may be.
(u) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date (except as
disclosed in the Offering Memorandum), neither Holding, the Company nor
any of the Subsidiaries has incurred any liabilities or obligations,
direct or contingent, which are material, individually or in the
aggregate, to Holding, the Company or any Subsidiary, nor entered into any
transaction not in the ordinary course of business and there has not been,
singly or in the aggregate, any material adverse change, or any
development which may reasonably be expected to involve a material adverse
change, in the properties, business, results of operations, condition
(financial or otherwise), affairs or prospects of Holding, the Company and
their Subsidiaries taken as a whole (each, a "MATERIAL ADVERSE CHANGE").
(v) All tax returns required to be filed by Holding, the
Company or any of the Subsidiaries in any jurisdiction have been filed,
other than those filings being contested in good faith, and all material
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities
14
<PAGE>
have been paid, other than those being contested in good faith and for
which adequate reserves have been provided or those currently payable
without penalty or interest.
(w) No authorization, approval or consent or order of, or
filing with, any court or governmental body or agency is necessary in
connection with the transactions contemplated by this Agreement or the
other Operative Documents, except such as may be required by the NASD, the
Trust Indenture Act of 1939, as amended (the "TIA"), or the Act, or have
been obtained and made. No consents or waivers from any person under any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument are required to consummate the transactions
contemplated by this Agreement, the Notes, the Note Guarantees, the
Indenture, the Registration Rights Agreement, the Acquisition Agreement
and the Offering Memorandum, except for such consents or waivers which
have been, or will be, obtained prior to the Closing Date or such as which
the failure to obtain would not have a Material Adverse Affect.
(x) (i) Each of Holding, the Company and the Subsidiaries has
all certificates, consents, exemptions, orders, permits, licenses,
authorizations or other approvals (each, an "AUTHORIZATION") of and from,
and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, necessary or required to own, lease,
license and use its properties and assets and to engage in the business
currently conducted by it, except as such are described in the Offering
Memorandum or to the extent that the failure to obtain or file would not,
singly or in the aggregate, have a Material Adverse Effect, (ii) all such
Authorizations are valid and in full force and effect and (iii) Holding,
the Company and the Subsidiaries are in compliance in all material
respects with the terms and conditions of all such Authorizations that
have been obtained thereby and with the rules and regulations of the
regulatory authorities and governing bodies having jurisdiction with
respect thereto. Neither Holding, the Company nor any Subsidiary believes
that any governmental body or agency is considering limiting, suspending
or revoking any such material license, certificate, permit, authorization,
approval, franchise or right.
(y) Neither Holding, the Company nor any of the Subsidiaries
is (a) an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as
amended, or (b) a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(z) No holder of any security of Holding, the Company or any
of the Subsidiaries has or will have any right to require the registration
of such security by virtue of any transaction contemplated by this
Agreement, other than the rights described in the Registration Rights
Agreement.
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<PAGE>
(aa) There are no contracts, agreements or understandings
between Holding, the Company or any of the Subsidiaries and any person
(other than the Initial Purchaser) that would give rise to a valid claim
against Holding, the Company, the Subsidiaries or the Initial Purchasers
for a brokerage commission, finder's fee or like payment in connection
with the issuance, purchase and sale of the Notes.
(bb) Holding, the Company and the Subsidiaries possess all
material patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "INTELLECTUAL
PROPERTY") presently employed by them in connection with the businesses
now operated by them, and, except as set forth in the Offering Memorandum,
neither Holding, the Company nor any Subsidiary has received any notice of
infringement of or conflict with asserted rights of others with respect to
the foregoing.
(cc) Holding, the Company and the Subsidiaries each maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(dd) The present fair saleable value of the assets of each of
the Company and the Guarantors exceeds the amount that will be required to
be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of each such person as they become
absolute and matured. The assets of each of the Company and the Guarantors
do not constitute unreasonably small capital to carry out their businesses
as conducted or as proposed to be conducted. Neither the Company nor any
of the Guarantors intends to, nor does it believe that it will, incur
debts beyond its ability to pay such debts as they mature. Upon the
issuance of the Series A Notes, the present fair saleable value of the
assets of each of the Company and the Guarantors will exceed the amount
that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such person as
they become absolute and matured. The assets of each of the Company and
the Guarantors, upon the issuance of the Series A Notes, will not
constitute unreasonably small capital to carry out their businesses as now
conducted, including the capital needs of each of the Company and the
Guarantors, taking into account the projected capital requirements and
capital availability of each of the Company and the Guarantors.
(ee) None of Holding, the Company, the Subsidiaries or any
agent thereof acting on the behalf of any of them has taken, and none of
them will take, any
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<PAGE>
action that might cause this Agreement, any of the other Operative
Documents or the issuance or sale of the Series A Notes to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
(ff) Holding, the Company and each Subsidiary maintains
insurance covering their properties, operations, personnel and businesses.
Such insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect Holding, the
Company and the Subsidiaries and their businesses. Neither Holding, the
Company nor any Subsidiary has received notice from any insurer or agent
of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance. All
such insurance is outstanding and duly in force on the date hereof and
will be outstanding and duly in force on the Closing Date.
(gg) When the Series A Notes and Note Guarantees are issued
and delivered pursuant to this Agreement, neither the Series A Notes nor
the Note Guarantees will be of the same class (within the meaning of Rule
144A under the Act) as securities of the Company or the Guarantors that
are listed on a national securities exchange registered under Section 6 of
the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(hh) Assuming (i) that your representations and warranties in
Section 6 are true, (ii) compliance by you with your covenants set forth
in Section 8 and (iii) that each of the Eligible Purchasers is a QIB or a
Regulation S Purchaser, the purchase and resale of the Series A Notes
pursuant hereto (including pursuant to the Exempt Resales) is exempt from
the registration requirements of the Act.
(ii) No form of general solicitation or general advertising
was used by the Company, the Guarantors or any of their representatives
(other than you, as to whom the Company and the Guarantors make no
representation) in connection with the offer and sale of the Series A
Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have
been issued and sold by the Company within the six-month period
immediately prior to the date hereof.
(jj) Set forth on Schedule E hereto is a list of each employee
pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of
Section 407(d)(7) of ERISA (an "AFFILIATE") is a party in interest or
disqualified person. The execution and delivery of this Agreement and the
other Operative Documents and the sale of the Series A Notes to be
purchased by the Eligible Purchasers will not involve any prohibited
transaction
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<PAGE>
within the meaning of Section 406 of ERISA or Section 4975 of the Code.
The representation made by the Company and the Guarantors in the preceding
sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by
the Eligible Purchasers as set forth in the Offering Memorandum under the
Section entitled "Notice to Investors."
(kk) Each of the Preliminary Offering Memorandum and the
Offering Memorandum as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and meets
the requirements of Rule 144A(d)(4) of the Act.
(ll) Except as disclosed in the Offering Memorandum, there are
no business relationships or related party transactions required to be
disclosed therein pursuant to Item 404 of Regulation S-K of the Commission
(assuming for purposes of this paragraph 5(ll) that Regulation S-K is
applicable to the Offering Memorandum).
(mm) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(nn) None of the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company and the Guarantors
make no representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S under the Act ("REGULATION S")
with respect to the Series A Notes or the Subsidiary Guarantees.
(oo) The Company, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Company and the Guarantors make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering
of the Series A Notes outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required by
Rule 902(g)(2).
(pp) To the best of our knowledge, the Series A Notes offered
and sold in reliance on Regulation S have been and will be offered and
sold in offshore transactions.
(qq) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of
the Act.
(rr) The Series A notes sold in reliance on Regulation S will
be represented upon issuance by a temporary global security that may not
be exchanged for definitive securities until the expiration of the 40-day
distribution compliance period referred to in Rule 903(c)(3) of the Act
and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S. persons who purchased
18
<PAGE>
such series A Notes in transactions that were exempt from the registration
requirements of the Act.
6. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of the
Initial Purchasers, severally and not jointly, represents and warrants to the
Company and the Guarantors that:
(a) Such Initial Purchaser is either a QIB or an accredited
investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Act) (an
"ACCREDITED INSTITUTION"), in either case with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (i) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes in a
transaction that would violate the Act or the securities laws of any State
of the United States or any other applicable jurisdiction and (ii) will be
reoffering and reselling the Series A Notes only to (A) QIBs in reliance
on the exemption from the registration requirements of the Act provided by
Rule 144A and (B) in offshore transactions in reliance upon Regulation S.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) has been or will be used by such Initial
Purchaser or any of its representatives in connection with the offer and
sale of the Series A Notes pursuant hereto, including, but not limited to,
articles, notices, or other communications published in any newspaper,
magazine or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or advertising.
(d) The Initial Purchasers further agree that, in connection
with the Exempt Resales, the Initial Purchasers will solicit offers to buy
the Series A Notes only from, and will offer to sell the Series A Notes
only to, the Eligible Purchasers. Each Initial Purchaser further agrees
that it will offer to sell the Series A Notes only to, and will solicit
offers to buy the Series A Notes only from, persons who in purchasing such
Series A Notes will be deemed to have represented and agreed (1) if such
Eligible Purchaser is a QIB, that they are purchasing the Series A Notes
for their own account or an account with respect to which they exercise
sole investment discretion and that they or such accounts are QIBs, (2)
that such Series A Notes will not have been registered under the Act and
may be resold, pledged or otherwise transferred, only (A) (I) to a person
who the seller reasonably believes is a QIB purchasing for its own account
or for the account of a QIB in a transaction meeting the requirements of
Rule 144A, or in accordance with Rule 144 under the Act, or pursuant to
another exemption from the registration requirements of the Act (and based
upon an opinion of counsel if the Company and the Guarantors so request)
or (II) to the Company, (III) in an offshore transaction (as defined in
Rule 902 under the Act) meeting the requirements of Rule 904 of the Act,
(IV) in a
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<PAGE>
transaction meeting the requirements of Rule 144 under the Act, (V) to an
Accredited Institution that, prior to such transfer, furnishes the Trustee
a signed letter containing certain representations and agreements relating
to the registration of transfer of such Series A Note and, if such
transfer is in respect of an aggregate principal amount of Series A Notes
less than $250,000, an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Act, (VI) in accordance with
another exemption from the registration requirements of the Act (and based
upon an opinion of counsel acceptable to the Company) or (VII) pursuant to
an effective registration statement and (B) in each case, in accordance
with any applicable securities laws of any State of the United States or
any other applicable jurisdiction, (3) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (2)
above.
(e) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in any
directed selling efforts within the meaning of Regulation S with respect
to the Series A Notes or the Note Guarantees.
(f) The Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will
be offered and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part
of a plan or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Series A Notes in the United States or
to, or for the benefit or account of, a U.S. Person (other than a
distributor), in each case, as defined in Rule 902 under the Act (i) as
part of its distribution at any time and (ii) otherwise until 40 days
after the later of the commencement of the offering of the Series A Notes
pursuant hereto and the Closing Date, other than in accordance with
Regulation S of the Act or another exemption from the registration
requirements of the Act. Such Initial Purchaser agrees that, during such
40-day distribution compliance period, it will not cause any advertisement
with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in
any public place and will not issue any circular relating to the Series A
Notes, except such advertisements as are permitted by and include the
statements required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor, dealer
or person receiving a selling concession, fee or other remuneration during
the 40-day distribution compliance period referred to in Rule 903(c)(2)
under the Act, it will send to such distributor, dealer or person
receiving a selling concession, fee or other remuneration a confirmation
or notice to substantially the following effect:
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"The Series A Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of your distribution at
any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, except in either case
in accordance with Regulation S under the Securities Act (or Rule 144A or
to institutional "accredited investors," as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act in transactions that are exempt
from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Series A Notes covered
hereby in reliance on Regulation S during the period referred to above to
any distributor, dealer or person receiving a selling concession, fee or
other remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned to them in
Regulation S."
(j) Such Initial purchaser agrees that the Series A Notes
offered and sold in reliance on Regulation S will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the 40-day distribution compliance
period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes in
transactions that were exempt from the registration requirements of the
Act.
Such Initial Purchaser also understands that the Company and the
Guarantors and, for purposes of the opinions to be delivered to you
pursuant to Sections 8(f) and 8(g) hereof, each of O'Sullivan Graev &
Karabell, LLP and Latham & Watkins, will rely upon the accuracy and truth
of the foregoing representations and you hereby consent to such reliance.
7. INDEMNIFICATION.
(a) The Company and each Guarantor (the "INDEMNIFYING
Parties") agree to indemnify and hold harmless (i) each Initial Purchaser,
(ii) each person, if any, who controls (within the meaning of Section 15
of the Act or Section 20 of the Exchange Act) any Initial Purchaser (any
of the persons referred to in this clause (ii) being hereinafter referred
to as a "CONTROLLING PERSON"), and (iii) the respective officers,
directors, partners, employees, representatives and agents of each Initial
Purchaser or any controlling person (any person referred to in clause (i),
(ii), or (iii) may hereinafter be referred to as an "INDEMNIFIED PERSON")
to the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, including the reasonable fees and expenses of counsel to
any Indemnified Person) directly or indirectly (a) caused by, related to,
based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering
21
<PAGE>
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission based upon such information relating
to such Initial Purchaser furnished in writing to the Company and the
Guarantors by such Initial Purchaser; PROVIDED, HOWEVER, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum or the Offering Memorandum shall not inure to the benefit of
any Initial Purchaser from whom the person asserting any such losses,
claims, damages, liabilities, judgments, actions or expenses purchased
Notes, or any controlling person of such Initial Purchaser, if a copy of
the Preliminary Offering Memorandum or the Offering Memorandum (including
any amendment or supplement thereto delivered to such Initial Purchaser
prior to the date such Preliminary Offering Memorandum or the Offering
Memorandum was sent or given to such purchaser, was not sent or given by
or on behalf of such Initial Purchaser to such person at or prior to the
written confirmation of the sale of Notes to such person, and if the
Preliminary Offering Memorandum or the Offering Memorandum (including any
amendment or supplement thereto delivered to such Initial Purchaser prior
to the date such Preliminary Offering Memorandum or the Offering
Memorandum was sent or given to such purchaser) cured the defect giving
rise to such losses, claims, damages, liabilities, judgments, actions or
expenses. The Indemnifying Parties shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Indemnifying Parties or an
Indemnified Person.
(b) In case any action or proceeding (including any
governmental investigation) shall be brought or asserted against any of
the Indemnified Persons with respect to which indemnity may be sought
against the Indemnifying Parties, such Indemnified Person (or the entity
controlled by such controlling person) shall promptly notify the Company
in writing (PROVIDED that the failure to give such notice shall not
relieve the Indemnifying Parties of their obligations pursuant to this
Agreement unless such failure to notify has materially prejudiced the
ability of the Indemnifying Parties to defend any such claim) and the
Indemnifying Parties shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Parties
and payment of all reasonable fees and expenses. Such Indemnified Person
shall have the right to employ its own counsel in any such action and
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the Indemnified Party's expense unless (i) the
employment of such counsel has been specifically authorized in writing by
the Company, (ii) the Indemnifying Parties have not assumed the defense
and employed counsel reasonably satisfactory to such Indemnified Party
within a reasonable time after notice of commencement of such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both an Indemnified Party and
any Indemnifying Party and any such Indemnified Party shall have been
advised by such counsel that there may be one or more legal defenses
available to it
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which are different from or additional to those available to the
Indemnifying Parties (in which case the Indemnifying Parties shall not
have the right to assume the defense of such action on behalf of the
Indemnified Parties, it being understood, however, that the Indemnifying
Parties shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) at any time for such Indemnified
Persons, which firm shall be designated by Donaldson, Lufkin & Jenrette
Securities Corporation). The Indemnifying Parties shall be liable for any
settlement of any such action or proceeding effected with the Indemnifying
Parties' prior written consent, which consent will not be unreasonably
withheld, and the Indemnifying Parties agree to indemnify and hold
harmless any Indemnified Person from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected
with the written consent of the Indemnifying Parties. If at any time the
Indemnified Person shall have requested the Indemnifying Parties to
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second sentence of this paragraph in connection with
any such action or proceeding, the Indemnifying Parties agree that they
shall be liable for any settlement of any proceeding effected without
their written consent so long as they receive written notice of such
settlement if (i) such settlement is entered into more than ninety
business days after receipt by such Indemnifying Parties of the aforesaid
request and (ii) such Indemnifying Parties shall not have reimbursed the
Indemnified Party in accordance with such request prior to the date of
such settlement. The Indemnifying Parties shall not, without the prior
written consent of each Indemnified Person, which will not be unreasonably
withheld, settle or compromise or consent to the entry of a judgment in or
otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified
Person is a party thereto), unless such settlement, compromise, consent or
termination includes an unconditional release of each Indemnified Person
from all liability arising out of such action, claim, litigation or
proceeding.
(c) Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors,
their respective directors and officers, any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, and the officers, directors, partners,
employees, representatives and agents of each such person to the same
extent as the foregoing indemnity from the Indemnifying Parties to each of
the Indemnified Persons, but only with respect to claims and actions based
on information relating to such Initial Purchaser furnished in writing by
such Initial Purchaser expressly for use in the Preliminary Offering
Memorandum and the Offering Memorandum.
(d) If the indemnification provided for in this Section 7 is
unavailable to a party entitled to indemnification pursuant to Section
7(b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each indemnifying
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party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities, expenses and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by
the indemnifying party (or parties, as applicable) on the one hand and the
indemnified party (or parties, as applicable) on the other hand from the
offering of the Series A Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party (or
parties, as applicable) and the indemnified party (or parties, as
applicable), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Guarantors, on the one
hand, and the Initial Purchasers, on the other hand, shall be deemed to be
in the same proportion as the total proceeds from the offering (net of
discounts and commissions but before deducting expenses) received by the
Company and the Guarantors bear to the total discounts and commissions
received by the Initial Purchasers, in each case as set forth in the table
on the cover page of the Offering Memorandum. The relative fault of the
Company and the Guarantors, on the one hand, and the Initial Purchasers,
on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact related to
information supplied by the Company or the Guarantors, on the one hand, or
the Initial Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The indemnity and contribution
obligations of the Company and the Guarantors set forth herein shall be in
addition to any liability or obligation the Company and the Guarantors may
otherwise have to any Indemnified Person.
The Company and the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in this Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no
Initial Purchaser (and its related Indemnified Persons) shall be required
to contribute, in the aggregate, any amount in excess of the amount by
which the total discount received by such Initial Purchaser applicable to
the Series A Notes purchased by such Initial Purchaser exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
The Initial Purchasers' obligations to contribute pursuant
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to this Section 7(d) are several in proportion to the respective principal
amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and not joint.
8. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
the Guarantors contained in this Agreement shall be true and correct in
all material respects (other than those representations and warranties
that are qualified by a reference to materiality, which shall be true and
correct in all respects) on the Closing Date with the same force and
effect as if made on and as of the date hereof and the Closing Date,
respectively. The Company and the Guarantors shall have performed or
complied with in all material respects all of their obligations and
agreements herein contained (other than those obligations and agreements
that are qualified by a reference to materiality, which shall be performed
or complied with in all respects) and required to be performed or complied
with by them at or prior to the Closing Date.
(b) No stop order suspending the sale of the Series A Notes in
any jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened.
(c) (i) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Series A Notes; (ii) no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction
shall have been issued as of the Closing Date which would prevent the
issuance of the Series A Notes; and (iii) on the Closing Date no action,
suit or proceeding shall be pending against or affecting or, to the
knowledge of the Company and the Guarantors, threatened against, Holding,
the Company or any Subsidiary before any court or arbitrator or any
governmental body, agency or official which, if adversely determined,
would prohibit the issuance of the Series A Notes except as disclosed in
the Offering Memorandum.
(d) (i) Since the date hereof or since the dates as of which
information is given in the Offering Memorandum, there shall not have been
any Material Adverse Change, (ii) since the date of the latest balance
sheet included in the Offering Memorandum, there shall not have been any
material change in the capital stock or long-term debt, or material
increase in short-term debt, of Holding, the Company or any of the
Subsidiaries (other than as disclosed in the Offering Memorandum) and
(iii) Holding, the Company and the Subsidiaries shall have no liability or
obligation, direct or contingent, that is material to Holding, the Company
and the Subsidiaries taken as a whole and is required to be disclosed on a
balance sheet in accordance with GAAP and is not disclosed on the latest
balance sheet included in the Offering Memorandum.
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(e) You shall have received certificates, dated the Closing
Date, signed by (i) the President or any Vice President or any other
executive officer and (ii) a principal financial or accounting officer of
the Company and each of the Guarantors confirming, as of the Closing Date,
the matters set forth in paragraphs (a), (b), (c) and (d) of this Section
8.
(f) On the Closing Date, you shall have received an opinion
(satisfactory to you and your counsel), dated the Closing Date, of
O'Sullivan Graev & Karabell, LLP, counsel for the Company and the
Guarantors, to the effect that:
(i) Holding, the Company and each of the U.S. Guarantors
is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, has
the requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as it is
currently being conducted and described in the Offering Memorandum,
and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction listed on a schedule attached to the
opinion;
(ii) Each of the Company and each of the U.S. Guarantors
has all necessary corporate power and authority to execute and
deliver this Agreement, the Series A Notes, the Note Guarantees, the
Indenture, the Registration Rights Agreement and the Acquisition
Agreement, as applicable, and to perform its obligations under this
Agreement, the Indenture, the Registration Rights Agreement and the
Acquisition Agreement, and to authorize, issue, sell and deliver the
Series A Notes and the Note Guarantees, as applicable, as
contemplated by this Agreement;
(iii) Each of this Agreement, the Series A Notes, the
Note Guarantees, the Registration Rights Agreement, the Indenture
and the Acquisition Agreement has been duly authorized, executed and
delivered by the Company and the U.S. Guarantors, as applicable;
(iv) When authenticated in accordance with the terms of
the Indenture and delivered to and paid for by you in accordance
with the terms of this Agreement, the Series A Notes will constitute
valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to
the benefits of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement
is sought at law or in equity);
(v) When the Series A Notes are executed and
authenticated in accordance with the terms of the Indenture, each of
the Note Guarantees of the
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Guarantors endorsed thereon will constitute valid and legally
binding obligations of the respective Guarantor, enforceable against
each such Guarantor in accordance with its terms and entitled to the
benefits of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement
is sought at law or in equity).
(vi) The Series B Notes and the note guarantees to be
endorsed thereon by the U.S. Guarantors have been duly authorized by
the Company and each of the U.S. Guarantors, as the case may be.
(vii) The Indenture, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid
and legally binding agreement of the Company and each of the
Guarantors, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles
of equity (regardless of whether enforcement is sought at law or in
equity);
(viii) The Notes, the Note Guarantees, the Indenture and
the Registration Rights Agreement conform to the descriptions
thereof contained in the Offering Memorandum in all material
respects;
(ix) All of the issued and outstanding shares of capital
stock of, or other ownership interests in, each U.S. Guarantor have
been duly and validly authorized and issued and are fully paid and
nonassessable. All of the shares of capital stock of, or other
ownership interests in, each U.S. Guarantor are owned, directly or
through U.S. Guarantors, by the Company;
(x) To the knowledge of such counsel, there are no
outstanding subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or Liens related to or
entitling any person to purchase or otherwise to acquire any shares
of the capital stock of, or other ownership interest in, any U.S.
Guarantor (other than those Liens created pursuant to the Credit
Facility (as defined in the Offering Memorandum));
(xi) Neither Holding, the Company nor any of the
Guarantors is (a) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment
Company Act of 1940, as amended, or (b) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of
1935, as amended;
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<PAGE>
(xii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings, and contracts and
other documents are accurate in all material respects; it being
understood that such counsel need express no opinion as to the
financial statements, notes or schedules or other financial or
statistical data included therein or omitted therefrom;
(xiii) To the knowledge of such counsel: (a) no action
has been taken and no statute, rule or regulation or order has been
enacted, adopted or issued by any governmental agency or body which
prevents the issuance of the Series A Notes or the Notes Guarantees,
and such counsel has received no notice which suspends the sale of
the Series A Notes or the Notes Guarantees; (b) no injunction,
restraining order or order of any nature by a federal or state court
of competent jurisdiction has been issued with respect to Holding,
the Company or any of the Guarantors which would prevent or suspend
the issuance or sale of the Series A Notes or the Notes Guarantees,
and such counsel has not received notice which prevents or suspends
the use of the Offering Memorandum in any jurisdiction referred to
in Section 4(e) hereof; and (c) no action, suit or proceeding is
pending against or threatened against or affecting Holding, the
Company or any of the Guarantors before any court or arbitrator or
any governmental body, agency or official, domestic or foreign,
which, if adversely determined, would prevent the issuance of the
Series A Notes or the Notes Guarantees;
(xiv) Except as may be required under state securities
or "Blue Sky" laws or regulations or by the NASD, as to which such
counsel expresses no opinion, no authorization, approval, consent or
order of, or filing with, any court or governmental body or agency
is required for the consummation of the transactions contemplated by
this Agreement or the other Operative Documents, except such as have
been obtained and made; no consents or waivers from any person under
any bond, debenture, note, indenture, mortgage, deed of trust or
other agreement or instrument that is listed on a schedule to the
opinion are required to consummate the transactions contemplated by
this Agreement or the other Operative Documents, except for any
consent or waiver which has been obtained on or prior to the Closing
Date;
(xv) On the Closing Date, the Offering Memorandum
(except for financial statements, the notes thereto and related
schedules and other financial data included therein, or omitted
therefrom, as to which no opinion need be expressed) complied as to
form in all material respects with Rule 144A(d)(4) of the Act;
(xvi) To the best knowledge of such counsel, other than
as set forth on Schedule C to this Agreement, neither Holding, the
Company nor any of the Guarantors is in violation of its respective
charter or bylaws or in default in the performance of any
obligation, agreement or condition contained in any
28
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agreement or instrument listed on a schedule to the opinion; to the
best knowledge of such counsel, there exists no condition which,
with notice, the passage of time or otherwise, would constitute a
default under any such document or instrument;
(xvii) The execution and delivery of this Agreement and
the other Operative Documents, the issuance and sale of the Series A
Notes and the Note Guarantees, the performance of this Agreement and
the other Operative Documents, compliance by the Company and the
Guarantors with the provisions hereof and thereof and of the Series
A Notes and the Note Guarantees, the consummation of the
transactions contemplated hereby and thereby and the payments
described in the Offering Memorandum under the caption "Use of
Proceeds," in each case, as applicable, will not result in a breach
or violation of any of the respective charters or bylaws of Holding,
the Company or any of the U.S. Guarantors or any of the terms or
provisions of, or constitute a default or cause an acceleration of
any obligation under, or result in the imposition or creation of (or
the obligation to create or impose) a Lien with respect to, any
agreement or instrument listed on a schedule to the opinion, or, to
the knowledge of such counsel, contravene any order of any court or
governmental agency or body having jurisdiction over Holding, the
Company or any of the U.S. Guarantors or any of their properties, or
violate any statute, rule or regulation or administrative or court
decree applicable to Holding, the Company or any of the U.S.
Guarantors, or any of their respective properties;
(xviii) The Registration Rights Agreement constitutes a
valid and legally binding agreement of the Company and each
Guarantor, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, and to general equitable principles
(regardless of whether considered in a proceeding in equity or at
law) and, to the extent the Registration Rights Agreement provides
for rights of indemnification and contribution, subject to the
limitations of applicable law;
(xix) The Acquisition Agreement constitutes a valid and
legally binding agreement of the Company and the Guarantors that are
party thereto, enforceable against the Company and such Guarantors
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to creditors' rights generally, and to equitable principles
(regardless of whether considered in a proceeding in equity or at
law) and to the extent the Acquisition Agreement provides for rights
of indemnification and contribution, subject to the limitations of
applicable law;
(xx) When the Series A Notes are issued and delivered
pursuant to the Purchase Agreement, such Series A Notes will not be
of the same class (within the meaning of Rule 144A under the Act) as
securities of the Company
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<PAGE>
that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system;
(xxi) Assuming, without independent investigation, (i)
that the Series A Notes and the Note Guarantees are sold to the
Initial Purchasers, and initially resold by the Initial Purchasers,
in accordance with the terms of, and in the manner contemplated by,
the Purchase Agreement and the Offering Memorandum, (ii) the
accuracy of the representations, warranties and covenants of the
Company and the Guarantors set forth in this Agreement and in
certain certificates (other than the representation and warranty in
Section 5(hh) of this Agreement but including the assumptions in
Section 5(hh) of this Agreement), (iii) the accuracy of the Initial
Purchasers' representations and warranties set forth in this
Agreement, (iv) the due performance by the Company and the
Guarantors of the covenants and agreements set forth in this
Agreement and the due performance by the Initial Purchasers of the
covenants and agreements set forth in this Agreement, (v) the
Initial Purchasers' compliance with the offering and transfer
procedures and restrictions described in the Offering Memorandum,
(vi) the accuracy of the representations and warranties made in
accordance with the Offering Memorandum by each purchaser to whom
the Initial Purchasers initially resell the Series A Notes and the
Note Guarantees and (vii) that each purchaser to whom the Initial
Purchasers initially resell Series A Notes and the Note Guarantees
receives a copy of the Offering Memorandum if requested by such
purchaser prior to such sale, the offer, issuance, sale and delivery
of the Series A Notes to the Initial Purchasers, and the initial
reoffer, resale and delivery of the Series A Notes to the Initial
Purchasers, as contemplated by this Agreement and the Offering
Memorandum, do not require registration under the Act, it being
understood that no opinion is expressed as to any subsequent resale
of the Series A Notes and Note Guarantees or any resale of Series A
Notes and Note Guarantees by any person other than the Initial
Purchasers;
(xxii) Prior to the Exchange Offer or the effectiveness
of the Shelf Registration Statement, the Indenture is not required
to be qualified under the TIA; and
(xxiii) The Offering Memorandum, as of its date, and
each amendment or supplement thereto, as of its date, contained the
information specified in, and meets the requirements of Rule
144A(d)(4) of the Act.
The opinions set forth in paragraphs (ix) and (x) will be based
solely on a review of stock records and other specified corporate record
books of Holding, the Company and its Subsidiaries and applicable law. As
to matters of Ohio, Kansas and South Carolina law, O'Sullivan Graev &
Karabell, LLP is entitled to rely on the opinion of Lathrop &
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Gage L.C., Kansas counsel, Nexsen Pruet Jacobs & Pollard, LLP, South
Carolina counsel and Squire, Sanders & Dempsey L.P.P., Ohio counsel.
The opinion of O'Sullivan Graev & Karabell, LLP shall be rendered to
you at the request of the Company and the Guarantors and shall so state
therein.
In giving their opinion required by this subsection 8(f), O'Sullivan
Graev & Karabell, LLP shall additionally state that such counsel has
participated in conferences with officers and other representatives of the
Company and the Guarantors, representatives of the independent public
accountants for the Company and the Guarantors, your representatives and
your counsel in connection with the preparation of the Preliminary
Offering Memorandum and the Offering Memorandum, although such counsel has
not independently verified the accuracy, completeness or fairness of such
statements (except as indicated above); and such counsel advises you that,
on the basis of the foregoing, no facts came to such counsel's attention
that caused such counsel to believe that the Offering Memorandum (as
amended or supplemented), as of its date and the Closing Date, contained
an untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion nor express any
statement or belief with respect to the financial statements and schedules
and other financial and statistical data included in, or omitted from, the
Preliminary Offering Memorandum or the Offering Memorandum or any
supplement or amendment thereto).
(g) On the Closing Date, you shall have received an opinion
(satisfactory to you and your counsel), dated the Closing Date, of Edwin
Coe, English counsel for the U.K. Guarantors, to the effect that:
(i) Each of NIM Holdings Limited, Norwich Injection
Moulders Limited and Norwich Acquisition Limited is duly
incorporated with limited liability and validly existing under the
laws of England and Wales and is not in liquidation and has the
requisite corporate power to own, lease and operate its properties
and to conduct its business as it is currently being conducted;
(ii) Each of NIM Holdings Limited, Norwich Injection
Moulders Limited and Norwich Acquisition Limited has all necessary
corporate power and authority to execute and deliver this Agreement,
the Registration Rights Agreement, the Indenture and the Note
Guarantees and to perform its obligations under each of this
Agreement, the Registration Rights Agreement, the Indenture and the
Note Guarantees and to authorize, issue and deliver the Note
Guarantees, as contemplated by this Agreement;
(iii) This Agreement, the Registration Rights Agreement,
the Indenture and the Note Guarantees have been duly authorized,
executed and
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delivered by NIM Holdings Limited, Norwich Injection Moulders
Limited and Norwich Acquisition Limited;
(iv) Each of the obligations expressed to be assumed by
NIM Holdings Limited, Norwich Injection Moulders Limited and Norwich
Acquiition under the Note Guarantees constitutes a valid and legally
binding obligation that is enforceable in accordance with its terms
on NIM Holdings Limited, Norwich Injection Moulders Limited and
Norwich Acquisition Limited;
(v) The Indenture constitutes a valid and legally
binding agreement of each of NIM Holdings Limited, Norwich Injection
Moulders Limited and Norwich Acquisition Limited, enforceable
against each of them in accordance with its terms;
(vi) The execution and delivery by NIM Holdings Limited,
Norwich Injection Moulders Limited and Norwich Acquisition Limited
of this Agreement, the Registration Rights Agreement, the Indenture
and the Note Guarantees, the issuance of the Note Guarantees, the
performance of this Agreement, the Registration Rights Agreement,
the Indenture and the Note Guarantees by NIM Holdings Limited,
Norwich Injection Moulders Limited and Norwich Acquisition Limited,
compliance by NIM Holdings Limited, Norwich Injection Moulders
Limited and Norwich Acquisition Limited with the provisions thereof
and of the Note Guarantees, the consummation of the transactions
contemplated thereby and the payments described in the Offering
Memorandum under the caption "Use of Proceeds", does not violate the
memorandum of association or articles of association of NIM holdings
Limited, Norwich Injection Moulders Limited and Norwich Acquisition
Limited or any of the terms or provisions of or constitute a default
or cause an acceleration of any obligation under, or result in the
imposition or creation of (or obligation to create or impose) a Lien
with respect to, any material agreement or instrument, or, to such
counsel's knowledge, contravene any order of any court or
governmental agency or body having jurisdiction over either of NIM
Holdings Limited, Norwich Injection Moulders Limited or Norwich
Acquisition Limited or any of their properties, or violate any
state, rule or regulation or administrative or court decree
applicable to either NIM Holdings Limited, Norwich Injection
Moulders Limited or Norwich Acquisition Limited;
(vii) All of the issued shares of NIM Holdings Limited,
Norwich Injection Moulders Limited and Norwich Acquisition Limited
have been validly authorized, issued and are fully paid. All of the
issued share capital of Norwich Injection Moulders Limited is owned
by NIM Holdings Limited, all of the issued share capital of NIM
Holdings Limited is owned by the Company and all of the issued share
capital of Norwich Acquisition Limited is owned by Norwich Injection
Moulders Limited;
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(viii) Except for the equitable charge over the issued
share capital of NIM Holdings Limited dated July 2, 1998 in favor of
NationsBank NA and the debentures dated July 2, 1998 given by each
of NIM Holdings Limited and Norwich Injection Moulders Limited in
favor of NationsBank, to the best of our knowledge there are no
outstanding rights, warrants, options, convertible securities, Liens
or other security relating to or entitling any person to purchase or
otherwise acquire any shares in either of NIM Holdings Limited,
Norwich Injection Moulders Limited or Norwich Acquisition Limited;
(ix) The Registration Rights Agreement constitutes a
valid and legally binding agreement of NIM Holdings Limited, Norwich
Injection Moulders Limited and Norwich Acquisition Limited
enforceable against each of them in accordance with its terms; and
(x) A judgment obtained in the State of New York of a
court of the State of New York or a Federal Court sitting in the
State of New York which is final and conclusive arising out of or
relating to the obligations of NIM Holdings Limited and Norwich
Injection Moulders Limited under this Agreement, the Registration
Rights Agreement, the Indenture and the Note Guarantees for a debt
or definite sum of money may be enforced against NIM Holdings
Limited, Norwich Injection Moulders Limited or Norwich Acquisition
Limited by an action in the English Courts for the amount due under
it.
The opinion of Edwin Coe shall be rendered to you at the request of
the Company and the Guarantors and shall so state therein.
(h) You shall have received an opinion, dated the Closing
Date, of Latham & Watkins, counsel for the Initial Purchasers, in form and
substance reasonably satisfactory to you.
(i) You shall have received letters on and as of the date
hereof as well as on and as of the Closing Date (in the latter case
constituting an affirmation of the statements set forth in the former), in
form and substance satisfactory to you, from (A) Ernst & Young, LLP,
independent auditors, with respect to the financial statements and certain
financial information contained in the Offering Memorandum relating to
Holding, the Company and the Subsidiaries and (B) Deloitte & Touche LLP,
independent auditors, with respect to the financial statements and certain
financial information contained in the Offering Memorandum relating to CPI
and its subsidiaries.
(j) Latham & Watkins shall have been furnished with such
documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in this Section 8 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any of
the representations, warranties or conditions herein contained.
33
<PAGE>
(k) Prior to the Closing Date, the Company and the Guarantors
shall have furnished to you such further information, certificates and
documents as you may reasonably request.
(l) The Company, the Guarantors and the Trustee shall have
entered into the Indenture and you shall have received counterparts,
conformed as executed, thereof.
(m) The Company, the Guarantors and you shall have entered
into the Registration Rights Agreement, and you shall have received
counterparts, conformed as executed thereof.
(n) The Acquisition shall be consummated prior to, or
simultaneously with, the closing of the Offering on substantially the
terms described in the Offering Memorandum and the Initial Purchasers
shall have received counterparts, conformed as executed, of the
Acquisition Agreement and such other documentation as they deem necessary
to evidence the consummation thereof.
(o) The Offering Memorandum shall have been distributed to you
not later than 10:00 A.M., New York City time, on July 1, 1999, or at such
later date and time as you may approve in writing.
(p) CPI and Cardinal Packaging shall have become parties to
this Agreement immediately after the consummation of the Acquisition.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company and the Guarantors will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Company and the Guarantors will furnish the
Initial Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as it shall reasonably request.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective upon the execution and
delivery of this Agreement by the parties hereto.
(b) This Agreement may be terminated at any time on or prior to the
Closing Date by you by notice to the Company if any of the following has
occurred: (i) subsequent to the date of the Offering Memorandum or of this
Agreement, any Material Adverse Change which, in the judgment of the Initial
Purchasers, materially impairs the investment quality of the Series A Notes;
(ii) any outbreak or escalation of hostilities or other national or
international calamity or crisis or material adverse change in the financial
markets of the United States or elsewhere, or any other substantial national or
international calamity or emergency if the effect of such outbreak, escalation,
calamity, crisis or emergency would, in the judgment of the Initial Purchasers,
make it impracticable or inadvisable to market the Series A Notes or to enforce
34
<PAGE>
contracts for the sale of the Series A Notes; (iii) any suspension or limitation
of trading generally in securities on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter markets or any setting of minimum
prices for trading on such exchange or markets; (iv) any declaration of a
general banking moratorium by either federal or New York authorities; (v) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs that, in the judgment of the Initial
Purchasers, has a material adverse effect on the financial markets in the United
States and would, in the judgment of the Initial Purchasers, make it
impracticable or inadvisable to market the Series A Notes or to enforce
contracts for the sale of the Series A Notes; or (vi) the enactment,
publication, decree, or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which, in
your judgment, materially and adversely affect, or will materially and adversely
affect, the business or operations of the Company and the Guarantors.
(c) The indemnities and contribution provisions and other
agreements, representations and warranties of the Company and the Guarantors,
their respective officers and directors and of the Initial Purchasers set forth
in or made pursuant to this Agreement shall remain operative and in full force
and effect, and will survive delivery of and payment for the Series A Notes,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of the Initial Purchasers or by or on behalf of the Company
and the Guarantors, the officers or directors of the Company and the Guarantors
or any controlling person of the Company and the Guarantors, (ii) acceptance of
the Series A Notes and payment for them hereunder and (iii) termination of this
Agreement.
(d) If this Agreement shall be terminated by the Initial Purchasers
pursuant to clause (i) of paragraph (b) of this Section 9 or because of the
failure or refusal on the part of the Company or any Guarantors to comply with
the terms or to fulfill any of the conditions of this Agreement, the Company and
each of the Guarantors agree to reimburse you for all out-of-pocket expenses
(including the fees and disbursements of counsel) incurred by you.
Notwithstanding any termination of this Agreement, the Company and each of the
Guarantors shall be liable for all expenses which it has agreed to pay pursuant
to Section 4(f) hereof.
(e) Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Guarantors, the Initial Purchasers, any Indemnified Person referred to herein
and their respective successors and assigns, all as and to the extent provided
in this Agreement, and no other person shall acquire or have any right under or
by virtue of this Agreement. The terms "successors and assigns" shall not
include a purchaser of any of the Notes from the Initial Purchasers merely
because of such purchase.
(f) If on the Closing Date either Initial Purchaser shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by the
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-
35
<PAGE>
defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
10. NOTICES. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company or any Guarantor,
to Berry Plastics Corporation, 101 Oakley Street, P.O. Box 959, Evansville,
Indiana 47710-0959, Attention: James M. Kratochvil, with a copy to O'Sullivan
Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112,
Attention: Michael Joseph O'Brien, and (b) if to the Initial Purchasers, to
Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc.,
c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New
York, New York 10172, Attention: Glenn Tongue, with a copy to Latham & Watkins,
885 Third Avenue, New York, New York 10022, Attention: Philip E. Coviello, or in
any case to such other address as the person to be notified may have requested
in writing.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
12. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors (by merger or
otherwise) and the officers and directors and other persons referred to in
Section 5, and no other person will have any right or obligation hereunder.
[signature page follows]
36
<PAGE>
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among the Company, the Guarantors and you.
Very truly yours,
BERRY PLASTICS CORPORATION
By:_________________________________
Name:
Title:
BPC HOLDING CORPORATION
By:_________________________________
Name:
Title:
BERRY PLASTICS ACQUISITION CORPORATION
By:_________________________________
Name:
Title:
BERRY IOWA CORPORATION
By:_________________________________
Name:
Title:
37
<PAGE>
BERRY STERLING CORPORATION
By:_________________________________
Name:
Title:
BERRY TRI-PLAS CORPORATION
By:_________________________________
Name:
Title:
AEROCON, INC.
By:_________________________________
Name:
Title:
PACKERWARE CORPORATION, a Kansas corporation
By:_________________________________
Name:
Title:
PACKERWARE CORPORATION, a Delaware
corporation
By:_________________________________
Name:
Title:
38
<PAGE>
BERRY PLASTICS DESIGN CORPORATION
By:_________________________________
Name:
Title:
VENTURE PACKAGING, INC.
By:_________________________________
Name:
Title:
VENTURE PACKAGING MIDWEST, INC., an Ohio
corporation
By:_________________________________
Name:
Title:
VENTURE PACKAGING MIDWEST, INC., a Delaware
corporation
By:_________________________________
Name:
Title:
VENTURE PACKAGING SOUTHEAST, INC., a South
Carolina corporation
By:_________________________________
Name:
Title:
39
<PAGE>
VENTURE PACKAGING SOUTHEAST, INC., a
Delaware corporation
By:_________________________________
Name:
Title:
NIM HOLDINGS LIMITED
By:_________________________________
Name:
Title:
NORWICH INJECTION MOULDERS LIMITED
By:_________________________________
Name:
Title:
NORWICH ACQUISITION LIMITED
By:_________________________________
Name:
Title:
KNIGHT PLASTICS, INC.
By:_________________________________
Name:
Title:
40
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By:_________________________________
Name:
Title:
41
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of July 6, 1999.
CPI HOLDING CORPORATION
By:_________________________________
Name:
Title:
CARDINAL PACKAGING, INC.
By:_________________________________
Name:
Title:
42
<PAGE>
SCHEDULE
A
PRINCIPAL AMOUNT
INITIAL PURCHASER OF NOTES
----------------- ----------------
Donaldson, Lufkin & Jenrette
Securities Corporation ............................... $ 48,750,000
Chase Securities Inc. ...................................... $ 26,250,000
----------------
Total ...................................................... $ 75,000,000
================
A-1
<PAGE>
SCHEDULE
B
SUBSIDIARIES
- ------------
Berry Plastics Acquisition Corporation
Berry Iowa Corporation
Berry Tri-Plas Corporation
Berry Sterling Corporation
AeroCon, Inc.
PackerWare Corporation, a Kansas corporation
PackerWare Corporation, a Delaware corporation
Berry Plastics Design Corporation
Venture Packaging, Inc.
Venture Packaging Midwest, Inc., an Ohio corporation
Venture Packaging Midwest, Inc., a Delaware corporation
Venture Packaging Southeast, Inc., a South Carolina corporation
Venture Packaging Southeast, Inc., a Delaware corporation
NIM Holdings Limited
Norwich Injection Moulders Limited
Norwich Acquisition Limited
Knight Plastics, Inc.
CPI Holding Corporation
Cardinal Packaging, Inc.
B-1
<PAGE>
SCHEDULE
C
Pursuant to the terms of the Underwriting Agreement dated April 14,
1994 among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas
Corporation (formerly known as Berry-CPI Plastics Corp.) and Donaldson, Lufkin &
Jenrette Securities Corporation, the Company was obligated to use the proceeds
of the offering of the Units (as defined in the Underwriting Agreement) to,
among other things, purchase the assets of CPI-Plastics, Inc. and its affiliates
(the "CPI TRANSACTION") or, in the alternative, to pay down certain industrial
revenue bonds. The Company utilized a portion of such proceeds to consummate
other acquisitions, rather than the CPI transaction or the repayment of such
debt, and for other capital expenditures related to such consummated
acquisitions.
The Company and certain of the Guarantors are in default (registered
exchange offer was not made effective within 150 days of the closing date) of
the Registration Rights Agreement dated as of August 24, 1998 by and among the
Company, Holding, Berry Iowa Corporation, Berry Sterling Corporation, Berry
Tri-Plas Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics
Design Corporation, Venture Packaging, Inc., Venture Packaging Midwest, Inc.,
Venture Packaging Southeast, Inc., NIM Holdings Limited, Norwich Injection
Moulders Limited and Donaldson, Lufkin & Jenrette Securities Corporation.
C-1
<PAGE>
SCHEDULE
D
With respect to the valuation of the outstanding employee stock
options, the Financial Statements contained in the 10-QA filed by Holding as of
May 13, 1996, were not prepared on a consistent basis with Financial Statements
in previously filed SEC Reports.
D-1
<PAGE>
SCHEDULE
E
1. Berry Plastics Corporation Employees 401(k) Retirement Plan.
2. Berry Plastics Health and Welfare Plan, which includes the following
benefits: (a) long term disability income (salaried employees); (b) long term
disability income (hourly employees); (c) short term disability; (d) group
life insurance; (e) vision; and (f) dental.
3. Berry Plastics Corporation Section 125 Plan.
E-1
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 19,
1999 with respect to BPC Holding Corporation and the use of our report dated May
19, 1999 with respect to the Knight Engineering and Plastics Division of
Courtaulds Packaging Inc. in Amendment No. 2 to the Registration Statement (Form
S-4) and related Prospectus of Berry Plastics Corporation for the registration
of $25,000,000 of 121/4% Series C Senior Subordinated Notes due 2004.
/s/ Ernst & Young LLP
Indianapolis, Indiana
October 27, 1999
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No.2 to Registration Statement No.
333-64599, relating to $25,000,000 of 12-1/4% Series C Senior Subordinated Notes
due 2004, of Berry Plastics Corporation on Form S-4 of our report dated June 11,
1999 relating to the consolidated financial statements of CPI Holding, Inc. as
of November 30, 1998 and 1997 and for the years ended November 30, 1998 and 1997
and for the period January 26, 1996 to November 30, 1996 appearing in the
Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
prospectus.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
September 8, 1999
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated 22 December 1997 relating to the financial statements of
Norwich Injection Moulders Limited for the years ended October 31, 1997, 1996
and 1995 in Amendment No. 2 the Registration Statement (Form S-4) and related
Prospectus of Berry Plastics Corporation for the registration $25,000,000 of
12.25% Series C Senior Subordinated Notes due 2004.
/s/ Lovewell Blake
Norwich, England
27 October 1999
