As filed with the Securities and Exchange Commission on December 17, 1999
Registration No. 333-85739
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
BERRY PLASTICS CORPORATION
(Exact name of registrant as specified in charter)
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<CAPTION>
<S> <C> <C>
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)
</TABLE>
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PACKERWARE CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3089 48-0759852
(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)
</TABLE>
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<S> <C> <C>
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:
Michael J. O'Brien, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2400
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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 SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
BERRY PLASTICS CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
11% SENIOR SUBORDINATED NOTES DUE 2007
$75,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING, FOR
11% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
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| THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, |
| ON JANUARY 21, 2000, UNLESS EXTENDED. |
--------------------------------------------------------------------
o We will exchange all notes that you validly tender and do not validly
withdraw.
o You may withdraw your tender of notes any time before the expiration of
the exchange offer.
o The exchange offer is not subject to any condition, other than that it not
violate any applicable law or interpretation of the staff of the
Securities and Exchange Commission.
o Neither us nor our guarantors will receive any proceeds from the exchange
offer.
o Based on the advice of our counsel, we believe the exchange of notes will
not be a taxable exchange for U.S. federal income tax purposes.
o The terms of the exchange notes are substantially identical to the
outstanding notes, except for the transfer restrictions and registration
rights relating to the outstanding notes.
o There is no existing market for the exchange notes, and we do not intend
to apply for their listing on any securities exchange.
o Each broker-dealer that receives exchange notes must deliver a prospectus
in connection with any resales of the exchange notes or the new preferred
stock.
o Each broker-dealer that acquired exchange notes for its own account in
exchange for outstanding notes, where the outstanding notes were acquired
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of those exchange notes.
o As of October 2, 1999, the aggregate amount of outstanding senior
indebtedness of Berry Plastics Corporation would have been $83.6 million,
the aggregate amount of outstanding total indebtedness of Berry Plastics
Corporation would have been $284.9 million, including the 1994 notes of
BPC Holding Corporation, and the indebtedness of the guarantors senior to
the note guarantees would have been $389.9 million.
SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DISCUSSION OF FACTORS THAT SHOULD
BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OUTSTANDING NOTES IN THE EXCHANGE
OFFER.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 17, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
PAGE PAGE
---- ----
Prospectus Summary................... 1 Principal Stockholders........... 64
Risk Factors ........................ 13 Certain Transactions............. 66
Where You Can Find More Description of Other Debt........ 71
Information ......................... 22 Description of Notes............. 74
Exchange Offer....................... 23 Certain Federal Income Tax
Capitalization....................... 33 Considerations................... 113
Pro Forma Condensed Consolidated Plan of Distribution............. 115
Financial Statements ................ 34 Legal Matters.................... 116
Selected Historical Financial Experts.......................... 116
Data ................................ 38 Index to Financial
Management's Discussion and Statements....................... F-1
Analysisof Financial Condition
and Results of Operations ........ 40
Business............................. 47
Management........................... 57
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Some of the names and logos of our products referenced in this prospectus
are our trademarks. Each trade name, trademark or servicemark of any other
appearing in this prospectus is the property of its holder.
i
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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 PLASTICS," "WE," "US," "OUR" AND SIMILAR TERMS REFER TO BERRY PLASTICS
CORPORATION, ITS SUBSIDIARIES AND THEIR RESPECTIVE OPERATIONS, AND THE TERM "BPC
HOLDING" REFERS TO BPC HOLDING CORPORATION. THE FISCAL YEAR OF BPC HOLDING AND
BERRY PLASTICS 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 PLASTICS AND BPC 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 EXCHANGE OFFER
REGISTRATION RIGHTS AGREEMENT......... The outstanding notes were sold by us
on July 6, 1999 to the initial
purchasers, Donaldson, Lufkin &
Jenrette Securities Corporation and
Chase Securities Inc., who placed the
outstanding notes with institutional
investors. In connection therewith, we
and the initial purchasers executed and
delivered for the benefit of the
holders of the outstanding notes a
registration rights agreement
providing, among other things, for the
exchange offer.
THE EXCHANGE OFFER.................... Exchange notes are being offered in
exchange for a like principal amount
of outstanding notes. As of the date
of this prospectus, $75,000,000
aggregate principal amount of notes
are outstanding. We will issue the
exchange notes to holders promptly
following the expiration date. See
"Risk Factors-- Your ability to
resell your notes will remain
restricted if you fail to exchange
them in the exchange offer."
EXPIRATION DATE....................... The exchange offer will expire at 5:00
p.m., New York City time, on January
21, 2000, unless we decide to extend
the expiration date.
INTEREST.............................. Each exchange note will bear interest
from January 15, 2000. Interest will be
payable on the outstanding notes
accepted for exchange to, but not
including, January 15, 2000.
CONDITIONS TO THE EXCHANGE OFFER...... The exchange offer is subject to some
customary conditions, which we may
waive. 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 OUTSTANDING
NOTES ................................ If you wish to accept the exchange
offer, you 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 the letter of transmittal, or
facsimile, or an agent's message
together with the outstanding notes
and any other required documentation
to the exchange agent at
1
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the address set forth herein. By
executing the letter of transmittal or
delivering an agent's message, you will
represent to us, among other things,
that
o the exchange notes acquired
pursuant to the exchange offer by
you and any beneficial owners of
outstanding notes are being
obtained in the ordinary course of
business of the person receiving
the exchange notes;
o neither you nor such beneficial
owner has an arrangement with any
person to participate in the
distribution of the exchange notes;
o neither you nor such beneficial
owner nor any such other person is
engaging in or intends to engage in
a distribution of such exchange
notes; and
o neither you nor such beneficial
owner is our "affiliate," as
defined under Rule 405 promulgated
under the Securities Act. Each
broker-dealer that receives
exchange notes for its own account
in exchange for outstanding notes,
where such outstanding notes were
acquired by such broker-dealer as a
result of market-making activities
or other trading activities (other
than outstanding notes acquired
directly from us), 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 exchange 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................................ If you are a beneficial owner whose
outstanding notes are registered in the
name of a broker, dealer, commercial
bank, trust company or other nominee
and you wish to tender you should
contact such registered person promptly
and instruct that registered person to
tender on your behalf. If you wish to
tender on your own behalf you must,
prior to completing and executing the
letter of transmittal or delivering an
agent's message and delivering his
outstanding notes, either make
appropriate arrangements to register
ownership of the outstanding notes in
such beneficial owner's name or obtain
a properly completed bond power from
the registered holder. The transfer of
registered ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES........ If you wish to tender your outstanding
notes and:
o time will not permit your notes or
other required
2
<PAGE>
documents to reach the notes
exchange agent by the expiration
date; or
o the procedure for book-entry
transfer cannot be completed on
time;
you may tender your notes in compliance
with the guaranteed delivery procedures
described in this prospectus under the
heading "The Exchange Offer --
Withdrawal of Tenders."
WITHDRAWAL RIGHTS..................... You may withdraw your tender as
provided in this prospectus 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 OUTSTANDING NOTES AND
DELIVERY OF EXCHANGE NOTES............ We will accept for exchange any and all
outstanding notes that are properly
tendered in the exchange offer prior to
5:00 p.m., New York City time, on the
expiration date. The exchange 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."
USE OF PROCEEDS....................... There will be no cash proceeds to us
or the guarantors from the exchange
pursuant to the exchange offer.
FEDERAL INCOME TAX CONSEQUENCES....... The exchange of outstanding notes for
exchange notes will not be a taxable
exchange for Federal income tax
purposes. See "Certain Federal
Income Tax Considerations."
CONSEQUENCES OF FAILURE TO EXCHANGE... If you do not exchange your
outstanding notes for exchange notes
pursuant to the exchange offer you
will continue to be subject to the
restrictions on transfer of such
outstanding notes as set forth in the
legend thereon as a consequence of
the issuance of the outstanding 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,
outstanding 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 EXCHANGE NOTES
The exchange offer applies to $75,000,000 aggregate principal amount of
outstanding notes. The terms of the exchange notes are identical in all material
respects to the outstanding notes, except that the exchange notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not contain some provisions providing for an
increase in the interest rate on the outstanding notes under some 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 exchange
notes will evidence the same debt as the outstanding notes and, except as set
forth in the immediately preceding sentence, will be entitled to the benefits of
the Indenture, under which both the outstanding notes were, and the exchange
notes will be, issued. See "Description
3
<PAGE>
of Notes."
THE EXCHANGE NOTES/1999 NOTES......... $75 million in aggregate principal
amount of 11% Series B Senior
Subordinated Notes due 2007.
MATURITY DATE......................... July 15, 2007.
INTEREST PAYMENT DATES................ January 15 and July 15 of each year,
commencing on January 15, 2000.
MANDATORY REDEMPTION.................. We are not required to make mandatory
redemption or sinking fund payments
with respect to the exchange notes.
OPTIONAL REDEMPTION................... On or after July 15, 2003, the
exchange 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 exchange notes will be guaranteed
by our parent corporation, BPC
Holding, and each of our domestic and
foreign subsidiaries. The note
guarantees will be unconditional
joint and several obligations of each
guarantor and will be subordinated as
described below under "Ranking."
RANKING............................... The exchange notes will be unsecured
senior subordinated obligations of
Berry Plastics, will rank equally
with our 1994 Notes that consist of
$100 million principal amount of 12
1/4% Senior Subordinated Notes due 2004
and our 1998 Notes that consist of
$25 million principal amount of 12 1/4%
Senior Subordinated Notes due 2004
and will be subordinate in right of
payment to all our senior
indebtedness, which will include
borrowings under our credit
facility. The exchange notes will be
senior to any indebtedness which by
its terms is subordinate to the
exchange notes, regardless of when
such indebtedness is incurred. Each
note guarantee will be subordinate in
right of payment to all senior
indebtedness of each guarantor. Our
senior indebtedness consists of
borrowings under our credit facility
and our Nevada Industrial Revenue
Bonds. Senior indebtedness of the
guarantors consists of their joint
and several guarantee of our
obligations under our credit facility
and obligations with respect to our
Nevada Industrial Revenue Bonds and,
in the case of BPC Holding, its 1996
Notes. As of October 2, 1999, the
aggregate amount of our outstanding
senior indebtedness would have been
$83.6 million, the aggregate amount
of our outstanding total
4
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indebtedness, including the 1994
Notes and the 1998 Notes, would have
been $284.9 million, and the
indebtedness of the guarantors senior
to the note guarantees would have
been $389.9 million. As of October
2, 1999, all of our indebtedness
other than the senior indebtedness
was equal in right of payment to the
exchange notes, and there was no
indebtedness subordinated to the
exchange notes.
COVENANTS............................. The Indenture pursuant to which the
outstanding notes were, and the
exchange notes will be, issued
contains covenants, including, but
not limited to, covenants with
respect to the following matters:
o limitations on the retention of
proceeds from asset sales;
o limitations on the incurrence of
additional indebtedness and the
issuance of disqualified stock;
o limitations on restricted payments;
o limitations on transactions with
affiliates;
o limitations on liens;
o limitations on dividends and other
payment restrictions affecting
subsidiaries; and
o 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 exchange notes
upon specific change of control transactions, the Indenture does not contain any
provisions specifically intended to protect holders of the exchange notes in the
event of a future highly leveraged transaction involving us or any guarantor.
See "Description of Notes."
5
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THE COMPANY
We believe that 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. Based on discussions
with our customers, sales representatives and external sales brokers, we believe
that 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 and based on discussions with our customers, sales
representatives and external sales brokers 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, containers are used for packaging a broad spectrum of
consumer and commercial products. Our drink cups are sold to fast food and
family-dining restaurants, convenience stores, stadiums and retail stores. 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.
o HIGH-CAPACITY, STATE-OF-THE-ART PRODUCTION CAPABILITIES.
o FULL PRODUCT LINES AND STRONG MARKET POSITION.
o LARGE, DIRECT SALES FORCE.
o IN-HOUSE PRODUCT DESIGN AND GRAPHIC ARTS CAPABILITIES.
o DEDICATION TO SERVICE AND QUALITY.
o LARGE, DIVERSE CUSTOMER BASE.
6
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For a complete discussion of our competitive strengths, see "Business --
Competitive Strengths."
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.
o DESIGN AND INTRODUCE INNOVATIVE NEW PRODUCTS TO PENETRATE NEW MARKETS.
o EMPHASIZE OUTSTANDING PRODUCT QUALITY AND CUSTOMER SERVICE.
For a complete discussion of our growth strategy, see "Business -- Growth
Strategy."
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 and net income of $0.8 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.
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 and net income of $1.4 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 certain assets of 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 and a division loss of $0.8 million. Since the acquisition, we
have significantly reduced Knight's manufacturing and operating costs,
principally by closing one of its two manufacturing plants.
7
<PAGE>
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 and net
income of $0.2 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 and a net loss of $0.9 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.
8
<PAGE>
RISK FACTORS
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF SOME FACTORS
THAT YOU SHOULD CONSIDER PRIOR TO TENDERING OUTSTANDING NOTES IN THE EXCHANGE
OFFER.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary financial data for BPC Holding and
its subsidiaries. The summary historical financial data for fiscal 1994, fiscal
1995, fiscal 1996, fiscal 1997 and fiscal 1998 come from BPC Holding's audited
consolidated financial statements. BPC Holding's and its subsidiaries' audited
consolidated financial statements for fiscal 1997 and fiscal 1998 and the
audited consolidated statement 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
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>
FISCAL
--------------------------------------
1994 1995 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED OPERATIONS STATEMENT
DATA:
Net sales ............................... $ 106,141 $ 140,681 $ 151,058
Cost of goods sold ...................... 73,997 102,484 110,110
--------- --------- ---------
Gross margin ............................ 32,144 38,197 40,948
Operating expenses ...................... 15,160 17,670 23,679
--------- --------- ---------
Operating income ........................ 16,984 20,527 17,269
Other expenses(1) ....................... 184 127 302
Interest expense, net (2) ............... 10,972 13,389 20,075
--------- --------- ---------
Income (loss) before income taxes and
extraordinary charge ................ 5,828 7,011 (3,108)
Income taxes (benefit) .................. 11 678 239
--------- --------- ---------
Income (loss) before extraordinary charge 5,817 6,333 (3,347)
Extraordinary charge(3) ................. 3,652 -- --
--------- --------- ---------
Net income (loss) ....................... $ 2,165 $ 6,333 $ (3,347)
--------- --------- ---------
CONSOLIDATED OTHER DATA:
Adjusted EBITDA(4) ...................... $ 26,380 $ 31,569 $ 34,718
Adjusted EBITDA margin(5) ............... 24.9% 22.4% 23.0%
Cash provided by operating activities ... 15,556 12,969 14,426
Cash used for investing activities ...... (9,495) (25,385) (14,639)
Cash provided by financing activities ... 2,184 11,124 2,370
Depreciation and amortization(6) ........ 8,176 9,536 11,331
Capital expenditures .................... 9,118 11,247 13,581
Ratios of earnings to fixed
charges (7) ............................. 1.5x 1.5x --
BERRY PLASTICS DATA:
Cash interest expense, net .................... $ 9,795 $ 12,439 $ 12,854
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA 39
FISCAL PRO FORMA WEEKS ENDED
------------------------ FISCAL OCTOBER 2
1997 1998 1998 1999
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS STATEMENT
DATA:
Net sales ............................... $ 226,953 $ 271,830 $ 352,670 $ 278,422
Cost of goods sold ...................... 180,249 199,227 265,079 204,647
--------- --------- --------- ---------
Gross margin ............................ 46,704 72,603 87,591 73,775
Operating expenses ...................... 30,505 44,001 55,851 44,238
--------- --------- --------- ---------
Operating income ........................ 16,199 28,602 31,740 29,537
Other expenses(1) ....................... 226 1,865 1,861 1,150
Interest expense, net (2) ............... 30,246 34,556 45,604 33,649
--------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary charge ................ (14,273) (7,819) (15,725) (5,262)
Income taxes (benefit) .................. 138 (249) 90 659
--------- --------- --------- ---------
Income (loss) before extraordinary charge (14,411) (7,570) (15,815) (5,921)
Extraordinary charge(3) ................. -- -- -- --
--------- --------- --------- ---------
Net income (loss) ....................... $ (14,411) $ (7,570) $ (15,815) $ (5,921)
--------- --------- --------- ---------
CONSOLIDATED OTHER DATA:
Adjusted EBITDA(4) ...................... $ 40,268 $ 59,768 $ 77,526 $ 62,009
Adjusted EBITDA margin(5) ............... 17.7% 22.0% 22.0% 22.3%
Cash provided by operating activities ... 14,154 34,131 47,745 37,137
Cash used for investing activities ...... (102,102) (52,120) (133,059) (97,276)
Cash provided by financing activities ... 80,444 17,619 84,944 59,910
Depreciation and amortization(6) ........ 19,026 24,830 32,496 26,438
Capital expenditures .................... 16,774 22,595 28,759 28,962
Ratios of earnings to fixed
charges (7) ............................. -- -- -- --
BERRY PLASTICS DATA:
Cash interest expense, net .................... $ 17,187 $ 20,569 $ 31,243 $ 22,220
Ratio of Adjusted EBITDA to cash interest expense, net.......... 2.9x 2.5x 2.8x
Ratio of net debt to Adjusted EBITDA............................ 3.6x 3.8x --
AT OCTOBER 2, 1999
------------------
HISTORICAL
------------------
BERRY PLASTICS CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 1,658
Working capital...................................................................... 10,919
Total assets......................................................................... 327,989
Total long-term debt, including current portion...................................... 284,948
Stockholders' equity (deficit)....................................................... (17,999)
</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 $1,593 for the pro forma 39 weeks ended
October 2, 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 some 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 FORMA
PRO 39 WEEKS
FISCAL FORMA ENDED
-------------------------------------------------- FISCAL OCTOBER
1994 1995 1996 1997 1998 1998 2, 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 $ 29,537
Depreciation and amortization ............................ 8,176 9,536 11,331 19,026 24,830 32,496 26,438
-------- -------- -------- -------- -------- -------- --------
EBITDA ................................................... 25,160 30,063 28,600 35,225 53,432 64,236 55,975
One-time expenses:
1996 transaction compensation expenses ............ -- -- 2,762 -- -- -- --
Plant shutdown expenses ........................... -- -- 907 848 2,559 2,559 1,048
Acquisition integration expenses .................. 116 867 692 3,267 1,525 1,525 1,842
Litigation expenses related to drink cup patent ... -- -- 650 100 631 631 --
Corporate expenses:
Non-cash compensation expenses (benefit) .......... 358 (214) 358 -- 749 749 225
Management fees and expenses ...................... 746 853 749 828 872 872 655
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 $ 62,009
======== ======== ======== ======== ======== ======== ========
</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 $6,003 for the pro forma 39 weeks ended October 2,
1999.
11
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CONSIDER THE FACTORS BELOW BEFORE MAKING A DECISION TO TENDER OUTSTANDING NOTES
IN THE EXCHANGE OFFER. THE FOLLOWING RISKS MAY CAUSE OUR BUSINESS, RESULT OF
OPERATIONS OR FINANCIAL CONDITION TO DECLINE.
WE HAVE A SIGNIFICANT AMOUNT OF DEBT.
We have now and, after this offering, will continue to have a large amount
of debt. As of October 2, 1999, our aggregate amount of total indebtedness was
about $284.9 million.
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 1998 Notes. See "Capitalization," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Description of Other Debt" 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, some
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 covenants and meeting
specified borrowing base prerequisites. See "Description
of Other Debt -- The Credit Facility."
12
<PAGE>
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 expenditures, selling assets, restructuring or
refinancing our debt, including 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 restricts, among other things, our
ability to:
o incur additional debt;
o pay dividends;
o redeem capital stock;
o create liens, dispose of particular assets, engage in
mergers;
o make contributions, loans or advances; and
o enter into specified transactions with affiliates.
Our credit facility and the indentures governing the 1994 and the 1998
Notes 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 1998 Notes and borrowings under our
credit facility, we would have to raise additional funds through capital
contributions from BPC 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 1998 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 Other Debt" 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
14
<PAGE>
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.
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.
BPC HOLDING HAS EXPERIENCED CONSOLIDATED NET LOSSES, AND EXPECTS TO CONTINUE TO
DO SO.
BPC 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, BPC 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. BPC Holding expects that it will continue to experience
consolidated net losses for the foreseeable future.
BPC 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.
BPC 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 BPC Holding. In addition, the indenture
governing the $105 million aggregate principal amount of BPC Holding's 1996
Notes, which are 12 1/2% Senior Secured Notes due 2006 limits the ability of BPC
Holding to make particular payments, including payments under its Guarantee.
15
<PAGE>
Accordingly, a refinancing of the 1996 Notes or an equity offering, we do not
expect BPC Holding to be able to perform under its guarantee.
In addition, we anticipate that we will be unable to generate sufficient
cash flow to permit a dividend to BPC Holding under the limitations placed on us
by our debt indentures in an amount sufficient to meet BPC 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 debt, totaling $83.6 million on October 2,
1999. Our senior debt currently includes borrowings under our credit facility
and our Nevada Industrial Revenue Bonds. Our Nevada Industrial Revenue 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 October 2, 1999, $23.9
million was available for borrowing under the credit facility (subject to
applicable borrowing base limitations), and there was no debt subordinated to
the Notes. See "Description of Other Debt--The Credit Facility." The indenture
permits us to incur additional senior debt under our credit facility provided
that specified 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 our credit facility or specified
other senior debt exist and are continuing and some other conditions are
satisfied. The notes rank equally with the 1998 Notes and the 1994 Notes and
equally with, or senior to, all other future subordinated debt of the Company.
In addition, the guarantees are subordinated to all existing and future senior
debt of each guarantor, including the guarantees under our credit facility, and,
in the case of BPC Holding, the 1996 Notes.
In addition, Berry Plastics' and the guarantors' respective obligations
under our credit facility and our Nevada Industrial Revenue 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 Plastics and
the guarantors, respectively. The indenture will permit us to incur some secured
debt, including debt under our credit facility, which is secured by a lien on
substantially all of the assets of Berry Plastics 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 Plastics and the guarantors. In such event, the
assets of Berry Plastics and the guarantors remaining after repayment of such
secured debt may be insufficient to satisfy our obligations with respect to the
notes.
WE HAVE $125 MILLION IN PRINCIPAL AMOUNT OF NOTES OUTSTANDING THAT WILL BE PAID
BEFORE THE NOTES IN THE EVENT OF SPECIFIED ASSETS SALES.
The 1994 Notes and the 1998 Notes have a priority upon the payment of
proceeds pursuant to specified asset sales. See "Description of
Notes--Repurchase at the Option of Holders--Asset Sales."
16
<PAGE>
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 some 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 some 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."
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 BPC
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 BPC Holding or Berry Plastics 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 Plastics as a
group beneficially own about 96.3% on a voting common stock equivalent basis of
BPC 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
some local governments have adopted ordinances prohibiting or restricting the
use or disposal of some 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, some 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
17
<PAGE>
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 particular change of control events, we will be required,
subject to particular conditions, to offer to purchase all outstanding notes,
1994 Notes and 1998 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, BPC Holding will also be required, subject to
particular 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, our 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 our 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. Our 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 our credit
facility, all amounts outstanding thereunder may become due and payable. All
debt of Berry Plastics under our credit facility is senior debt, which, as of
October 2, 1999, could have been as much as $107.5 million under the borrowing
base calculation. The subordination provisions contained in the Indenture will
prohibit us from making any payment on the notes, of the holders of senior debt
issue a notice to us to such effect, 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 into
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 Other Debt" 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
Plastics 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;
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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 Plastics 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.
THERE IS NO PUBLIC MARKET FOR THE EXCHANGE NOTES.
The exchange notes will be new securities for which currently there is no
trading market. We do not intend to list the exchange notes on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
National Market. The outstanding notes are designated for trading in the PORTAL
market. We have been advised by the Initial Purchasers that they currently
intend to make a market. The Initial Purchasers are not obligated to do so,
however, and any market-making activities with respect to the exchange 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 while any shelf
registration statement is pending. Accordingly, we cannot assure you that an
active public or other market or liquidity will develop for the exchange notes.
If a trading market does not develop or is not maintained, you may experience
difficulty in reselling the exchange notes or may be unable to sell them at all.
If a market develops for the exchange notes, future trading prices of the
exchange notes will depend on many factors, including among other things:
o our financial performance or prospects;
o prevailing interest rates;
o the overall market for high yield securities;
o the prospects for companies in our industry generally; and
o the number of holders of the exchange notes.
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Depending on those and other factors, the exchange notes may trade at a
discount from their principal amount. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the exchange
notes. We cannot assure you that the market for the exchange notes, if any, will
not be subject to similar disruptions. Any such disruptions may adversely affect
you as a holder of the exchange notes.
YOUR ABILITY TO RESELL YOUR NOTES WILL REMAIN RESTRICTED IF YOU FAIL TO EXCHANGE
THEM IN THE EXCHANGE OFFER.
If you do not exchange the outstanding notes for exchange notes pursuant
to the exchange offer you will continue to be subject to the restrictions on
transfer of the outstanding notes as set forth in the legend thereon as a
consequence of the issuance of the outstanding 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 outstanding
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 outstanding notes under the Securities Act.
In addition, any trading market for the outstanding notes not exchanged for
exchange notes will be adversely affected to the extent that outstanding 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 exchange notes issued pursuant to the exchange offer in
exchange for outstanding 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 Plastics 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 the exchange notes are
acquired in the ordinary course of the holder's business, the holder has no
arrangement with any person to participate in the distribution of such exchange
notes and neither the holder nor any such other person is engaging in or intends
to engage in a distribution of the exchange notes. Notwithstanding the
foregoing, each broker-dealer that receives exchange 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 exchange 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 exchange notes received in exchange for outstanding notes
where such outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than outstanding
notes acquired directly from Berry Plastics). Berry Plastics 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, your
ability to resell the exchange notes is subject to applicable state securities
laws as described in "Risk Factors -- There are state securities laws
restrictions on the resale of exchange notes."
TO PARTICIPATE IN THE EXCHANGE OFFER YOU MUST COMPLY WITH THE PROCEDURES
DISCUSSED IN THIS PROSPECTUS.
To participate in the exchange offer, and to avoid the restrictions on
transfer of the outstanding notes, holders of outstanding notes must transmit a
properly completed letter of transmittal or an Agent's Message, including all
other documents required by the 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 the outstanding notes must be received by the Exchange Agent along with the
letter of transmittal; (ii) a timely confirmation of a book-entry transfer of
such outstanding 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) you must comply with the guaranteed
delivery procedures described in this prospectus. The method of delivery of the
outstanding notes and the letter of transmittal and all other required documents
to the Exchange Agent is at the your election and risk. Neither Berry Plastics,
the Exchange Agent nor any other person shall incur any liability for failure to
notify you of defects or irregularities with respect to tenders of outstanding
notes. See "The Exchange Offer."
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THERE ARE STATE SECURITIES LAWS RESTRICTIONS ON THE RESALE OF EXCHANGE NOTES.
In order to comply with the securities laws of some jurisdictions, the
exchange notes may not be offered or resold by you 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 exchange notes in any such jurisdictions. However, an
exemption is generally available for sales to registered broker-dealers and some
institutional buyers. Other exemptions under applicable state securities laws
may also be available.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 with respect to the
exchange notes. This prospectus, which is a part of that registration statement,
does not contain all of the information set forth in the registration statement.
For further information about us and the exchange notes, you should refer to the
registration statement. This prospectus summarizes material provisions of
contracts and other documents to which we refer you. Since this prospectus may
not contain all of the information that you may find important, you should
review the full text of these documents. We have included copies of these
documents as exhibits to our registration statement.
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith will
file reports and other information with the SEC. You may inspect any such
material, without charge, at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition we will file electronic versions of
these documents with the SEC through the SEC's Electronic Data Gathering,
Analysis and Retrieval (EDGAR) system. The SEC maintains a World Wide Web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC.
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act
including, in particular, the statements about our plans, strategies, and
prospects under the headings "Prospectus Summary", and "Management's Discussion
and Analysis of Financial Condition and Results of Operations and Business."
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this prospectus are set forth in this
prospectus, including under the heading "Risk Factors." All forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements included in this
prospectus.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The outstanding notes were sold by Berry Plastics on July 6, 1999 to the
initial purchasers, who placed the outstanding notes with institutional
investors. In connection therewith, Berry Plastics, the guarantors and the
initial purchasers entered into the Registration Rights Agreement, pursuant to
which Berry Plastics and the guarantors agreed, for the benefit of the holders
of the outstanding notes, that Berry Plastics and the guarantors would, at their
sole cost, among other things:
o within 45 days following the original issuance of the outstanding
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 Plastics identical in all
material respects to the series of outstanding notes. Such exchange
notes would not contain terms with respect to transfer restrictions;
and
o cause such Registration Statement to be declared effective under the
Securities Act within 210 days following the original issuance of
the outstanding notes.
Upon the effectiveness of the Registration Statement, Berry Plastics will
offer, pursuant to this prospectus, to the holders of Transfer Restricted
Securities (as defined herein) who are able to make specific representations,
the opportunity to exchange their Transfer Restricted Securities for a like
principal amount of exchange 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 outstanding notes
are registered on the books of Berry Plastics or any other person who has
obtained a properly completed bond power from the registered holder.
Berry Plastics has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
exchange 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 Plastics believes that exchange 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 the
exchange notes (other than any such holder that is an "affiliate" of Berry
Plastics 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 the exchange 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
exchange notes and neither such holder nor any other such person is engaging in
or intends to engage in a distribution of the exchange 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 Plastics or who tenders in the exchange offer for the purpose
of participating in a distribution of the exchange 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 exchange 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 exchange 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 exchange 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
Berry Plastics). Berry Plastics and the guarantors have agreed that, for a
period of
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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
(1) Berry Plastics 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
(2) any holder of Transfer Restricted Securities notifies Berry Plastics
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 exchange 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 Plastics or an
affiliate of Berry Plastics, Berry Plastics 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
specific conditions relating to the provision of information in connection with
the Shelf Registration Statement. Berry Plastics and the guarantors will use
their best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each outstanding note
(together with any related note guarantees) until:
o the date on which the outstanding note has been exchanged by a
person other than a broker-dealer for an exchange note in the
exchange offer,
o following the exchange by a broker-dealer in the exchange offer of
an outstanding note for an exchange note, the date on which the
exchange 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,
o the date on which the outstanding note has been effectively
registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, or
o the date on which the outstanding note is distributed to the public
pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that:
o Berry Plastics and the guarantors will file the Registration
Statement with the Commission on or prior to 45 days after the
original issuance of the outstanding notes,
o Berry Plastics will use its best efforts to have the Registration
Statement declared effective by the Commission on or prior to 210
days after the original issuance of the outstanding notes,
o unless the exchange offer would not be permitted by applicable law
or Commission policy, Berry Plastics 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,
exchange notes in exchange for all outstanding notes tendered prior
thereto in the exchange offer, and
o if obligated to file the Shelf Registration Statement, Berry
Plastics 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 either:
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(1) Berry Plastics 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,
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness, or
(3) Berry Plastics and the guarantors fail to consummate the exchange
offer within 60 business days of the date specified for such effectiveness with
respect to the Registration Statement, or
(4) 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 (1)
through (4) above a "Registration Default"), then Berry Plastics and the
guarantors will pay liquidated damages to each holder of outstanding 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 outstanding 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 outstanding 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 outstanding notes. All accrued liquidated damages will be
paid by Berry Plastics 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 outstanding notes will be required to make representations to
Berry Plastics and the guarantors in order to participate in the exchange offer
and will be required to deliver 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 outstanding notes included in the Shelf Registration
Statement and benefit from the provisions regarding liquidated damages set forth
above.
The summary herein of some of the 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 outstanding notes are designated for trading in the PORTAL market. To
the extent outstanding notes are tendered and accepted in the exchange offer,
the principal amount of outstanding notes will decrease with a resulting
decrease in the liquidity in the market therefor. Following the consummation of
the exchange offer, holders of outstanding notes who were eligible to
participate in the exchange offer but who did not tender their outstanding notes
will not be entitled to specified rights under the Registration Rights Agreement
and those outstanding notes will continue to be subject to restrictions on
transfer. Accordingly, the liquidity of the market for the outstanding notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, Berry Plastics will accept any and all
outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the expiration date of the exchange offer. Berry Plastics
will issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding notes accepted in the exchange offer. Holders
may tender some or all of their outstanding notes pursuant to the exchange
offer. However, outstanding notes may be tendered only in integral multiples of
$1,000.
The form and terms of the exchange notes will be identical in all material
respects to the form and terms of the outstanding notes, except that the
exchange notes have been registered under the Securities Act and therefore will
not bear legends restricting their transfer and will not contain provisions
providing for an increase in the interest
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rate on the outstanding notes under some circumstances relating to the
Registration Rights Agreement, which provisions will terminate upon the
consummation of the exchange offer. The exchange notes will evidence the same
debt as the outstanding notes and will be entitled to the benefits of the
Indenture under which the outstanding notes were, and the exchange notes will
be, issued.
As of the date of this prospectus, $75,000,000 aggregate principal amount
of the outstanding notes. Berry Plastics has fixed the close of business on ,
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
outstanding notes.
Holders of the outstanding 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 Plastics 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 Plastics shall be deemed to have accepted validly tendered
outstanding notes when, as and if Berry Plastics has given oral notice or
written notice thereof to the Exchange Agent. An oral notice must be confirmed
in writing. The Exchange Agent will act as agent for the tendering holders for
the purpose of the exchange of outstanding notes.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of other events set forth herein or otherwise,
any such unaccepted outstanding notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the expiration date.
Holders who tender outstanding 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
outstanding notes pursuant to the exchange offer. Berry Plastics will pay all
charges and expenses, other than some 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
January , 2000, unless Berry Plastics, 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 Plastics 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 Plastics reserves the right, in its sole discretion,
o to delay accepting any outstanding 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
o 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 Plastics to constitute
a material change, Berry Plastics will promptly disclose such amendment by means
of a prospectus supplement that will be distributed to the registered Holders,
and Berry Plastics will extend the exchange offer for a period of five to 10
business days, depending upon the significance of the amendment and the manner
of
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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 Plastics may choose to make
public announcement of any delay, extension, termination or amendment of the
exchange offer, Berry Plastics 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 EXCHANGE NOTES
The exchange notes will bear interest from January 15, 2000. Interest will
be payable on the outstanding notes accepted for exchange to, but not including,
January 15, 2000.
PROCEDURES FOR TENDERING
The tender of outstanding notes by a holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by Berry Plastics will
constitute a binding agreement between such holder and Berry Plastics 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 December , 1999, to all holders of
outstanding notes known to Berry and the Exchange Agent.
Only a holder of the outstanding notes may tender such outstanding notes
in the exchange offer. A holder who wishes to tender any outstanding 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
(1) the certificates for such outstanding notes must be received by the
Exchange Agent along with the letter of transmittal or
(2) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such outstanding 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
(3) the Holder must comply with the guaranteed delivery procedures
described below. To be tendered effectively, the outstanding 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 outstanding 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 Plastics may
enforce such agreement against such participant.
THE METHOD OF DELIVERY OF OUTSTANDING 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
OUTSTANDING NOTES SHOULD BE SENT TO BERRY PLASTICS.
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Any beneficial owner whose outstanding 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 outstanding notes, either make appropriate arrangements to register
ownership of the outstanding notes in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the outstanding notes tendered pursuant thereto are tendered
(1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery
Instructions" on the letter of transmittal or
(2) 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 outstanding notes listed therein, such outstanding
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
outstanding notes.
If the letter of transmittal or any outstanding 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 Plastics, evidence satisfactory Berry Plastics 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 outstanding notes will be
determined by Berry Plastics in its sole discretion, which determination will be
final and binding. Berry Plastics reserves the absolute right to reject any and
all outstanding notes not properly tendered or any acceptance of which would, in
the opinion of counsel for Berry Plastics, be unlawful. Berry Plastics also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular outstanding 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 outstanding notes must
be cured within such time as Berry Plastics shall determine. Although Berry
Plastics intends to notify holders of defects or irregularities with respect to
tenders of outstanding notes, neither Berry Plastics, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of outstanding notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any outstanding notes
received by the Exchange Agent that Berry Plastics 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 Plastics, among other
things, that (i) the exchange notes acquired by the holder and any beneficial
owners of outstanding notes pursuant to the exchange offer are being obtained in
the ordinary course of business of the persons receiving such exchange notes,
(ii) neither the holder nor such beneficial owner has an arrangement with any
person to participate in the distribution of such exchange 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 exchange 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 Plastics. Each broker-dealer that
receives exchange notes for its own account in exchange for outstanding notes,
where such outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than outstanding
notes
28
<PAGE>
acquired directly from Berry Plastics), 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 exchange 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 outstanding 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
outstanding notes by causing the Book-Entry Transfer Facility to transfer such
outstanding 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 outstanding notes may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the letter of
transmittal or facsimile thereof, or an agent's message, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "The Exchange Offer -- Exchange Agent" on or prior to the
expiration date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and (i) whose
outstanding notes are not immediately available or (ii) who cannot deliver their
outstanding notes, the letter of transmittal or any other required documents to
the Exchange Agent prior to the expiration date may effect a tender if:
1. the tender is made through an Eligible Institution;
2. 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
outstanding notes and the principal amount of outstanding
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 outstanding
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
3. 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 outstanding 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 outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of outstanding 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
29
<PAGE>
(1) specify the name of the person having deposited the
outstanding notes to be withdrawn (the "Depositor"),
(2) identify the outstanding notes to be withdrawn. The
indemnification must include the certificate number or numbers
and principal amount of such outstanding notes,
(3) be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such
outstanding notes were tendered (including any required
signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the
outstanding notes register the transfer of such outstanding
notes into the name of the persons withdrawing the tender, and
(4) specify the name in which any such outstanding notes are to be
registered, if different from that of the Depositor. If
certificates for outstanding 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 outstanding 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 outstanding 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 Plastics
in its sole discretion, which determination shall be final and
binding on all parties. Any outstanding notes so withdrawn
will be deemed not to have been validly tendered for purposes
of the exchange offer and no exchange notes will be issued
with respect thereto unless the outstanding notes so withdrawn
are validly rendered. Properly withdrawn outstanding notes may
be rendered by following one of the procedures described above
under "The Exchange Offer -- Procedures for Tendering" at any
time prior to the Expiration Date.
Any outstanding notes which have been tendered but which are not accepted
for payment due to withdrawal, rejection of tender or termination of the
exchange offer will be returned as soon as practicable to the holder thereof
without cost to such holder (or, in the case of outstanding 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
outstanding notes will be credited to an account maintained with such Book-Entry
Transfer Facility for the outstanding notes).
CONDITIONS
Notwithstanding any other term of the exchange offer, Berry Plastics shall
not be required to accept for exchange, or exchange notes for, any outstanding
notes, and may terminate the exchange offer as provided herein before the
acceptance of such outstanding notes, if:
(1) the exchange offer shall violate applicable law or any applicable
interpretation of the staff of the Commission;
(2) any action or proceeding is instituted or threatened in any court or
by any governmental agency that might materially impair the ability
of Berry Plastics to proceed with the exchange offer or any material
adverse development has occurred in any existing action or
proceeding with respect to Berry Plastics; or
(3) any governmental approval has not been obtained, which approval
Berry Plastics shall deem necessary for the consummation of the
exchange offer.
If Berry Plastics determines in its sole discretion that any of the
conditions are not satisfied, Berry Plastics may:
30
<PAGE>
(1) refuse to accept any outstanding notes and return all tendered
outstanding notes to the tendering holders (or, in the case of
outstanding 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 outstanding
notes will be credited to an account maintained with such Book-Entry
Transfer Facility),
(2) extend the exchange offer and retain all outstanding notes tendered
prior to the expiration of the exchange offer, subject, however, to
the rights of holders to withdraw such outstanding notes (see "The
Exchange Offer -- Withdrawal of Tenders"), or
(3) waive such unsatisfied conditions with respect to the exchange offer
and accept all properly tendered outstanding notes which have not
been withdrawn. If such waiver constitutes a material change to the
exchange offer, Berry Plastics will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the
registered holders, and Berry Plastics 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
<TABLE>
<CAPTION>
<S> <C> <C>
BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE: BY HAND BEFORE 4:30 P.M.
United States Trust Company of (212)420-6211 United States Trust Company of
New York Attention: Customer New York
Cooper Station Service 111 Broadway
P.O. Box 843 New York, New York 10276
New York, New York 10276 Attention: Lower Level Corporate Trust
Attention: Corporate Trust Services Window
CONFIRM BY TELEPHONE BY OVERNIGHT COURIER AND BY HAND AFTER
TO: 4:30 P.M. ON THE EXPIRATION DATE:
(800)548-6565 United States Trust Company of
New York
770 Broadway
New York, New York 10003
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Berry Plastics. 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 Plastics and our affiliates.
Berry Plastics 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 Plastics, 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.
31
<PAGE>
The cash expenses to be incurred in connection with the exchange offer
will be paid by Berry Plastics. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
Berry Plastics will pay all transfer taxes, if any, applicable to the
exchange of outstanding notes pursuant to the exchange offer. If, however,
certificates representing exchange notes or outstanding 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
outstanding notes tendered, or if tendered outstanding 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
outstanding 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 exchange notes will be recorded at the same carrying value as the
outstanding notes as reflected in Berry Plastic'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 outstanding notes will be amortized over the term
of the exchange notes.
32
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of BPC
Holding and its subsidiaries at October 2, 1999. You should read the information
in the table below in conjunction with the historical consolidated financial
statements of BPC Holding and the related notes included elsewhere in this
prospectus.
AT OCTOBER 2, 1999
----------------------
HISTORICAL
----------------------
(DOLLARS IN THOUSANDS)
Long-term debt, including current portion:
BERRY PLASTICS CORPORATION:
Revolving credit facility ................................... $ 22,768
Term loans .................................................. 56,819
Nevada Industrial Revenue Bonds ............................. 4,000
Capital lease obligations ................................... 640
1994 Notes .................................................. 100,000
1998 Notes .................................................. 25,000
1999 Notes .................................................. 75,000
Debt premium ................................................ 721
---------
Total Berry Plastics long-term debt, including
current portion .......................................... 284,948
BPC HOLDING:
1996 Notes .................................................. 105,000
---------
Total consolidated long-term debt, including
current portion ........................................ 389,948
Total stockholders' equity (deficit) ........................... (125,854)
---------
Total capitalization ........................................ $ 264,094
=========
33
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statements of
operations of BPC Holding (collectively, the "Pro Forma Statements") give effect
to (1) the issuance of the notes, (2) the offering of our 1998 Notes and the
applications of the proceeds therefrom and (3) our acquisitions of Cardinal,
Knight and Norwich, as if the transactions had occurred as of the beginning of
the respective period for the statement of operations data and other data.
Fiscal year data reflect Cardinal's financial data for its fiscal year ended
November 30, 1998. Thirty-nine week period data reflect Cardinal's financial
data for its period ended May 31, 1999. The Pro Forma Statements do not purport
to represent what BPC 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 BPC 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 BPC Holding and related notes thereto
included elsewhere in this prospectus.
BPC HOLDING
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
BPC CARDINAL 1998 PRO FORMA ACQUISITIONS
HOLDING ACQUISITION ACQUISITIONS FOR THE 1999 NOTES AND THE
HISTORICAL ADJUSTMENTS ADJUSTMENTS ACQUISITIONS ADJUSTMENTS 1999 NOTES
--------- --------- --------- --------- --------- ---------
(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 --(2) 2,423(7) 36,979 8,625(11) 45,604
--------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes ........ (7,819) 2,745 (2,026) (7,100) (8,625) (15,725)
Income taxes
(benefit) ........... (249) --(3) 339(8) 90 -- 90
--------- --------- --------- --------- --------- ---------
Net income (loss) ... $ (7,570) $ 2,745 $ (2,365) $ (7,190) $ (8,625) $ (15,815)
========= ========= ========= ========= ========= =========
OTHER DATA:
Depreciation and
amortization ........ $ 24,830 $ 5,828(4) $ 1,838(9) $ 32,496 $-- $ 32,496
BERRY PLASTICS DATA:
Cash interest
expense, net ........ $ 20,569 $--(5) $ 2,423(10) $ 22,993 $ 8,250 $ 31,243
Total interest
expense, net ........ 21,835 -- 2,423 24,258 8,625(11) 32,883
</TABLE>
34
<PAGE>
BPC HOLDING
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
39 WEEKS ENDED OCTOBER 2, 1999
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
BPC CARDINAL PRO FORMA FOR ACQUISITION
HOLDING ACQUISITION THE CARDINAL 1999 NOTES AND THE
HISTORICAL ADJUSTMENTS ACQUISITION ADJUSTMENTS 1999 NOTES
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales ....................... $ 249,957 $ 28,465 $ 278,422 -- $ 278,422
Cost of goods sold .............. 181,240 23,407 204,647 -- 204,647
--------- --------- --------- --------- ---------
Gross margin .................... 68,717 5,058 73,775 -- 73,775
Operating expenses .............. 39,987 4,251(1) 44,238 -- 44,238
--------- --------- --------- --------- ---------
Operating income ................ 28,730 807 29,537 -- 29,537
Other expenses .................. 1,150 -- 1,150 -- 1,150
Interest expense, net ........... 29,335 --(2) 29,335 4,314(11) 33,649
--------- --------- --------- --------- ---------
Income (loss) before income taxes (1,755) 807 (948) (4,314) (5,262)
Income taxes .................... 659 --(3) 659 -- 659
--------- --------- --------- --------- ---------
Net income (loss) ............... $ (2,414) $ 807 $ (1,607) $ (4,314) $ (5,921)
========= ========= ========= ========= =========
OTHER DATA:
Depreciation and amortization ... $ 23,066 $ 3,372(4) $ 26,438 $ -- $ 26,438
BERRY PLASTICS DATA:
Cash interest expense, net ...... $ 18,095 $ -- $ 18,095 $ 4,125 $ 22,220
Total interest expense, net ..... 19,124 --(5) 19,124 4,314(11) 23,438
</TABLE>
35
<PAGE>
BPC HOLDING
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL 39 WEEKS
YEAR ENDED ENDED
JANUARY 2, OCTOBER 2,
1999 1999
------- -------
(DOLLARS IN THOUSANDS)
CARDINAL ACQUISITION 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)
------- -------
Adjusted interest expense ............ $ -- $ --
======= =======
(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
------- -------
Adjusted net cash interest expense ... $ -- $ --
======= =======
NORWICH AND KNIGHT ACQUISITIONS ADJUSTMENTS:
(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............................. 2,375
------
Adjusted interest expense................$2,423
======
(8) Actual provision for income taxes........$ 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
======
36
<PAGE>
FISCAL 39 WEEKS
YEAR ENDED ENDED
JANUARY 2, OCTOBER 2,
1999 1999
------- -------
(10) Actual net cash interest expense...... $ 48
Add incremental net cash interest
expense from acquisitions........... 2,375
-------
Adjusted net cash interest expense.... $2,423
=======
OFFERING ADJUSTMENTS:
(11) Adjustment of net interest expense:
Interest on the 1999 Notes at 11%..... $8,250 $4,125
Amortization of deferred financing
costs associated with this Offering. 375 189
-------- ------
Change in net interest expense........ $8,625 $4,314
======== ======
37
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected financial data of BPC Holding and its subsidiaries
as of and for the five fiscal years ended January 2, 1999 are derived from the
consolidated financial statements of BPC Holding that have been audited by Ernst
& Young LLP, independent auditors. The following selected consolidated financial
data for the 39 weeks ended September 26, 1998 and October 2, 1999 are derived
from the unaudited condensed consolidated financial statements of BPC 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 39 weeks ended October 2, 1999 are not necessarily indicative of
the results that may be achieved for BPC 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>
FISCAL THIRTY-NINE WEEKS ENDED
-------------------------------------------------------------- -----------------------
SEPTEMBER 26, OCTOBER 2,
STATEMENT OF OPERATIONS DATA: 1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ....................... $ 106,141 $ 140,681 $ 151,058 $ 226,953 $ 271,830 $ 205,116 $ 249,956
Cost of goods sold .............. 73,997 102,484 110,110 180,249 199,227 151,083 181,240
--------- --------- --------- --------- --------- --------- ---------
Gross margin .................... 32,144 38,197 40,948 46,704 72,603 54,033 68,716
Operating expenses .............. 15,160 17,670 23,679 30,505 44,001 31,136 39,986
--------- --------- --------- --------- --------- --------- ---------
Operating income ................ 16,984 20,527 17,269 16,199 28,602 22,897 28,730
Other expenses(1) ............... 184 127 302 226 1,865 492 1,150
Interest expense, net (2) ....... 10,972 13,389 20,075 30,246 34,556 25,691 29,335
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary charge ..... 5,828 7,011 (3,108) (14,273) (7,819) (3,286) (1,755)
Income taxes (benefit) .......... 11 678 239 138 (249) 331 659
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary charge ......... 5,817 6,333 (3,347) (14,411) (7,570) (3,617) (2,414)
Extraordinary charge(3) ......... 3,652 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ............ $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (7,570) $ (3,617) $ (2,414)
========= ========= ========= ========= ========= ========= =========
Preferred stock dividends .... $ -- $ -- $ 1,116 $ 2,558 $ 3,551 $ 2,620 $ 2,996
Common stock dividends ....... 50,000 -- -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital ................. $ 13,393 $ 13,012 $ 15,910 $ 20,863 $ 4,762 $ 5,020 $ 6,593
Fixed assets .................... 38,103 52,441 55,664 108,218 120,005 104,564 147,501
Total assets .................... 91,790 103,465 145,798 239,444 255,317 248,521 340,116
Total debt ...................... 112,287 111,676 216,046 306,335 323,298 308,391 389,948
Stockholders' equity (deficit) .. (38,838) (32,484) (97,550) (108,975) (120,357) (115,078) (125,854)
OTHER DATA:
Adjusted EBITDA(4) .............. $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 44,802 $ 55,566
Adjusted EBITDA margin .......... 24.9% 22.4% 23.0% 17.7% 22.0% 21.8% 22.2%
Cash provided by operating
activities ................... 15,556 12,969 14,426 14,154 34,131 28,580 32,397
Cash used for investing activities (9,495) (25,385) (14,639) (102,102) (52,120) (25,036) (96,418)
Cash provided by (used for)
financing activities ......... 2,184 11,124 2,370 80,444 17,619 890 63,853
Depreciation and amortization(5) 8,176 9,536 11,331 19,026 24,830 17,949 23,066
Capital expenditures ............ 9,118 11,247 13,581 16,774 22,595 13,540 25,580
Ratio of earnings to fixed
charges(6) ................... 1.5x 1.5x -- -- -- -- --
</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 $1,335 and $1,404 for the thirty-nine weeks ended September 26, 1998 and
October 2, 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.
38
<PAGE>
<TABLE>
<CAPTION>
FISCAL THIRTY-NINE WEEKS ENDED
----------------------------------------------------- -------- --------
SEPTEMBER 26, OCTOBER 2,
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 $ 22,897 $ 28,730
Depreciation and amortization ................ 8,176 9,536 11,331 19,026 24,830 17,949 23,066
-------- -------- -------- -------- -------- -------- --------
EBITDA ....................................... 25,160 30,063 28,600 35,225 53,432 40,846 51,796
One-time expenses related to acquisitions:
1996 transaction compensation expenses . -- -- 2,762 -- -- -- --
Acquisition integration expenses ....... 116 867 692 3,267 1,525 1,006 1,842
Plant shutdown expenses ................ -- -- 907 848 2,559 2,234 1,048
Litigation expenses related to drink cup
patent ................................ -- -- 650 100 631 -- --
Corporate expenses:
Non-cash compensation expenses (benefit) 358 (214) 358 -- 749 62 225
Management fees and expenses ........... 746 853 749 828 872 654 655
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA .............................. $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 44,802 $ 55,566
======== ======== ======== ======== ======== ======== ========
</TABLE>
(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 some 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:
(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
$3,694 and by $2,496 for the 39 weeks ended September 26, 1998 and October
2, 1999.
39
<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
39 WEEKS ENDED OCTOBER 2, 1999
COMPARED TO 39 WEEKS ENDED SEPTEMBER 26, 1998
NET SALES. Net sales increased $44.9 million, or 22%, to $250.0 million
for the 39 weeks ended October 2, 1999 from $205.1 million for the 39 weeks
ended September 26, 1998 with net selling prices relatively unchanged. Plastic
packaging product net sales increased $41.7 million from the 39 weeks ended
September 26, 1998. Within this segment, the addition of Cardinal, Norwich and
Knight provided net sales for the 39 weeks ended October 2, 1999 of $14.0
million, $6.9 million and $13.7 million, respectively. In addition, overcaps
sales, excluding Knight, increased $2.3 million. Custom sales increased $7.7
million from the 39 weeks ended September 26, 1998 with a large promotion in the
39 weeks ended October 2, 1999. Container sales increased $0.9 million from the
39 weeks ended September 26, 1998 despite the Company's decision to exit certain
low margin business. Drink cup sales for the 39 weeks ended October 2, 1999 were
$4.0 million off the 39 weeks ended September 26, 1998 due to a $3.5 million
promotion during the 39 weeks ended September 26, 1998. Plastic housewares
product sales for the 39 weeks ended September 26, 1998 increased $3.2 million
from the 39 weeks ended October 2, 1999 due to strong internal growth including
several new products.
GROSS MARGIN. Gross margin increased by $14.7 million to $68.7 million
(27% of net sales) for the 39 weeks ended October 2, 1999 from $54.0 million
(26% of net sales) from the 39 weeks ended September 26, 1998. This increase of
27% includes the combined impact of the added Cardinal, Norwich and Knight sales
volume, acquisition integration, and productivity improvement initiatives. 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 the second quarter of 1998, the Arlington
Heights, Illinois facility (which was acquired in the Knight acquisition) in the
first quarter of 1999 and the Ontario, California location (which was acquired
in the Cardinal acquisition) in the third quarter of 1999. In addition, we
closed the molding operations of the Minneapolis, Minnesota facility (which was
acquired in the Cardinal acquisition) and the Iowa Falls, Iowa facility in the
third quarter of 1999, distributing the molding business from these facilities
throughout our other facilities. 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 $2.3 million to $13.2
million for the 39 weeks ended October 2, 1999 from $10.9 million for the 39
weeks ended September 26, 1998 principally as a result of expanded sales
coverage and increased marketing expenses. General and administrative expenses
increased by $3.9 million to $17.2 million for the 39 weeks ended October 2,
1999 from $13.3 million for the prior 39 weeks ended September 26, 1998. The
increase is primarily attributable to the Cardinal, Norwich Moulders and Knight
acquisitions and increased accrued compensation expenses. One-time transition
expenses for the 39 weeks ended October 2, 1999 include $1.0 million related to
facility reorganizations and $1.9 million related to acquisitions. One-time
transition expenses for the 39 weeks ended September 26, 1998 were $1.0 million
related to acquisitions and $2.2 million related to plant consolidation.
INTEREST EXPENSE. Interest expense increased $3.0 million to $29.5 million
for the 39 weeks ended October 2, 1999 compared to $26.5 million for the 39
weeks ended September 26, 1998 primarily due to additional borrowings to support
the Cardinal, Norwich Moulders and Knight acquisitions.
INCOME TAX. Our income tax expense was $0.7 million for the 39 weeks ended
October 2, 1999. We continue to operate in a net operating loss carryforward
position for Federal income tax purposes.
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<PAGE>
NET LOSS. Net loss of $2.4 million for the 39 weeks ended October 2, 1999
improved $1.2 million from a net loss of $3.6 million for the 39 weeks ended
September 26, 1998 for the reasons discussed above.
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. 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.
41
<PAGE>
YEAR ENDED DECEMBER 27, 1997
COMPARED TO YEAR ENDED DECEMBER 28, 1996
NET SALES. Net sales increased 50.2% to $227.0 million in 1997, up $75.9
million from $151.1 million in 1996, which sales included an approximate 2%
increase in net selling price due mainly to the impact of cyclical adjustments
in the price of plastic resin. Container sales increased $30.1 million in 1997,
primarily due to the continued market strength of base products and the
acquisitions of Venture, 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 BPC 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
BPC Holding, which occurred in June 1996. The recapitalization of BPC 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 BPC 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.
42
<PAGE>
INCOME TAX MATTERS
BPC 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 BPC Holding
indefinitely to reduce future years' federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
We have a credit facility with NationsBank, N.A. for a senior secured line
of credit. The credit facility provides for aggregate borrowings up to a maximum
of about $134.4 million as of October 2, 1999, including:
o a $70.0 million revolving line of credit, subject to a borrowing base
formula;
o a 1.5 million revolving line of credit, subject to a borrowing base;
o a $51.1 million term loan facility;
o a 3.4 million term loan facility; and
o a $5.2 million standby letter of credit facility to support our and our
subsidiaries' obligations under our Nevada Industrial Revenue Bonds.
The debt under our credit facility is guaranteed by our parent, BPC
Holding, and our subsidiaries. Our 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.
The requirements of these tests may change on a quarterly basis. At October 2,
1999, our credit facility required us to have tangible capital funds of not less
than $80.0 million and a maximum leverage ratio of 4.5 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 may change on a quarterly basis.
See "Description of Other Debt -- The Credit Facility".
The 1994 Indenture, the 1996 Indenture and the 1998 Indenture restrict our
ability to incur additional debt and contain other provisions that could limit
our liquidity. At October 2, 1999, we had unused borrowing capacity under the
credit facility's borrowing base of $23.9 million, which is not considered
additional indebtedness under the 1994 Indenture, 1996 Indenture, 1998 Indenture
of 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
improved operating performance. Net cash provided by operating activities was
$32.4 million for the 39 weeks ended October 2, 1999, an increase of $3.8
million from the 39 weeks ended September 26, 1998. The increase is primarily
the result of improved operating performance with income before depreciation and
amortization increasing $6.3 million from the 39 weeks ended September 28, 1998.
Net working capital changes (defined as accounts receivable, inventories,
prepaid expenses, other receivables, accounts payable and accrued expenses)
decreased net cash $3.7 million from the 39 weeks ended September 26, 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
Plastics. 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 $29.1 million, including about $8.1 million for
building and systems which includes a major plant renovation, $12.8 million for
molds, $5.2 million for molding and printing machines, and $3.0 million for
miscellaneous accessory equipment. Capital expenditures for the 39 weeks ended
October 2, 1999 included $9.1
43
<PAGE>
million for molds, $5.0 million for molding and printing machines, $7.7 million
for buildings and systems, and $3.8 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 provided by financing activities was $63.9 million for the 39 weeks ended
October 2, 1999, representing an increase of $63.0 million from the 39 weeks
ended September 26, 1998. This increase can be attributed to our issuance of the
1999 Notes to finance the acquisition of Cardinal in the third quarter of 1999.
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 1998 Notes and the Notes
restrict, and our credit facility prohibits, our ability to pay any dividend or
make any distribution of funds to BPC Holding to satisfy interest and other
obligations on the 1996 Notes. Based upon historical operating results, we
anticipate that we will be unable to generate sufficient net income to permit a
dividend to BPC Holding in an amount sufficient to meet BPC 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, BPC 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. After June 15, 2001 or in the event that BPC
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 BPC Holding to consummate a
refinancing or equity offering.
At October 2, 1999, our cash balance was $2.1 million and we had unused
borrowing capacity under our credit facility's borrowing base of about $23.4
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. Excluding Cardinal, the most recent acquired
business, Knight, was converted to our applications on March 1, 1999. We plan to
convert Cardinal to our applications by January 10, 2000.
44
<PAGE>
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 $2.7 million of which $2.5 million has been
paid through October 2, 1999. 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. Due to recent
plant acquisitions and ongoing Year 2000 testing we have moved our goal of being
Year 2000 compliant to December 17, 1999. Year 2000 testing revealed that the
voice mail system in our Lawrence plant is not Year 2000 compliant. This system
is to be replaced by November 30, 1999. Our Woodstock plant is scheduled to
replace the software on its palletizer by November 30, 1999 to make it Year 2000
ready. The costs of these conversions are estimated to be below $110,000, none
of which has been paid through October 2, 1999.
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;
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 compliant 203
o Compliant by third quarter 1999 30
o Compliant by fourth quarter 1999 34
o Second request for information 32
o No response 4
o Suppliers will not respond 1
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.
45
<PAGE>
BUSINESS
We believe that 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. Based on discussions
with our customers, sales representatives and external sales brokers, we believe
that 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 and based on discussions with our customers, sales
representatives and external sales brokers 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
------ ------ ------ ------ ------
PLASTIC PACKAGING PRODUCTS: (DOLLARS IN MILLIONS)
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. Similarly, our containers are used for packaging a broad
spectrum of consumer and commercial products. Our drink cups are sold to fast
food and family-dining restaurants, convenience stores, stadiums and retail
stores. 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. The rapid pace of our acquisitions of
other businesses may adversely effect our efforts to integrate
acquisitions and manage those acquisitions profitably. Also, costs of
integration could have an adverse affect on short term operating
results.
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
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<PAGE>
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, our modern and
extensive post-molding 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. 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 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 particular 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 our having to reduce our
prices, either of which would have a material adverse effect on our
business and results of operation.
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. This acquisition poses several risks, such as
the possibility that it will be difficult to integrate new operations
into an existing operation and the risks of entering markets or
offering services for which we have no prior experience.
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
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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. This strategy may prove unsuccessful if we are unable
to successfully develop new products or penetrate our targeted
markets.
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.
PLASTIC PACKAGING PRODUCTS
AEROSOL OVERCAPS
Based on discussions with our customers, sales representatives and
external sales brokers, 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 Plastics.
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 Plastics 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:
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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:
<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 Pool and other chemicals
Commission standards for child safety
Pry-off Containers having a tight lid-fit and requiring 4 oz. to 2 gallons Building products, adhesives, other
an opening device industrial uses
Dairy Thinwall containers in traditional dairy market 6 oz. to 1.25 gallons, Cultured dairy products including
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. Food, deli, sauces, salads
rectangular shapes
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 particular
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.
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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 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 and plastic lawn and garden products. Examples of our
semi-disposable plastic housewares are plates, bowls, pitchers and tumblers. 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.
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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.
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 through more efficient use of
space, lowers warehousing and shipping costs. 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.
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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, of which 70% was high
density polyethylene, 12% linear low density polyethylene and 18% polypropylene.
The above figures do not incorporate purchases of specialty resins. 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. 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 suppliers."
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 Plastics 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 or the off-site disposal of hazardous
substances.
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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 some 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 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 Plastics, 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.
In December 1996, the Department of Environmental Quality estimated that
based on 1996 data Oregon had met its recycling goal of 25% for 1997, 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.
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PROPERTIES
The following table sets forth our principal facilities:
<TABLE>
<CAPTION>
LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED
- ------------------------------- -------------- -------------- ------------------------------------- ----------------
<S> <C> <C> <C> <C>
Lawrence, KS................... 19.3 423,000 Manufacturing Owned
Evansville, IN................. 13.4 420,000 Headquarters and Manufacturing Owned
Leased (expires
Ontario, CA.................... 10.0 200,000 Manufacturing 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
Leased (expires
Minneapolis, MN................ 3.0 110,000 Manufacturing 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
Leased (expires
York, PA....................... 10.0 40,000 Manufacturing December 2001)
</TABLE>
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 Plastics and/or our subsidiary Berry Sterling have been litigating
two lawsuits that involve United States Patent No. Des. 362,368. 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 declaratory judgment
of invalidity and non-infringement, and damages under the Lanham Act. On
December 28, 1995, Berry Sterling filed suit against Packaging Resources
Incorporated 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 declaratory judgment 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 judgment because of the finding of the invalidity of the patent. On March
11, 1998, Berry Sterling filed a motion with the Court to set aside the verdict
of invalidity and the award on the counterclaim, which was subsequently denied
by the Court. On
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April 29, 1998, Berry Sterling filed a Notice of Appeal of the Court's judgment
and the denial of its motion to set aside the jury's verdict. Oral argument for
the appeal took place on January 5, 1999.
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 United
States Patent No. Des 362,368 (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
judgment against Berry Sterling (included costs 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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the executive
officers, directors and key personnel of our parent, BPC Holding and its
subsidiaries:
<TABLE>
<CAPTION>
NAME AGE TITLE ENTITY
- -------------------------------------- --- -------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Roberto Buaron(1)(4).................. 52 Chairman and Director Berry Plastics and BPC Holding
Martin R. Imbler(1)(4)................ 51 President, Chief Executive Officer and Director Berry Plastics
President and Director BPC Holding
Ira G. Boots.......................... 45 Executive Vice President - Operations and Director Berry Plastics
Executive Vice President, Chief Financial
James M. Kratochvil................... 42 Officer, Treasurer and Secretary Berry Plastics
Executive Vice President - Chief Financial
Officer and Secretary BPC Holding
R. Brent Beeler....................... 46 Executive Vice President, Sales and Marketing Berry Plastics
Randy Hobson.......................... 32 Vice President - Sales and Marketing Berry Plastics
Vice President - Planning and Administration and
Ruth Richmond......................... 36 Assistant Secretary Berry Plastics
David Weaver.......................... 36 Vice President and Plant Manager - Lawrence Berry Plastics
Fredrick A. Heseman................... 46 Vice President and Plant Manager -Evansville Berry Plastics
Bruce J. Sims......................... 49 Vice President - Sales and Marketing, Housewares Berry Plastics
George A. Willbrandt.................. 54 Vice President - Sales and Marketing Berry Plastics
Lawrence G. Graev(2)(3)............... 54 Director Berry Plastics and BPC Holding
Joseph S. Levy(2)(3).................. 31 Vice President, Assistant Secretary and Director Berry Plastics and BPC Holding
Donald J. Hofmann, Jr.(1)(2)(3)(4).... 41 Director Berry Plastics and BPC Holding
Mathew J. Lori........................ 35 Director Berry Plastics and BPC Holding
David M. Clarke....................... 48 Director Berry Plastics and BPC Holding
</TABLE>
- ---------------------------------
(1) Member of the Stock Option Committee of BPC Holding.
(2) Member of the Audit Committee of BPC Holding.
(3) Member of the Audit Committee of Berry Plastics.
(4) Member of the Compensation Committee of Berry Plastics.
ROBERTO BUARON has been Chairman and a Director of Berry Plastics since it
was organized in December 1990. He has also served as Chairman and a Director of
BPC 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
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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 Plastics since January 1991. He has also served as a Director
of BPC Holding since January 1991, and as President of BPC 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.
IRA G. BOOTS has been Executive Vice President-Operations, and a Director
of Berry Plastics 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 Plastics in December 1997.
He formerly served as Vice President, Chief Financial Officer and Secretary of
Berry Plastics since 1991, and as Treasurer of Berry Plastics since May 1996. He
was also promoted to Executive Vice President, Chief Financial Officer and
Secretary of BPC Holding in December 1997. He formerly served as Vice President,
Chief Financial Officer and Secretary of BPC 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 Plastics 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 Plastics
since June 1998. Mr. Hobson was Marketing Manager-Containers for Berry Plastics
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 BPC Holding and Berry
Plastics since April 1998. Ms. Richmond has been Vice President-Planning and
Administration of Berry Plastics 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
Plastics 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 Plastics 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 Plastics 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.
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<PAGE>
GEORGE A. WILLBRANDT was promoted to Vice President-Sales and Marketing of
Berry Plastics 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 Plastics and BPC 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
Plastics and BPC Holding since April 1995. Mr. Levy has been a Director of BPC
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 BPC Holding and Berry
Plastics since June 1996. Mr. Hofmann has been a General Partner of Chase
Capital Partners since 1992. Prior to that, he was head of MH Capital Partners
Inc., the equity investment arm of Manufacturers Hanover. 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 BPC Holding and Berry Plastics 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 BPC Holding and Berry Plastics
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 BPC Holding has an Audit Committee and a Stock
Option Committee, and the Board of Directors of Berry Plastics 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 BPC Holding 1996 Stock Option Plan. The
Compensation Committee makes recommendations to the Board of Directors of Berry
Plastics 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
Plastics 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 Plastics 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> <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
1998 176,631 39,024 -- 1,650
Ira G. Boots........................................ 1997 151,691 72,868 -- 1,520
Executive Vice President - Operations 1996 145,735 94,205 5,214 239,335
James M. Kratochvil................................. 1998 142,483 30,413 -- 1,650
Executive Vice President, Chief Financial Officer, 1997 119,459 56,307 -- 1,520
Treasurer and Secretary 1996 112,614 72,796 3,259 120,427
1998 145,218 32,621 -- 1,650
R. Brent Beeler..................................... 1997 125,973 60,554 -- 1,520
Executive Vice President - Sales and Marketing 1996 121,108 72,796 3,259 120,427
1998 182,823 39,024 -- 1,650
George A. Willbrandt................................ 1997 214,788 -- -- 11,303
Vice President - Sales and Marketing 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>
(1) None of BPC Holding's capital stock is currently publicly traded. The
reflect management's estimate of the fair market value of the Class B
Nonvoting Common Stock of BPC Holding at January 2, 1999.
(2) All options granted to management of Berry Plastics are excercisable for
shares of Class B Nonvoting Common Stock, par value $.01 per share, of BPC
Holding.
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<PAGE>
DIRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of
Directors of BPC Holding or Berry Plastics, but directors are reimbursed for
out-of-pocket expenses incurred in connection with their duties as directors.
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 Plastics' attainment of specified 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
Plastics. 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 Plastics. 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 specified 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 Plastics (other than Mr. Willbrandt, who
would receive one year's salary), and (2) particular 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
Plastics 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 BPC Holding in 1996, the
Management Agreement was amended to provide for a fee for services rendered in
connection with some 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 BPC Holding in
1996, BPC 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. First Atlantic Capital
received advisory fees of about $140,000 in July 1998 for originating,
structuring and
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<PAGE>
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. 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 BPC Holding and Berry Plastics,
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 BPC Holding to First Atlantic Capital in connection with
the recapitalization of BPC Holding or any of the fees paid with respect to the
acquisitions described above. First Atlantic Capital is engaged by Atlantic
Equity Partners International II to provide 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 BPC Holding prior to the
consummation of the recapitalization of BPC Holding in 1996, received about
$67.6 million from the sale of its common stock in BPC Holding and warrants to
purchase common stock. First Atlantic is engaged by Atlantic Equity Partners to
provide 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 BPC Holding. See "Certain Transactions."
In connection with the recapitalization of BPC Holding in 1996, Mr.
Imbler, a director of Berry Plastics and BPC Holding, received about $5.9
million, Douglas E. Bell, a former director of Berry Plastics, received about
$2.5 million, Mr. Boots, a director of Berry Plastics, received about $2.4
million, and Messrs. Beeler and Kratochvil, officers of Berry Plastics, each
received about $1.3 million from their sale of equity interests in BPC 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 BPC
Holding, and BPC Holding distributed that amount to its holders of equity
interests. In connection therewith, BPC Holding agreed to pay cash bonuses, upon
the occurrence of particular events, to the members of management who held
options under BPC 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 BPC Holding. As a result of the
recapitalization of BPC 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 BPC 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 BPC Holding's Common Stock to Atlantic Equity Partners International
II, Chase Venture Capital Associates and other equity investors (collectively,
the "Common Stock Purchasers") and the sale of $15.0 million of BPC 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 BPC Holding in
the 1996 Transaction.
STOCK OPTION PLAN
Employees, directors and some independent consultants of Berry Plastics
and its subsidiaries are entitled to participate in the BPC 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 BPC Holding for
which options may be granted pursuant to the Stock Option Plan is 51,620. The
Stock
61
<PAGE>
Option Plan will terminate on October 3, 2003 or such earlier date on
which the Board of Directors of BPC Holding, in its sole discretion, determines.
The Stock Option Committee of the Board of Directors of BPC Holding administers
all aspects of the Stock Option Plan. The Stock Option Committee selects which
of Berry Plastics' 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 BPC 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 BPC Holding, the exercise price of any incentive stock option may not be less
than 110% of the fair market value of such shares at the time of grant and the
term of such option may not exceed five years. The exercise price of a
non-qualified stock option is determined by the Stock Option Committee on the
date the option is granted. However, the exercise price of a non-qualified stock
option may not be less than 100% of the fair market value of Class B Nonvoting
Common Stock if the option is granted at any time after the initial public
offering of such stock.
Options granted under the 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 Plastics, 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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<PAGE>
PRINCIPAL STOCKHOLDERS
All of our outstanding capital stock is owned by BPC Holding. The
following table sets forth information regarding the ownership of the capital
stock of BPC Holding with respect to the following:
o each person known by BPC Holding to own beneficially more than 5% of
the outstanding shares of any class of its voting capital stock;
o each of BPC 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>
Shares of Shares of Percentage of
Voting Nonvoting All Classes of
Common Stock(1) Percentage of Common Stock(1) Common Stock
Name and Address of -------------------- Voting -----------------------------------
Beneficial Owner Class A Class B Common Stock Class A Class B Class C (Fully-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 BPC Holding. The authorized
capital stock of BPC 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 BPC 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 BPC 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 BPC 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 BPC Holding held by Atlantic Equity
Partners International
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<PAGE>
II. Buaron Holdings disclaims any beneficial ownership of any shares of
capital stock owned by Atlantic Equity Partners International II,
including the shares of common stock of BPC 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 BPC 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 BPC
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 BPC 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 BPC 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 BPC 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 BPC
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 BPC 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 BPC 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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<PAGE>
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 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 BPC Holding in 1996, BPC 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 BPC 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. Upon completion of the
Cardinal acquisition, First Atlantic received advisory fees of about $695,000
for services provided with respect to the acquisition.
Mr. Buaron, the Chairman and a director of BPC Holding and Berry Plastics,
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 BPC Holding to
First Atlantic Capital in connection with the recapitalization of BPC 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 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 BPC Holding prior to the
consummation of the recapitalization of BPC Holding in 1996, received about
$67.6 million from the sale of its common stock in BPC Holding and warrants to
purchase common stock. First Atlantic is engaged by Atlantic Equity Partners to
provide 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 BPC Holding.
THE 1996 TRANSACTION
On June 18, 1996, our parent, BPC 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 BPC Holding. Pursuant to a Stock Purchase and Recapitalization Agreement
dated as of June 12, 1996, some 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
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purchase of the common stock, the preferred stock and the 1996 Warrants of BPC
Mergerco, BPC Mergerco merged with and into BPC Holding, with BPC 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 BPC Holding and some 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 stock of BPC Holding, a majority of
which was held by members of management, were converted into shares
of common stock of the surviving corporation. These shares
constituted about 19% of the post-merger common stock and the
surviving corporation, and
(3) the common stock, preferred stock and 1996 Warrants of Mergerco were
converted into common stock, preferred stock and warrants 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 BPC 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
BPC Holding, including the holders of the 1994 Warrants, was about $119.6
million in cash. In order to finance the recapitalization of BPC Holding,
including the payment of related fees and expenses:
(1) BPC Holding issued the 1996 Notes for net proceeds of about $100.2
million. Net proceeds were about $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 some
members of management made equity and rollover investments in the
aggregate amount of $70.0 million. This 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) BPC Holding received an aggregate of about $0.9 million in
connection with the exercise of management stock options to purchase
common stock of BPC Holding.
In connection with the recapitalization of BPC Holding, Atlantic Equity
Partners International II, Chase Venture Capital Associates, some other
institutional investors and some members of management entered into a
Stockholders Agreement pursuant to which particular stockholders, among other
things:
(1) were granted specific registration rights and
(2) under specific circumstances, have the right to force a sale of BPC
Holding.
MANAGEMENT
In connection with the recapitalization of BPC 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 equity interests in BPC Holding. In
connection with the 1994 Transaction, we paid a $50.0 million dividend on our
common stock to BPC Holding, and BPC Holding distributed that amount to its
holders of equity interests. In connection therewith, BPC Holding agreed to pay
cash bonuses, upon the occurrence of particular events, to the members of
management who held options under BPC 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
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dividend by BPC Holding. As a result of the recapitalization of BPC 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 BPC Holding, BPC 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. Currently these three directors
are 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. Currently this
director is Mr. Clarke;
(2) in the case of some Common Stock Purchasers, to subscribe for a
proportional share of future equity issuances by BPC Holding;
(3) under some 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 BPC Holding or a
sale of BPC Holding subsequent to the fifth anniversary of the
closing of the recapitalization of BPC Holding and
(4) under some circumstances and in the case of a majority in interest
of the institutional holders, to cause the initial public offering
of equity securities of BPC Holding or a sale of BPC Holding
subsequent to the sixth anniversary of the closing of the
recapitalization of BPC Holding. Provisions under the Stockholders
Agreement also
(1) prohibits BPC Holding from taking specific 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 particular events, the consent of Atlantic
Equity Partners International II), including particular
transactions between BPC Holding and any subsidiary, on the
one hand, and First Atlantic Capital or any of its affiliates,
on the other hand;
(2) obligates BPC Holding to provide some Common Stock Purchasers
with financial and other information regarding BPC 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 some 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 some
circumstances the Preferred Stock
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Purchasers (and their transferees) have tag-along rights with
respect to the 1996 Warrants and the common stock of BPC
Holding issuable upon exercise of the 1996 Warrants. Under
specified circumstances and subject to some 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 BPC Holding's expense, of their shares of common stock of BPC
Holding. Under some 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
BPC Holding's expense, of their shares of common stock of BPC Holding. The
Stockholders Agreement provides that if BPC Holding proposes to register any of
its securities, either for its own account or for the account of other
stockholders, BPC Holding will be required to notify all Common Stock Purchasers
and to include in such registration the shares of common stock of BPC Holding
requested to be included by them. All shares of common stock of BPC 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
BPC 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 BPC Holding in 1996, if an
underwritten public offering of equity securities of BPC
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 BPC Holding in 1996;
o the twentieth anniversary of the closing of the
recapitalization of BPC Holding in 1996; and
o a sale of BPC Holding.
In addition, the Stockholders Agreement provides that 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 BPC Holding and/or to approve
particular actions by BPC Holding will terminate under specific circumstances.
BPC 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 BPC Holding or Atlantic Equity Partners II upon the
consummation of particular transactions;
o grant the Management Stockholders particular rights of co-sale in
connection with sales by Atlantic Equity Partners International II;
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o grant BPC Holding rights to repurchase capital stock from the
Management Stockholders upon the occurrence of particular events;
and
o require the Management Stockholders to offer shares to BPC Holding
prior to any permitted transfer.
CHASE SECURITIES INC.
In connection with the recapitalization of BPC 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 BPC Holding and Berry
Plastics, received a fee of $500,000 for arranging the sale of $15.0 million of
BPC Holding's Common Stock to some of the Common Stock Purchasers and the sale
of $15.0 million of BPC 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 BPC Holding in the recapitalization of BPC 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 BPC Holding in connection with particular 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 1998 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 OTHER DEBT
BPC HOLDING 1996 NOTES
On June 18, 1996, BPC Holding, as part of a recapitalization, issued
12.50% Senior Secured Notes due 2006 for net proceeds, after expenses, of about
$100.2 million (net proceeds were about $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, BPC 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 to
pay three years' interest on the notes. The escrow account was depleted on June
15, 1999.
The 1996 Notes rank senior in right of payment to all existing and future
subordinated debt of BPC Holding and all other obligations of Berry Plastics,
including BPC Holding's subordinated guarantee of the 1994 Notes, the 1998 Notes
and the Notes and PARI PASSU in right of payment with all senior debt of BPC
Holding. The 1996 Notes are structurally subordinated to all existing and future
senior debt of Berry Plastics, including borrowings under the credit facility
and our Nevada Industrial Revenue Bonds.
BERRY PLASTICS 1994 NOTES AND 1998 NOTES
On April 21, 1994, Berry Plastics 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 BPC 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 Plastics from the sale of the 1994 Notes,
after expenses, were $93.0 million.
On August 24, 1998, Berry Plastics issued $25 million aggregate principal
amount of 12.25% Berry Plastics Corporation Series B Senior Subordinated Notes
due 2004. The 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, 1998. The 1998 Notes are unconditionally guaranteed on a senior subordinated
basis by the Guarantors. The net proceeds to Berry Plastics from the sale of the
1998 Notes, after expenses, were $25.2 million.
Berry Plastics is not required to make mandatory redemption or sinking
fund payments with respect to the 1994 Notes or 1998 Notes. The 1994 Notes and
1998 Notes may be redeemed at the option of Berry Plastics, in whole or in part,
at redemption prices ranging from 106.125% beginning on April 15, 1999 and par
after April 15, 2002. Upon a change of control, as defined in the indentures
governing the 1994 Notes and 1998 Notes, each holder of 1994 Notes and 1998
Notes will have the right to require Berry Plastics 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 the Notes and PARI
PASSU with or senior in right of payment to all existing and future subordinated
debt of Berry Plastics. The 1994 Notes and 1998 Notes rank junior in right of
payment to all existing and future senior debt of Berry Plastics, including
borrowings under our credit facility and our Nevada Industrial Revenue Bonds.
The indentures governing the 1994 Notes and 1998 Notes contain certain
covenants which, among other things, limit Berry Plastics and its subsidiaries'
ability to incur debt, merge or consolidate, sell, lease or transfer assets,
make dividend payments and engage in transactions with affiliates.
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The terms of the 1998 Notes are identical in all material respects to the
terms of the 1994 Notes, except that the 1994 Notes have a priority upon the
payment of proceeds pursuant to an Asset Sale. In addition, since the 1998 Notes
are issued pursuant to a separate indenture from the 1994 Notes, holders of the
1998 Notes vote as a separate class from holders of the 1994 Notes.
THE CREDIT FACILITY
Our credit facility with NationsBank, N.A. provides for aggregate
borrowing up to a maximum of about $134.4 million including:
o a $70.0 million revolving line of credit, subject to a
borrowing base formula. At October 2, 1999, we had unused
borrowing capacity under our credit facility's revolving line
of credit of about $23.9 million;
o a (pound)1.5 million revolving line of credit, subject to a
borrowing base;
o a $51.1 million term loan facility;
o a (pound)3.4 million term loan facility; and
o a $5.2 million standby letter of credit facility to support
our and our subsidiaries' obligations under our Nevada
Industrial Revenue Bonds.
The debt under our credit facility is guaranteed by BPC 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 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:
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 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:
o maintenance of particular financial ratios and compliance with
particular financial tests and limitations;
(a) Tangible capital funds must be greater than the
following amounts as of the end of the respective fiscal
quarter:
3rd 1999 $80.0 million
4th 1999 $80.0 million
1st 2000 $91.5 million
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2nd 2000 $91.5 million
3rd 2000 $91.5 million
4th 2000 $93.0 million
1st 2001 $93.0 million
2nd 2001 $116.5 million
all thereafter $130.0 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 charge ratio of at least 1.0 to 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, pursuant to which we have agreed to pay amounts
sufficient to pay principal, interest and any premium on the 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 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
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 and the word "Holding" refers to BPC Holding Corporation and not to
any of its subsidiaries.
The Company will issue the Notes under an Indenture (the "Indenture")
among itself, the Guarantors and United States Trust Company of New York, as
trustee (the "Trustee"), in a private transaction that is not subject to the
registration requirements of the Securities Act. 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 following description is a summary of certain provisions of the
Indenture and the Registration Rights Agreement. It does not restate those
agreements in their entirety. We urge you to read the Indenture and the
Registration Rights Agreement because they, and not this description, define
your rights as holders of the Notes. Copies of the Indenture and the
Registration Rights Agreement will be made available to prospective investors as
set forth below under "--Additional Information." Certain defined terms used in
this description but not defined below under "--Certain Definitions" have the
meanings assigned to them in the Indenture.
As of the date of the Indenture, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "--Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants in the Indenture. Unrestricted
Subsidiaries will not guarantee these Notes.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
The Notes:
o are general unsecured obligations of the Company;
o are 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;
o are PARI PASSU in right of payment with the 1994 Notes and the
1998 Notes and PARI PASSU with or senior in right of payment
to all existing and future subordinated Indebtedness of the
Company; and
o are unconditionally guaranteed by the Guarantors.
THE GUARANTEES
The Notes are guaranteed by all of the Guarantors.
Each Guarantee of the Notes:
o is a general unsecured obligation of the Guarantor;
o is junior in right of payment to all existing and future
Senior Indebtedness of the Guarantor, including the
Guarantor's Guarantee of borrowings under the Credit Facility
and the Nevada Bonds; and
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o is PARI PASSU in right of payment with the Guarantor's
Guarantee of the 1994 Notes and the 1998 Notes and PARI PASSU
with or senior in right of payment with any existing and
future subordinated Indebtedness of the Guarantor.
PRINCIPAL, MATURITY AND INTEREST
Notes with a maximum aggregate principal amount of $75.0 million will be
issued in this offering. The Company may issue additional notes (the "Additional
Notes") from time to time after this offering. Any offering of Additional Notes
is subject to the covenant described below under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." The
Notes and any Additional Notes subsequently issued under the Indenture would be
treated as a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase. The
Company will issue Notes in denominations of $1,000 and integral multiples of
$1,000. The Notes will mature on July 15, 2007.
Interest on the Notes will accrue at the rate of 11% per annum and will be
payable semi-annually in arrears on January 15 and July 15, commencing on
January 15, 2000. The Company will make each interest payment to the Holders of
record on the immediately preceding January 1 and July 1.
Interest on the Notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
The Company will pay all principal, interest and premium and Liquidated
Damages, if any, on the Notes at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless the Company elects to
make interest and Liquidated Damages, if any, payments by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
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.
OPTIONAL REDEMPTION
At any time prior to July 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 111% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of a public offering of common stock
of the Company or a capital contribution to the Company's common equity made
with the net cash proceeds of an Initial Public Offering; PROVIDED that:
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(1) at least 65% of the aggregate principal amount of Notes issued under
the Indenture remains outstanding immediately after the occurrence of
such redemption (excluding Notes held by the Company and its
Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the closing of
such public offering or the making of such capital contribution.
Except pursuant to the preceding paragraph, the Notes will not be
redeemable at the Company's option prior to July 15, 2003.
After July 15, 2003, the Company may redeem all or a part of the Notes
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 July 15
of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2003.......................................................... 105.500%
2004.......................................................... 103.667%
2005.......................................................... 101.833%
2006 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 that 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 of Notes repurchased plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the date of
purchase. 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 the 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;
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(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. To the extent
that the provisions of any securities laws or regulations conflict with the
Change of Control provisions of the Indenture, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the Indenture
by virtue of such conflict.
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 aggregate principal
amount of Notes or portions thereof tendered to the Company.
The Paying Agent will promptly mail to each Holder of Notes so accepted
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Prior to making the Change of Control Payment, but in any event within 90
days following a Change of Control, the Company will 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.
One of the events that constitutes a Change of Control is a sale, lease or
transfer of all or substantially all of Holding's or the Company's assets. The
Indenture will be 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 the covenant described
below under the caption "--Certain Covenants--Restricted Payments," to find
alternative uses for the proceeds of that sale. Pursuant to the terms of the
Indenture, however, the Company could be required to make an Asset Sale Offer in
those 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 certain change of control events will
constitute an event of default thereunder. Upon the occurrence of an event of
default under the Credit Facility, all amounts outstanding thereunder
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may become due and payable. All indebtedness of the Company under the Credit
Facility is Senior Indebtedness. Accordingly, in the event of an event of
default under the Credit Facility, including with respect to an event similar to
a Change of Control, the subordination provisions contained in the Indenture
will prohibit the Company (if the holders of Senior Indebtedness issue a notice
to the Company to such effect) from making any payment on the Notes until such
event of default is cured or upon the expiration of 179 days (unless the holders
of Senior Indebtedness accelerate the maturity of the Senior Indebtedness). See
"--Subordination."
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of Notes to
require that the Company 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. 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 Purchasers. 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.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, conduct an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal
to the fair market value of the assets sold or otherwise disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and 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 $2.0 million; and
(3) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash. For purposes of
this provision, each of the following shall be deemed to be cash:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto),
of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or
any Note Guarantee) that are assumed by the transferee of any such
assets; and
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(b) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received).
Within 180 days after any Asset Sale, the Company may apply the Net
Proceeds from such Asset Sale to either:
(1) permanently reduce Senior Indebtedness; or
(2) make an investment in another business, make a capital expenditure or
acquire other long-term tangible assets, in each case, in the same or
a similar line of business as the Company or any Restricted Subsidiary
was engaged in on the date of the Indenture.
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 preceding paragraph will constitute "Excess Proceeds." If the
aggregate amount of Excess Proceeds exceeds $5.0 million, upon completion of the
Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture, the
Company will make an Asset Sale Offer to all Holders of Notes and all holders of
other Indebtedness that is PARI PASSU with the Notes containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum principal
amount of Notes and such other PARI PASSU Indebtedness, that is in an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds, if any,
remaining upon completion of the Asset Sale Offers required under the 1994
Indenture and the 1998 Indenture. The offer price in any Asset Sale Offer will
be equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If the aggregate amount of Notes and such other PARI PASSU
Indebtedness 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 and such other PARI PASSU Indebtedness
surrendered by Holders into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other PARI PASSU
Indebtedness to be purchased in the manner described under the caption
"--Selection and Notice" below. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset to zero.
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 each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the Indenture by virtue of such
conflict.
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 a 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, the Trustee will select Notes for purchase or
redemption as follows:
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(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
(2) 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.
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
purchased or redeemed at its registered address. Notices of purchase or
redemption may not be conditional.
If any Note is to be purchased or redeemed in part only, the notice of
redemption that relates to that 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 the original Note will be issued in
the name of the Holder thereof upon cancellation of the original Note. Notes
called for purchase or redemption become due on the date fixed for purchase or
redemption. On and after the purchase or redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
NOTE GUARANTEES
The Guarantors will jointly and severally guarantee the Company's
obligations under the Notes. Each Note Guarantee will be subordinated to the
prior payment in full of all Senior Indebtedness of that Guarantor. The
obligations of each Guarantor under its Note Guarantee will be limited as
necessary to prevent that Note Guarantee from constituting a fraudulent
conveyance under applicable law. See "Risk Factors--Under specific
circumstances, the Notes and Guarantees may be voided."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than the Company or
another Guarantor, unless subject to the provisions of the following paragraph
and certain other provisions of the Indenture:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) in the case of any Guarantor other than Holding, the Person acquiring
the property in such sale or disposition or the Person formed by or
surviving any such consolidation or merger 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 first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock."
The Note Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (other than
Holding), by way of merger or consolidation or otherwise, to a Person
that is not (either before or after giving effect to such transaction)
a Subsidiary of the Company, if the Guarantor applies the Net Proceeds
of that sale or other disposition in accordance with the "Asset Sale"
provisions of the Indenture;
(2) in connection with the sale or other disposition of all of the Capital
Stock of any Guarantor to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of the Company, if the
Company applies the Net Proceeds of that sale or other disposition in
accordance with the "Asset Sale" provisions of the Indenture; or
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(3) if the Company properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in accordance with the
provisions described below under "--Certain Covenants--Designation of
Restricted Subsidiaries and Unrestricted Subsidiaries."
See "--Repurchase at the Option of Holders--Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, including
Senior Indebtedness of the Company incurred after the date of the Indenture.
The holders of Senior Indebtedness of the Company will be entitled to
receive payment in full of all Obligations due in respect of Senior Indebtedness
(including interest after the commencement of any bankruptcy 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 (except that Holders
of Notes may receive and retain Permitted Junior Securities and payments made
from the trust described under "--Legal Defeasance and Covenant Defeasance"), in
the event of any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the Notes (except
in Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance") if:
(1) a default in the payment, when due, whether upon acceleration or
otherwise, of the principal, premium, if any, or interest on any
Senior Indebtedness of the Company occurs and is continuing; or
(2) any other default occurs and is continuing on any series of 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 Designated Senior Indebtedness.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) 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.
If the Trustee or any Holder of the Notes receives a payment in respect of
the Notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
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(2) the Trustee or the Holder has actual knowledge that the payment is
prohibited;
the Trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Indebtedness. Upon the proper written
request of the holders of Senior Indebtedness, the Trustee or the Holder, as the
case may be, shall deliver the amounts in trust to the holders of Senior
Indebtedness or their proper representative.
The Company must 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 a bankruptcy, liquidation or reorganization 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. See "Risk Factors."
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.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution on account of the
Company's or any of its Restricted 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 Restricted Subsidiary of the Company that
is a Guarantor);
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Restricted Subsidiary or other
Affiliate of the Company (other than any such Equity Interests owned
by the Company or any Wholly Owned Restricted Subsidiary of the
Company that is a Guarantor);
(3) purchase, redeem or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or the Note Guarantees,
except a payment of interest or principal at the Stated Maturity
(other than intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries that is a Guarantor);
(4) directly or indirectly make any loan or advance to, or make any other
payment to, Holding; or
(5) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (5) above being collectively referred
to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) 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
described below under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock;" and
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(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (2), (3), (5), (6) and (7) of the next
succeeding paragraph), is less than the sum, without duplication, of:
(a) 50% 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 commencing after the date of the Indenture 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, less 100% of such deficit); PLUS
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or
sale of convertible or exchangeable Disqualified Stock or
convertible or exchangeable debt securities of the Company that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of the Company); PLUS
(c) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (i) the cash return of capital
with respect to such Restricted Investment (less the cost of
disposition, if any) and (ii) the initial amount of such
Restricted Investment.
The preceding provisions will not prohibit:
(1) 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;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Guarantor or of any Equity Interests of the Company in exchange for,
or out of the net cash proceeds of, the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of other Equity
Interests of the Company (other than Disqualified Stock); PROVIDED
that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (3) (b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor in a
Permitted Refinancing;
(4) 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;
(5) a Restricted Payment to Holding to pay its operating and
administrative expenses including, without limitation, directors fees,
legal and audit expenses, Commission compliance expenses and corporate
franchise and other taxes, in an aggregate amount not to exceed
$500,000 in any fiscal year;
(6) a Restricted Payment to Holding to pay management fees in an aggregate
amount not to exceed $750,000 in any fiscal year of the Company;
(7) the payment of any dividend by a Restricted Subsidiary of the Company
to the holders of its common Equity Interests on a pro rata basis;
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(8) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Holding from any current or former
employee of Holding, the Company or any Subsidiary of the Company;
PROVIDED, HOWEVER, that (a) the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $1.0 million in any fiscal year, net of cash proceeds received
from the sale of Equity Interests to employees and (b) no Default or
Event of Default shall have occurred and be continuing immediately
after such transaction;
(9) Investments by the Company in joint ventures or similar projects in a
business similar to that conducted by the Company and its Restricted
Subsidiaries on the date of the Indenture in an aggregate amount not
to exceed $5.0 million;
(10)a Restricted Payment to Holding to pay cash interest payments on
Holding's 12 1/2% Senior Secured Notes due 2006 and on any Refinancing
Indebtedness incurred to refund, refinance or replace Holding's 12
1/2% Senior Secured Notes due 2006 in a Permitted Refinancing; and
(11)other Restricted Payments in an aggregate amount not to exceed $5.0
million since the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or its Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee if the fair market value
exceeds $1.0 million. The Board of Directors' determination must be based upon
an opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if the fair market value exceeds $5.0 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 Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to (collectively, "incur" and
correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt),
and 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 (including Acquired Debt) or issue
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 pro forma 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
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and its Restricted Subsidiaries of term
Indebtedness, revolving credit Indebtedness and letters of credit
under the Credit Facility in an aggregate principal amount at any one
time outstanding under this clause (1) not to exceed the greater of:
(a) $150.0 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 Net Proceeds of Asset Sales that have been applied by the
Company or any of its Restricted Subsidiaries since the date of
the Indenture to repay any term Indebtedness under a
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Credit Facility pursuant to the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" and
(b) the Borrowing Base;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the related Note Guarantees to be issued
on the date of the Indenture and the New Notes and the related Note
Guarantees to be issued pursuant to the Registration Rights Agreement;
(4) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in
the business of the Company or such Restricted Subsidiary, in an
aggregate principal amount, including all Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (4) in a Permitted Refinancing, not to exceed
$10.0 million at any time outstanding;
(5) the incurrence by the Company or any of its Restricted Subsidiaries of
Refinancing Indebtedness; PROVIDED, HOWEVER, that such Refinancing
Indebtedness is a Permitted Refinancing;
(6) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries that is a Guarantor; PROVIDED,
HOWEVER, that:
(a) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect
to the Notes, in the case of the Company, or the Note Guarantee,
in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary that is
a Guarantor thereof; shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted
by this clause (6);
(7) the incurrence by the Company of Indebtedness between the Company and
Holding; PROVIDED that the advances evidenced by such Indebtedness are
permitted under the covenant described above under the caption
"--Restricted Payments;"
(8) the incurrence by the Company or any of its Restricted Subsidiaries of
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
(9) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
(10)the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; PROVIDED, HOWEVER, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company that was not permitted by this
clause (10).
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(11)the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment
of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; PROVIDED, in each such case, that the
amount thereof is included in Fixed Charges of the Company as accrued;
and
(12)the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount, including
all Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (12) in a Permitted
Refinancing, not to exceed the sum of $25.0 million at any time
outstanding.
The Company will not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of the Company unless such Indebtedness is also contractually subordinated in
right of payment to the Notes on substantially identical terms; PROVIDED,
HOWEVER, that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Disqualified Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (12) above, or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company will be
permitted to classify such item of Indebtedness on the date of its incurrence,
or later reclassify all or a portion of such item of Indebtedness, in any manner
that complies with this covenant.
LIENS
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any Lien of any
kind securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits,
or pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reasons of:
(1) Existing Indebtedness as in effect on the date of the Indenture 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 such Existing Indebtedness, as in
effect on the date of the Indenture;
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(2) the 1994 Indenture, the 1994 Notes and the guarantees thereof, the
1998 Indenture and the 1998 Notes and the guarantees thereof;
(3) the Indenture, the Notes and the Note Guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired,
PROVIDED that the Consolidated Cash Flow of such Person, to the extent
of such restriction, is not taken into account in determining whether
such acquisition was permitted by the terms of the Indenture;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding
paragraph; and
(8) Refinancing Indebtedness that is a Permitted Refinancing, 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 Company may not: (1) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation); or (2) sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its Subsidiaries taken as a whole, in
one or more related transactions, to another Person; unless:
(1) the Company is the surviving corporation; or the 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;
(2) 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 agreements
reasonably satisfactory to the Trustee, under the Notes, the Indenture
and the Registration Rights Agreement;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) 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 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 first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock."
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TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted
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, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with a Person who was not an Affiliate; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate
payments in excess of $2.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with this covenant and that
such Affiliate Transaction is approved by a majority of the Board
of Directors; and
(b) with respect to any Affiliate Transaction involving aggregate
payments in excess of $5.0 million, an opinion as to the fairness
to the Holders from a financial point of view issued by an
accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted
Subsidiary;
(2) transactions between or among Holding, the Company and/or its
Restricted Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company;
(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments;"
and
(5) the payment of annual fees and expenses to First Atlantic (PROVIDED
that such payment is permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments").
NO SENIOR SUBORDINATED INDEBTEDNESS
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 of the Company and senior in any respect in
right of payment to the Notes. 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 NOTE GUARANTEES
If the Company or any of its Subsidiaries transfers or causes 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 by the provisions of the covenant described above under the caption
"--Restricted Payments," any assets, businesses, divisions, real property or
equipment having a book value in excess of $1.0 million to any Subsidiary that
is not a Guarantor or if the Company or any of its Subsidiaries shall acquire
another Domestic Restricted Subsidiary having (a) total assets with a book value
in excess of $1.0 million or (b) Consolidated Cash Flow in excess of $1.0
million,
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then such transferee or acquired Subsidiary (if other than a Subsidiary that has
been properly designated as an Unrestricted Subsidiary in accordance with the
terms of the Indenture) 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.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of the covenant
described above under the caption "--Restricted Payments" or Permitted
Investments, as applicable. That designation will only be permitted if such
Restricted Payment would be permitted at that time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if the redesignation would not cause a Default.
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, within the time periods specified in the Commission's
rules and regulations 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 on the annual financial
statements 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 within the time periods specified in the
Commission's rules and regulations (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. In
addition, the Company and the Guarantors have agreed that, for so long as any
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraphs shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes thereto, and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) 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;
(2) 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;
(3) failure by the Company to comply with the provisions described under
the captions "--Repurchase at the Option of Holders--Change of
Control," "--Repurchase at the Option of Holders--Asset Sales,"
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"--Certain Covenants--Restricted Payments" and "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock;"
(4) failure by the Company or the Guarantors for 60 days after notice to
comply with any of the other agreements in the Indenture or the Notes;
(5) 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 date of the Indenture, if that default:
(a) is caused by a failure to pay principal of, 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 $2.0 million or more;
(6) failure by the Company, Holding or any of their respective
Subsidiaries to pay final judgments aggregating in excess of $2.0
million, which judgments are not paid, discharged or stayed for a
period of 60 days;
(7) 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
(8) certain events of bankruptcy or insolvency with respect to the
Company, Holding or any of their respective Subsidiaries.
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
immediately without further action or notice. If any other 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.
Under certain circumstances, the Holders of at least a majority in
aggregate principal amount of the outstanding Notes may rescind any acceleration
with respect to the Notes and its consequences. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest or Liquidated Damages) if it determines
that withholding notice is in their interest.
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 or Liquidated Damages on, or the principal of, any
Note held by a non-consenting Holder.
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In the case of any Event of Default occurring 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 July 15, 2003,
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 July 15, 2003, 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 Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required 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
Indenture, the Notes Guarantees 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. The waiver may not be effective to waive liabilities under
the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Note Guarantees ("Legal
Defeasance") except for:
(1) 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;
(2) 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;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's and the Guarantors' obligations in connection therewith;
and
(4) 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 those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including nonpayment, 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:
(1) 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
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the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, of such principal or
installment of principal of, or premium, if any, interest or
Liquidated Damages, if any on the outstanding Notes;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, 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;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel 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;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or 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 (b) 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;
(5) such Legal Defeasance or Covenant Defeasance will 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;
(6) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that, assuming no intervening bankruptcy of the Company
or any Guarantor between the date of deposit and the day on which all
applicable preferences have run and assuming that no Holder is an
"insider" of the Company under applicable bankruptcy law, after the
day on which all applicable preferences 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;
(7) 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
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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).
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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):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) 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;
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) 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);
(5) make any Note payable in money other than that stated in the Notes;
(6) 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;
(7) waive a redemption payment with respect to any Note;
(8) make any change to the subordination provisions of the Indenture that
adversely affects Holders;
(9) release any Guarantor from any of its obligations under its Note
Guarantee or the Indenture, except in accordance with the terms of the
Indenture or change any Note Guarantee in any manner that would
adversely affect Holders; or
(10) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of the Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's
assets;
(4) 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 provisions described above
under the caption "--Certain Covenants--Additional Note Guarantees")
or that does not adversely affect the legal rights under the Indenture
of any such Holder;
(5) to provide for the issuance of Additional Notes in accordance with the
provisions of the Indenture; or
(6) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
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CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of the Company, the Guarantors or any
Affiliate of the Company or the Guarantors, the Indenture limits its right 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 and be continuing, 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.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Berry Plastics
Corporation, 101 Oakley Street, Evansville, Indiana 47710, Attention: Corporate
Secretary.
BOOK-ENTRY; DELIVERY AND FORM
The New Notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest
coupons (the "Global Notes") that will be deposited with, or on behalf of,
Depository Trust Company ("DTC") and registered in the name of DTC or its
nominee, on behalf of the acquirers of New Notes represented thereby for credit
to the respective accounts of the acquirers, or to such other accounts as they
may direct, at DTC, or Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System ("Euroclear"), or Cedel Bank,
societe anonyme ("Cedel"). See "The Exchange Offer--Book Entry Transfer".
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, solely 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 physical, certificated form except in the limited circumstances
described below.
All interests in the Global Notes, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the procedures
and requirements of such systems.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. 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 Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other
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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:
o upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes; and
o ownership of these 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 interest in the Global Notes).
Investors in the Rule 144A Global Notes who are Participants in DTC's
system may hold their interests therein directly through DTC. Investors in the
Rule 144A Global Notes who are not Participants may hold their interests therein
indirectly through organizations (including Euroclear and Cedel) which are
Participants in such system. Investors in the Regulation S Global Notes must
initially hold their interests therein through Euroclear or Cedel, if they are
participants in such systems, or indirectly through organizations that are
participants in such systems. After the expiration of the Restricted Period (but
not earlier), investors may also hold interests in the Regulation S Global Notes
through Participants in the DTC system other than Euroclear and Cedel. Euroclear
and Cedel will hold interests in the Regulation S Global Notes on behalf of
their participants through customers' securities accounts in their respective
names on the books of their respective depositories, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of Cedel. All interests in a Global Note, including
those held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also be
subject to the procedures and requirements of such systems. 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, the ability of a Person having beneficial interests in
a Global Note to pledge such interests to Persons 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 interest and premium and
Liquidated Damages, if any, 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
payments and for all other purposes. Consequently, neither the Company, the
Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for:
(1) 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
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
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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 unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. 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.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or Cedel,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
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.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Rule 144A Global Notes and the
Regulation S Global Notes among participants in DTC, Euroclear and Cedel, they
are under no obligation to perform or to continue to perform such procedures,
and may discontinue such procedures at any time. Neither the Company nor the
Trustee nor any of their respective agents will have any responsibility for the
performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company fails to
appoint a successor depositary or (b) has ceased to be a clearing
agency registered under the Exchange Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Notes.
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In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes 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 in Global
Notes 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).
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The following description is a summary of the material provisions of the
Registration Rights Agreement. It does not restate that agreement in its
entirety. We urge you to read the proposed form of Registration Rights Agreement
in its entirety because it, and not this description, defines your registration
rights as Holders of these Notes. See "--Additional Information."
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on July 6, 1999. Pursuant to the Registration
Rights Agreement, the Company and the Guarantors agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the New Notes. Upon the effectiveness
of the Exchange Offer Registration Statement, the Company and the Guarantors
will offer to the holders of Transfer Restricted Securities pursuant to the
Exchange Offer who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for New Notes.
If:
(1) the Company and the Guarantors are not
(a) required to file the Exchange Offer Registration Statement; or
(b) permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy; or
(2) any holder of Transfer Restricted Securities notifies the Company
prior to the 20th day following consummation of the Exchange Offer
that:
(a) it is prohibited by law or Commission policy from participating in
the Exchange Offer; or
(b) that it may not resell the New Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales; or
(c) that it is a broker-dealer and owns Notes acquired directly from
the Company or an affiliate of the Company,
the Company and the Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Notes by the holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement.
The Company and the Guarantors will use their best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Note (together with any Note Guarantees) until:
(1) the date on which such Note has been exchanged by a Person other than
a broker-dealer for a New Note in the Exchange Offer;
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(2) following the exchange by a broker-dealer in the Exchange Offer of a
Note for an 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 the prospectus contained in the Exchange Offer
Registration Statement;
(3) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf
Registration Statement; or
(4) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The Registration Rights Agreement will provide:
(1) the Company and the Guarantors will file an Exchange Offer
Registration Statement with the Commission on or prior to 45 days
after the date of the Indenture;
(2) the Company and the Guarantors will use their best efforts to have the
Exchange Offer Registration Statement declared effective by the
Commission on or prior to 210 days after the date of the Indenture;
(3) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company and the Guarantors will
(a) commence the Exchange Offer; and
(b) use their best efforts to issue on or prior to 30 business days,
or longer, if required by the Federal securities laws, after the
date on which the Exchange Offer Registration Statement was
declared effective by the Commission, New Notes in exchange for
all Notes tendered prior thereto in the Exchange Offer; and
(4) if obligated to file the Shelf Registration Statement, the Company and
the Guarantors will use their best efforts to file the Shelf
Registration Statement with the Commission on or prior to 45 days
after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to
90 days after such obligation arises.
If:
(1) the Company and the Guarantors fail to file any of the registration
statements required by the Registration Rights Agreement on or before
the date specified for such filing; or
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"); or
(3) the Company and the Guarantors fail to consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect
to the Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer 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 (1) through (4) above, a
"Registration Default"),
then the Company and the Guarantors will pay Liquidated Damages to each Holder
of 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 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 Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to
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a maximum amount of Liquidated Damages for all Registration Defaults of $.50 per
week per $1,000 principal amount of Notes.
All accrued Liquidated Damages will be paid by the Company and the
Guarantors on each Damages Payment Date to the Global Note Holder by wire
transfer of immediately available funds or by Federal funds check and to Holders
of Certificated Notes 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 Notes will be required to make certain representations to the
Company and the Guarantors (as described in the Registration Rights Agreement)
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 Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above. By acquiring Transfer
Restricted Securities, a Holder will be deemed to have agreed to indemnify the
Company and the Guarantors against certain losses arising out of information
furnished by such Holder in writing for inclusion in any Shelf Registration
Statement.
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:
(1) Indebtedness of any other Person existing at the time such other
Person merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection
with, or in contemplation of, such other Person merging with or into
or becoming a Subsidiary of such specified Person; and
(2) 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,"
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. For
purposes of this definition, the terms "controlling," "controlled by" and "under
common control with" shall have correlative meanings. Neither Chase Venture
Capital Associates, L.P., nor its Affiliates will be deemed an Affiliate of
Holding, the Company or any of its Subsidiaries for purposes of this definition
by reason of its direct or indirect beneficial ownership of 30% or less of the
voting Common Stock of Holding or by reason of any employee thereof being
appointed to the Board of Directors of Holding.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any property or
assets of the Company or any Restricted Subsidiary, including by way
of a sale-and-leaseback, other than sales of inventory in the ordinary
course of business; PROVIDED that the sale, conveyance or other
disposition of all or substantially all of the assets of the Company
and its Restricted Subsidiaries will be governed by the provisions of
the Indenture described above under the caption "--Repurchase at the
Option of Holders--Change of Control" and/or the provisions described
above under the caption "--Certain Covenants--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant;
or
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(2) the issuance or sale of Equity Interests of any of the Company's
Restricted Subsidiaries,
in the case of either clause (1) or (2) above, whether in a single transaction
or a series of related transactions.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value equal to or less than $1.0 million
or for Net Proceeds equal to or less than $1.0 million;
(2) a transfer of assets between or among the Company and its Wholly Owned
Restricted Subsidiaries,
(3) any Restricted Payment, dividend or purchase or retirement of Equity
Interests that is permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments;"
(4) the issuance or sale of Equity Interests of any Restricted Subsidiary
of the Company; PROVIDED that such Equity Interests are issued or sold
in consideration for the acquisition of assets by such Restricted
Subsidiary or in connection with a merger or consolidation of another
Person into such Restricted Subsidiary;
(5) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business; and
(6) the sale or other disposition of cash or Cash Equivalents.
"BOARD OF DIRECTORS" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"BORROWING BASE" means, as of any date, an amount equal to:
(1) 85% of the face amount of all accounts receivable owned by the Company
and its Subsidiaries as of such date that were not more than 90 days
past due; PLUS
(2) 65% of the book value (calculated on a first in first out 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 that 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:
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(1) United States dollars;
(2) 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;
(3) 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 $500.0 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above; and
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in
each case maturing within six months after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) 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 those terms are used
in Section 13(d)(3) of the Exchange Act) other than the Principal and
his Related Parties;
(2) the adoption of a plan relating to the liquidation or dissolution of
Holding or the Company;
(3) the acquisition by any "person" or "group" (as defined above), other
than by the Principal and his Related Parties, of a direct or indirect
interest in more than 35% of the voting power of the voting stock of
Holding by way of purchase, merger or consolidation or otherwise if:
(a) such person or group (as defined above), other than the Principal
and his Related Parties, owns, directly or indirectly, more of the
voting power of the voting stock of Holding than the Principal and
his Related Parties; and
(b) such acquisition occurs prior to an Initial Public Offering;
(4) 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 an Initial Public Offering; or
(5) the first day on which a majority of the members of the Board of
Directors of Holding are not Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period PLUS:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Restricted Subsidiaries in connection
with an Asset Sale, to the extent such losses were deducted in
computing Consolidated Net Income; PLUS
(2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent such provision
for taxes was included in computing Consolidated Net Income; PLUS
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(3) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period to the extent such expense was deducted
in computing Consolidated Net Income; PLUS
(4) Consolidated Depreciation and Amortization Expense of such Person and
its Restricted Subsidiaries for such period to the extent such expense
was deducted in computing Consolidated Net Income; PLUS
(5) other non-cash charges (including, without limitation, repricing of
stock options, to the extent deducted in computing Consolidated Net
Income; but excluding any non-cash charge that requires an accrual or
reserve for cash expenditures in future periods or which involved a
cash expenditure in a prior period), in each case, on a consolidated
basis and determined in accordance with GAAP.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect
to any Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) of such
Person for such period on a consolidated basis as determined in accordance with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of:
(1) consolidated interest expense of such Person and its Restricted
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);
(2) commissions, discounts and other fees and charges paid or accrued with
respect to letters of credit and bankers' acceptance financing; and
(3) interest for such period whether or not paid by such Person or its
Restricted Subsidiaries under a Guarantee of Indebtedness of any other
Person.
"CONSOLIDATED NET INCOME" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that:
(1) the Net Income of any Person that is not a Restricted 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 specified Person or a Guarantor;
(2) the Net Income of any Person that is a Restricted Subsidiary (other
than a Wholly Owned Restricted Subsidiary) shall be included only to
the extent of the amount of dividends or distributions paid to the
specified Person or a Guarantor;
(3) 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;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded whether or not distributed to the specified Person or one of
its Subsidiaries.
"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 to the extent such
depreciation was deducted in computing Consolidated Net Income.
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"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of Holding who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) 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.
"CREDIT FACILITY" means the Second Amended and Restated Financing and
Security Agreement dated as of July 2, 1998 as amended through the date hereof,
by and among the Company, NIM Holdings, Norwich Injection Moulders, the
financial institutions party thereto and NationsBank, N.A., as collateral and
administrative agent, 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:
(1) the Senior Bank Indebtedness; and
(2) any other Senior Indebtedness permitted to be incurred under the
Indenture the principal amount of which is $15.0 million or more and
that has been 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 the date
that is 91 days after the date on which the Notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an
asset sale shall not constitute Disqualified Stock if the terms of such Capital
Stock provide that the Company may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption complies
with the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that was
formed under the laws of the United States or any state thereof or the District
of Columbia or that guarantees or otherwise provides direct credit support for
any Indebtedness of the Company.
"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 Indebtedness under the Credit Facility) in existence on
the date of the Indenture, until such amounts are repaid.
"FIRST ATLANTIC" means First Atlantic Capital, Ltd.
"FIXED CHARGES" means, with respect to any specified Person for any
period, the sum, without duplication, of:
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(1) the Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent
such expense was deducted in computing Consolidated Net Income; PLUS
(2) the product of (a) all cash dividend payments and noncash dividend
payments in the form of securities (other than Disqualified Stock) on
any series of preferred stock of such Person and its Restricted
Subsidiaries, times (b) except to the extent such dividend payments
are deemed tax deductible, 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 and its
Restricted Subsidiaries, 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 specified 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 specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than
revolving credit borrowings) or issues, repurchases or redeems 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, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.
For purposes of calculating the Fixed Charge Coverage Ratio, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by the specified Person or any of its Restricted
Subsidiaries, including all mergers and consolidations and including any related
financing transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date shall be given
pro forma effect as if they (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 date of the Indenture.
"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, through letters of credit
and reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"GUARANTORS" means each of:
(1) each Domestic Restricted Subsidiary of the Company;
(2) NIM Holdings Limited and Norwich Injection Moulders Limited; and
(3) any other Restricted Subsidiary 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 specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
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(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) representing Capital Lease Obligations;
(4) in respect of the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued
expense or trade payable; or
(5) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes the Guarantee by the specified Person of any
indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"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.
"INVESTMENTS" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees), advances or capital contributions (excluding
commission, travel and similar advances to officers, directors, consultants and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments." The acquisition by the Company or any Restricted Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the fair market value of the Investment held by the
acquired Person in such third Person in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"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.
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"NET INCOME" means, with respect to any specified 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:
(1) 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
(2) 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 Restricted 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, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and 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 adjustment in respect of the sale price of such asset or assets.
"1998 INDENTURE" means the Indenture dated August 24, 1998 among the
Company, the Guarantors named therein and the Trustee, governing the 1998 Notes.
"1994 INDENTURE" means the Indenture dated April 21, 1994 among the
Company, the Guarantors named therein and the Trustee, governing the 1994 Notes.
"1998 NOTES" means the $25.0 million in principal amount of the Company's
12 1/4% Senior Subordinated Notes due 2004.
"1994 NOTES" means the $100.0 million in principal amount of the Company's
12 1/4% senior Subordinated Notes due 2004.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c) is
the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other than the Notes) of
the Company or any of its Restricted Subsidiaries to declare a default
on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means:
(1) any Investments in the Company or in a Wholly Owned Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
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(3) any Investment by the Company or any Subsidiary of the Company in a
Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales;"
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; and
(6) Hedging Obligations.
"PERMITTED JUNIOR SECURITIES" means:
(1) Equity Interests in the Company or any Guarantor; or
(2) debt securities that are subordinated to all Senior Indebtedness and
any debt securities issued in exchange for Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the
Notes and the Note Guarantees are subordinated to Senior Indebtedness
under the Indenture.
"PERMITTED LIENS" means:
(1) Liens of the Company and any Guarantor securing Senior Indebtedness
that was permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; PROVIDED that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with the Company or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, PROVIDED that
such Liens were in existence prior to the contemplation of such
acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant
entitled "--Certain Covenants--Incurrence of Indebtedness and
Disqualified Stock" covering only the assets acquired with such
Indebtedness;
(7) Liens existing on the date of the Indenture;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
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PROVIDED that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries; and
(10)Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $5.0 million at any one time outstanding.
"PERMITTED REFINANCING" means Refinancing Indebtedness if:
(1) the principal amount of Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premiums, accrued
interest and reasonable expenses incurred in connection therewith);
(2) the Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and 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;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
the Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and 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; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on 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, limited
liability company, government or any agency or political subdivision thereof or
any other entity.
"PRINCIPAL" means Roberto Buaron.
"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 the first paragraph of or in clauses (2),
(3), (4) and (12) of the second paragraph of the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock."
"RELATED PARTY" means with respect to the Principal:
(1) any spouse, sibling or descendant of the Principal, whether or not
such relationship arises from birth, adoption or marriage or despite
such relationship being dissolved by divorce; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding a controlling interest of which consist of the Principal
and/or such other Persons referred to in the immediately preceding
clause (1).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
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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:
(1) the Senior Bank Indebtedness;
(2) 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; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include:
(1) any liability for Federal, state, local or other taxes owed or owing
by the Company or a Guarantor, as the case may be;
(2) 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;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"STOCK EXCHANGE" means the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market.
"SUBSIDIARY" means, with respect to any specified Person:
(1) 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; and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more
Subsidiaries of such Person or any combination thereof.
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, as in
effect on the date of the Indenture, between the Company and Holding.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
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(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless
the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its Board of Directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Disqualified Stock," the Company shall be in default of such
covenant. The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) 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 (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the due
date of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a
Restricted 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
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary prepared by O'Sullivan Graev & Karabell, LLP,
special counsel to Berry Plastics ("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.
Subject to the qualifications, limitations, and factual assumptions set forth
herein, the following constitutes the opinion of Special Counsel, with respect
to the material Federal income tax considerations relevant to the exchange of
outstanding notes for exchange notes pursuant to the exchange offer and to the
ownership of the notes (other than with respect to those matters stated to be as
to the belief of Berry Plastics). 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 (other than with respect to those matters stated to
be as to the belief of Berry Plastics). This summary deals only with holders
that will hold notes as "capital assets" (within the meaning of Section 1221 of
the Code). As used herein, "U.S. holder" means (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
(or certain trusts in existence on August 20, 1996, which have elected to
continue to be treated as United States persons). As used herein, "Non - U.S.
holder" means any holder that is not a U.S. holder. 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 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.
U.S. HOLDERS
EXCHANGE OF OUTSTANDING NOTES FOR EXCHANGE NOTES
The exchange of outstanding notes for exchange notes pursuant to the
exchange offer will not be considered a taxable exchange for Federal income tax
purposes because the exchange notes will not constitute a material modification
of the terms of the outstanding notes. Accordingly, such exchange will have no
Federal income tax consequences to holders of outstanding notes, and a holder's
adjusted tax basis and holding period in an exchange note will be the same as
such holder's adjusted tax basis and holding period in the outstanding 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.
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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 Berry
Plastics's right to redeem the notes. Holders should consult their own tax
advisors with respect to the amortization of bond premium. Any such election
would apply to all bonds (other than bonds the interest on which is excludable
from gross income) held by the holder at the beginning of the first taxable year
to which the election applies or which thereafter are acquired by the holder,
and such election is irrevocable without the consent of the IRS.
OPTIONAL REDEMPTION OR REPAYMENT
The notes will not have original issue discount ("OID") because they were
issued at par. 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 Berry Plastics
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, Berry Plastics 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 Berry Plastics will be deemed to exercise its option to redeem the notes in
a manner that minimizes the yield on the notes. Berry Plastics may redeem the
notes in certain circumstances, pursuant to the terms of the notes. See
"Description of the Notes -- Optional Redemption." Berry Plastics believes that
its option to redeem would not be deemed exercised for the purposes of the
Treasury Regulations concerning OID at certain dates because any such deemed
exercise would not minimize the yield on the notes.
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
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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 (1) 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 (2) 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.
NON-U.S. HOLDERS
PAYMENT OF INTEREST
A Non-U.S. holder will not be subject to United States Federal income tax
by withholding or otherwise on payments of interest on a note (provided that the
beneficial owner of the note fulfills the statement requirements set forth in
applicable Treasury Regulations) unless (A) such Non-U.S. holder (i) actually or
constructively owns 10% or more of the total combined voting power of all
classes of stock of Berry Plastics entitled to vote, (ii) is a controlled
foreign corporation related, directly or indirectly, to Berry Plastics through
stock ownership, or (iii) is a bank receiving interest described in Section
881(c)(3)(A) of the Code or (B) such interest is effectively connected with the
conduct of a trade or business by the Non-U.S. holder in the United States.
If a Non-U.S. holder does not claim, or does not qualify for, the benefit
of the exemption from taxation described above, such Non-U.S. holder may be
subject to a 30% withholding tax on interest payments made on the notes.
However, such Non-U.S. holder may be able to claim the benefit of:
o a reduced withholding tax rate under an applicable income tax
treaty.
GAIN ON DISPOSITION OF THE NOTES
A Non-U.S. holder will not be subject to United States Federal income tax
by withholding or otherwise on any gain realized upon the disposition of a note
unless:
o in the case of a Non-U.S. holder who is an individual, such Non-U.S.
holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the
disposition and certain other requirements are met, or
o the gain is effectively connected with the conduct of a trade or
business by the Non-U.S. holder in the United States.
EFFECTIVELY CONNECTED INCOME
To the extent that interest income or gain on the disposition of a note is
effectively connected with the conduct of a trade or business of the Non-U.S.
holder in the United States, such income will be subject to United States
Federal income tax on a net income basis in the same manner as if such holder
were a United States person. Additionally, in the case of a Non-U.S. holder that
is a corporation, such effectively connected income may be subject to the United
States branch profits tax at the rate of 30%.
112
<PAGE>
TREATIES
A tax treaty between the United States and a country in which a Non-U.S.
holder is a resident may alter the tax consequences described above.
LIQUIDATED DAMAGES
Berry Plastics 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.
Generally, such information reporting and backup withholding may apply to
payments of principal, interest and premium (if any) to Non-U.S. holders that
are not exempt recipients and which fail to provide certain information as may
be required by United States law and applicable regulations. The payment of the
proceeds of the disposition of notes to or through the United States office of a
broker will be subject to information reporting and backup withholding at a rate
of 31% unless the owner certifies its status as a Non-U.S. holder under
penalties of perjury or otherwise establishes an exemption.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situation and
the availability of an exemption therefrom, and the procedures for obtaining any
such exemption.
The United States Department of the Treasury has promulgated final
regulations regarding the information reporting and backup reporting rules
discussed above. In general, the final regulations do not significantly alter
the substantive information reporting and backup withholding requirements but
rather unify current certification procedures and forms and clarify reliance
standards. In addition, the final regulations permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The final regulations are generally effective for
payments made on or after January 1, 2001, subject to certain transition rules.
Prospective purchasers of notes should consult their own tax advisors concerning
the effect of such regulations on their particular situations.
113
<PAGE>
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 exchange notes
issued pursuant to the exchange offer in exchange for outstanding 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 Plastics 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 exchange 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 exchange notes and neither such holder nor any such
other person is engaging in or intends to engage in a distribution of such
exchange notes. Accordingly, any holder who is an affiliate of Berry Plastics or
any holder using the exchange offer to participate in a distribution of the
exchange 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 exchange 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 exchange 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 exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities (other than
outstanding notes acquired directly from Berry Plastics). Berry Plastics 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 March ___, 2000 (90 days from the date of this prospectus), all
dealers effecting transactions in the exchange notes may be required to deliver
a prospectus.
Berry Plastics will not receive any proceeds from any sale of exchange
notes by broker-dealers. Exchange 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 outstanding 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 exchange notes. Any
broker-dealer that resells exchange 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 exchange notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
exchange 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 Plastics
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 Plastics 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 Plastics and the guarantors have agreed to indemnify the Initial
Purchasers 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 the initial purchasers in connection with offers and
sales related to market-making transactions in the Notes. The initial purchasers
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 Plastics
will not receive any of the proceeds of such sales. The initial purchasers have
no obligation to make a market in the notes and may discontinue their
market-making activities at any time without notice, at their sole discretion.
We have agreed to indemnify the initial purchasers against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
which the initial purchasers might be required to make in respect thereof.
114
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with this offering and the exchange
notes will be passed upon for us by O'Sullivan Graev & Karabell, LLP, New York,
New York. Lawrence G. Graev, one of our directors, is the Chairman of O'Sullivan
Graev & Karabell, LLP. See "Certain Transactions--Legal Services."
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 Injection Moulders
Limited 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.
115
<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
Consolidated Balance Sheets at October 2, 1999 and January 2, 1999 ..................... F-22
Consolidated Statements of Operations for the Thirteen and Thirty-Nine
Weeks ended October 2, 1999 and September 26, 1998 ................................... F-24
Consolidated Statements of Cash Flows for the Thirty-Nine Weeks ended
October 2, 1999 and September 26, 1998 ............................................... F-25
Notes to Consolidated Financial Statements ............................................. F-26
CPI HOLDING, INC. AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors ......................................................... F-31
Consolidated Balance Sheets at November 30, 1998 and 1997 .............................. F-32
Consolidated Statements of Income for the three years in the period
ended November 30, 1998 .............................................................. F-35
Consolidated Statements of Mandatorily Redeemable Preferred Stock and
Shareholders' Equity for the three years in the period ended November 30, 1998 ....... F-36
Consolidated Statements of Cash Flows for the three years in the
period ended November 30, 1998 ....................................................... F-39
Notes to Consolidated Financial Statements ............................................. F-40
CPI HOLDING, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet at May 31, 1999 ................................... F-48
Condensed Consolidated Statements of Operations for the 26 weeks
ended May 31, 1999 and 1998 .......................................................... F-50
Condensed Consolidated Statements of Cash Flows for the 26 weeks
ended May 31, 1999 and 1998 .......................................................... F-51
Notes to Condensed Consolidated Financial Statements ................................... F-52
KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors ......................................................... F-54
Balance Sheet at March 31, 1998 ........................................................ F-55
Statement of Operations for the year ended March 31, 1998 .............................. F-56
Statement of Cash Flows for the year ended March 31, 1998 .............................. F-57
Notes to Financial Statements .......................................................... F-58
KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC
UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Balance Sheet at September 30, 1998 .......................................... F-60
Condensed Statements of Operations for the six months ended
September 30, 1998 and 1997 .......................................................... F-61
Condensed Statements of Cash Flows for the six months ended
September 30, 1998 and 1997 .......................................................... F-62
Notes to Condensed Financial Statements ................................................ F-63
NORWICH INJECTION MOULDERS LIMITED AUDITED FINANCIAL STATEMENTS
Report of the Directors ................................................................ F-64
Report of Independent Auditors ......................................................... F-66
Profit and Loss Account for the three years in the period ended
October 31, 1997 ..................................................................... F-67
Balance Sheet at October 31, 1997, 1996, and 1995 ...................................... F-68
Cash Flow Statement for the three years in the period ended
October 31, 1997 ..................................................................... F-69
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Notes to the Accounts .................................................................. F-70
NORWICH INJECTION MOULDERS LIMITED UNAUDITED INTERIM FINANCIAL STATEMENTS
Profit and Loss Accounts for the 6 months ended April 30, 1998 and 1997 ................ F-83
Balance Sheet at April 30, 1998 ........................................................ F-84
Cash Flow Statements for the 6 months ended April 30, 1998 and 1997 .................... F-85
Notes to the Accounts .................................................................. F-86
</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
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 2, JANUARY 2,
1999 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................. $ 2,089 $ 2,318
Accounts receivable (less allowance for doubtful accounts
of $1,648 at October 2, 1999 and $1,651 at January 2, 1999) ...... 44,097 29,951
Inventories:
Finished goods ................................................... 27,185 23,146
Raw materials and supplies ....................................... 11,070 8,556
-------- --------
38,255 31,702
Prepaid expenses and other receivables ................................ 3,087 1,665
Income taxes recoverable .............................................. 45 577
-------- --------
Total current assets ...................................................... 87,573 66,213
Assets held in trust ...................................................... 267 6,679
Property and equipment:
Land .................................................................. 8,180 7,769
Buildings and improvements ............................................ 42,941 38,960
Machinery, equipment and tooling ...................................... 162,310 141,054
Automobiles and trucks ................................................ 1,448 1,386
Construction in progress .............................................. 28,979 11,780
-------- --------
243,858 200,949
Less accumulated depreciation ......................................... 96,357 80,944
-------- --------
147,501 120,005
Intangible assets:
Deferred financing and origination fees, net .......................... 12,192 10,327
Covenants not to compete, net ......................................... 3,446 4,404
Excess of cost over net assets acquired, net .......................... 84,932 44,536
Deferred acquisition costs ............................................ 84 20
-------- --------
100,654 59,287
Deferred income taxes ..................................................... 2,758 2,758
Other ..................................................................... 1,363 375
======== ========
Total assets .............................................................. $340,116 $255,317
======== ========
</TABLE>
F-22
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 2 JANUARY 2,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ....................................................... $ 19,028 $ 18,059
Accrued expenses and other liabilities ................................. 14,391 9,944
Accrued interest ....................................................... 13,238 4,166
Employee compensation and payroll taxes ................................ 15,885 8,953
Income taxes ........................................................... 892 941
Current portion of long-term debt ...................................... 17,546 19,388
--------- ---------
Total current liabilities .................................................. 80,980 61,451
Long-term debt, less current portion ....................................... 372,402 303,910
Accrued dividends on preferred stock ....................................... 10,222 7,225
Deferred income taxes ...................................................... 494 497
Other liabilities .......................................................... 1,872 2,591
--------- ---------
465,970 375,674
Stockholders' equity (deficit):
Series A Preferred Stock; 800,000 shares authorized;
600,000 shares issued and outstanding (net of
discount of $2,551 at October 2, 1999 and $2,770
at January 2, 1999) ............................................... 12,021 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 57,169 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;
1,443 shares Class B Nonvoting Common Stock; and
167 shares Class C Nonvoting Common Stock ......................... (296) (280)
Additional paid-in capital ............................................. 42,395 45,611
Warrants ............................................................... 3,511 3,511
Retained earnings (deficit) ............................................ (188,339) (185,923)
Accumulated other comprehensive loss ................................... (152) (83)
--------- ---------
Total stockholders' equity (deficit) ....................................... (125,854) (120,357)
========= =========
Total liabilities and stockholders' equity (deficit) ....................... $ 340,116 $ 255,317
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-23
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------- ---------------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1999 1998 1999 1998
------------ --------------- ------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales .......................................... $ 90,105 $ 68,800 $ 249,956 $ 205,116
Cost of goods sold ................................. 68,458 51,066 181,240 151,083
--------- --------- --------- ---------
Gross margin ....................................... 21,647 17,734 68,716 54,033
Operating expenses:
Selling ..................................... 4,630 3,769 13,183 10,881
General and administrative .................. 5,336 4,502 17,220 13,301
Research and development .................... 537 488 1,712 1,231
Amortization of intangibles ................. 2,432 776 4,981 2,483
Other ....................................... 1,224 877 2,890 3,240
--------- --------- --------- ---------
Operating income ................................... 7,488 7,322 28,730 22,897
Other income and expense:
Loss on disposal of property and
equipment ................................... 372 62 1,150 492
--------- --------- --------- ---------
Income before interest and income taxes ............ 7,116 7,260 27,580 22,405
Interest:
Expense ..................................... (11,516) (9,083) (29,539) (26,524)
Income ...................................... 41 259 204 833
--------- --------- --------- ---------
Loss before income taxes ........................... (4,359) (1,564) (1,755) (3,286)
Income tax expense ................................. 175 306 659 331
--------- --------- --------- ---------
Net loss ........................................... (4,534) (1,870) (2,414) (3,617)
Preferred stock dividends .......................... (1,034) (837) (2,996) (2,620)
Amortization of preferred stock discount ........... (73) (73) (219) (219)
========= ========= ========= =========
Net loss attributable to
common stockholders ......................... $ (5,641) $ (2,780) $ (5,629) $ (6,456)
========= ========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-24
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
---------------------------------
OCTOBER 2, SEPTEMBER 26,
1999 1998
------------ ---------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .............................................................. $ (2,414) $ (3,617)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation ................................................. 18,085 15,466
Non-cash interest expense .................................... 1,404 1,335
Amortization ................................................. 4,981 2,483
Interest funded by assets held in trust ...................... 6,413 6,617
Loss on sale of property and equipment ....................... 1,150 492
Changes in operating assets and liabilities:
Accounts receivable, net ................................ (7,079) (3,590)
Inventories ............................................. 706 3,492
Prepaid expenses and other receivables .................. (1,391) 316
Other assets ............................................ (4,757) 5,935
Payables and accrued expenses ........................... 15,299 (349)
-------- --------
Net cash provided by operating activities ............................. 32,397 28,580
INVESTING ACTIVITIES
Additions to property and equipment ................................... (25,580) (13,540)
Proceeds from disposal of property and equipment ...................... 455 4,452
Acquisitions of businesses ............................................ (71,293) (15,948)
-------- --------
Net cash used for investing activities ................................ (96,418) (25,036)
FINANCING ACTIVITIES
Proceeds from long-term borrowings .................................... 81,333 42,254
Payments on long-term borrowings ...................................... (14,520) (40,244)
Debt issuance costs ................................................... (3,000) (1,141)
Proceeds from issuance of common stock ................................ 56 80
Purchase of stock from management ..................................... (16) (59)
-------- --------
Net cash provided by (used for) financing activities .................. 63,853 890
-------- --------
Effect of exchange rate changes on cash ............................... (61) --
-------- --------
Net increase (decrease) in cash and cash equivalents .................. (229) 4,434
Cash and cash equivalents at beginning of period ...................... 2,318 2,688
-------- --------
Cash and cash equivalents at end of period ............................ $ 2,089 $ 7,122
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-25
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO 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 (collectively, 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"),
Knight Plastics, Inc., CPI Holding Corporation, Cardinal Packaging, Inc.,
Norwich Acquistion Limited, and Berry Plastics Acquisition Corporation. 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 in 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. 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 operations of Knight are
included in Berry's operations since the acquisition date using the purchase
method of accounting.
On July 6, 1999, Berry acquired all of the outstanding capital stock of
CPI Holding Corporation ("Cardinal"), the parent company of Cardinal Packaging,
Inc., for aggregate consideration of approximately $72.0 million. The purchase
price and allocation of such to the purchased assets and liabilities is
preliminary and subject to completion of Cardinal's working capital accounts.
The purchase was financed through the issuance by Berry of $75.0 million of 11%
Senior Subordinated Notes. The operations of Cardinal are included in Berry's
operations since the acquisition date using the purchase method of accounting.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Norwich Moulders, Knight, and Cardinal
acquisitions occurred on December 28, 1997.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------- ------------------------------------
SEPTEMBER 26, SEPTEMBER 26, OCTOBER 2,
1998 1998 1999
--------------------- --------------- --------------
<S> <C> <C> <C>
Net sales ........................... $ 88,940 $ 270,370 $ 278,422
Loss before income taxes ............ (3,436) (9,878) (5,262)
Net loss ............................ (3,742) (10,326) (5,921)
</TABLE>
F-26
<PAGE>
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.
3. LONG-TERM DEBT
Long-term debt consists of the following:
OCTOBER 2, JANUARY 2,
1999 1999
------------ ------------
Holding 12.50% Senior Secured Notes ........... $105,000 $105,000
Berry 12.25% Senior Subordinated Notes ........ 125,000 125,000
Berry 11% Senior Subordinated Notes ........... 75,000 --
Term loans .................................... 56,819 71,243
Revolving line of credit ...................... 22,768 16,162
Nevada Industrial Revenue Bonds ............... 4,000 4,500
Capital leases ................................ 640 561
Debt premium, net ............................. 721 832
-------- --------
389,948 323,298
Less current portion of long-term debt ........ 17,546 19,388
======== ========
$372,402 $303,910
======== ========
The current portion of long-term debt consists of $16.9 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.
On July 6, 1999, Berry completed an offering of $75.0 million aggregate
principal amount of 11% Series B Senior Subordinated Notes due 2007 (the "1999
Notes"). The net proceeds to Berry from the sale of the 1999 Notes, after
expenses, were $72.0 million. The proceeds from the 1999 Notes were used to
finance the Cardinal acquisition. The 1999 Notes mature on July 15, 2007 and
interest is payable semi-annually on January 15 and July 15 of each year.
Holding and all of Berry's subsidiaries fully, jointly, severally, and
unconditionally guarantee on a senior subordinated basis the 1999 Notes. There
are no nonguarantor subsidiaries.
The debt under Berry's credit facility is guaranteed by BPC Holding and
substantially all of its subsidiaries. As of October 2, 1999, the credit
facility provided an aggregate commitment of about $134.4 million including (i)
$70.0 million revolving line of credit, subject to a borrowing base formula;
(ii) (pound)1.5 million revolving line of credit, subject to a borrowing base
("UK Revolver"); (iii) $51.1 million term loan facility; (iv) (pound)3.4 million
term loan facility ("UK Term Loan"); and (v) $5.2 million standby letter of
credit facility to support Berry and its subsidiaries' obligations under its
Nevada Industrial Revenue Bonds. At October 2, 1999, Berry had unused borrowing
capacity under the credit facility's revolving line of credit of about $23.9
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 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 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 Berry Plastics 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%.
F-27
<PAGE>
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.
F-28
<PAGE>
4. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes financial information of Holding's wholly-owned
subsidiary, Berry Plastics Corporation, and its subsidiaries.
OCTOBER 2, JANUARY 2,
1999 1999
------------ ------------
CONSOLIDATED BALANCE SHEETS
Current assets ........................... $ 87,142 $ 65,590
Property and equipment - net of
accumulated depreciation ............... 147,501 120,005
Other noncurrent assets .................. 93,346 58,716
Current liabilities ...................... 76,223 60,210
Noncurrent liabilities ................... 269,765 210,093
Equity (deficit) ......................... (17,999) (25,992)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------------- --------------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1999 1998 1999 1998
----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales ....................................... $ 90,105 $ 68,800 $249,956 $205,116
Cost of goods sold .............................. 68,458 51,066 181,240 151,083
Income (loss) before income taxes ............... (749) 1,652 8,716 6,223
Net income (loss) ............................... (924) 1,346 8,064 5,892
</TABLE>
The following summarizes parent company only financial information of Berry:
<TABLE>
<CAPTION>
OCTOBER 2, JANUARY 2,
1999 1999
-------------- ------------
<S> <C> <C>
BALANCE SHEETS
Current assets .................................................. $ 36,350 $ 28,579
Property and equipment - net of accumulated depreciation ........ 51,458 48,220
Investment in/due from subsidiaries ............................. 185,151 120,230
Other noncurrent assets ......................................... 17,939 15,629
Current liabilities ............................................. 46,381 41,325
Noncurrent liabilities .......................................... 262,516 197,325
Equity (deficit) ................................................ (17,999) (25,992)
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1999 1998 1999 1998
------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales .................................... $ 40,415 $ 35,294 $116,623 $107,702
Cost of goods sold ........................... 28,033 23,001 76,675 70,055
Income before income taxes ................... 1,896 3,968 10,406 8,539
Net income ................................... 1,781 3,878 9,987 8,424
</TABLE>
F-29
<PAGE>
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 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 "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 THIRTY-NINE WEEKS ENDED
---------------------------- ----------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1999 1998 1999 1998
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales:
Plastic packaging products ....................................... $ 87,329 $ 65,273 $ 227,771 $ 186,168
Plastic housewares products ...................................... 2,776 3,527 22,185 18,948
Adjusted EBITDA:
Plastic packaging products ....................................... 17,496 14,611 51,411 41,782
Plastic housewares products ...................................... 414 125 4,155 3,020
Reconciliation of Adjusted EBITDA to loss before income taxes:
Adjusted EBITDA for reportable segments ......................... $ 17,910 $ 14,736 $ 55,566 $ 44,802
Net interest expense ............................................ (11,475) (8,824) (29,335) (25,691)
Depreciation .................................................... (6,525) (5,391) (18,085) (15,466)
Amortization .................................................... (2,432) (775) (4,981) (2,483)
Loss on disposal of property and
equipment .................................................... (372) (62) (1,150) (492)
One-time expenses ............................................... (1,224) (877) (2,890) (3,240)
Stock option market value adjustment ............................ (23) (152) (225) (62)
Management fees ................................................. (218) (219) (655) (654)
--------- --------- --------- ---------
Loss before income taxes ........................................ $ (4,359) $ (1,564) $ (1,755) $ (3,286)
</TABLE>
6. COMPREHENSIVE LOSS
Comprehensive loss was $4.6 million and $1.9 million for the thirteen weeks
ended October 2, 1999 and September 26, 1998, respectively, and $2.5 million and
$3.7 million for the thirty-nine weeks ended October 2, 1999 and September 26,
1998, respectively.
F-30
<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-31
<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-32
<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-33
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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-47
<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-48
<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-49
<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-50
<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-51
<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-52
<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-53
<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-54
<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-55
<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-56
<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-57
<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-58
<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-59
<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-60
<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-61
<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-62
<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-62
<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-64
<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-65
<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-66
<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-67
<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-68
<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-69
<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-70
<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-71
<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-72
<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-73
<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-74
<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-75
<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-76
<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>
F-77
<PAGE>
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.
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
========== ========== ========
F-78
<PAGE>
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>
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)
======== ======== ========
F-79
<PAGE>
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>
<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.
F-80
<PAGE>
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.
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
========== ========== ==========
F-81
<PAGE>
24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
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 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-82
<PAGE>
<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-83
<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-84
<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-85
<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-86
<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-87
<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-88
<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 ........................... ii
Summary of Prospectus ........................... 1
Risk Factors .................................... 12
Company History ................................. 20
The Exchange Offer .............................. 22
Capitalization .................................. 30
Pro Forma Condensed Consolidated
Financial Statements ......................... 31
Selected Historical Financial Data .............. 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................ 37
Business ........................................ 43
Management ...................................... 53
Principal Stockholders .......................... 60
Certain Transactions ............................ 62
Description of Certain Indebtedness ............. 66
Description of Notes ............................ 69
Material Federal Income Tax
Considerations ............................... 90
Plan of Distribution ............................ 94
Legal Matters ................................... 94
Experts ......................................... 95
Index to Financial Statements ................... F-1
$25,000,000
BERRY PLASTICS CORPORATION
12 1/4% SERIES C SENIOR SUBORDINATED NOTES
DUE 2004
-----------------
PROSPECTUS
-----------------
DECEMBER 2, 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 NIM Holdings and Norwich Acquisition), 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 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)
II-1
<PAGE>
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)
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
II-2
<PAGE>
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)
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 (filed as Exhibit
3.11 to the Registration Statement filed on Form S-4 (Registration
No. 333-64599) on December 29, 1998 and incorporated herein by
reference)
3.12 By-laws of Berry Sterling (filed as Exhibit 3.12 to the Registration
Statement filed on Form S-4 (Registration No. 333-64599) on December
29, 1998 and incorporated herein by reference)
3.13 Certificate of Incorporation of AeroCon (filed as Exhibit 3.13 to
the Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
II-3
<PAGE>
3.14 By-laws of AeroCon (filed as Exhibit 3.14 to the Registration
Statement filed on Form S-4 (Registration No. 333-64599) on December
29, 1998 and incorporated herein by reference)
3.15 Articles of Incorporation of PackerWare (filed as Exhibit 3.15 to
the Registration Statement filed on Form S-4 (Registration No.
333-64599) on November __, 1999)
3.16 By-laws of PackerWare (filed as Exhibit 3.16 to the Registration
Statement filed on Form S-4 (Registration No. 333-64599) on November
__, 1999)
3.17 Certificate of Incorporation of Berry Design (filed as Exhibit 3.17
to the Registration Statement filed on Form S-4 (Registration No.
337-64599) on December 29, 1998 and incorporated herein by
reference)
3.18 By-laws of Berry Design (filed as Exhibit 3.18 to the Registration
Statement filed on Form S-4 (Registration No. 333-64599) on December
29, 1998 and incorporated herein by reference)
3.19 Certificate of Incorporation of Venture Holdings (filed as Exhibit
3.19 to the Registration Statement filed on Form S-4 (Registration
No. 333-64599) on December 29, 1998 and incorporated herein by
reference)
3.20 By-laws of Venture Holdings (filed as Exhibit 3.20 to the
Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
3.21 Articles of Incorporation of Venture Midwest (filed as Exhibit 3.21
to the Registration Statement filed on Form S-4 (Registration No.
333-64599) on November __, 1999)
3.22 By-laws of Venture Midwest (filed as Exhibit 3.22 to the
Registration Statement filed on Form S-4 (Registration No.
333-64599) on November __, 1999)
3.23 Articles of Incorporation Venture Southeast (filed as Exhibit 3.23
to the Registration Statement filed on Form S-4 (Registration No.
333-64599) on November __, 1999 and incorporated herein by
reference)
3.24 By-laws of Venture Southeast (filed as Exhibit 3.24 to the
Registration Statement filed on Form S-4 (Registration No.
333-64599) on November __, 1999 and incorporated herein by
reference)
3.25 Memorandum of Association of NIM Holdings (filed as Exhibit 3.25 to
the Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
II-4
<PAGE>
3.26 Articles of Association of NIM Holdings (filed as Exhibit 3.26 to
the Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
3.27 Memorandum of Association of Norwich (filed as Exhibit 3.27 to the
Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
3.28 Articles of Association of Norwich (filed as Exhibit 3.28 to the
Registration Statement filed on Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference)
3.29 Certificate of Incorporation of Knight Plastics (filed as Exhbit
3.29 to the Registration Statement filed on Form S-4 (Registration
No. 333-64599) on December 29, 1998 and incorporated herein by
reference).
3.30 By-laws of Knight Plastics (filed as Exhibit 3.30 to the
Registration Statement filed in Form S-4 (Registration No.
333-64599) on December 29, 1998 and incorporated herein by
reference).
3.31 Certificate of Incorporation of CPI Holding Corporation (filed as
Exhibit 3.31 to the Registration Statement (Registration No.
333-64599) in Form S-4 filed on December 2, 1999 and incorporated
herein by reference)
3.32 By-laws of CPI Holding Corporation (filed as Exhibit 3.32 to the
Registration Statement (Registration No. 333-64599) on Form S-4
filed on December 2, 1999 and incorporated herein by reference)
3.33 Certificate of Incorporation of Cardinal Packaging, Inc. (filed as
Exhibit 3.33 to the Registration Statement (Registration No.
333-64529) on Form S-4 filed on December 2, 1999 and incorporated
herein by reference)
3.34 Code of Regulations of Cardinal Packaging, Inc. (filed as Exhibit
3.34 to the Registration Statement (Registration No. 333-64529) on
Form S-4 filed on December 2, 1999 and incorporated herein by
reference)
3.35 Memorandum of Association of Norwich Acquisition Limited (filed as
Exhibit 3.35 to the Registration Statement (Registration No.
333-64529) on Form S-4 filed on December 2, 1999 and incorporated
herein by reference)
3.36 Articles of Association of Norwich Acquisition Limited (filed as
Exhibit 3.36 to the Registration Statement (Registration No.
333-64529) on Form S-4 filed on December 2, 1999 and incorporated
herein by reference)
II-5
<PAGE>
3.37 Certificate of Incorporated of Berry Plastics Acquisitions
Corporation (filed as Exhibit 3.37 to the Registration Statement
(Registration No. 333-64529) on Form S-4 filed on December 2, 1999
and incorporated herein by reference)
3.38 By-Laws of Berry Plastics Acquisition Corporation (filed as Exhibit
3.38 to the Registration Statement (Registration No. 333-64529) on
Form S-4 filed on December 2, 1999 and incorporated herein by
reference)
**4.1 Indenture dated April 21, 1994 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)
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
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
(filed as Exhibit 4.9 to the Registration Statement filed on Form
S-4 (Registration No. 333-64599) and incorporated herein by
reference)
4.10 Registration Rights Agreement dated as of August 24, 1998 by and
among the Company, the Guarantors and DLJ (filed as Exhibit 4.10 to
the Registration Statement filed on Form S-4 (Registration No.
333-64599) and incorporated herein by reference)
II-6
<PAGE>
4.11 Indenture dated as of July 6, 1999 among the Company, the Guarantors
and United States Trust Company of New York , as trustee (previously
filed as Exhibit 10.27 to this Registration Statement on August 23,
1999)
**4.12 Registration Rights Agreement dated as of July 6, 1999 by and among
the Company, the Guarantors, DLJ and Chase Securities, Inc.
(previously filed as Exhibit 10.28 to this Registration Statement on
August 23, 1999)
*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-7
<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)
II-8
<PAGE>
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)
10.26 Purchase Agreement dated August 19, 1998 among the Company, the
Guarantors and DLJ (filed as Exhibit 10.26 to the Registration
Statement on Form S-4 filed September 29, 1998)
**10.27 Purchase Agreement dated July 6, 1999 among the Company, the
Guarantors, DLJ and Chase Securities Inc. (filed as Exhibit 10.27 to
the Registration Statement on Form S-4 (file no. 333-64599) and
incorporated herein by reference).
21 List of Subsidiaries (filed as Exhibit 21 to the Registration
Statement on Form S-4 (Registration No. 333-645499) on December 2,
1999 and incorporated herein by reference)
*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
II-9
<PAGE>
*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.
(b) FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors S-1
Schedule I -- Condensed Financial Information of Registrant S-2
Schedule II -- Valuation and Qualifying Accounts S-6
Schedules other than the above have been omitted because they are either not
applicable or the required information has been disclosed in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the Corporation Law, the Certificate of Incorporation
and By-laws, or otherwise, the Registrants have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-10
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of that time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrants hereby undertake to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
*
- -------------------------------- President and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
David M. Clarke Director December 17, 1999
*
- --------------------------------
Lawrence G. Graev Director December 17, 1999
*
- --------------------------------
Donald J. Hofmann Director December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
*
- --------------------------------
Mathew J. Lori Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 1999.
BERRY PLASTICS 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Ira G. Boots Director December 17, 1999
*
- --------------------------------
David M. Clarke Director December 17, 1999
*
- --------------------------------
Lawrence G. Graev Director December 17, 1999
*
- --------------------------------
Donald J. Hofmann Director December 17, 1999
*
- --------------------------------
Mathew J. Lori Director December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
President, Chief Executive Officer
* and Chairman of the Board of
- -------------------------------- Directors (Principal Executive
Martin R. Imbler Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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, the
Registration Statement has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
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. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- -------------------------------- Chairman of the Board of Directors
Martin R. Imbler (Principal Executive Officer) December 17, 1999
*
- -------------------------------- Director (Principal Financial and
James M. Kratochvil Accounting Officer) December 17, 1999
*
- --------------------------------
Trevor D. Johnson Sales and Marketing Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-21
<PAGE>
POWER OF ATTORNEY
I, the undersigned director of NIM HOLDINGS LIMITED, do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, my true and lawful attorneys and agents, to do any and all acts and things
in my name and on my behalf in my capacity as a director and to execute any and
all instruments for me and in my name in the capacity indicated below, which
said attorneys and agents, or either of them, may deem necessary or advisable to
enable said Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for me in my name in the capacity
indicated below, any and all amendments (including post-effective amendments)
hereto; and I ho hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
person on behalf of the registrant and in the capacity and on the date
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
/s/ GRAHAM EDWARDS
- --------------------------------
Graham Edwards Director December 17, 1999
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 1999.
NORWICH INJECTION MOULDERS 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- -------------------------------- Chairman of the Board of Directors
Martin R. Imbler (Principal Executive Officer) December 17, 1999
*
- -------------------------------- Director (Principal Financial and
James M. Kratochvil Accounting Officer) December 17, 1999
*
- --------------------------------
Trevor D. Johnson Sales and Marketing Director December 17, 1999
*
- --------------------------------
Alan R. Sandell Managing Director December 17, 1999
*
- --------------------------------
Ira G. Boots Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-23
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors of NORWICH INJECTION MOULDERS LIMITED, do
hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or
either of them, our true and lawful attorneys and agents, to do any and all acts
and things in our name and on our behalf in our capacity as directors and to
execute any and all instruments for us and in our names in the capacity
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable said Corporation to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us in our
names in the capacity indicated below, any and all amendments (including
post-effective amendments) hereto; and we do hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons on behalf of the registrant and in the capacity and on the date
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
/s/ GRAHAM EDWARDS
- --------------------------------
Graham Edwards Director December 17, 1999
/s/ DOUGLAS BELL
- --------------------------------
Douglas Bell Director December 17, 1999
/s/ STEVEN CASSIDY
- --------------------------------
Steven Cassidy Director December 17, 1999
/s/ ADRIAN ATKINS
- --------------------------------
Adrian Atkins Director December 17, 1999
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal Executive
Martin R. Imbler Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial and
James M. Kratochvil Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive
- -------------------------------- Officer and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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, the
Registration Statement has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
*
- --------------------------------
Roberto Buaron Chairman of the Board of Directors December 17, 1999
* President, Chief Executive Officer
- -------------------------------- and Director (Principal
Martin R. Imbler Executive Officer) December 17, 1999
Executive Vice President, Chief
* Financial Officer, Treasurer and
- -------------------------------- Secretary (Principal Financial
James M. Kratochvil and Accounting Officer) December 17, 1999
*
- --------------------------------
Joseph S. Levy Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of December, 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. 1 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
* Chairman of the Board of
- -------------------------------- Directors (Principal Executive
Martin R. Imbler Officer) December 17, 1999
*
- -------------------------------- Director (Principal Financial and
James M. Kratochvil Accounting Officer) December 17, 1999
*
- --------------------------------
Trevor D. Johnson Sales and Marketing Director December 17, 1999
*
- --------------------------------
Alan R. Sandell Managing Director December 17, 1999
*
- --------------------------------
Ira G. Boots Director December 17, 1999
</TABLE>
By: /s/ JAMES M. KRATOCHVIL
James M. Kratochvil
Attorney-in-fact
II-29
<PAGE>
POWER OF ATTORNEY
I, the undersigned director of NORWICH ACQUISITION LIMITED, do hereby
constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of
them, my true and lawful attorneys and agents, to do any and all acts and things
in my name and on my behalf in my capacity as a director and to execute any and
all instruments for me and in my name in the capacity indicated below, which
said attorneys and agents, or either of them, may deem necessary or advisable to
enable said Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for me in my name in the capacity
indicated below, any and all amendments (including post-effective amendments)
hereto; and I do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
person on behalf of the registrant and in the capacity and on the date
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
/s/ GRAHAM EDWARDS
- --------------------------------
Graham Edwards Director December 17, 1999
</TABLE>
II-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULES
We have audited the consolidated financial statements of BPC Holding Corporation
as of January 2, 1999, 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 audit.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Indianapolis, Indiana
February 19, 1999
S-1
<PAGE>
BPC HOLDING CORPORATION
(PARENT COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
JANUARY 2, DECEMBER 27,
1999 1997
--------- -----------
(IN THOUSANDS)
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
========= =========
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>
BALANCE CHARGED CHARGED TO BALANCE
AT TO OTHER DEDUCTIONS AT
BEGINNING COSTS AND ACCOUNTS - - 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.
S-6
EXHIBIT 5
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
New York, NY 10112
December 13, 1999
Berry Plastics Corporation
101 Oakley Street
Evansville, Indiana 47710
Ladies and Gentlemen:
We have acted as special counsel to Berry Plastics Corporation, a
Delaware corporation (the "Company"), and BPC Holding Corporation, a Delaware
corporation ("Holding"), Berry Iowa Corporation, a Delaware corporation ("Berry
Iowa"), Berry Tri-Plas Corporation, a Delaware corporation ("Berry Tri-Plas"),
Berry Sterling Corporation, a Delaware corporation ("Berry Sterling"), AeroCon,
Inc., a Delaware corporation ("AeroCon"), PackerWare Corporation, a Delaware
corporation ("PackerWare"), Berry Plastics Design Corporation, a Delaware
corporation ("Berry Design"), Venture Packaging, Inc., a Delaware corporation
("Venture Holdings"), Venture Packaging Midwest, Inc., a Delaware corporation
("Venture Midwest"), Venture Packaging Southeast, Inc., a Delaware corporation
("Venture Southeast"), Knight Plastics, Inc., a Delaware corporation ("Knight"),
CPI Holding Corporation, a Delaware corporation ("CPI"), Cardinal Packaging,
Inc., an Ohio corporation ("Cardinal"), Berry Plastics Acquisition Corporation,
a Delaware corporation ("Berry Acquisition"), NIM Holdings Limited, a company
organized under the laws of England and Wales ("NIM Holdings"), Norwich
Injection Moulders Limited, a company organized under the laws of England and
Wales ("Norwich"), Norwich Acquisition Limited, a company organized under the
laws of England and Wales ("Norwich Acquisition," and Holding, Berry Iowa, Berry
Tri-Plas, Berry Sterling, AeroCon, PackerWare, Berry Design, Venture Holdings,
Venture Midwest, Venture Southeast, Knight, CPI, Cardinal and Berry Acquisition,
collectively, the "U.S. Guarantors" and the U.S. Guarantors, NIM Holdings,
Norwich and Norwich Acquisition, collectively, the "Guarantors") in connection
with the Company's offer (the "Exchange Offer") to exchange its 11% Series B
Senior Subordinated Notes due 2007 (the "New Notes"), which will be guaranteed
pursuant to Note Guarantees endorsed on the New Notes by the Guarantors (the
"Note Guarantees"), for a like principal amount of any or all of its outstanding
11% Series A Senior Subordinated Notes due 2007 (the "Old Notes"), which are
guaranteed by the Guarantors.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for the purpose of rendering this opinion.
<PAGE>
Page 2
Upon the basis of the foregoing, we are of the opinion that:
1. The New Notes have been duly authorized and, assuming the due
execution and delivery of the New Notes, when the New Notes are executed,
authenticated and delivered in accordance with the Indenture dated as of July 6,
1999 (the "Indenture") among the Company, the Guarantors and the United States
Trust Company of New York, as Trustee, in exchange for the Old Notes in
accordance with the Indenture and the Exchange Offer, the New Notes will be
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally and subject to general principles of equity.
2. When (i) the Note Guarantees to be endorsed on the New Notes have
been duly executed and delivered by the Guarantors and (ii) the New Notes have
been duly executed, authenticated and delivered in accordance with the Indenture
in exchange for the Old Notes in accordance with the Indenture and the Exchange
Offer, each of the Note Guarantees will be the valid and binding obligation of
the Guarantors enforceable against the Guarantors in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights generally and
subject to general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America, and the corporation law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Exchange Offer. We also consent to the
reference to us under the caption "Legal Matters" in the Prospectus contained in
such Registration Statement.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
/s/ O'SULLIVAN GRAEV & KARABELL, LLP
EXHIBIT 8
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
December 17, 1999
Berry Plastics Corporation
101 Oakley Street
Evansville, Indiana 47710
Berry Plastics Corporation
11% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
Dear Sirs:
We have acted as counsel for Berry Plastics Corporation, a Delaware
corporation (the "Company"), in connection with the preparation and filing of
the Registration Statement of the Company on Form S-4, as amended (File No.
333-85739) (the "Registration Statement"), under the Securities Act of 1933, as
amended. All capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Registration Statement.
In that connection, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of such documents, corporate
records and other instruments as we have deemed necessary for the purposes of
rendering the opinions set forth in the Registration Statement. As to certain
questions of fact material to such opinions, we have relied upon certificates or
statements of officers of the Company and certificates of public officials. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic originals of all documents submitted to us as certified or photostatic
copies.
Based upon and subject to the foregoing, and subject to the
qualifications, limitations and factual assumptions set forth therein, we
confirm that the discussion in the Registration Statement entitled "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS" constitutes our opinion of 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 New Notes.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name in said Registration Statement and to the use of
this letter for filing with said Registration Statement as Exhibit 8 thereto.
Very truly yours,
O'Sullivan Graev & Karabell, LLP
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. 1 to the Registration Statement (Form
S-4) and related Prospectus of Berry Plastics Corporation for the registration
of $75,000,000 of 11% Series B Senior Subordinated Notes due 2007.
/s/ Ernst & Young LLP
Indianapolis, Indiana
December 2, 1999
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to the Registration Statement No.
333-85739, relating to $75,000,000 of 11% Series B Senior Subordinated Notes due
2007, 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
December 16, 1999
EXHIBIT 23.4
NORWICH INJECTION MOULDERS LIMITED
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 this Amendment No. 1 to the Registration Statement (Form S-4) and
related Prospectus of Berry Plastics Corporation for the registration of
$75,000,000 of 11% Series B Senior Subordinated Notes due 2007.
/s/ Lovewell Blake
Norwich, England
16 December 1999
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11% SENIOR SUBORDINATED NOTES DUE 2007
OF
BERRY PLASTICS CORPORATION
PURSUANT TO THE PROSPECTUS DATED NOVEMBER __, 1999
------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON DECEMBER __, 1999, UNLESS EXTENDED.
------------------------------------------------------------------------
To: United States Trust Company of New York, as Exchange Agent
<TABLE>
<CAPTION>
<S> <C> <C>
BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE: BY HAND BEFORE 4:30 P.M.:
United States Trust Company (212) 780-0592 United States Trust Company
of New York Attention: of New York
P.O. Box 843 Customer Service 111 Broadway
Cooper Station New York, New York 10006
New York, New York 10276 Attention: Lower Level
Attention: Corporate Trust Corporate Trust Window
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, 13th Floor
New York, New York 10003
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER
OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
The undersigned acknowledges that he or she has received the
Prospectus, dated November __, 1999 (the "Prospectus), of Berry Plastics
Corporation (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Company's offer (the "Exchange
Offer") to exchange its 11% Series B Senior Subordinated Notes due 2007 (the
"New Notes") for an equal principal amount of its 11% Series A Senior
Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes,
the "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 of 1933, as amended (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 (as defined
in the Prospectus). The term "Expiration Date" shall mean 5:00 p.m., New York
City time, on December __, 1999, unless the Exchange Offer is extended as
provided in the Prospectus, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended. Capitalized
terms used but not defined herein have the meanings given to them in the
Prospectus.
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, this
Letter of Transmittal or an Agent's Message (as defined in the Prospectus) and
any other documents required by this Letter of Transmittal to the Exchange Agent
prior to the Expiration Date must tender their Old Notes
<PAGE>
according to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. See
Instruction 5.
The term "Holder" with respect to the Exchange Offer means any
person in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Old Notes
must complete this Letter of Transmittal in its entirety.
If the undersigned is a broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), the
undersigned may be deemed to be an "underwriter" under the Securities Act and
the undersigned acknowledges, therefore, that it will deliver a prospectus in
connection with any resale of such New Notes. 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.
-2-
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
- -------------------------------------------------------------------------------
DESCRIPTION OF 11% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
- -------------------------------------------------------------------------------
Name(s) and Aggregate Principal Amount
Address(es) of Principal Tendered (must
Registered Holder(s) Amount be in integral
(please fill in, if Certificate Represented by multiples
blank) Number(s) Certificate(s) of $1,000)*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix such schedule to
this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount. All other tenders
must be in integral multiples of $1,000.
- -------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY
("DTC") AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER
SHARES BY BOOK-ENTRY TRANSFER) (SEE INSTRUCTION 4):
Name of Tendering Institution______________________________________________
Account No.________________________________________________________________
Transaction Code Number____________________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTION 5):
Name(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any)______________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution which Guaranteed Delivery______________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO AND COMPLETE THE FOLLOWING:
Name:______________________________________________________________________
Address:___________________________________________________________________
___________________________________________________________________________
3
<PAGE>
- -------------------------------------- --------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 7, 8 AND 9) (SEE INSTRUCTIONS 7, 8 AND 9)
To be completed ONLY of certificates To be completed only if certificates
for Old Notes in a principal amount for Old Notes in a principal amount
not tendered, or New Notes issued in not tendered, or New Notes issued in
exchange for Old Notes accepted for exchange for Old Notes accepted for
exchange, are to be issued in the name exchange, are to be issued in the name
of someone other than the undersigned. of someone other than the undersigned.
Issue certificate(s) to: Deliver certificate(s) to:
Name:_________________________________ Name:_________________________________
(Please Print) (Please Print)
Address:______________________________ Address:______________________________
______________________________________ ______________________________________
(Include Zip Code) (Include Zip Code)
______________________________________ ______________________________________
(Tax Identification or (Tax Identification or
Social Security No.) Social Security No.)
- -------------------------------------- --------------------------------------
-4-
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the tendered Old
Notes with full power of substitution (i) to deliver certificates for such Old
Notes to the Company and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company and (ii) to present such Old
Notes for transfer on the books of the Company, all in accordance with the terms
of the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are acquired by the Company. The
undersigned and any beneficial owner of Old Notes tendered hereby further
represent and warrant that (i) the New Notes acquired by the undersigned and any
such beneficial owner of Old Notes pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, (ii) neither the undersigned nor any such beneficial owner has an
arrangement with any person to participate in the distribution of such New
Notes, (iii) neither the undersigned nor any 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 undersigned nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under the Securities Act, of
the Company. The undersigned and each beneficial owner acknowledge and agree
that any person who is an affiliate of the Company or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a resale transaction of the New Notes
acquired by such person and may not rely on the position of the staff of the
Securities and Exchange Commission set forth in the no-action letters discussed
in the Prospectus under the caption "The Exchange Offer -- Purpose and Effect of
the Exchange Offer." The undersigned and each beneficial owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to
have accepted validly tendered Old Notes when, as and if the Company has given
oral notice (confirmed in writing) or written notice thereof to the Exchange
Agent.
If any tendered Old Notes are not accepted for exchange pursuant to
the Exchange Offer because of an invalid tender, the occurrence of certain other
events set forth in the Prospectus or otherwise, any such unaccepted Old Notes
will be returned, without expense, to
-5-
<PAGE>
the undersigned at the address shown below or at a different address as may be
indicated herein under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to
the procedures described under the caption " The Exchange Offer -- Procedures
for Tendering" in the Prospectus and in the instructions hereto will constitute
a binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer -- Withdrawal of Tenders."
Unless otherwise indicated under "Special Registration
Instructions," please issue the certificates representing the New Notes issued
in exchange for the Old Notes accepted for exchange and any certificates for Old
Notes not tendered or not exchanged in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Notes issued in exchange for the Old Notes accepted for exchange in the name(s)
of, and return any certificates for Old Notes not tendered or not exchanged to,
the person(s) so indicated. The undersigned understands that the Company has no
obligation pursuant to the "Special Registration Instructions" and "Special
Delivery Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
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, this
Letter of Transmittal or an Agent's Message and any other documents required by
this Letter of Transmittal to the Exchange Agent prior to the Expiration Date
may tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures" See Instruction 5.
-6-
<PAGE>
- -------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X___________________________________________________________ Date:____________
X___________________________________________________________ Date:____________
Signature(s) of Registered Holder(s) or Authorized Signatory
Area Code and Telephone Number:_________________________________________________
THE ABOVE LINES MUST BE SIGNED BY THE REGISTERED HOLDER(S) AS HIS OR HER NAME(S)
APPEAR(S) ON THE OLD NOTES OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED
HOLDER(S) BY A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED HOLDER(S), A
COPY OF WHICH MUST BE TRANSMITTED WITH THIS LETTER OF TRANSMITTAL. IF THE OLD
NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATE ARE HELD OF RECORD BY TWO OR
MORE JOINT HOLDERS, THEN ALL SUCH HOLDERS MUST SIGN THIS LETTER OF TRANSMITTAL.
IF THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES OR BOND POWERS ARE SIGNED BY A
TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A
CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY,
SUCH PERSON MUST (I) SO INDICATE AND SET FORTH HIS OR HER FULL TITLE BELOW AND
(II) UNLESS WAIVED BY THE COMPANY, SUBMIT EVIDENCE SATISFACTORY TO THE COMPANY
OF SUCH PERSON'S AUTHORITY TO SO ACT. SEE INSTRUCTION 7.
Name(s):________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 7)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name of Firm)
Date:_______________________, 1999
- -------------------------------------------------------------------------------
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. PROCEDURES FOR TENDERING. This Letter of Transmittal or a
facsimile hereof, properly completed and duly executed, or an Agent's Message,
and any other documents required by this Letter of Transmittal 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. In addition, either (i) certificates for
tendered 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 DTC 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.
THE METHOD OF DELIVERY OF OLD NOTES AND THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER 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 LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
All questions as to the validity, form, eligibility (including time
of receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give any such notification, nor shall any of them incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
-8-
<PAGE>
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. 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 this Letter of
Transmittal 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.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of 11% Series A
Senior Subordinated Notes due 2007" above. The entire principal amount of any
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, then Old Notes for the principal amount of Old Notes not tendered
and a certificate or certificates representing New Notes issued in exchange for
any Old Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
4. BOOK-ENTRY TRANSFER. Any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfer. However, although delivery of Old
Notes may be effected through book-entry transfer at DTC, this Letter of
Transmittal or a facsimile hereof, 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 on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
5. 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, this Letter of Transmittal or an Agent's Message
or any other documents required hereby to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedure: (a) such
tender must be made through an Eligible Institution (as defined below); (b)
prior to the Expiration Date, the Exchange Agent must have received from the
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, this Letter of Transmittal (or facsimile hereof)
or an Agent's Message together with the certificate(s) representing the Old
Notes, or a Book-Entry Confirmation, and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (c) such
properly completed and executed Letter of Transmittal (or facsimile hereof) or
an
-9-
<PAGE>
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 documents required by this Letter of Transmittal must be
received by the Exchange Agent within three New York Stock Exchange trading days
after the Expiration Date, all as provided in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." Any Holder who wishes to
tender his or her Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on 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.
6. 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 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 DTC to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above in Instruction 1, under Procedures for Tendering,
at any time prior to the Expiration Date.
7. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be
-10-
<PAGE>
reissued) to the registered holder or holders and neither the "Special Delivery
Instructions" nor the "Special Registration Instructions" has been completed,
then such holder or holders need not and should not endorse any tendered Old
Notes, nor provide a separate bond power. In any other case, such holder or
holders must either properly endorse the Old Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes
or bond powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must so indicate when signing, and,
unless waived by the Company, submit evidence satisfactory to the Company of
such person's authority to so act with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by
this Instruction 7 must be guaranteed by an Eligible Institution which is a
member of (a) the Securities Transfer Agents Medallion Program, (b) the New York
Stock Exchange Medallion Signature Program or (c) the Stock Exchange Medallion
Program.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange or 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 under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
if (a) this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered herewith and such holder(s) has not completed the box set
forth herein entitled "Special Registration Instructions" or the box set forth
herein entitled "Special Delivery Instructions" or (b) such Old Notes are
tendered for the account of an Eligible Institution.
8. SPECIAL REGISTRATION AND DELIVERY INFORMATION. Tendering holders
should indicate, in the applicable box or boxes, the name and address to which
New Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person singing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered in the name of, any person other than the registered holder of the
Old Notes tendered hereby, or if tendered Old Notes are registered in the name
of any person other than the person signing this 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 on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
-11-
<PAGE>
10. Except as provided in Instruction 9, it will not be necessary
for transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
11. WAIVER OF CONDITIONS. The Company reserves the right, in its
sole discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
specified herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
-12-
<PAGE>
IMPORTANT TAX INFORMATION
The Holder is required to give the Exchange Agent the social
security number or employer identification number of the Holder of the Notes. If
the Notes are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
PAYER'S NAME: BERRY PLASTICS CORPORATION
- -------------------------------------------------------------------------------
Name of Holder (if joint, list first and circle the name of the person or entity
whose number you enter in Part I below).
- -------------------------------------------------------------------------------
Address (if Holder does not complete, signature below will constitute a
certification that the above address is correct.)
- -------------------------------------------------------------------------------
SUBSTITUTE | Part I--Please provide your
| TIN in the box at right and Social Security Number
| certify by signing and dating or
FORM W-9 | below. If you do not have a Employer Identification
| number, see How to Obtain a Number
DEPARTMENT OF THE | "TIN" in the enclosed
TREASURY INTERNAL | Guidelines. -----------------------
REVENUE SERVICE ----------------------------------------------------------
Payer's Request for | Part II--For Payees exempt from backup withholding,
Taxpayer | see the enclosed Guidelines for Certification of
Identification Number | Taxpayer Identification Number on Substitute Form W-9.
(TIN) |
- -------------------------------------------------------------------------------
CERTIFICATION. Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreported interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.)
Signature__________________________________________ Date______________________
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
(DO NOT WRITE IN SPACE BELOW)
- --------------------------------------------------------------------------------
CERTIFICATE SURRENDERED | OLD NOTES TENDERED | OLD NOTES ACCEPTED
- --------------------------------------------------------------------------------
| |
- --------------------------------------------------------------------------------
| |
- --------------------------------------------------------------------------------
Delivery Prepared By_____________ Checked By_____________ Date_____________
-13-
EXHIBIT 99.2
BERRY PLASTICS CORPORATION
NOTICE OF GUARANTEED DELIVERY
OF
11% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
As set forth in the Prospectus dated November __, 1999 (the
"Prospectus"), of Berry Plastics Corporation (the "Company") under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures," this form must be used
to accept the Company's offer to exchange its 11% Series B Senior Subordinated
Notes due 2007 (the "New Notes") for an equal principal amount of its 11% Series
A Senior Subordinated Notes due 2007 (the "Old Notes"), by 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 an Agent's
Message (as defined in the Prospectus) and any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the Expiration Date. This
form must be delivered by an Eligible Institution by mail or hand delivery or
transmitted, via facsimile, to the Exchange Agent at its address set forth below
not later than the Expiration Date. All capitalized terms used herein but not
defined herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE AGENT IS:
UNITED STATES TRUST COMPANY OF NEW YORK
BY REGISTERED OR BY HAND BEFORE 4:30 P.M.: BY OVERNIGHT COURIER AND
CERTIFIED MAIL: United States Trust BY HAND AFTER 4:30 P.M.
United States Trust Company of New York ON THE EXPIRATION DATE:
Company of New York 111 Broadway United States Trust
P.O. Box 843 New York, New York 10006 Company of New York
Cooper Station Attention: Lower Level 770 Broadway, 13th Floor
New York, New York Corporate Trust Window New York, New York 10003
10276
Attention: Corporate
Trust Services
FOR INFORMATION CALL:
(212) 852-1000
Facsimile: (212) 780-0592
Attention: Customer
Service
Confirm: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders for exchange to the Company, upon the
terms and subject to the conditions set forth in the Prospectus and the Letter
of Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer
will expire at 5:00 p.m., New York City time, on December __, 1999, unless
extended by the
<PAGE>
Company. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
December __, 1999, unless the Exchange Offer is extended as provided in the
Prospectus, in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
- -------------------------------------------|
| Principal Amount of Old Notes
| Tendered (must be in integral
SIGNATURE | multiples of $1,000): $____________
|
X______________________ Date:____________ |
| Certificate Number(s) of Old Notes
X______________________ Date:____________ | (if available):____________________
Signature(s) of Registered Holder(s) or |
Authorized Signatory | ___________________________________
|
Area Code and |
Telephone Number:_________________________ | Aggregate Principal Amount
| Represented by
| Certificate(s): $__________________
Name(s):__________________________________ |
(Please Print) | IF TENDERED OLD NOTES WILL BE
| DELIVERED BY BOOK-ENTRY TRANSFER,
Capacity (full title), if signing in a | PROVIDE THE DEPOSITORY TRUST
fiduciary or representative capacity): | COMPANY ("DTC") ACCOUNT NO. AND
| TRANSACTION CODE NUMBER
Address:__________________________________ | (IF AVAILABLE):____________________
(Including Zip Code) |
| ___________________________________
Taxpayer Identification or |
Social Security No.:______________________ | Account No.________________________
|
| Transaction Number_________________
- -------------------------------------------|
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, 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 Securities Exchange Act of 1934, as amended, guarantees
deposit with the Exchange Agent of a 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 confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility described in the Prospectus
under the caption "The Exchange Offer -- Book-Entry Transfer" and any other
documents required by the Letter of Transmittal, all by 5:00 p.m., New York City
time, on the third New York Stock Exchange trading day following the Expiration
Date.
2
<PAGE>
Name of Eligible
Institution:___________________________________ _______________________________
AUTHORIZED SIGNATURE
Address:_______________________________________ Name:__________________________
_______________________________________________ Title:_________________________
Area Code and Telephone No:____________________ Date:__________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE. ACTUAL SURRENDER
OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF
TRANSMITTAL.
3
BERRY PLASTICS CORPORATION
Offer to Exchange up to $75,000,000 of its
11% Series B Senior Subordinated Notes due 2007
for any and all of its outstanding
11% Series A Senior Subordinated Notes due 2007
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON DECEMBER __,
1999, UNLESS EXTENDED.
- -------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks, November __, 1999
Trust Companies and Other Nominees:
Berry Plastics Corporation, a Delaware corporation (the "Company"),
is offering, upon the terms and subject to the conditions set forth in the
Prospectus dated November __, 1999 (the "Prospectus") and the accompanying
Letter of Transmittal enclosed herewith (which together constitute the "Exchange
Offer"), to exchange its 11% Series B Senior Subordinated Notes due 2007 (the
"New Notes") for an equal principal amount of its 11% Series A Senior
Subordinated Notes due 2007 (the "Old Notes" and together with the New Notes,
the "Notes"). As set forth in the Prospectus, 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, 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 (as defined
in the Prospectus). Old Notes may be tendered only in integral multiples of
$1,000.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE
"THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your
clients are copies of the following documents:
1. the Prospectus, dated November __, 1999;
2. the Letter of Transmittal for your use and for the information of
your clients (facsimile copies of the Letter of Transmittal may be used to
tender Old Notes);
3. a form of letter which may be sent to your clients for whose accounts
you hold Old Notes registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
4. a Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
<PAGE>
6. a return envelope addressed to United States Trust Company of New
York, the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER __, 1999, UNLESS EXTENDED.
PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR
WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE
AS QUICKLY AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of (a) certificates representing such Old Notes, or a Book-Entry
Confirmation (as defined in the Prospectus), as the case may be, (b) the Letter
of Transmittal (or facsimile thereof), properly completed and duly executed, or
an Agent's Message (as defined in the Prospectus) and (c) any other required
documents.
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 an Agent's Message and 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 under the caption "The Exchange Offer -- Guaranteed Delivery Procedures"
in the Prospectus.
The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Old Notes residing in any jurisdiction
in which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction.
The Company will not pay any fees or commissions to brokers, dealers
or other persons for soliciting exchanges of Notes pursuant to the Exchange
Offer. The Company will, however, upon request, reimburse you for customary
clerical and mailing expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Company will pay or cause to be paid any transfer
taxes payable on the transfer of Notes to it, except as otherwise provided in
Instruction 9 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange
Offer or for copies of the Prospectus and Letter of Transmittal may be directed
to the Exchange Agent at its address set forth in the Prospectus or at (212)
852-1000.
Very truly yours,
BERRY PLASTICS CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL
CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR
2
<PAGE>
ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
3
BERRY PLASTICS CORPORATION
Offer to Exchange up to $75,000,000 of its
11% Series B Senior Subordinated Notes due 2007
for any and all of its outstanding
11% Series A Senior Subordinated Notes due 2007
===============================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER __,
1999, UNLESS EXTENDED.
===============================================================================
To Our Clients:
Enclosed for your consideration is a Prospectus dated November __,
1999 (the "Prospectus") and a Letter of Transmittal (which together constitute
the "Exchange Offer") relating to the offer by Berry Plastics Corporation (the
"Company") to exchange its 11% Series B Senior Subordinated Notes due 2007 (the
"New Notes") for an equal principal amount of its 11% Series A Senior
Subordinated Notes due 2007 (the "Old Notes" and together with the New Notes,
the "Notes"). As set forth in the Prospectus, 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, 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 (as defined
in the Prospectus). Old Notes may be tendered only in integral multiples of
$1,000.
The enclosed material is being forwarded to you as the beneficial
owner of Old Notes carried by us for your account or benefit but not registered
in your name. An exchange of any Old Notes may only be made by us as the
registered Holder and pursuant to your instructions. Therefore, the Company
urges beneficial owners of Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such Holder promptly
if they wish to exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to
exchange any or all such Old Notes held by us for your account or benefit,
pursuant to the terms and conditions set forth in the Prospectus and Letter of
Transmittal. We urge you to read carefully the Prospectus and Letter of
Transmittal before instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible
in order to permit us to exchange Old Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER EXPIRES AT 5:00 P.M.,
NEW YORK CITY TIME, ON DECEMBER __, 1999, UNLESS EXTENDED. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on December __, 1999, unless the
Exchange Offer is extended as provided in the Prospectus, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. A tender of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
<PAGE>
1. The Exchange Offer is for the exchange of $1,000 principal amount of
the New Notes for each $1,000 principal amount of the Old Notes, of which
$75,000,000 aggregate principal amount was outstanding as of November __, 1999.
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, 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.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE
"THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on December __, 1999, unless extended.
4. The Company has agreed to pay the expenses of the Exchange Offer.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Company will be paid by the Company, except as provided
in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Old Notes residing in any jurisdiction
in which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction.
If you wish us to tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the attached instruction form. THE ACCOMPANYING LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE
USED BY YOU TO EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR
ACCOUNT OR BENEFIT.
2
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the
enclosed material referred to therein relating to the Exchange Offer of Berry
Plastics Corporation.
This will instruct you to tender for exchange the aggregate
principal amount of Old Notes indicated below (or, if no aggregate principal
amount is indicated below, all Old Notes) held by you for the account or benefit
of the undersigned, pursuant to the terms of and conditions set forth in the
Prospectus and the Letter of Transmittal.
-----------------------------------------------------------------------
Aggregate Principal Amount of Old Notes to be tendered for exchange
$
----------------------------------
-----------------------------------------------------------------------
*I (WE) UNDERSTAND THAT IF I WE) _______________________________________
SIGN THIS INSTRUCTION FORM WITHOUT
INDICATING AN AGGREGATE PRINCIPAL _______________________________________
AMOUNT OF OLD NOTES IN THE SPACE SIGNATURE(S)
ABOVE, ALL OLD NOTES HELD BY YOU
FOR MY (OUR) ACCOUNT WILL BE _______________________________________
TENDERED FOR EXCHANGE. CAPACITY (FULL TITLE), IF SIGNING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
NAME(S) AND ADDRESS, INCLUDING ZIP CODE
DATE:__________________________________
_______________________________________
AREA CODE AND TELEPHONE NUMBER
_______________________________________
TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NO.
3
