SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended JANUARY 1, 2000
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission File Number 33-75706
BERRY PLASTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1813706
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY IOWA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 42-1382173
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY TRI-PLAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 56-1949250
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY STERLING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 54-1749681
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
AEROCON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1948748
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
PACKERWARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 48-0759852
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
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<PAGE>
BERRY PLASTICS DESIGN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 62-1689708
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
VENTURE PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 51-0368479
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
VENTURE PACKAGING MIDWEST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 34-1809003
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
VENTURE PACKAGING SOUTHEAST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 57-1029638
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
NIM HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
England and Wales N/A
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY PLASTICS U.K. LIMITED
(f/k/a Norwich Injection Moulders Limited)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
England and Wales N/A
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
KNIGHT PLASTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-2056610
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
CPI HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 34-1820303
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
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<PAGE>
CARDINAL PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 34-1396561
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
NORWICH ACQUISITION LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
England and Wales N/A
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY PLASTICS ACQUISITION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware N/A
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
101 Oakley Street
Evansville, Indiana 47710
(Address of principal executive
offices) (Zip code)
Registrants' telephone number, including area code: (812) 424-2904
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrants: (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: Not applicable.
Other than with respect to BPC Holding Corporation ("Holding"), none of the
voting stock of any registrant is held by a non-affiliate of such registrant.
There is no public trading market for any class of voting stock of Holding,
however, Holding estimates the market value of its voting stock that is held by
non-affiliates to be $1,762,800.
As of March 28, 2000, the following shares of capital stock of BPC Holding
Corporation were outstanding: 91,000 shares of Class A Voting Common Stock;
259,000 shares of Class A Nonvoting Common Stock; 144,546 shares of Class B
Voting Common Stock; 57,169 shares of Class B Nonvoting Common Stock; and 16,833
shares of Class C Nonvoting Common Stock. As of March 28, 2000 there were
outstanding 100 shares of the Common Stock, $.01 par value, of Berry Plastics
Corporation, 100 shares of the Common Stock, $.01 par value, of Berry Iowa
Corporation, 100 shares of the Common Stock, $.01 par value, of Berry Tri-Plas
Corporation, 100 shares of the Common Stock, $.01 par value, of Berry Sterling
Corporation, 100 shares of the Common Stock, $.01 par value, of Aerocon, Inc.,
100 shares of the Common Stock, $.01 par value, of PackerWare Corporation, 100
shares of the Common Stock, $.01 par value, of Berry Plastics Design
Corporation, 100 shares of the Common Stock, $.01 par value, of Venture
Packaging, Inc., 100 shares of the Common Stock, $.01 par value, of Venture
Packaging Midwest, Inc., 100 shares of the Common Stock, $.01 par value, of
Venture Packaging Southeast, Inc., 4,000,000 Ordinary Shares of (pound)1 par
value, of NIM Holdings Limited, 5,850 Ordinary Shares of (pound)1 par value, of
Berry Plastics U.K. Limited, 100 shares of the Common Stock, $.01 par value, of
Knight Plastics, Inc., 100 shares of the Common Stock, $.01 par value, of CPI
Holding Corporation, 100 shares of the Common Stock, $.01 par value, of Cardinal
Packaging, Inc., 2 Ordinary Shares of (pound)1 par value, of Norwich Acquisition
Limited, and 100 shares of the Common Stock, $.01 par value, of Berry
Acquisition Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS FORM 10-K CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). THOSE STATEMENTS APPEAR IN A NUMBER OF PLACES IN
THIS FORM 10-K AND INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT
EXPECTATIONS OF THE COMPANY. WITHOUT LIMITING THE FOREGOING, THE WORDS
"BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS. VARIOUS ECONOMIC AND COMPETITIVE
FACTORS COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE
DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING INFORMATION
CONTAINED IN THIS FORM 10-K, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET
FORTH UNDER "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," IDENTIFIES IMPORTANT FACTORS THAT COULD
CAUSE DIFFERENCES, INCLUDING THE COMPANY'S ABILITY TO PASS THROUGH RAW MATERIAL
PRICE INCREASES TO ITS CUSTOMERS, ITS ABILITY TO SERVICE DEBT, THE AVAILABILITY
OF PLASTIC RESIN, THE IMPACT OF CHANGING ENVIRONMENTAL LAWS AND CHANGES IN THE
LEVEL OF THE COMPANY'S CAPITAL INVESTMENT. ALTHOUGH MANAGEMENT BELIEVES IT HAS
THE BUSINESS STRATEGY AND RESOURCES NEEDED FOR IMPROVED OPERATIONS, FUTURE
REVENUE AND MARGIN TRENDS CANNOT BE RELIABLY PREDICTED.
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<PAGE>
BERRY PLASTICS CORPORATION
BPC HOLDING CORPORATION
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
BERRY PLASTICS U.K. LIMITED
KNIGHT PLASTICS, INC.
CPI HOLDING CORPORATION
CARDINAL PACKAGING, INC.
NORWICH ACQUISITION LIMITED
BERRY PLASTICS ACQUISITION CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 1, 2000
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business...................................................... 6
Item 2. Properties.................................................... 14
Item 3. Legal Proceedings............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders........... 15
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters...................................................... 16
Item 6. Selected Financial Data........................................ 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..... 23
Item 8. Financial Statements and Supplementary Data.................... 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 24
PART III
Item 10. Directors and Executive Officers of the Registrants............ 25
Item 11. Executive Compensation......................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and Management. 32
Item 13. Certain Relationships and Related Transactions................. 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................... 36
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
BPC Holding Corporation ("Holding"), is the parent of Berry Plastics
Corporation ("Berry" or the "Company"), a leading domestic manufacturer and
supplier of plastic packaging products focused on three markets: aerosol
overcaps, open-top containers, and drink cups. In addition, based on discussions
with our customers, sales representatives and external sales brokers, the
Company believes that it is a leading manufacturer and supplier of
semi-disposable housewares. Within each of its markets, the Company concentrates
on manufacturing value-added products sold to marketers of image-conscious
industrial and consumer products that utilize the Company's proprietary molds,
superior color matching capabilities and sophisticated multi-color printing
capabilities. The Company believes that it is the largest supplier of aerosol
overcaps in the world, with sales of over two billion overcaps in fiscal 1999
and based on discussions with customers, sales representatives and external
sales brokers.
The Company supplies aerosol overcaps to a wide variety of customers and for
a wide variety of commercial and consumer products. Similarly, the Company's
containers are used for packaging a broad spectrum of commercial and consumer
products. The Company's drink cups are sold to fast food and family-dining
restaurants, convenience stores, stadiums, and retail stores. The Company also
sells houseware products, primarily seasonal, semi-disposable housewares and
lawn and garden items such as plates, bowls, pitchers and flower pots, to major
retail marketers. Berry's customer base is comprised of over 7,000 customers
with operations in a widely diversified range of markets. The Company's top ten
customers accounted for approximately 15% of fiscal 1999 net sales, and no
customer accounted for more than 5% of the Company's net sales in fiscal 1999.
The historical allocation of the Company's total net sales among its product
categories is as follows:
FISCAL
------------------------
1999 1998 1997
---- ---- ----
Packaging products:
Aerosol overcaps.... 20% 18% 21%
Containers.......... 53 54 49
Drink cups.......... 10 15 17
Other............... 9 5 5
Housewares............ 8 8 8
The Company believes that it derives a strong competitive position from its
state-of-the-art production capabilities, extensive array of proprietary molds
in a wide variety of sizes and styles and dedication to service and quality. In
the aerosol overcap market, the Company distinguishes itself with superior color
matching capabilities, which is of extreme importance to its base of
image-conscious consumer products customers, and proprietary packing equipment,
which enables the Company to deliver a higher quality product while lowering
warehousing and shipping costs. In the container and drink cup markets, an
in-house graphic arts department and sophisticated printing and decorating
capabilities permit the Company to offer extensive value-added decorating
options. The Company believes that it is an industry innovator, particularly in
the area of decoration. These market-related strengths, combined with the
Company's modern proprietary mold technology, high speed molding capabilities
and multiple-plant locations, all contribute to the Company's strong market
position.
In addition to these marketing and manufacturing strengths, the Company
believes that its close working relationships with customers are crucial to
maintaining market positions and developing future growth opportunities. The
Company employs a direct sales force which is focused on working with customers
and the Company's production and product design personnel to develop customized
packaging that enhances customer product differentiation and improves product
performance. The Company works to develop innovative new products and identify
and pursue non-traditional markets that can use existing Company products.
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HISTORY
Imperial Plastics, the Company's predecessor, was established in 1967 in
Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983 to
purchase substantially all of the assets of Imperial Plastics. In 1988, Old
Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading
manufacturer of aerosol overcaps, and subsequently relocated Gilbert Plastics'
production to Old Berry's Evansville, Indiana facility. In 1990, the Company and
Holding, the holder of 100% of the outstanding capital stock of the Company,
were formed to purchase the assets of Old Berry. In February 1992, the Company
acquired substantially all of the assets (the "Mammoth Acquisition") of the
Mammoth Containers division of Genpak Corporation.
In March 1995, Berry Sterling Corporation, a newly formed wholly owned
subsidiary of the Company ("Berry Sterling"), acquired substantially all of the
assets of Sterling Products, Inc. (the "Sterling Products Acquisition"), a
producer of injection molded plastic drink cups and lids. Management believes
that the Sterling Products Acquisition gave the Company immediate penetration
into a rapidly expanding plastic drink cup market. In December 1995, Berry
Tri-Plas Corporation (formerly Berry-CPI Corp.), a wholly owned subsidiary of
the Company ("Berry Tri-Plas"), acquired substantially all of the assets of
Tri-Plas, Inc. (the "Tri-Plas Acquisition"), a manufacturer of injection molded
containers and lids, and added manufacturing plants in Charlotte, North Carolina
and York, Pennsylvania. Management believes that the Tri-Plas Acquisition gave
the Company an immediate presence in the polypropylene container product line,
which is mainly used for food and "hot fill" applications.
In January 1997, the Company acquired certain assets of Container Industries,
Inc. ("Container Industries"), a manufacturer and marketer of injection molded
industrial and pry-off containers for building products and other industrial
markets (the "Container Industries Acquisition"). Management believes the
acquisition of Container Industries has provided additional market presence on
the west coast, primarily in the pry-off container product line. Also, in
January 1997, the Company acquired PackerWare Corporation ("PackerWare"), a
manufacturer and marketer of plastic containers, drink cups, housewares, and
lawn and garden products (the "PackerWare Acquisition"). Management believes
that the PackerWare Acquisition significantly diversified and expanded the
Company's position in the drink cup business and gave the Company immediate
penetration into the housewares market. The acquisition also provided the
Company with a plant located in Lawrence, Kansas, that is well-situated to
service its markets.
In May 1997, Berry Plastics Design Corporation ("Berry Design"), a newly
formed wholly owned subsidiary of the Company, acquired substantially all of the
assets of Virginia Design Packaging Corp. ("Virginia Design"), a manufacturer
and marketer of injection-molded containers used primarily for food packaging.
Management believes that the acquisition of these assets has enhanced the
Company's position in the food packaging and food service markets. In August
1997, the Company acquired Venture Packaging, Inc. ("Venture Packaging"), a
manufacturer and marketer of injection-molded containers used in the food, dairy
and various other markets (the "Venture Packaging Acquisition"). Management
believes that the Venture Packaging Acquisition strategically assisted the
Company in marketing its product line of open-top containers and lids.
In July 1998, NIM Holdings ("NIM Holdings"), a newly-formed wholly-owned
subsidiary of the Company, acquired all of the capital stock of Norwich
Injection Moulders Limited ("Norwich Moulders") of Norwich, England (the "Berry
UK Acquisition"), a manufacturer and marketer of injection-molded overcaps and
closures for the European market. In fiscal 1999, the Company changed the name
from Norwich Injection Moulders Limited to Berry Plastics UK Limited ("Berry
UK"). Management believes that the Berry UK Acquisition will provide the Company
with a production platform that will allow it to better serve its global
customers and to introduce its product lines in Europe. In October 1998, Knight
Plastics, Inc. ("Knight") acquired substantially all of the assets of the Knight
Engineering and Plastics Division of Courtaulds Packaging Inc. (the "Knight
Acquisition"), a manufacturer of aerosol overcaps. Management believes that the
Knight Acquisition will enhance the Company's overcap business and better
position the Company to meet the needs of its domestic and multi-national
customers.
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In July 1999, the Company acquired all of the outstanding capital stock of
CPI Holding Corporation ("CPI Holding"), the parent company of Cardinal
Packaging, Inc. ("Cardinal"), for aggregate consideration of approximately $72.0
million (the "Cardinal Acquisition"). The purchase was financed through the
issuance by Berry of $75.0 million of 11% Senior Subordinated Notes. Cardinal, a
manufacturer and marketer of open-top containers had fiscal 1998 net sales of
approximately $54.0 million. Management believes that the Cardinal Acquisition
will enhance the Company's open-top container product selection and provide many
of its customers with a single packaging supplier.
PACKAGING PRODUCTS
AEROSOL OVERCAP MARKET
Based on discussions with our customers, sales representatives and external
sales brokers, the Company believes it is the worldwide leader in the production
of aerosol overcaps. Approximately 20% of the U.S. market consists of marketers
who produce overcaps in-house for their own needs. Management believes that a
portion of these in-house producers will increase the outsourcing of their
production to high technology, low cost manufacturers, such as the Company, as a
means of reducing manufacturing assets and focusing on their core marketing
objectives.
The Company's aerosol overcaps are used in a wide variety of consumer goods
markets 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 are customers of the
Company for some portion of their needs. In fiscal 1999, no single overcap
customer accounted for more than 2% of the Company's total net sales.
Management believes that, over the years, the Company has developed several
significant competitive advantages, including a reputation for outstanding
quality, short lead-time requirements to fill customer orders, long-standing
relationships with major customers, the ability to accurately reproduce over
3,500 colors, proprietary packing technology that minimizes freight cost and
warehouse space, high-speed, low-cost molding and decorating capability and a
broad product line of proprietary molds. In addition, the Company received a
"Supplier Quality Achievement Award" in 1998 from SC Johnson Wax. The Company
continues to develop new products in the overcap market, including the
"spray-thru" line of aerosol overcaps.
Major competitors in this market include Dubuque Plastics, Cobra and
Transcontainer. In addition, a number of companies, including several of the
Company's customers (e.g., S.C. Johnson and Reckitt & Colman), currently produce
aerosol overcaps for their own use.
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CONTAINER MARKET
The Company classifies its containers into five product lines: thinwall,
pry-off, dairy, polypropylene and industrial. Management believes that the
Company is the leading U.S. manufacturer in the thinwall, pry-off and frozen
dessert (component of dairy) container markets. Management considers industrial
containers to be a commodity market, characterized by little product
differentiation and an absence of higher margin niches. The following table
describes each of the Company's five product lines.
<TABLE>
<CAPTION>
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PRODUCT LINE DESCRIPTION SIZES MAJOR END MARKETS
------------ ----------- ----- -----------------
<S> <C> <C> <C>
Thinwall Thinwalled, multi-purpose containers 6 oz. to 2 gallons Food, promotional products, toys and a
with or without handles and lids wide variety of other uses
Pry-off Containers having a tight lid-fit and 4 oz. to 2 gallons Building products, adhesives, pool and
requiring an opening device and also other chemicals, and other industrial
meet the Consumer Product Safety uses
Commission standards for child safety
Thinwall containers in traditional 6 oz. to 5 lbs., Cultured dairy products including
Dairy dairy market sizes and styles Multi-pack yogurt, cottage cheese, sour cream and
dips, frozen desserts
Polypropylene Usually clear containers in round, 6 oz. to 5 lbs. Food, deli, sauces, salads
oblong or rectangular shapes
Industrial Thick-walled, larger pails designed to 2.5 to 5 gallons Building products, chemicals, paints,
accommodate heavy loads other industrial uses
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</TABLE>
The largest end-uses for the Company's containers are food products, building
products, chemicals and dairy products. The Company has a diverse customer base
for its container lines, and no single container customer exceeded 2% of the
Company's total net sales in fiscal 1999.
Management believes that the Company offers the broadest product line among
U.S.-based injection-molded plastic container manufacturers. The Company's
container capacities range from 4 ounces to 5 gallons and are offered in various
styles with accompanying lids, bails and handles, as well as a wide array of
decorating options. In addition to a complete product line, the Company has
sophisticated printing capabilities, an in-house graphic arts department, low
cost manufacturing capability with eleven plants strategically located
throughout the United States and a dedication to high quality products and
customer service. Product engineers work with customers to design and
commercialize new containers. In addition, as part of the Company's dedication
to customer service, the Company provides filling machine equipment to many of
the its customers, primarily in the dairy market, and also provides the services
necessary to operate such equipment. The Company believes providing such
equipment and services increases customer retention by increasing the customer's
production efficiency.
The Company seeks to develop niche container products and new applications by
taking advantage of the Company's state-of-the-art decorating and graphic arts
capabilities and dedication to service and quality. Management believes that
these capabilities have given the Company a significant competitive advantage in
certain high-margin niche container applications for specialized products.
Examples include popcorn containers for new movie promotions and professional
and college sporting and entertainment events, where the ability to produce
sophisticated and colorful graphics is crucial to the product's success. In
order to identify new applications for existing products, the Company relies
extensively on its national sales force. Once these opportunities are
identified, the Company's sales force interfaces with the Company's product
design engineers to satisfy customers' needs.
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In non-industrial containers, the Company's strongest competitors include
Airlite, Sweetheart, Landis, and Polytainers. The Company also produces
commodity industrial pails for a market which is dominated by large volume
competitors such as Letica, Plastican, NAMPAC and Ropak. The Company does not
participate heavily in this market due to generally lower margins. The Company
intends to selectively participate in the industrial container market when
higher margin opportunities, equipment utilization or customer requirements make
participation an attractive option.
DRINK CUP MARKET
The Company believes that it is the leading provider of injection molded
plastic drink cups in the U.S. As beverage producers, convenience stores and
fast food restaurants increase their marketing efforts for larger sized drinks,
the Company believes that the plastic drink cup market will expand because of
plastic's desirability over paper for larger drink cups. The Company produces
injection-molded plastic cups that range in size from 12 to 64 ounces. Primary
markets are fast food and family dining restaurants, convenience stores,
stadiums, and retail stores. Virtually all cups are decorated, often as
promotional items, and Berry is known in the industry for innovative,
state-of-the-art graphics capability.
Berry has historically supplied a full line of traditional straight-sided and
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 PackerWare
Acquisition, the Company expanded its presence 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 the Company's fastest
growing drink cups. Major drink cup competitors include Packaging Resources
Incorporated, Pescor Plastics and WNA (formerly Cups Illustrated).
CUSTOM MOLDED PRODUCTS AND CLOSURES MARKETS
The Company also produces custom molded products by utilizing molds provided
by its customers. Typically, the low cost of entry in the custom molded products
market creates a commodity-like marketplace. However, the Company has focused
its custom molding efforts on those customers that are cognizant of the
Company's mold and product design expertise, superior color matching abilities
and sophisticated multi-color printing capabilities. The majority of the
Company's custom business requires specialized equipment and expertise.
The Company entered the closures market as a result of the Berry UK
Acquisition in July 1998. The Company's participation is primarily in the U.K.
market. The primary product is a foil sealed milk cap for which demand has
increased in recent years with the U.K.'s milk market trending to plastic
containers. Norwich offers a broad product line including dispensing, tamper
evident and custom molded closures.
HOUSEWARES MARKET
The housewares market is a multi-billion dollar market. The Company's
participation is focused on producing seasonal (spring and summer)
semi-disposable plastic housewares and plastic lawn and garden products.
Examples of our products include plates, bowls, pitchers, tumblers and outdoor
flower pots. Berry sells virtually all of its 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 PackerWare
branded products are often co-branded by the Company's customers.
The Company's position in this market has been to provide a high value to
consumers at a relatively modest price, consistent with the key price points of
the retail marketers. Berry believes outstanding service and ability to deliver
products with timely combination of color and design further enhance its
position in this market. This focus allowed PackerWare to be named 1998 Vendor
of the Year by Wal-Mart in its Housewares division.
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<PAGE>
MARKETING AND SALES
The Company reaches its large and diversified base of over 7,000 customers
primarily through its direct field sales force. These field sales
representatives are focused on individual product lines, but are encouraged to
sell all Company products to serve the needs of the Company's customers. The
Company believes that a direct field sales force is able to better focus on
target markets and customers, with the added benefit of permitting the Company
to control pricing decisions centrally. The Company also utilizes the services
of manufacturing representatives to assist its direct sales force.
The Company believes that it produces a high level of customer satisfaction.
Highly skilled customer service representatives are located in each of the
Company's facilities to support the national field sales force. In addition,
telemarketing representatives, marketing managers and sales/marketing executives
oversee the marketing and sales efforts. Manufacturing and engineering personnel
work closely with field sales personnel to satisfy customers' needs through the
production of high quality, value-added products and on-time deliveries.
Additional marketing and sales techniques include a Graphic Arts department
with computer-assisted graphic design capabilities and in-house production of
photopolymer printing plates. Berry also has a centralized Color Matching and
Materials Blending department that utilizes a computerized spectrophotometer to
insure that colors match those requested by customers.
MANUFACTURING
GENERAL
The Company manufactures its products using the plastic injection molding
process. The process begins when plastic resin, in the form of small pellets, is
fed into an injection molding machine. The injection molding machine then melts
the plastic resin and injects it into a multi-cavity steel mold, forcing the
plastic resin to take the final shape of the product. At the end of each molding
cycle (generally five to 25 seconds), the plastic parts are ejected from the
mold into automated handling systems from which they are packed in corrugated
containers for further processing or shipment. After molding, the product may be
either decorated (printing, silk-screening, labeling) or assembled (e.g., bail
handles fitted to containers). The Company believes that its molding and
decorating capabilities are among the best in the industry.
The Company's overall manufacturing philosophy is to be a low-cost producer
by using high speed molding machines, modern multi-cavity hot runner, cold
runner and insulated runner molds, extensive material handling automation and
sophisticated printing technology. The Company utilizes state-of-the-art robotic
packaging processes for large volume products, which enables the Company to
deliver a higher quality product (due to reduced breakage) while lowering
warehousing and shipping costs (due to more efficient use of space). Each plant
has complete tooling maintenance capability to support molding and decorating
operations. The Company has historically made, and intends to continue to make,
significant capital investments in plant and equipment because of the Company's
objectives to grow, improve productivity, and maintain competitive advantages.
PRODUCT DEVELOPMENT
The Company utilizes full-time product engineers who use three-dimensional
computer-aided-design (CAD) technology to design and modify new products and
prepare mold drawings. Engineers use an in-house model shop, which includes a
thermoforming machine, to produce prototypes and sample parts. The Company can
simulate the molding environment by running unit-cavity prototype molds in a
small injection molding machine dedicated to research and development of new
products. Production molds are then designed and outsourced for production by
various companies in the United States and Canada with whom the Company has
extensive experience and established relationships. The Company's engineers
oversee the mold-building process from start to finish.
-11-
<PAGE>
QUALITY ASSURANCE
Each plant extensively utilizes Total Quality Management philosophies,
including the use of statistical process control and extensive involvement of
employees to increase productivity. This teamwork approach to problem-solving
increases employee participation and provides necessary training at all levels.
The Evansville, Henderson, Iowa Falls, Charlotte, and Lawrence plants have been
approved for ISO 9000 certification, which certifies compliance by a company
with a set of shipping, trading and technology standards promulgated by the
International Standardization Organization ("ISO"). The Company is actively
pursuing ISO certification in all of the remaining facilities. Extensive testing
of parts for size, color, strength and material quality using statistical
process control (SPC) techniques and sophisticated technology is also an ongoing
part of the Company's traditional quality assurance activities.
SYSTEMS
Berry utilizes a fully integrated computer software system at its plants
capable of producing complete financial and operational reports. This accounting
and control system is easily expandable to add new features and/or locations as
the Company grows. In addition, the Company has in place a sophisticated quality
assurance system based on ISO 9000 certification, a bar code based material
management system and an integrated manufacturing system.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important raw material purchased by the Company is plastic resin.
The Company purchased approximately $82.4 million of resin in fiscal 1999.
Approximately 66% of the resin pounds purchased were high density polyethylene
("HDPE"), 10% linear low density polyethylene and 24% polypropylene. The
Company's purchasing strategy is to deal with only high-quality, dependable
suppliers, such as Dow, Union Carbide, Chevron, Nova, Equistar, and Mobil.
Although the Company does not have any supply requirements contracts with its
key suppliers, management believes that the Company has maintained outstanding
relationships with these key suppliers over the past several years and expects
that such relationships will continue into the foreseeable future. Based on its
experience, the Company believes that adequate quantities of plastic resins will
be available, but no assurances can be given.
EMPLOYEES
At the end of fiscal 1999, the Company had approximately 2,800 employees. No
employees of the Company are covered by collective bargaining agreements.
PATENTS AND TRADEMARKS
The Company has numerous patents and trademarks with respect to its products.
None of the patents or trademarks are considered by management to be material to
the business of the Company. See "Legal Proceedings" below.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes or otherwise relating to the protection of
the environment. The Company believes that it is in substantial compliance with
applicable environmental laws and regulations. However, the Company cannot
predict with any certainty that it will not in the future incur liability under
environmental statutes and regulations with respect to non-compliance with
environmental laws, contamination of sites formerly or currently owned or
operated by the Company (including contamination caused by prior owners and
operators of such sites) or the off-site disposal of hazardous substances.
-12-
<PAGE>
Based upon a May 1998 compliance inspection, the Ohio Environmental
Protection Agency ("OEPA") issued a Notice of Violation dated June 23, 1998 to
Venture Packaging alleging that the Monroeville, Ohio facility failed to file
certain reports required pursuant to the Federal Emergency Planning and
Community Right-to-Know Act of 1986 (also known as "SARA Title III") for
reporting years 1994 and 1995. The matter has since been closed by the OEPA, and
no fines or penalties were assessed.
Like any manufacturer, the Company is subject to the possibility that it may
receive notices of potential liability, pursuant to CERCLA or analogous state
laws, for cleanup costs associated with offsite waste recycling or disposal
facilities at which wastes associated with its operations have allegedly come to
be located. Liability under CERCLA is strict, retroactive and joint and several.
No such notices are currently pending.
The Food and Drug Administration (the "FDA") regulates the material content
of direct-contact food containers and packages, including certain thinwall
containers manufactured by the Company. The Company uses approved resins and
pigments in its direct contact food products and believes it is in material
compliance with all such applicable FDA regulations.
The plastics industry, including the Company, 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
the Company's products, HDPE, is recyclable, and, accordingly, the Company
believes that the legislation promulgated to date and such initiatives to date
have not had a material adverse effect on the Company. There can be no assurance
that any such future legislative or regulatory efforts or future initiatives
would not have a material adverse effect on the Company. On January 1, 1995,
legislation in Oregon, California and Wisconsin went into effect requiring
products packaged in rigid plastic containers to comply with standards intended
to encourage recycling and increased use of recycled materials. Although the
regulations vary by state, the principal requirement is the use of post consumer
regrind ("PCR") as an ingredient in containers sold for non-food uses.
Additionally, Oregon and California allow lightweighting of the container or
concentrating the product sold in the container as options for compliance.
Oregon and California provide for an exemption from all such regulations if
statewide recycling reaches or exceeds 25% of rigid plastic containers. In
September 1996, California passed a new bill permanently exempting food and
cosmetics containers from the foregoing requirement. However, non-food
containers are still required to comply.
In December 1996, the Department of Environmental Quality estimated that
Oregon had met its recycling goal of 25% for 1997 (based on 1996 data), and
accordingly, 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. The Company, in order
to facilitate individual customer compliance with these regulations, is
providing customers the option of purchasing containers with reduced weight.
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<PAGE>
ITEM 2. PROPERTIES
The following table sets forth the Company's principal facilities:
<TABLE>
<CAPTION>
LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED
-------- ----- -------------- --- ------------
<S> <C> <C>
Evansville, IN 13.4 420,000 Headquarters and Owned
manufacturing Owned
Henderson, NV 12.0 168,000 Manufacturing Owned
Iowa Falls, IA 14.0 101,000 Manufacturing Owned
Charlotte, NC 32.0 148,000 Manufacturing Owned
York, PA 10.0 40,000 Manufacturing Leased (expires December 2001)
Lawrence, KS 19.3 423,000 Manufacturing Owned
Suffolk, VA 14.0 102,000 Manufacturing Owned
Monroeville, OH 19.0 112,000 Manufacturing Owned
Norwich, England 5.0 44,000 Manufacturing Owned
Woodstock, IL 11.7 98,000 Manufacturing Owned
Streetsboro, OH 12.0 140,000 Manufacturing Owned
Minneapolis, MN 3.0 110,000 Manufacturing Leased (expires December 2002)
</TABLE>
The Company believes that its property and equipment are well-maintained, in
good operating condition and adequate for its present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings involving routine claims
which are incidental to its business. Although the Company's legal and financial
liability with respect to such proceedings cannot be estimated with certainty,
the Company believes that any ultimate liability would not be material to its
financial condition.
The Company and/or Berry Sterling are currently litigating two lawsuits that
involve United States Patent No. Des. 362,368 (the "'368 Patent"). The '368
Patent claims an ornamental design for a cup that fits an automobile cup holder.
On September 21, 1995, Berry Sterling filed suit in United States District
Court, Eastern District of Virginia, against Pescor Plastics, Inc. ("Pescor
Plastics") for infringement of the '368 Patent. Pescor Plastics filed
counterclaims seeking a declaratory judgment of invalidity and non-infringement,
and damages under the Lanham Act. On December 28, 1995, Berry Sterling filed
suit against Packaging Resources Incorporated ("Packaging Resources") in United
States District Court, Southern District of New York, for infringement of the
'368 Patent 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 the '368
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 '368 Patent to be invalid on
the grounds of functionality and obviousness and awarded Pescor $150,000 on its
counterclaim. The jury also found that Pescor willfully infringed the '368
Patent and awarded Berry Sterling damages of $1.2 million, but this award was
not included in the judgment because of the finding of the invalidity of the
`368 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
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<PAGE>
Court. On April 29, 1998, Berry Sterling filed a Notice of Appeal of the Court's
judgment and the denial of its motion to set aside the jury's verdict. 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 decided Berry Sterling's appeal in the Pescor Plastics case. The Federal
Circuit affirmed the jury's finding that the 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 in the Pescor case was $24,171, including costs
and applicable interest. The judgement was paid in September 1999, and the case
was closed.
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 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-15-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public trading market for any class of common stock of the
Company, Holding, Berry Iowa, Berry Tri-Plas, Berry Sterling, Aerocon,
PackerWare, Berry Design, Venture Packaging, Venture Midwest, Venture Southeast,
NIM Holdings, Berry UK, Knight, CPI Holding, Cardinal, Norwich Acquisition
Limited or Berry Acquisition. With respect to the capital stock of Holding, as
of March 28, 2000, there were three holders of the Class A Voting Common Stock,
three holders of the Class A Nonvoting Common Stock, 41 holders of the Class B
Voting Common Stock, 81 holders of the Class B Nonvoting Common Stock and 40
holders of the Class C Nonvoting Common Stock. All of the issued and outstanding
common stock of the Company is held by Holding, and all of the issued and
outstanding common stock of Berry Iowa, Berry Tri-Plas, Berry Sterling, Aerocon,
PackerWare, Berry Design, Venture Packaging, NIM Holdings, CPI Holding, Knight,
and Berry Acquisition is held by the Company. All of the issued and outstanding
common stock of Venture Midwest and Venture Southeast is held by Venture
Packaging, and all of the issued and outstanding common stock of Berry UK is
held by NIM Holdings. All of the issued and outstanding common stock of Cardinal
is held by CPI Holding, and all of the issued and outstanding common stock of
Norwich Acquisition Limited is held by Berry UK.
On April 21, 1994, the Company paid a $50.0 million dividend, which was
financed through the issuance of the 1994 Notes, to Holding, the holder of all
of its common stock. Holding utilized the $50.0 million dividend to make a
distribution to the holders of its common stock and holders of certain other
equity interests.
Other than the payment of the $50.0 million distribution described above,
Holding has not paid cash dividends on its capital stock. Because Holding
intends to retain any earnings to provide funds for the operation and expansion
of the Company's business and to repay outstanding indebtedness, Holding does
not intend to pay cash dividends on its common stock in the foreseeable future.
Furthermore, as a holding company with no independent operations, the ability of
Holding to pay cash dividends will be dependent on the receipt of dividends or
other payments from the Company. Under the terms of the Indenture dated as of
April 21, 1994 (the "1994 Indenture"), among the Company, Holding, Berry Iowa,
Berry Tri-Plas and United States Trust Company of New York, as Trustee ("U.S.
Trust", the Indenture dated June 18, 1996 (the "1996 Indenture"), between
Holding and First Trust of New York, National Association, as Trustee, and also
the Indenture dated August 24, 1998 (the "1998 Indenture") and the Indenture
dated July 6, 1999 (the "1999 Indenture"), among Holding, all of its direct and
indirect subsidiaries and U.S. Trust, Holding and the Company are not permitted
to pay any dividends on their common stock for the foreseeable future. In
addition, the Credit Facility contains covenants that, among other things,
restricts the payment of dividends by the Company. In addition, Delaware law
limits Holding's ability to pay dividends from current or historical earnings or
profits or capital surplus. Any determination to pay cash dividends on common
stock of the Company or Holding in the future will be at the discretion of the
Board of Directors of the Company and Holding, respectively.
On July 6, 1999, the Company issued $75.0 million aggregate principal amount
of 11% Senior Subordinated Notes due 2007, in which Donaldson, Lufkin, and
Jenrette Securities Corporation and Chase Securities Inc. acted as initial
purchaser. The offering was exempt from the registration requirements under the
Securities Act pursuant to Rule 144A and Regulation S promulgated thereunder.
Discount and commissions paid to the initial purchasers in connection with the
offering were $2,250,000.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data are derived from the consolidated
financial statements of Holding which have been audited by Ernst & Young LLP,
independent auditors. The data should be read in connection with the
consolidated financial statements, related notes and other financial information
included herein. Holding's fiscal year is a 52/53 week period ending generally
on the Saturday closest to December 31. All references herein to "1999," "1998,"
"1997," "1996," and "1995" relate to the fiscal years ended January 1, 2000,
January 2, 1999, December 27, 1997, December 28, 1996, and December 30, 1995,
respectively.
<TABLE>
<CAPTION>
BPC HOLDING CORPORATION AND SUBSIDIARIES
FISCAL
-------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales .............................. $ 328,834 $ 271,830 $ 226,953 $ 151,058 $ 140,681
Cost of goods sold ..................... 241,067 199,227 180,249 110,110 102,484
--------- --------- --------- --------- ---------
Gross margin ........................... 87,767 72,603 46,704 40,948 38,197
Operating expenses (a) ................. 54,118 44,001 30,505 23,679 17,670
--------- --------- --------- --------- ---------
Operating income ....................... 33,649 28,602 16,199 17,269 20,527
Other expenses (b) ..................... 1,416 1,865 226 302 127
Interest expense, net (c) .............. 40,817 34,556 30,246 20,075 13,389
--------- --------- --------- --------- ---------
Income (loss) before income taxes ...... (8,584) (7,819) (14,273) (3,108) 7,011
Income taxes ........................... 554 (249) 138 239 678
--------- --------- --------- --------- ---------
Net income (loss) ...................... (9,138) (7,570) (14,411) (3,347) 6,333
Preferred stock dividends .............. 3,776 3,551 2,558 1,116 --
Amortization of preferred stock discount 292 292 74 -- --
--------- --------- --------- --------- ---------
Net income (loss) attributable to common
shareholders ......................... $ (13,206) $ (11,413) $ (17,043) $ (4,463) $ 6,333
========= ========= ========= ========= =========
Balance Sheet Data (at end of year):
Working capital ........................ $ 10,527 $ 4,762 $ 20,863 $ 15,910 $ 13,012
Fixed assets ........................... 146,792 120,005 108,218 55,664 52,441
Total assets ........................... 340,807 255,317 239,444 145,798 103,465
Total debt ............................. 403,989 323,298 306,335 216,046 111,676
Stockholders' equity (deficit) ......... (133,471) (120,357) (108,975) (97,550) (32,484)
Other Data:
Depreciation and amortization (d) ...... $ 31,795 $ 24,830 $ 19,026 $ 11,331 $ 9,536
Capital expenditures ................... 30,738 22,595 16,774 13,581 11,247
</TABLE>
(a)Operating expenses include business start-up and machine integration
expenses of $3,649 related to recent acquisitions and plant consolidation
expenses of $1,501 related to the shutdown and reorganization of facilities
during fiscal 1999; business start-up and machine integration expenses of
$1,272 related to the 1997 Acquisitions (as hereinafter defined), plant
consolidation expenses of $2,370 and $191 related to the shutdown of the
Anderson, South Carolina and Reno, Nevada facilities, and start-up expenses
of $109 and $142 related to the Norwich and Knight Acquisitions,
respectively, during fiscal 1998; business start-up and machine integration
expenses of $3,255 related to the 1997 Acquisitions, plant consolidation
expenses of $480 and $368 related to the shutdown of the Winchester, Virginia
and Reno, Nevada facilities, respectively, during fiscal 1997; one-time
compensation expense of $2,762, Tri-Plas Acquisition start-up expenses of
$671 and $907 for costs related to the consolidation of the Winchester,
Virginia facility during fiscal 1996; and pursued acquisition costs of $473
and business start-up expenses of $394 in fiscal 1995.
(b)Other expenses consist of loss on disposal of property and equipment for the
respective years.
(c)Includes non-cash interest expense of $8,888, $1,765, $2,005, $1,212, and
$950 in fiscal 1999, 1998, 1997, 1996, and 1995, respectively.
(d)Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt premium/discount amortization which
are included in interest expense.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless the context discloses otherwise, the "Company" as used in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations shall include Holding and its subsidiaries on a consolidated basis.
The following discussion should be read in conjunction with the consolidated
financial statements of Holding and its subsidiaries and the accompanying notes
thereto, which information is included elsewhere herein.
The Company is highly leveraged. The high degree of leverage could have
important consequences, including, but not limited to, the following: (i) a
substantial portion of Berry's cash flow from operations must be dedicated to
the payment of principal and interest on its indebtedness, thereby reducing the
funds available to Berry for other purposes; (ii) Berry's ability to obtain
additional debt financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired; (iii) certain of Berry's borrowings will be at variable rates of
interest, which will expose Berry to the risk of higher interest rates; (iv) the
indebtedness outstanding under the Credit Facility is secured by substantially
all of the assets of Berry; (v) Berry is substantially more leveraged than
certain of its competitors, which may place Berry at a competitive disadvantage,
particularly in light of its acquisition strategy; and (vi) Berry's degree of
leverage may hinder its ability to adjust rapidly to changing market conditions
and could make it more vulnerable in the event of a downturn in general economic
conditions or its business.
Berry's ability to pay principal and interest on the Notes will depend on
Berry's financial and operating performance, which in turn are subject to
prevailing economic conditions and to certain financial, business and other
factors beyond its control. However, if Berry cannot generate sufficient cash
flow from operations to meet its obligations, then it may be forced to take
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There is no assurance that any of these remedies could be effected on
satisfactory terms, if at all.
Consolidated earnings have been insufficient to cover fixed charges by $7.1
million, $7.0 million, and $13.9 million for fiscal year 1999, 1998, and 1997,
respectively. In addition, Holding has experienced consolidated net losses
during each of such periods principally as a result of expenses and charges
incurred in connection with acquisitions by Berry. These net losses were $9.1
million, $7.6 million, and $14.4 million for fiscal 1999, 1998, and 1997.
Holding expects that it will continue to experience consolidated net losses for
the foreseeable future.
YEAR ENDED JANUARY 1, 2000
COMPARED TO YEAR ENDED JANUARY 2, 1999
NET SALES. Net sales increased 21% to $328.8 million in 1999, up $57.0
million from $271.8 million in 1998, including an approximate 1% increase in net
selling price due to increased raw material costs. Plastic packaging product net
sales increased $53.2 million in fiscal 1999. Within this segment, aerosol
overcap net sales increased $17.3 million primarily due to the Knight
Acquisition. In addition, container sales increased $27.5 million, primarily due
to the Cardinal Acquisition and continued market strength of base products. Net
sales in the drink cup product line decreased $6.2 million in 1999 primarily as
a result of a large promotion in 1998 and increased competition in the drink cup
market. Other plastic packaging product lines, including closures and custom
molded products, increased $14.5 million due to a large custom program in 1999
and the acquisition of Berry UK in 1998. Housewares net sales increased $3.8
million or 18% in 1999 due primarily to new products and strong consumer demand.
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<PAGE>
GROSS MARGIN. Gross margin increased $15.2 million or 21% from $72.6 million
(27% of net sales) in 1998 to $87.8 million (27% of net sales) in 1999. This
increase of 21% includes the combined impact of the added Cardinal, Berry UK,
and Knight sales volume, acquisition integration, and productivity improvement
initiatives offset partially by higher raw material costs. 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, the Company closed
its Arlington Heights, Illinois facility (acquired in the Knight Acquisition) in
the first quarter of 1999 and its Ontario, California facility (acquired in the
Cardinal Acquisition) in the third quarter of 1999. In addition, the Company
made two configuration changes that were completed in the fourth quarter of 1999
with the Minneapolis, Minnesota (acquired in the Cardinal Acquisition) and Iowa
Falls, Iowa locations closing their molding operations. The business from these
locations are distributed throughout Berry's facilities. Also, significant
productivity improvements were made during the year, including the addition of
state-of-the-art injection molding equipment, molds and printing equipment at
several of the Company's facilities.
OPERATING EXPENSES. Operating expenses during 1999 were $54.1 million (16% of
net sales), compared with $44.0 million (16% of net sales) for 1998. Selling
expenses increased $2.6 million, almost all a result of expanded sales coverage
and recent acquisitions. General and administrative expenses increased $2.7
million in 1999 primarily as a result of recent acquisitions. Research and
development costs increased $0.6 million to $2.3 million in 1999 primarily as a
result of increased new product requests from customers and productivity
improvement initiatives. Intangible amortization increased from $4.1 million in
1998 to $7.2 million for 1999, primarily a result of the amortization of
goodwill ascribed to acquired companies in 1998 and 1999. Other expenses were
$5.1 million for 1999 compared to $4.1 million for 1998. Other expenses in 1999
include business start-up and machine integration expenses of $3.6 million
related to recent acquisitions and plant consolidation expenses of $1.5 million
related to the shutdown and reorganization of facilities. Other expenses in 1998
include business start-up and machine integration expenses of $1.5 million
related to recent acquisitions and plant consolidation expenses of $2.6 million
related to the shutdown of facilities.
INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of
deferred financing costs for 1999, was $40.8 million (12% of net sales) compared
to $34.6 million (13% of net sales) in 1998, an increase of $6.2 million. This
increase is attributed to interest on borrowings related to the acquired
businesses in 1998 and 1999 offset partially by principal reductions. Cash
interest paid in 1999 was $29.8 million as compared to $33.2 million for 1998.
INCOME TAXES. During fiscal 1999, the Company recorded an expense of $0.6
million for income taxes compared to a benefit of $0.2 million for fiscal 1998.
The Company continues to operate in a net operating loss carryforward position
for federal income tax purposes.
NET LOSS. The Company recorded a net loss of $9.1 million in 1999 compared to
a $7.6 million net loss in 1998 for the reasons stated 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 Venture Packaging Acquisition. Net sales in the drink
cup product line increased $2.3 million in 1998 as a result of a large
promotion. Aerosol overcap net sales increased approximately $2.0 million due to
the Knight Acquisition.
Housewares net sales increased $4.0 million or 23% in 1998 due primarily to new
products and strong market demands. The Berry UK Acquisition also brought the
Company 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.
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<PAGE>
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 is 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 1997 Acquisitions (as defined herein) to the most
efficient tooling, providing customers with the best product and customer
service. As part of the integration, the Company closed the Anderson, South
Carolina facility, which was acquired in the Venture Packaging Acquisition, in
1998 with the majority of the business being transferred to the 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 the Company's 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 the 1997 Acquisitions. General and administrative expenses increased
$7.8 million in 1998 primarily as a result of the 1997 and 1998 Acquisitions,
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 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. The 1997 Acquisitions resulted in additional expenses of $3.2 million and
$1.3 million in 1997 and 1998, respectively, for start-up related expenses. The
PackerWare Acquisition included a facility in Reno, Nevada, which was closed in
1997. Expense related to the closing of the Reno facility was $0.5 million and
$0.2 million in 1997 and 1998, respectively. 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 12.50% Series
B Senior Secured Notes due 2006 ("1996 Notes") from the escrow account.
INCOME TAXES. During fiscal 1998, the Company 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. The Company continues to
operate in a net operating loss carryforward position for federal income tax
purposes.
NET LOSS. The Company 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.
INCOME TAX MATTERS
Holding has unused operating loss carryforwards of $30.5 million for
federal income tax purposes which begin to expire in 2010. Alternative minimum
tax credit carryforwards of approximately $3.1 million are available to Holding
indefinitely to reduce future years' federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit facility with Bank of America for a senior secured
line of credit. As of January 1, 2000, the Credit Facility provides the Company
with (i) a $70.0 million revolving line of credit, subject to a borrowing base
formula, (ii) a $2.4 million (using the January 1, 2000 exchange rate) revolving
line of credit in the U.K. ("UK Revolver"), subject to a borrowing base formula,
(iii) a $50.0 million term loan facility, (iv) a $5.2 million (using the January
1, 2000 exchange rate) term loan facility in the U.K. ("UK Term Loan") and (v) a
$4.2 million standby letter of credit facility to support the Company's and its
subsidiaries' obligations under the Nevada Bonds. The indebtedness under the
Credit Facility is guaranteed by Holding and the Company's subsidiaries and is
secured by substantially all of the assets of the Company and guarantors. The
Credit Facility
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<PAGE>
requires the Company 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 January 1, 2000, the Credit Facility required
the Company to have Tangible Capital Funds of not less than $73.9 million and a
maximum leverage ratio of 4.5. In addition, the interest, debt service, and
fixed charge coverage ratios could not be less than 2.5, 1.5, and 1.0,
respectively. At January 1, 2000, the last quarterly test date, the Company was
in compliance with all of the financial covenants tested on such date.
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. Such periodic payments will
aggregate approximately $20.4 million for fiscal 2000. Interest on borrowings
under the Credit Facility is based on either (i) the lender's base rate (which
is the higher of the lender's prime rate and the federal funds rate plus 0.50%)
plus an applicable margin of 0.50% or (ii) LIBOR (adjusted for reserves) plus an
applicable margin of 2.0%, at the Company's option. Following receipt of the
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 1994 Indenture, the 1996 Indenture, the 1998 Indenture, and 1999
Indenture restrict the Company's ability to incur additional debt and contain
other provisions, which could limit the liquidity of the Company. At January 1,
2000, the Company had unused borrowing capacity under the Credit Facility's
borrowing base of $22.3 million, which is not considered additional indebtedness
under the 1994 Indenture, 1996 Indenture, 1998 Indenture or 1999 Indenture. Any
additional indebtedness above the borrowing base requires approval from the
Credit Facility's lenders.
Net cash provided by operating activities was $36.0 million in 1999 as
compared to $34.1 million in 1998. The increase was primarily the result of
improved operating performance as the Company's net loss plus non-cash expenses
improved $5.8 million. 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.
Capital expenditures in 1999 were $30.7 million, an increase of $8.1
million from $22.6 million in 1998. Included in capital expenditures during 1999
was $9.5 million relating to a major facility renovation, production systems and
offices necessary to support production operating levels throughout the Company.
Capital expenditures in 1999 also included investment of $12.7 million for
molds, $3.4 million for molding and printing machines, and $5.1 million for
accessory equipment and systems. The capital expenditure budget for 2000 is
expected to be $33.6 million, including approximately $11.7 million for building
and systems which includes additions to three current facilities, $14.4 million
for molds, $3.8 million for molding and printing machines, and $3.7 million for
accessory equipment.
Net cash provided by financing activities was $71.1 million in 1999 as
compared to $17.6 million in 1998. The $53.5 million increase can be attributed
primarily to the 1999 Notes issuance of $75.0 million to finance the Cardinal
Acquisition. 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.
Increased working capital needs occur whenever the Company experiences strong
incremental demand or a significant rise in the cost of raw material,
particularly plastic resin. However, the Company anticipates that its cash
interest, working capital and capital expenditure requirements for 2000 will be
satisfied through a combination of funds generated from operating activities and
cash on hand, together with funds available under the Credit Facility.
Management bases such belief on historical experience and the substantial funds
available under the Credit Facility. However, the Company cannot predict its
future results of operations.
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<PAGE>
The 1994 Indenture, 1998 Indenture, and 1999 Indenture restrict, and the
Credit Facility prohibits, Berry's ability to pay any dividend or make any
distribution of funds to Holding to satisfy interest and other obligations on
the 1996 Notes. Based upon historical operating results, without a substantial
increase in the operating results of Berry, management anticipates that it will
be unable to generate sufficient cash flow to permit a dividend to Holding in an
amount sufficient to meet Holding's interest payment obligations under the 1996
Notes. Interest on the 1996 Notes is payable semi-annually on June 15 and
December 15 of each year. However, from December 15, 1999 until June 15, 2001,
Holding may, at its option, pay interest, at an increased rate of 0.75% per
annum, in additional 1996 notes valued at 100% of the principal amount thereof.
On December 15, 1999, Holding issued an additional approximately $7.0 million
aggregate principal amount of 1996 Notes in satisfaction of its interest
obligation. After June 15, 2001 or in the event that Holding does not pay
interest in additional notes, management anticipates that such interest
obligations will only be met by refinancing the 1996 Notes or raising capital
through equity offerings. We can not assure you that then-current market
conditions would permit Holding to consummate a refinancing or equity offering.
At January 1, 2000, the Company's cash balance was approximately $2.5
million, and the Company had unused borrowing capacity under the Credit
Facility's borrowing base of approximately $22.3 million.
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company faces various economic risks ranging from an economic downturn
adversely impacting the Company's primary markets to market fluctuations in
plastic resin prices. In the short-term, rapid increases in resin cost may not
be fully recovered through price increases to customers. Also, shortages of raw
materials may occur from time to time. In the long-term, however, raw material
availability and price changes generally do not have a material adverse effect
on gross margin. Cost changes generally are passed through to customers. In
addition, the Company believes that its sensitivity to economic downturns in its
primary markets is less significant due to its diverse customer base and its
ability to provide a wide array of products to numerous end markets.
The Company believes that it is not affected by inflation except to the
extent that the economy in general is thereby affected. Should inflationary
pressures drive costs higher, the Company believes that general industry
competitive price increases would sustain operating results, although there can
be no assurance that this will be the case.
IMPACT OF YEAR 2000
The Company has been modifying or replacing portions of its software since
1991 so that its computer systems will function properly with respect to dates
in the Year 2000 and thereafter. Because this process was commenced early, the
costs incurred to address this issue in any single year have not been
significant. The Company's current business applications are Year 2000
compliant. Acquired businesses are converted to the Company's applications for
Year 2000 compliance and consistency in applications and reporting. The most
recent acquired businesses, Knight and Cardinal, were converted to the Company's
applications by March 1, 1999 and January 10, 2000, respectively.
However, the Company is currently in the process of replacing its 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
have been experienced in the business due to acquisitions in recent years. The
anticipated cost of this conversion is about $2.8 million of which $2.6 million
has been paid through January 1, 2000. 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 2000.
The Company believes it has an effective program in place to resolve all
internal Year 2000 issues and that all such issues were adequately resolved
prior to January 1, 2000. An inventory of computer based systems has been
compiled and verified through testing and supplier verification. The Company
replaced the voicemail system in the Lawrence plant for about $80,000. In
addition, the computer on the palletizer in the Woodstock plant has been
back-dated, which has not had any impact on operations. This system is planned
to be upgraded by the end of 2000.
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<PAGE>
The anticipated cost of this upgrade is about $13,000. No internal Year 2000
problems have been experienced to date by Company.
The major Year 2000 risk that the Company faces is the Year 2000 readiness of
external suppliers of goods and services. This 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
have been completed:
o Identified 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 Identified which suppliers are not compliant or at risk; and
o Engaged in risk assessment and contingency planning for these key
suppliers.
The Company completed a survey of 304 "key suppliers" to determine their Year
2000 status. The Company did not identify any suppliers who were not Year 2000
compliant or at risk. The Company does not currently have any contingency plans
in place. The Company has not experienced any Year 2000 problems with any
suppliers to date.
Management believes that the Company has effectively resolved any potential
Year 2000 problems, has not experienced any Year 2000 problems to date and does
not currently expect to incur any additional costs for Year 2000 compliance.
However, the Company may not have identified and remedied all Year 2000
problems. If any Year 2000 issues arise, any remediation efforts could involve
significant time and expense and may have a material adverse effect on our
business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors F-1
Consolidated Balance Sheets at January 1, 2000 and January 2, 1999 F-2
Consolidated Statements of Operations for the years ended January 1,
2000, January 2, 1999, and December 27, 1997 F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the years ended January 1, 2000, January 2, 1999, and
December 27, 1997 F-5
Consolidated Statements of Cash Flows for the years ended January 1, 2000,
January 2, 1999, and December 27, 1997 F-6
Notes to Consolidated Financial Statements F-7
INDEX TO FINANCIAL STATEMENT SCHEDULES
I. Condensed Financial Information of Parent Company S-1
II. Valuation and Qualifying Accounts S-5
All other schedules have been omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers, directors and certain key personnel of Holding and its
subsidiaries:
<TABLE>
<CAPTION>
NAME AGE TITLE ENTITY
---- --- ----- ------
<S> <C> <C>
Roberto Buaron(1)(4)..................... 53 Chairman and Director Company and Holding
President, Chief Executive Officer and
Martin R. Imbler(1)(4)................... 52 Director Company
President and Director Holding
Executive Vice President, Operations
Ira G. Boots............................. 45 and Director Company
Executive Vice President, Chief
Financial Officer, Treasurer and
James M. Kratochvil...................... 43 Secretary Company
Executive Vice President, Chief
Financial Officer and Secretary Holding
Executive Vice President, Sales and
R. Brent Beeler.......................... 47 Marketing Company
Randy Hobson............................. 34 Vice President, Sales and Marketing Company
Douglas E. Bell.......................... 48 Vice President, Sales and Marketing Company
Stephen P. Cassidy....................... 36 Vice President, Operations Company
Vice President-- Sales and Marketing,
Bruce J. Sims............................ 50 Housewares Company
Lawrence G. Graev(2)(3).................. 55 Director Company and Holding
Vice President, Assistant Secretary and
Joseph S. Levy(2)(3)..................... 31 Director Company and Holding
Donald J. Hofmann, Jr.(1)(2)(3)(4)....... 42 Director Company and Holding
Mathew J. Lori........................... 36 Director Company and Holding
David M. Clarke.......................... 49 Director Company and Holding
</TABLE>
(1) Member of the Stock Option Committee of Holding.
(2) Member of the Audit Committee of Holding.
(3) Member of the Audit Committee of the Company.
(4) Member of the Compensation Committee of the Company.
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<PAGE>
ROBERTO BUARON has been Chairman and a Director of the Company since it was
organized in December 1990. He has also served as Chairman and a Director of
Holding since 1990. He is the Chairman and Chief Executive Officer of First
Atlantic Capital, Ltd. ("First Atlantic"), which he founded in 1989. From 1987
to 1989, he was an Executive Vice President with Overseas Partners, Inc., an
investment management firm. From 1983 to 1986 he was First Vice President of
Smith Barney, Inc., and a General Partner of First Century Partnership, its
venture capital affiliate. Prior to 1983, he was a Principal at McKinsey &
Company. Mr. Buaron is also a director of CFP Holdings, Inc., a processed meat
company.
MARTIN R. IMBLER has been President, Chief Executive Officer and a Director
of the Company since January 1991. He has also served as a Director of Holding
since January 1991, and as President of Holding since May 1996. From June 1987
to December 1990, he was President and Chief Executive Officer of Risdon
Corporation, a cosmetic packaging company. Mr. Imbler was employed by American
Can Company from 1981 to 1987, as Vice President and General Manager of the
East/South Region Food and General Line Packaging business from 1985 to 1987 and
as Vice President, Marketing, from 1981 to 1985. Mr. Imbler is also a Director
of Portola Packaging, Inc., a manufacturer of closures used in the dairy
industry.
IRA G. BOOTS has been Executive Vice President, Operations, and a Director of
the Company since April 1992. Prior to that, Mr. Boots was Vice President of
Operations, Engineering and Product Development of the Company from December
1990 to April 1992. Mr. Boots was employed by Old Berry from 1984 to December
1990 as Vice President, Operations.
JAMES M. KRATOCHVIL has been Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since December 1997. He formerly
served as Vice President, Chief Financial Officer and Secretary of the Company
since 1991, and as Treasurer of the Company since May 1996. He was also promoted
to Executive Vice President, Chief Financial Officer and Secretary of Holding in
December 1997. He formerly served as Vice President, Chief Financial Officer and
Secretary of Holding since 1991. Mr. Kratochvil was employed by Old Berry from
1985 to 1991 as Controller.
R. BRENT BEELER has been Executive Vice President, Sales and Marketing since
February 1996. He formerly served as Vice President, Sales and Marketing of the
Company since December 1990. Mr. Beeler was employed by Old Berry from October
1988 to December 1990 as Vice President, Sales and Marketing.
RANDY HOBSON has been Vice President - Sales and Marketing of the Company
since June 1998. Mr. Hobson was Marketing Manager - Containers for the Company
from November 1997 to June 1998. Prior to that, he was a Regional Sales Manager
from 1992 to November 1997. Mr. Hobson joined Old Berry in 1988.
DOUGLAS E. BELL has been Vice President, Sales and Marketing of the Company
since August 1999. Mr. Bell retired from the Company in June 1998 and worked as
a consultant for the Company until his return in August 1999. From March 1991 to
June 1998, he served as Executive Vice President, Sales and Marketing and a
Director of the Company.
STEPHEN P. CASSIDY has been Vice President, Operations of the Company since
August 1999. From January 1997 to August 1999, he was Vice President of
Courtaulds Packaging. From 1995 to 1997, Mr. Cassidy was Operating Director of
Courtaulds Asia. Mr. Cassidy was Chief Executive from 1993 to 1995 for
Courtaulds Powder Coatings Malaysia.
BRUCE J. SIMS has been Vice President, Sales and Marketing, Housewares of the
Company since January 1997. Prior to the PackerWare Acquisition, Mr. Sims served
as President of PackerWare from March 1996 to January 1997 and as Vice President
from October 1994 to March 1996. From January 1990 to October 1994 he was Vice
President of the Miner Container Corporation, a national injection molder. Mr.
Sims was Executive Vice President of MKM Distribution Company from 1985 to 1990.
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<PAGE>
LAWRENCE G. GRAEV has been a Director of the Company and Holding since August
1995. Mr. Graev is a partner in 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 the Company
and Holding since April 1995. Mr. Levy has been a Director of Holding and the
Company since April 1998. Mr. Levy has been Principal of First Atlantic since
December 1999, and prior to that Mr. Levy had been a Vice President.
DONALD J. HOFMANN, JR. has been a Director of Holding and the Company since
June 1996. Mr. Hofmann has been a General Partner of Chase Capital Partners
since 1992. Prior to that, he was head of MH Capital Partners Inc., the equity
investment arm of Manufacturers Hanover. Mr. Hofmann is also a director of
Advanced Accessory Systems, LLC, a manufacturer of towing and rack systems and
related accessories for automobiles.
MATHEW J. LORI has been a Director of Holding and the Company since October
1996. Mr. Lori has been a Principal with Chase Capital Partners since January
1998, and prior to that, Mr. Lori had been an Associate since April 1996. From
September 1993 to March 1996, he was an Associate in the Merchant Banking Group
of The Chase Manhattan Bank, N.A.
DAVID M. CLARKE has been a Director of Holding and the Company since June
1996. Mr. Clarke is a Managing Director with Aetna, Inc., a private equity
investment group and, prior to that, he had been a Vice President in the
Investment Group of Aetna Life Insurance Company from 1988 to 1996.
The Stockholders Agreement (as defined herein) contains provisions regarding the
election of directors. See "Certain Relationships and Related Transactions -
Stockholders Agreements."
BOARD COMMITTEES
The Board of Directors of Holding has an Audit Committee and a Stock Option
Committee, and the Board of Directors of the Company has an Audit Committee and
a Compensation Committee. The Audit Committees oversee the activities of the
independent auditors and internal controls. The Stock Option Committee
administers the BPC Holding Corporation 1996 Stock Option Plan. The Compensation
Committee makes recommendations to the Board of Directors of the Company
concerning salaries and incentive compensation for officers and employees of the
Company.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during fiscal 1999, 1998 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ SECURITIES
FISCAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION(1)
--------------------------- ----- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Martin R. Imbler 1999 $ 362,940 $ 121,201 -- $ 1,650
President and Chief Executive Officer 1998 327,397 46,697 -- 1,650
1997 307,396 87,623 __ 1,520
Ira G. Boots 1999 251,163 95,486 -- 1,650
Executive Vice President, Operations 1998 176,631 39,024 -- 1,650
1997 151,691 72,868 __ 1,520
James M. Kratochvil 1999 200,894 80,083 -- 1,650
Executive Vice President, Chief Financial 1998 142,483 30,413 -- 1,650
Officer, Treasurer and Secretary 1997 119,459 56,307 __ 1,520
R. Brent Beeler 1999 226,504 79,350 -- 1,650
Executive Vice President, Sales and Marketing 1998 145,218 32,621 -- 1,650
1997 125,973 60,554 __ 1,520
Bruce J. Sims 1999 190,922 95,486 -- 1,650
Vice President, Sales and Marketing 1998 163,518 39,024 -- 1,650
1997 413,497 __ -- 1,520
</TABLE>
(1) Amounts shown reflect contributions by the Company under the Company's
401(k) plan.
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<PAGE>
FISCAL YEAR-END OPTION HOLDINGS
The following table provides information on the number of exercisable and
unexercisable management stock options held by the Named Executive Officers at
January 1, 2000.
FISCAL YEAR-END OPTION VALUES(1)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
(#)(2) (2)
Martin R. Imbler 5,930/2,542 $747,180/$320,292
Ira G. Boots 3,650/1,564 459,900/197,064
James M. Kratochvil 2,281/978 287,406/123,228
R. Brent Beeler 2,281/978 287,406/123,228
Bruce J. Sims 650/650 76,700/76,700
(1) None of Holding's capital stock is currently publicly traded. The values
reflect management's estimate of the fair market value of the Class B
Nonvoting Common Stock at January 1, 2000.
(2) All options granted to management of the Company are exercisable for shares
of Class B Nonvoting Common Stock, par value $.01 per share, of Holding.
DIRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of Directors
of Holding or the Company, but directors are reimbursed for out-of-pocket
expenses incurred in connection with their duties as directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Imbler (the "Imbler
Employment Agreement") that expires on June 30, 2001. Base compensation under
the Imbler Employment Agreement for fiscal 1999 was $362,940. The Imbler
Employment Agreement also provides for an annual performance bonus of $50,000 to
$175,000 based upon the Company's attainment of certain financial targets. The
Company may terminate Mr. Imbler's employment for "cause" or upon a "disability"
(as such terms are defined in the Imbler Employment Agreement). If the Company
terminates Mr. Imbler "without cause" (as defined in the Imbler Employment
Agreement), Mr. Imbler is entitled to receive, among other things, the greater
of (i) one year's salary or (ii) 1/12 of one year's salary for each year (not to
exceed 24 years in the aggregate) of employment with the Company. The Imbler
Employment Agreement also contains customary noncompetition, nondisclosure and
nonsolicitation provisions.
The Company also has employment agreements with each of Messrs. Boots,
Kratochvil, Beeler, and Sims (each, an "Employment Agreement" and, collectively,
the "Employment Agreements"). The agreements for Boots, Kratochvil and Beeler
expire on June 30, 2001, and the agreement for Sims expires on January 21, 2002.
The Employment Agreements provided for fiscal 1999 base compensation of
$251,163, $200,894, $226,504 and $190,922, respectively. Salaries are subject in
each case to annual adjustment at the discretion of the Compensation Committee
of the Board of Directors of the Company. The Employment Agreements entitle each
executive to participate in all other incentive compensation plans established
for executive officers of the Company. The Company may terminate each Employment
Agreement for "cause" or a "disability" (as such terms are defined in the
Employment Agreements). If the Company terminates an executive's employment
without "cause" (as defined in the Employment Agreements), the Employment
Agreements require the Company to pay certain amounts to the terminated
executive, including (i) the greater of (A) one year's salary or (B) 1/12 of one
year's salary for each year (not to exceed 24 years in the aggregate) of
employment with the Company (other than Mr. Sims, who would receive his salary
for one year), and (ii) certain benefits under applicable incentive compensation
plans. Each Employment Agreement also includes customary noncompetition,
nondisclosure and nonsolicitation provisions.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company 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 Sims for fiscal 1999 were
determined by the Compensation Committee in accordance with their respective
employment agreements. All other compensation decisions with respect to officers
of the Company are made by Mr. Imbler pursuant to policies established in
consultation with the Compensation Committee.
The Company is party to an Amended and Restated Management Agreement (the
"FACL Management Agreement") with First Atlantic pursuant to which First
Atlantic provides the Company with financial advisory and management consulting
services in exchange for an annual fee of $750,000 and reimbursement for
out-of-pocket costs and expenses. In consideration of such services, the Company
paid First Atlantic fees and expenses of $792,000 for fiscal 1999, $835,000 for
fiscal 1998, and $771,200 for fiscal 1997. Under the FACL Management Agreement,
the Company pays a fee for services rendered in connection with certain
transactions equal to the lesser of (i) 1% of the total transaction value and
(ii) $1,250,000 for any such transaction consummated plus out-of-pocket expenses
in respect of such transaction, whether or not consummated. First Atlantic
received advisory fees of approximately $287,500 and $28,700 in January 1997 for
originating, structuring and negotiating the PackerWare Acquisition and the
Container Industries Acquisition, respectively. First Atlantic received advisory
fees of approximately $117,900 and $531,600 in May 1997 and August 1997,
respectively, for originating, structuring and negotiating the Virginia Design
Acquisition and the Venture Packaging Acquisition, respectively. First Atlantic
received advisory fees of approximately $140,000 and $180,000 in July 1998 and
October 1998, respectively, for originating, structuring and negotiating the
Berry UK Acquisition and the Knight Acquisition, respectively. First Atlantic
received advisory fees of approximately $690,000 in July 1999 for originating,
structuring and negotiating the Cardinal Acquisition. See "Certain Relationships
and Related Transactions."
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a director
of First Atlantic. As an officer and the sole stockholder of First Atlantic, Mr.
Buaron is entitled to receive any bonuses paid and any dividends declared by
First Atlantic on its capital stock, including any bonuses paid as a result of,
and any dividends paid out of any of the fees paid with respect to the
acquisitions described above. First Atlantic is engaged by International to
provide certain financial and management consulting services for which it
receives annual fees. First Atlantic and International have completely distinct
ownership and equity structures. See "Certain Relationships and Related
Transactions."
Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of Holding,
received in June 1996 approximately $67.6 million from the sale of its common
stock in Holding and warrants to purchase common stock. First Atlantic is
engaged by the Fund to provide certain financial and management consulting
services for which it receives annual fees. First Atlantic and the Fund have
completely distinct ownership and equity structures. Atlantic Equity Associates,
L.P., a Delaware limited partnership ("AEA"), is the sole general partner of the
Fund. Mr. Buaron is the sole shareholder of Buaron Capital Corporation ("Buaron
Capital"). Buaron Capital is the managing and sole general partner of AEA. See
"Certain Relationships and Related Transactions."
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<PAGE>
STOCK OPTION PLAN
Employees, directors and certain independent consultants of the Company and
its subsidiaries are entitled to participate in the BPC Holding Corporation 1996
Stock Option Plan (the "Option Plan"), which provides for the grant of both
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and stock options that are
non-qualified under the Code. The total number of shares of Class B Nonvoting
Common Stock of Holding for which options may be granted pursuant to the Option
Plan is 61,620. The Option Plan will terminate on October 3, 2003 or such
earlier date on which the Board of Directors of Holding, in its sole discretion,
determines. The Stock Option Committee of the Board of Directors of Holding
administers all aspects of the Option Plan, including selecting which of the
Company's directors, employees and independent consultants will receive options,
the time when options are granted, whether the options are incentive stock
options or non-qualified stock options, the manner and timing for vesting of
such options, the terms of such options, the exercise date of any options and
the number of shares subject to such options. Directors who are also employees
are eligible to receive options under the Option Plan.
The exercise price of incentive stock options granted by Holding under the
Option Plan may not be less than 100% of the fair market value of the Class B
Nonvoting Common Stock at the time of grant and the term of any option may not
exceed seven years. With respect to any employee who owns stock representing
more than 10% of the voting power of the outstanding capital stock of Holding,
the exercise price of any incentive stock option may not be less than 110% of
the fair market value of such shares at the time of grant and the term of such
option may not exceed five years. The exercise price of a non-qualified stock
option is determined by the Stock Option Committee on the date the option is
granted. However, the exercise price of a non-qualified stock option may not be
less than 100% of the fair market value of Class B Nonvoting Common Stock if the
option is granted at any time after the initial public offering of such stock.
Options granted under the Option Plan are nontransferable except by will and
the laws of descent and distribution. Options granted under the Option Plan
typically expire after seven years and vest over a five-year period based on
timing as well as achieving financial performance targets.
Under the Option Plan, as of January 1, 2000, there were outstanding options
to purchase an aggregate of 51,479 shares of Class B Nonvoting Common Stock to
70 employees of the Company, at an exercise price between $100 and $170 per
share.
-31-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP
All of the outstanding capital stock of the Company is owned by Holding. The
following table sets forth certain information regarding the ownership of the
capital stock of Holding with respect to (i) each person known by Holding to own
beneficially more than 5% of the outstanding shares of any class of its voting
capital stock, (ii) each of Holding's directors, (iii) the Named Executive
Officers and (iv) all directors and officers of Holding as a group. Except as
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned. Unless otherwise indicated,
the address for each stockholder is c/o Berry Plastics Corporation, 101 Oakley
Street, Evansville, Indiana 47710.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
VOTING NONVOTING
COMMON STOCK(1) COMMON STOCK(1)
-------------------------- -------------------------------------- PERCENTAGE OF
PERCENTAGE OF ALL CLASSES OF
NAME AND ADDRESS OF VOTING COMMON STOCK
BENEFICIAL OWNER CLASS A CLASS B COMMON STOCK CLASS A CLASS B CLASS C (FULLY-DILUTED)
- ------------------------------ ------------ ------------- ------------------- ------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlantic Equity Partners
International II, L.P.(2) -- 128,142 54.4% -- 3,385 11,470 22.2%
Chase Venture Capital
Associates, LLC (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) 23.9 148,000 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
Bruce J. Sims -- -- * -- 1,994(16) 170 *
All officers and directors as
a group (14 persons) 83,200 141,741 95.5 236,800 56,214 12,994 82.6
</TABLE>
* Less than one percent.
(1) The authorized capital stock of Holding consists of 3,500,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value
(the "Holding Common Stock"), and 1,000,000 shares of Preferred Stock, $.01
par value (the "Preferred Stock"). Of the 2,500,000 shares of Holding
Common Stock, 500,000 shares are designated Class A Voting Common Stock,
500,000 shares are designated Class A Nonvoting Common Stock, 500,000
shares are designated Class B Voting Common Stock, 500,000 shares are
designated Class B Nonvoting Common Stock, and 500,000 shares are
designated Class C Nonvoting Common Stock. Of the 1,000,000 shares of
Preferred Stock, 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 ("AEA II"), is the
sole general partner of International and as such exercises voting and/or
investment power over shares of capital stock owned by International,
including the shares of Holding Common Stock held by International (the
"International Shares"). Mr. Buaron is the sole shareholder of Buaron
Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II. As the
general partner of AEA II, BHL may be deemed to beneficially own the
International Shares. BHL disclaims any beneficial ownership of any shares
of capital stock owned by International, including the International
Shares. Through his affiliation with BHL and AEA II, Mr. Buaron controls
the sole general partner of International and therefore has the authority
to control voting and/or investment power over, and may be deemed to
beneficially own, the International Shares. Mr. Buaron disclaims any
beneficial ownership of any of the International Shares.
(3) Address is 380 Madison Avenue, 12th Floor, New York, New York 10017.
(4) Represents warrants to purchase such shares of common stock held by Chase
Venture Capital Associates, LLC ("CVCA") which are currently exercisable.
(5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U,
151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance
Company exercises voting and/or investment power over shares of capital
stock owned by BPC Equity, LLC ("BPC Equity"), including shares of Holding
Common Stock held by BPC Equity.
(6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022. Represents shares of Holding Common Stock owned by
International. Mr. Buaron is the sole shareholder of BHL. BHL is the sole
general partner of AEA II. AEA II is the sole general
-32-
<PAGE>
partner of International and as such, exercises voting and/or investment
power over shares of capital stock owned by International, including the
International Shares. Mr. Buaron, as the sole shareholder and Chief
Executive Officer of BHL, controls the sole general partner of
International and therefore has voting and/or investment power over, and
may be deemed to beneficially own, the International Shares. Mr. Buaron
disclaims any beneficial ownership of the International Shares.
(7) Includes 5,930 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 CVCA. Mr. Hofmann is a
General Partner of Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of
CVCA. Mr. Hofmann disclaims any beneficial ownership of the shares of
Holding Common Stock held by CVCA.
(11) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares owned by CVCA. Mr. Lori is a
Principal with Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of
CVCA. Mr. Lori disclaims any beneficial ownership of the shares of Holding
Common Stock held by CVCA.
(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 Holding
Common Stock held by BPC Equity.
(13) Includes 3,650 options granted to Mr. Boots, which are currently
exercisable.
(14) Includes 2,281 options granted to Mr. Kratochvil, which are currently
exercisable.
(15) Includes 2,281 options granted to Mr. Beeler, which are currently
exercisable.
(16) Includes 650 options granted to Mr. Sims, which are currently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FIRST ATLANTIC
Pursuant to the FACL Management Agreement, First Atlantic provides the
Company with financial advisory and management consulting services in exchange
for an annual fee of $750,000 and reimbursement for out-of-pocket costs and
expenses. In consideration of such services, the Company paid First Atlantic
fees and expenses of approximately $792,000 for fiscal 1999, $835,000 for fiscal
1998, and $771,200 for fiscal 1997. Under the FACL Management Agreement, the
Company pays a fee for services rendered in connection with certain transactions
equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000
for any such transaction consummated plus out-of-pocket expenses in respect of
such transaction, whether or not consummated. First Atlantic received advisory
fees of approximately $287,500 and $28,700 in January 1997 for originating,
structuring and negotiating the PackerWare Acquisition and the Container
Industries Acquisition, respectively. First Atlantic received advisory fees of
approximately $117,900 and $531,600 in May 1997 and August 1997, respectively,
for originating, structuring and negotiating the Virginia Design Acquisition and
the Venture Packaging Acquisition, respectively. First Atlantic received
advisory fees of approximately $140,000 and $180,000 in July 1998 and October
1998, respectively, for originating, structuring and negotiating the Berry UK
Acquisition and the Knight Acquisition, respectively. First Atlantic received
advisory fees of approximately $690,000 in July 1999 for originating,
structuring and negotiating the Cardinal Acquisition.
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. As an officer and the
sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any
bonuses paid and any dividends declared by First Atlantic on its capital stock,
including any bonuses paid as a result of, and any dividends paid out of the
fees paid with respect to the acquisitions described above. Mr. Graev is also a
director of First Atlantic, and Mr. Levy is an officer of First Atlantic. First
Atlantic is engaged by International to provide certain financial and management
consulting services for which it receives annual fees. First Atlantic and
International have completely distinct ownership and equity structures.
Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of Holding,
received in June 1996 approximately $67.6 million from the sale of its common
stock in Holding and warrants to purchase common stock. First Atlantic is
engaged by the Fund to provide certain financial and management consulting
services for which it receives annual fees. First Atlantic and the Fund have
completely distinct ownership and equity structures. AEA is the sole general
partner of the Fund. Mr. Buaron is the sole shareholder of Buaron Capital, and
Buaron Capital is the managing and sole general partner of AEA.
-33-
<PAGE>
STOCKHOLDERS AGREEMENTS
Holding entered into a Stockholders Agreement dated as of June 18, 1996 (the
"Stockholders Agreement") with certain common equity investors ("Common Stock
Purchasers"), certain Management Stockholders (as defined herein) and, for
limited purposes thereunder, the Northwestern Mutual Life Insurance Company and
CVCA ("Preferred Stock Purchasers"). The Stockholders Agreement grants the
Common Stock Purchasers certain rights and obligations, including the following:
(i) until the occurrence of certain events specified in the Stockholders
Agreement, to designate the members of a seven person Board of Directors as
follows: (A) one director will be Roberto Buaron or his designee; (B)
International will have the right to designate three directors (who are
currently Messrs. Graev, Imbler and Levy); (C) CVCA will have the right to
designate two directors (who are currently Messrs. Hofmann and Lori); and (D)
the institutional holders (excluding International and CVCA) will have the right
to designate one director (who is currently Mr. Clarke); (ii) in the case of
certain Common Stock Purchasers, to subscribe for a proportional share of future
equity issuances by Holding; (iii) under certain circumstances and in the case
of International or CVCA, to cause the initial public offering of equity
securities of Holding or a sale of Holding subsequent to June 18, 2001 and (iv)
under certain circumstances and in the case of a majority in interest of the
institutional holders, to cause the initial public offering of equity securities
of Holding or a sale of Holding subsequent to June 18, 2002. Provisions under
the Stockholders Agreement also (i) prohibit Holding from taking certain actions
without the consent of holders of a majority of voting stock held by CVCA and
the institutional holders other than International (or, following the occurrence
of certain events, International's consent), including certain transactions
between Holding and any subsidiary, on the one hand, and First Atlantic or any
of its affiliates, on the other hand; (ii) obligate Holding to provide certain
Common Stock Purchasers with financial and other information regarding Holding
and to provide access and inspection rights to all Common Stock Purchasers; and
(iii) restrict transfers of equity by the Common Stock Purchasers, subject to
certain exceptions (including for transfers of up to 10% of the equity
(including warrants to purchase equity) held by each Common Stock Purchaser on
the date of the Stockholders Agreement). Pursuant to the Stockholders Agreement,
under certain circumstances the Preferred Stock Purchasers (and their
transferees) have tag-along rights with respect to the warrants issued by
Holding in 1996 and the Holding Common Stock issuable upon exercise thereof.
Under specified circumstances and subject to certain exceptions, the Preferred
Stock Purchasers (and their transferees) are entitled to include a pro rata
share of their Preferred Stock in a transaction (or series of related
transactions) involving the transfer by International, CVCA and the
Institutional Holders (as defined in the Stockholders Agreement) of more than
50% of the aggregate amount of securities held by them on June 19, 1996.
The Stockholders Agreement grants registration rights, under certain
circumstances and subject to specified conditions, to the Common Stock
Purchasers. International and CVCA each have the right, on three occasions, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. Under certain circumstances, a majority in interest of the institutional
holders (excluding International and CVCA) have the right, on one occasion, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. The Stockholders Agreement provides that if Holding proposes to register
any of its securities, either for its own account or for the account of other
stockholders, Holding will be required to notify all Common Stock Purchasers and
to include in such registration the shares of Holding Common Stock requested to
be included by them. All shares of Holding Common Stock owned by the Common
Stock Purchasers requested to be included in a registration will be subject to
cutbacks under certain circumstances in connection with an underwritten public
offering.
The provisions of the Stockholders Agreement regarding voting rights,
negative covenants, information/inspection rights, the right to force a sale of
Holding, preemptive rights and transfer restrictions generally will expire on
the earlier to occur of (i) the later of (A) June 18, 2001 if an underwritten
public offering of equity securities of Holding resulting in gross proceeds of
at least $20.0 million occurs prior to June 18, 2001 and (B) the occurrence of
such underwritten public offering that occurs subsequent to June 18, 2001; (ii)
June 18, 2016; and (iii) a sale of Holding. In addition, the Stockholders
Agreement provides that certain rights of a Common Stock Purchaser (to the
extent such rights apply to such Common Stock Purchaser) to designate members of
the Board of Directors of Holding and/or to approve certain actions by Holding
will terminate if certain circumstances occur.
Holding is also party to the Amended and Restated Stockholders Agreement
dated June 18, 1996 (the "Management Stockholders Agreement"), with
International and all management shareholders including, among
-34-
<PAGE>
others, Messrs. Imbler, Boots, Kratochvil, Beeler, and Sims (collectively, the
"Management Stockholders"). The Management Stockholders Agreement contains
provisions (i) limiting transfers of equity by the Management Stockholders; (ii)
requiring the Management Stockholders to sell their shares as designated by
Holding or International upon the consummation of certain transactions; (iii)
granting the Management Stockholders certain rights of co-sale in connection
with sales by International; (iv) granting Holding rights to repurchase capital
stock from the Management Stockholders upon the occurrence of certain events;
and (v) requiring the Management Stockholders to offer shares to Holding prior
to any permitted transfer.
TAX SHARING AGREEMENT
For federal income tax purposes, Berry and its subsidiaries are included in
the affiliated group of which Holding is the common parent and as a result, the
federal taxable income and loss of Berry and its subsidiaries is included in the
group consolidated tax return filed by Holding. In April 1994, Holding, Berry
and certain of its subsidiaries entered into a tax sharing agreement (the "Tax
Sharing Agreement"). Under the Tax Sharing Agreement, for fiscal 1994 and all
taxable years thereafter for which the Tax Sharing Agreement remains in effect,
Berry and its subsidiaries as a consolidated group are required to pay to
Holding an amount equal to the taxes that they would otherwise have to pay if
they were to file separate federal, state or local income tax returns (including
any amounts determined to be due as a result of a redetermination arising from
an audit or otherwise of a tax liability which is attributable to them). If
Berry and its subsidiaries would have been entitled to a tax refund for taxes
paid previously on the basis computed as if they were to file separate returns,
then under the Tax Sharing Agreement, Holding is required to pay to Berry and
its subsidiaries an amount equal to such tax refund. If, however, Berry and its
subsidiaries would have reported a tax loss if they were to file separate
returns, then Holdings intends, but is not obligated under the Tax Sharing
Agreement, to pay to Berry and its subsidiaries an amount equal to the tax
benefit that is realized by Holding as a result of such separate loss. Under the
Tax Sharing Agreement any such payments to be made by Holding to Berry or any of
its subsidiaries on account of a tax loss are within the sole discretion of
Holding. No payments have been made to date.
LEGAL SERVICES
Mr. Graev is a partner in the law firm of O'Sullivan Graev & Karabell, LLP,
New York, New York. O'Sullivan Graev & Karabell, LLP provides legal services to
the Company and Holding in connection with certain matters, principally relating
to transactional, securities law, general corporate and litigation matters.
TRANSACTIONS WITH AFFILIATES
The 1996 Indenture, the Stockholders Agreement, the 1994 Indenture, the 1998
Indenture, the 1999 Indenture, and the Credit Facility restrict the Company's
and its affiliates' ability to enter into transactions with their affiliates,
including their officers, directors and principal stockholders.
-35-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
1. FINANCIAL STATEMENTS
The financial statements listed under Item 8 are filed as part of this
report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules listed under Item 8 are filed as part
of this report.
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.
3. EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as part
of this report.
(b) Reports on Form 8-K
None.
-36-
<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 ("Holding") as of January 1, 2000 and January 2, 1999, 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
1, 2000. Our audits also included the financial statement schedules listed in
the Index at Item 14(a). These financial statements and schedules are the
responsibility of Holding's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 at January 1, 2000 and January 2, 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended January 1, 2000, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedules, 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 18, 2000
F-1
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 1, 2000 JANUARY 2, 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................ $ 2,546 $ 2,318
Accounts receivable (less allowance for doubtful accounts of $1,386 at
January 1, 2000 and $1,651 at January 2, 1999) ................... 37,507 29,951
Inventories:
Finished goods ................................................... 31,676 23,146
Raw materials and supplies ....................................... 15,016 8,556
--------------- ---------------
46,692 31,702
Prepaid expenses and other receivables ............................... 2,082 1,665
Income taxes recoverable ............................................. 45 577
--------------- ---------------
Total current assets ...................................................... 88,872 66,213
Assets held in trust ...................................................... -- 6,679
Property and equipment:
Land ................................................................. 8,556 7,769
Buildings and improvements ........................................... 48,080 38,960
Machinery, equipment and tooling ..................................... 172,082 142,440
Construction in progress ............................................. 18,170 11,780
--------------- ---------------
246,888 200,949
Less accumulated depreciation ........................................ 100,096 80,944
--------------- ---------------
146,792 120,005
Intangible assets:
Deferred financing and origination fees, net ......................... 11,571 10,327
Covenants not to compete, net ........................................ 3,723 4,071
Excess of cost over net assets acquired, net ......................... 87,614 44,536
--------------- ---------------
102,908 58,934
Deferred income taxes ..................................................... -- 2,758
Other ..................................................................... 2,235 728
--------------- ---------------
Total assets .............................................................. $ 340,807 $ 255,317
=============== ===============
</TABLE>
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 1, 2000 JANUARY 2, 1999
----------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ...................................................................... $ 25,798 $ 18,059
Accrued expenses and other liabilities ................................................ 9,590 10,863
Accrued interest ...................................................................... 8,108 4,166
Employee compensation and payroll taxes ............................................... 13,461 8,953
Income taxes .......................................................................... 279 22
Current portion of long-term debt ..................................................... 21,109 19,388
----------------- -----------------
Total current liabilities ................................................................. 78,345 61,451
Long-term debt, less current portion ...................................................... 382,880 303,910
Accrued dividends on preferred stock ...................................................... 11,001 7,225
Deferred income taxes ..................................................................... 503 497
Other liabilities ......................................................................... 1,549 2,591
----------------- -----------------
474,278 375,674
Stockholders' equity (deficit):
Series A Preferred Stock; 800,000 shares authorized; 600,000 shares issued
and outstanding (net of discount of $2,478 at January 1, 2000 and $2,770
at January 2, 1999)................................................................ 12,093 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 ....................... (256) (280)
Additional paid-in capital ............................................................ 41,559 45,611
Warrants .............................................................................. 3,511 3,511
Retained earnings (deficit) ........................................................... (195,061) (185,923)
Accumulated other comprehensive income (loss) ......................................... (323) (83)
----------------- -----------------
Total stockholders' equity (deficit) ...................................................... (133,471) (120,357)
----------------- -----------------
Total liabilities and stockholders' equity (deficit) ...................................... $ 340,807 $ 255,317
================= =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales ..................................... $ 328,834 $ 271,830 $ 226,953
Cost of goods sold ............................ 241,067 199,227 180,249
---------- ---------- ----------
Gross margin .................................. 87,767 72,603 46,704
Operating expenses:
Selling .................................. 17,383 14,780 11,320
General and administrative ............... 22,034 19,308 11,505
Research and development ................. 2,338 1,690 1,310
Amortization of intangibles .............. 7,215 4,139 2,226
Other expenses ........................... 5,148 4,084 4,144
---------- ---------- ----------
Operating income .............................. 33,649 28,602 16,199
Other expenses:
Loss on disposal of property and equipment 1,416 1,865 226
---------- ---------- ----------
Income before interest and taxes .............. 32,233 26,737 15,973
Interest:
Expense .................................. (41,040) (35,555) (32,237)
Income ................................... 223 999 1,991
---------- ---------- ----------
Loss before income taxes ...................... (8,584) (7,819) (14,273)
Income taxes (benefit) ........................ 554 (249) 138
---------- ---------- ----------
Net loss ...................................... (9,138) (7,570) (14,411)
Preferred stock dividends ..................... (3,776) (3,551) (2,558)
Amortization of preferred stock discount ...... (292) (292) (74)
---------- ---------- ----------
Net loss attributable to common shareholders .. $ (13,206) $ (11,413) $ (17,043)
========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<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 WARRANTS
------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 .......... $ 4 $ 2 $ -- $11,216 $ -- $ (22) $ 51,681 $ 3,511
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 3,511
------- ------- ------- ------- ------- -------- -------- --------
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 3,511
------- ------- ------- ------- ------- -------- -------- --------
Net loss .............................. -- -- -- -- -- -- -- --
Sale of treasury stock to management .. -- -- -- -- -- 40 16 --
Purchase treasury stock from management -- -- -- -- -- (16) -- --
Translation loss ...................... -- -- -- -- -- -- -- --
Accrued dividends on preferred stock .. -- -- -- -- -- -- (3,776) --
Amortization of preferred stock
discount .............................. -- -- -- _292 -- -- (292) --
------- ------- ------- ------- ------- -------- -------- --------
Balance at January 1, 2000 ............ $ 4 $ 2 $ -- $12,093 $ 5,000 $ (256) $ 41,559 $ 3,511
======= ======= ======= ======= ======= ======== ======== ========
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE COMPREHENSIVE
EARNINGS INCOME (LOSS) TOTAL INCOME (LOSS)
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Balance at December 29, 1996 .......... $(163,942) $ -- $ (97,550) --
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 .......... (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 ............ (185,923) (83) (120,357) $ (7,653)
--------- ------------- --------- =============
Net loss .............................. (9,138) -- (9,138) $ (9,138)
Sale of treasury stock to management .. -- -- 56 --
Purchase treasury stock from management -- -- (16) --
Translation loss ...................... -- (240) (240) (240)
Accrued dividends on preferred stock .. -- -- (3,776) --
Amortization of preferred stock
discount .............................. -- -- -- --
--------- ------------- --------- -------------
Balance at January 1, 2000 ............ $(195,061) $ (323) $(133,471) $ (9,378)
========= ============= ========= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ...................................................... $ (9,138) $ (7,570) $ (14,411)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation ......................................... 24,580 20,690 16,800
Non-cash interest expense ............................ 8,888 1,765 2,005
Amortization ......................................... 7,215 4,139 2,226
Interest funded by assets held in trust .............. 6,679 13,059 11,255
Non-cash compensation ................................ -- 600 --
Write-off of deferred acquisition costs .............. -- -- 515
Loss on sale of property and equipment ............... 1,416 1,865 226
Deferred income taxes ................................ 6 (709) --
Changes in operating assets and liabilities:
Accounts receivable, net ......................... (723) 4,413 (2,290)
Inventories ...................................... (7,746) (252) 2,767
Prepaid expenses and other receivables ........... (529) 1,016 (137)
Other assets ..................................... 493 (43) (225)
Accounts payable and accrued expenses ............ 4,603 (4,809) (4,516)
Income taxes payable ............................. 257 (33) (61)
---------- ---------- ----------
Net cash provided by operating activities ..................... 36,001 34,131 14,154
INVESTING ACTIVITIES
Additions to property and equipment ........................... (30,738) (22,595) (16,774)
Proceeds from disposal of property and equipment .............. 529 4,471 1,078
Acquisitions of businesses .................................... (76,769) (33,996) (86,406)
---------- ---------- ----------
Net cash used for investing activities ........................ (106,978) (52,120) (102,102)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ............................ 90,435 44,044 85,703
Payments on long-term borrowings .............................. (16,340) (24,906) (2,821)
Purchase of treasury stock from management .................... (16) (258) --
Proceeds from issuance of common stock ........................ -- 80 325
Proceeds from issuance of treasury stock ...................... 56 -- --
Debt issuance costs ........................................... (3,000) (1,341) (2,763)
---------- ---------- ----------
Net cash provided by financing activities ..................... 71,135 17,619 80,444
Effect of exchange rate changes on cash ....................... 70 -- --
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents .......... 228 (370) (7,504)
Cash and cash equivalents at beginning of year ................ 2,318 2,688 10,192
---------- ---------- ----------
Cash and cash equivalents at end of year ...................... $ 2,546 $ 2,318 $ 2,688
========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<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 subsidiary Berry Plastics
Corporation ("Berry" or the "Company") and its subsidiaries 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 Berry
Plastics U.K. Limited ("Berry UK"), Knight Plastics, Inc., and CPI Holding
Corporation and its subsidiary Cardinal Packaging, Inc. ("Cardinal"),
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; Lawrence, Kansas,
Monroeville, Ohio; Norwich, England; Woodstock, Illinois; Streetsboro, Ohio; and
Minneapolis, Minnesota.
In connection 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. In connection with the Cardinal acquisition in July 1999 (see Note
3), the Company also acquired a manufacturing facility in Ontario, California.
This facility was closed in 1999, and its operations were consolidated into the
Henderson, Nevada facility.
Holding's fiscal year is a 52/53 week period ending generally on the Saturday
closest to December 31. All references herein to "1999", "1998," and "1997"
relate to the fiscal years ended January 1, 2000, January 2, 1999, and December
27, 1997, 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: aerosol overcaps,
containers, and drink cups. In addition, the Company is a manufacturer for the
retail housewares market. The Company's customers are located principally
throughout the United States, without significant concentration in any one
region or with 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 $82.4 million in 1999. Dow Chemical
Corporation is the principal supplier (approximately 38%) of the Company's total
resin material requirements. The Company also uses other suppliers such as Union
Carbide, Chevron, Mobil, Nova 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.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company is subject to existing and potential federal, state, local and
foreign legislation designed to reduce solid waste in landfills. While the
principal resins used by the Company are recyclable and, therefore, reduce the
Company's exposure to legislation promulgated to date, there can be no assurance
that future legislation or regulatory initiatives would not have a material
adverse effect on the Company. Legislation, if promulgated, requiring plastics
to be degradable in landfills or to have minimum levels of recycled content
would have a significant impact on the Company's business as would legislation
providing for disposal fees or limiting the use of plastic products.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
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 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 ranging from one to five years.
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 1998 and 1997 financial statements have been reclassified
to conform with the 1999 presentation.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES, which is required to be adopted in fiscal years
beginning after June 15, 2000. This statement establishes accounting reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement requires
all derivatives be recognized on the balance sheet at fair value. Changes in the
fair value of derivatives will be accounted for based upon their intended use
and designation. The adoption of this standard is not expected to have a
material effect on the consolidated financial statements.
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.
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. 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. 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. 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 operations
of Knight are included in Berry's operations since the acquisition date using
the purchase method of accounting.
On July 6, 1999, the Company 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
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 fair value of the net assets acquired was based on preliminary estimates and
may be revised at a later date.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The pro forma results listed below are unaudited and reflect purchase accounting
adjustments assuming the Cardinal acquisition occurred at the beginning of each
fiscal year presented and the Norwich Moulders and Knight acquisitions occurred
on December 28, 1997.
YEAR ENDED
----------------------------
JANUARY 1, JANUARY 2,
2000 1999
---------- ----------
Net sales $ 357,299 $ 350,455
Loss before income taxes (12,750) (15,218)
Net loss (13,304) (15,085)
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 1, JANUARY 2,
2000 1999
---------- ----------
Deferred financing and origination fees $ 18,924 $ 15,817
Covenants not to compete 7,745 6,233
Excess of cost over net assets acquired 96,104 49,197
Accumulated amortization (19,865) (12,313)
---------- ----------
$ 102,908 $ 58,934
========== ==========
Excess of cost over net assets acquired increased primarily due to the
acquisition of CPI Holding 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:
JANUARY 1, JANUARY 2,
2000 1999
---------- ----------
Holding 12.50% Senior Secured Notes $ 111,956 $ 105,000
Berry 12.25% Senior Subordinated Notes 125,000 125,000
Berry 11% Senior Subordinated Notes 75,000 --
Term loans 55,221 71,243
Revolving lines of credit 31,649 16,162
Nevada Industrial Revenue Bonds 4,000 4,500
Capital leases 479 561
Debt premium, net 684 832
---------- ----------
403,989 323,298
Less current portion of long-term debt 21,109 19,388
---------- ----------
$382,880 $ 303,910
========== ==========
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. On December 15, 1999,
Holding issued an additional approximately $7.0 million aggregate principal
amount of 1996 Notes in satisfaction of its interest obligation.
The 1996 Notes rank senior in right of payment to all existing and future
subordinated indebtedness of Holding, including Holding's subordinated guarantee
of all of Berry's Senior Subordinated Notes and and PARI PASSU in right of
payment with all senior indebtedness of Holding. The 1996 Notes are effectively
subordinated to all existing and future senior indebtedness of Berry, including
borrowings under the Credit Facility and the Nevada Industrial Revenue Bond.
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, 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. The 1994 Notes and 1998 Notes may be
redeemed at the option of Berry, in whole or in part, at redemption prices
ranging from 104.08% in 2000 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 indebtedness of Berry. The notes rank
junior in right of payment to all existing and future senior indebtedness of
Berry, including borrowings under the Credit Facility 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.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
BERRY 11% SENIOR SUBORDINATED NOTES
On July 6, 1999, Berry completed an offering of 75,000 units consisting of $75.0
million aggregate principal amount of 11% Berry Plastics Corporation 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 1999 Notes
mature on July 15, 2007 and interest is payable semi-annually on January 15 and
July 15 of each year and commence on January 15, 2000. Holding and all of
Berry's subsidiaries fully, jointly, and severally, and unconditionally
guarantee on a senior subordinated basis the 1999 Notes. There are no
nonguarantor subsidiaries.
Berry is not required to make mandatory redemption or sinking fund payments with
respect to the 1999 Notes. On or subsequent to July 15, 2003, the 1999 Notes may
be redeemed at the option of Berry, in whole or in part, at redemption prices
ranging from 105.5% in 2003 to 100% in 2006 and thereafter. Upon a change in
control, as defined in the indenture entered into in connection with the 1999
Transaction (the "1999 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.
CREDIT FACILITY
The Company has a financing and security agreement (the "Security Agreement")
with Bank of America for a senior secured line of credit (the "Credit Facility")
for an aggregate principal amount at January 1, 2000 of approximately $131.8
million consisting of (i) a $70.0 million revolving line of credit, subject to a
borrowing base formula, (ii) a $2.4 million revolving line of credit in the U.K.
("UK Revolver"), subject to a borrowing base formula, (iii) a $50.0 million term
loan facility, (iv) a $5.2 million term loan facility in the U.K. ("UK Term
Loan") and (v) a $4.2 million standby letter of credit facility to support the
Company's and its subsidiaries' obligations under the Nevada Bonds. At January
1, 2000, the Company had unused borrowing capacity under the Credit Facility's
revolving line of credit of approximately $22.3 million. The indebtedness under
the Credit Facility is guaranteed by Holding and 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 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 (8.1% at January 1, 2000 and
7.0% at January 2, 1999). 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
indebtedness and (iii) limitations on capital expenditures.
NEVADA INDUSTRIAL REVENUE BONDS
The Nevada Industrial Revenue Bonds bear interest at a variable rate (5.7% at
January 1, 2000 and 3.0% at January 2, 1999), require annual principal payments
of $0.5 million on April 1, are collateralized by irrevocable letters of credit
issued by Bank of America under the Credit Facility and mature in April 2007.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER
Future maturities of long-term debt are as follows: 2000, $21,109; 2001,
$17,100; 2002, $50,665; 2003, $500; 2004, $125,500, and $188,431 thereafter.
Interest paid was $29,759, $33,236 and $29,927 for 1999, 1998 and 1997,
respectively. Interest capitalized was $1,447, $777 and $341 for 1999, 1998 and
1997, 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
$993 and $2,970 and related accumulated amortization of $169 and $1,468 at
January 1, 2000, and January 2, 1999, respectively. Capital lease amortization
is included in depreciation expense. Total rental expense for operating leases
was approximately $7,282, $5,414, and $3,332 for 1999, 1998, and 1997,
respectively.
Future minimum lease payments for capital leases and noncancellable operating
leases with initial terms in excess of one year are as follows:
AT JANUARY 1, 2000
-----------------------
CAPITAL OPERATING
LEASES LEASES
------- ---------
2000 $ 183 $ 6,403
2001 155 6,340
2002 97 5,181
2003 92 4,451
2004 8 3,627
Thereafter -- 4,404
------- ---------
535 $ 30,406
=========
Less: amount representing interest (56)
-------
Present value of net minimum lease
payments $ 479
=======
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 1, 2000 and January 2, 1999 are
as follows:
JANUARY 1, JANUARY 2,
2000 1999
----------- ----------
Deferred tax assets:
Allowance for doubtful accounts $ 529 $ 633
Inventory 1,047 900
Compensation and benefit accruals 1,508 1,592
Insurance reserves 415 436
Net operating loss carryforwards 11,943 10,012
Alternative minimum tax (AMT) credit
carryforwards 3,055 2,758
---------- ----------
Total deferred tax assets 18,497 16,331
Valuation allowance (3,572) (2,493)
---------- ----------
Deferred tax assets, net of valuation
allowance 14,925 13,838
Deferred tax liabilities:
Depreciation and amortization 15,428 11,577
---------- ----------
Net deferred tax asset (liability) $ (503) $ 2,261
========== ==========
Income tax expense (benefit) consists of the following:
JANUARY 1, JANUARY 2, DECEMBER 2,
2000 1999 1997
---------- ---------- ----------
Current
Federal $ -- $ (493) $ --
Foreign 80 152 --
State 468 92 138
Deferred
Federal -- -- --
Foreign 6 -- --
State -- -- --
---------- ---------- ----------
Income tax expense (benefit) $ 554 $ (249) $ 138
========== ========== ==========
Holding has unused operating loss carryforwards of approximately $30.5 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 1999, 1998 and 1997 approximated $860, $526, and $47
respectively.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of income tax expense (benefit), computed at the federal
statutory rate, to income tax expense, as provided for in the financial
statements, is as follows:
YEAR ENDED
----------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ------------
Income tax expense (benefit)
computed at statutory rate $ (2,919) $ (2,658) $ (4,853)
State income tax expense, net of
federal benefit 309 90 138
Amortization of goodwill 1,292 339 285
Expenses not deductible for income
tax purposes 248 432 219
Change in valuation allowance 1,773 1,677 4,298
Other (149) (129) 51
---------- ---------- ------------
Income tax expense (benefit) $ 554 $ (249) $ 138
========== ========== ============
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
$1,057, $933, and $629 for 1999, 1998 and 1997, 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.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The authorized capital stock of Holding consists of 3,500,000 shares of capital
stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding
Common Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000 shares
are designated Class A voting Common Stock (the "Class A Voting Stock"), 500,000
shares are designated Class A Nonvoting Common Stock (the "Class A Nonvoting
Stock"), 500,000 shares are designated Class B Voting Common Stock (the "Class B
Voting 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, compounding and 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.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 on which the Board of Directors of Holding, in its sole discretion,
determines. Option prices range from $100 to $170 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.
Financial Accounting Statements Board 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 1, 2000 JANUARY 2, 1999 DECEMBER 27, 1997
---------------------------- ----------------------------- ---------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise Of Exercise Of Exercise
Shares Price Shares Price Shares Price
------------- -------------- ------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of year 50,729 $105 47,708 $101 43,393 $100
Options granted 1,500 170 11,005 122 5,425 106
Options exercised -- -- -- -- -- --
Options canceled (750) 115 (7,984) 100 (1,110) 100
------------- ------------- --------------
Options outstanding, end of year 51,479 107 50,729 105 47,708 105
============= ============= ==============
Option price range at end of year $100 - $170 $100 - $122 $100 - $108
Options exercisable at end of year 30,091 25,191 13,561
Options available for grant at year end 141 891 3,912
Weighted average fair value of options
granted during year $170 $122 $122
</TABLE>
The following table summarizes information about the options outstanding at
January 1, 2000:
<TABLE>
<CAPTION>
Weighted
Range of Weighted Average Average Number
Exercise Number Outstanding Remaining Contractual Exercise Exercisable at
Prices at January 1, 2000 Life Price January 1, 2000
- --------------- ------------------ --------------------- -------- - ----------------
<S> <C> <C> <C> <C>
$100 - $122 49,979 2 years $105 29,941
$170 1,500 4 years $170 150
</TABLE>
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Disclosure of pro forma financial information is required by Statement 123 as if
Holding had accounted for its employee stock options using the fair value method
as defined by the Statement. The fair value for options granted by Holding have
been estimated at the date of grant using a Black Scholes option pricing model
with the following weighted average assumptions:
YEAR ENDED
----------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ------------
Risk-free interest
rate 7.0% 6.4% 6.4%
Dividend yield 0.0% 0.0% 0.0%
Volatility factor .19 .20 .07
Expected option
life 5.0 years 5.0 years 5.0 years
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. Holding's pro forma net
losses giving effect to the estimated compensation expense related to stock
options are as follows:
YEAR ENDED
------------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
------------- ------------ ------------
Net loss $ (9,400) $ (7,798) $ (14,594)
STOCKHOLDERS AGREEMENTS
Holding entered into a stockholders agreement (the "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 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 has an agreement with its management stockholders and International that
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"). First Atlantic received
advisory fees of $966 for originating, structuring and negotiating the 1997
acquisitions and advisory fees of approximately $140, $180, and $690, in July
1998, October 1998 and July 1999, respectively, for originating, structuring and
negotiating the acquisitions of Berry UK, Knight, and Cardinal, respectively.
In consideration of financial advisory and management consulting services, the
Company paid First Atlantic fees and expenses of $792, $835 and $771 for fiscal
1999, 1998, and 1997, respectively.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION
Holding's and the Company's financial instruments generally consist of cash and
cash equivalents and long-term debt. The carrying amounts of Holding's and the
Company's financial instruments approximate fair value at January 1, 2000,
except for the 1994 Notes and 1999 Notes for which the fair value exceeds the
carrying value by approximately $2.9 million and $1.1 million, respectively, and
the 1996 Notes and 1998 Notes for which the fair value was below the carrying
value by approximately $4.5 million and $0.8 million, respectively.
NOTE 12. OPERATING SEGMENTS
The Company has two reportable segments: packaging products and housewares
products. The Company's packaging business consists of three primary market
groups: aerosol overcaps, containers, and plastic drink cups. The Company's
housewares business consists of semi-disposable plastic housewares and 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, and (iii) management fees and reimbursed expenses paid
to First Atlantic ("Adjusted EBITDA"). The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ------------
<S> <C> <C> <C>
Net sales:
Packaging products $ 303,432 $ 250,270 $ 209,433
Housewares products 25,402 21,560 17,520
Adjusted EBITDA:
Packaging products 66,588 56,102 38,016
Housewares products 4,953 3,662 2,253
Total assets:
Packaging products 305,550 218,537 202,198
Housewares products 35,257 36,780 37,246
Reconciliation of Adjusted EBITDA to loss
before income taxes:
Adjusted EBITDA for reportable segments $ 71,541 $ 59,764 $ 40,269
Net interest expense (40,817) (34,556) (30,246)
Depreciation (24,580) (20,690) (16,800)
Amortization (7,215) (4,140) (2,226)
Loss on disposal of property and equipment (1,416) (1,865) (226)
One-time expenses (5,224) (4,860) (4,216)
Stock option market value adjustment -- (600) --
Management fees (873) (872) (828)
---------- ---------- ------------
Loss before income taxes $ (8,584) $ (7,819) $ (14,273)
========== ========== ============
</TABLE>
One time-expenses represent non-recurring expenses that relate to recently
acquired businesses, plant consolidations, and litigation associated with a
drink cup patent.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS)
The following summarizes consolidated financial information of Holding's
wholly-owned subsidiary, Berry Plastics Corporation and subsidiaries:
JANUARY 1, JANUARY 2,
2000 1999
---------- ----------
CONSOLIDATED BALANCE SHEETS
Current assets $ 88,169 $ 65,590
Property and equipment - net of accumulated
depreciation 146,786 120,005
Other noncurrent assets 93,889 58,716
Current liabilities 77,308 60,210
Noncurrent liabilities 272,977 210,093
Equity (deficit) (21,441) (25,992)
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- -----------
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales $ 328,834 $ 271,830 $ 226,954
Cost of goods sold 241,067 199,226 180,249
Income (loss) before income taxes 5,331 5,650 (2,493)
Net income (loss) 4,794 5,899 (2,631)
The following summarizes parent company only financial information of Berry:
JANUARY 1, JANUARY 2,
2000 1999
---------- ----------
BALANCE SHEET
Current assets $ 37,296 $ 28,579
Property and equipment - net of accumulated
depreciation 53,452 48,220
Investment in/due from subsidiaries 191,258 120,230
Other noncurrent assets 13,398 15,629
Current liabilities 50,983 41,325
Noncurrent liabilities 265,862 197,325
Equity (deficit) (21,441) (25,992)
YEAR ENDED
--------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 27,
2000 1999 1997
---------- ---------- ------------
STATEMENTS OF OPERATIONS
Net sales $ 149,901 $ 140,856 $ 140,976
Cost of goods sold 98,953 91,763 101,769
Income (loss) before income taxes 12,047 5,650 (2,493)
Net income (loss) 11,622 5,899 (2,631)
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY PLASTICS CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of Directors March 29, 2000
Roberto Buaron
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director (Principal
Executive Officer)
/s/ James M. Kratochvil Executive Vice President, Chief March 29, 2000
James M. Kratochvil Financial Officer, Treasurer
and Secretary (Principal
Financial and Accounting
Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, and Director
/s/ Ira G. Boots Executive Vice President and March 29, 2000
Ira G. Boots Director
/s/ David M. Clarke Director March 29, 2000
David M. Clarke
/s/ Lawrence G. Graev Director March 29, 2000
Lawrence G. Graev
/s/ Donald J. Hofmann, Jr. Director March 29, 2000
Donald J. Hofmann, Jr.
/s/ Mathew J. Lori Director March 29, 2000
Mathew J. Lori
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BPC HOLDING CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President and Director March 29, 2000
Martin R. Imbler (Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Treasurer, and Secretary
(Principal Financial and
Accounting Officer)
/s/ David M. Clarke Director March 29, 2000
David M. Clarke
/s/ Lawrence G. Graev Director March 29, 2000
Lawrence G. Graev
/s/ Donald J. Hofmann, Jr. Director March 29, 2000
Donald J. Hofmann, Jr.
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, and Director
/s/ Mathew J. Lori Director March 29, 2000
Mathew J. Lori
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY IOWA CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY TRI-PLAS CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY STERLING CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
AEROCON, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Chairman of
the Board of Directors
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant
Joseph. S. Levy Secretary, Assistant
Treasurer and Director March 29, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
PACKERWARE CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
/ Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY PLASTICS DESIGN CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
VENTURE PACKAGING, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
VENTURE PACKAGING MIDWEST, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
VENTURE PACKAGING SOUTHEAST, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
NIM HOLDINGS LIMITED
By /S/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Martin R. Imbler Chairman of the Board of March 29, 2000
Martin R. Imbler Directors (Principal
Executive Officer)
/s/ James M. Kratochvil Director (Principal March 29, 2000
James M. Kratochvil Financial and Accounting
Officer)
/s/ Trevor D. Johnson Sales and Marketing Director March 29, 2000
Trevor D. Johnson
/s/ Alan R. Sandell Managing Director March 29, 2000
Alan R. Sandell
/s/ Ira G. Boots Director March 29, 2000
Ira G. Boots
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY PLASTICS U.K. LIMITED
(F/K/A NORWICH INJECTION MOULDERS LIMITED)
By /S/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Martin R. Imbler Chairman of the Board of March 29, 2000
Martin R. Imbler Directors (Principal
Executive Officer)
/s/ James M. Kratochvil Director (Principal March 29, 2000
James M. Kratochvil Financial and Accounting
Officer)
/s/ Trevor D. Johnson Sales and Marketing Director March 29, 2000
Trevor D. Johnson
/s/ Alan R. Sandell Managing Director March 29, 2000
Alan R. Sandell
/s/ Ira G. Boots Director March 29, 2000
Ira G. Boots
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
KNIGHT PLASTICS, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
CPI HOLDING CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
CARDINAL PACKAGING, INC.
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
NORWICH ACQUISITION LIMITED
By /S/ MARTIN R. IMBLER
Martin R. Imbler
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Martin R. Imbler Chairman of the Board of March 29, 2000
Martin R. Imbler Directors (Principal
Executive Officer)
/s/ James M. Kratochvil Director (Principal March 29, 2000
James M. Kratochvil Financial and Accounting
Officer)
/s/ Trevor D. Johnson Sales and Marketing Director March 29, 2000
Trevor D. Johnson
/s/ Alan R. Sandell Managing Director March 29, 2000
Alan R. Sandell
/s/ Ira G. Boots Director March 29, 2000
Ira G. Boots
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2000.
BERRY PLASTICS ACQUISITION CORPORATION
By /S/ MARTIN R. IMBLER
Martin R. Imbler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Roberto Buaron Chairman of the Board of March 29, 2000
Roberto Buaron Directors
/s/ Martin R. Imbler President, Chief Executive March 29, 2000
Martin R. Imbler Officer and Director
(Principal Executive
Officer)
/s/ James M. Kratochvil Executive Vice President, March 29, 2000
James M. Kratochvil Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Joseph. S. Levy Vice President, Assistant March 29, 2000
Joseph. S. Levy Secretary, Assistant
Treasurer and Director
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANT WHICH HAS NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The Registrants have not sent any annual report or proxy material to
securityholders.
<PAGE>
BPC HOLDING CORPORATION
(PARENT COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 1, 2000 JANUARY 2, 1999
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash $ 703 $ 622
Other assets (principally investment in subsidiary) (21,439) (25,992)
Assets held in trust -- 6,679
Intangible assets 3,204 3,704
Due from Berry Plastics Corporation 8,049 8,095
--------------- ---------------
Total assets $ (9,483) $ (6,892)
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities $ 1,031 $ 1,240
Accrued dividends 11,001 7,225
Long-term debt 111,956 105,000
--------------- ---------------
Total liabilities 123,988 113,465
Preferred stock 17,093 16,801
Class A common stock 4 4
Class B common stock 2 2
Class C common stock -- --
Treasury stock (256) (280)
Additional paid-in capital 41,559 45,611
Warrants 3,511 3,511
Currency translation (323) (83)
Retained earnings (deficit) (195,061) (185,923)
--------------- ---------------
Total stockholders' equity (deficit) (133,471) (120,357)
--------------- ---------------
Total liabilities and stockholders' equity (deficit) $ (9,483) $ (6,892)
=============== ===============
</TABLE>
S-1
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------
JANUARY 1, 2000 JANUARY 2, 1999 DECEMBER 27, 1997
--------------- --------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ -- $ -- $ --
Cost of goods sold -- -- --
--------------- --------------- -----------------
Gross profit -- -- --
Operating expenses 70 749 220
Interest expense, net 13,845 12,720 11,560
--------------- --------------- -----------------
Loss before income taxes and equity in net income (loss) of
subsidiary (13,915) (13,469) (11,780)
Equity in net income (loss) of subsidiary 4,794 5,899 (2,631)
--------------- --------------- -----------------
Loss before income taxes (9,121) (7,570) (14,411)
Income taxes 17 -- --
--------------- --------------- -----------------
Net loss (9,138) (7,570) (14,411)
Preferred stock dividends (3,776) (3,551) (2,558)
Amortization of preferred stock discount (292) (292) (74)
--------------- --------------- -----------------
Net loss attributable to common shareholders $ (13,206) $ (11,413) $ (17,043)
=============== =============== =================
</TABLE>
S-2
<PAGE>
BPC HOLDING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------
JANUARY 1, 2000 JANUARY 2, 1999 DECEMBER 27, 1997
--------------- --------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net loss $ (9,138) $ (7,570) $ (14,411)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Net loss (income) of subsidiary (4,788) (5,899) 2,631
Amortization and non cash interest 7,456 500 726
Interest funded by assets held in trust 6,679 12,221 11,256
Changes in operating assets and liabilities (168) 840 (208)
--------------- --------------- -----------------
Net cash provided by (used for) operating activities 41 92 (6)
Net cash provided by investing activities -- -- --
Net cash provided by financing activities:
Proceeds from issuance of common and preferred stock and
warrants -- 80 325
Other 40 (258) --
--------------- --------------- -----------------
Net cash provided by (used for) financing activities 40 (178) 325
--------------- --------------- -----------------
Net increase (decrease) in cash and cash equivalents 81 (86) 319
Cash and cash equivalents at beginning of year 622 708 389
--------------- --------------- -----------------
Cash and equivalents at end of year $ 703 $ 622 $ 708
=============== =============== =================
</TABLE>
S-3
<PAGE>
Notes to Condensed Financial Statements
(1) BASIS OF PRESENTATION. In the parent company-only financial statements,
Holding's investment in subsidiary is stated at cost plus equity in
undistributed earnings of subsidiary since date of acquisition. The parent
company-only financial statements should be read in connection with Holding's
consolidated financial statements, which are included beginning on page F-1.
(2) GUARANTEE. Berry had approximately $292.0 million and $218.3 million of
long-term debt outstanding at January 1, 2000 and January 2, 1999, respectively.
Under the terms of the debt agreements, Holding has guaranteed the payment of
all principal and interest.
S-4
<PAGE>
BPC HOLDING CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE YEAR
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended January 1, 2000:
Allowance for doubtful accounts $ 1,651 $ 324 $ 456(2) $ 1,045(1) $ 1,386
============ ============ ============ ============ ============
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
============ ============ ============ ============ ============
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Primarily relates to purchase of accounts receivable and related allowance
through acquisitions.
S-5
<PAGE>
INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
2.1 Asset Purchase Agreement dated February 12, 1992, among Berry Plastics
Corporation (the "Company"), Berry Iowa, Berry Carolina, Inc., Genpak
Corporation, a New York corporation, and Innopac International Inc., a
public Canadian corporation (filed as Exhibit 10.1 to the Registration
Statement on Form S-1 filed on February 24, 1994 (the "Form S-1") and
incorporated herein by reference)
2.2 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
Corporation, 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
Corporation, Tri-Plas, Inc. and Frank C. DeVore (filed as Exhibit 2.4 to
the Annual Report on Form 10-K filed on March 28, 1996 (the "1995 Form
10-K") and incorporated herein by reference)
2.5 Asset Purchase Agreement dated January 23, 1996, between the Company and
Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K and
incorporated herein by reference)
2.6 Stock Purchase and Recapitalization Agreement dated as of June 12, 1996,
by and among Holding, BPC Mergerco, Inc. ("Mergerco") and the other
parties thereto (filed as Exhibit 2.1 to the Current Report on Form 8-K
filed on July 3, 1996 (the "Form 8-K") and incorporated herein by
reference)
2.7 Preferred Stock and Warrant Purchase Agreement dated as of June 12,
1996, by and among Holding, Mergerco, Chase Venture Capital Associates,
L.P. ("CVCA") and The Northwestern Mutual Life Insurance Company
("Northwestern") (filed as Exhibit 2.2 to the Form 8-K and incorporated
herein by reference)
2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and between
Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K and
incorporated herein by reference)
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 (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)
<PAGE>
2.12 Asset Purchase Agreement dated as of January 17, 1997, among the
Company, Container Industries, Inc. and the shareholders of Container
Industries, Inc. (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
Plastics Design Corporation, 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)
4.10 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 (filed as Exhibit 2.15 to Amendment No. 1 to Form S-4 filed on
December 29, 1998 (the "1998 Amended Form S-4") and incorporated herein
by reference)
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 Corporation ("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 Corporation ("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 Corporation (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 1998 Amended Form S-4 and incorporated herein by reference)
<PAGE>
3.12 By-laws of Berry Sterling (filed as Exhibit 3.12 to the 1998 Amended
Form S-4 and incorporated herein by reference)
3.13 Certificate of Incorporation of AeroCon (filed as Exhibit 3.13 to the
1998 Amended Form S-4 and incorporated herein by reference)
3.14 By-laws of AeroCon (filed as Exhibit 3.14 to the 1998 Amended Form S-4
and incorporated herein by reference)
3.15 Articles of Incorporation of PackerWare (filed as Exhibit 3.15 to the
1998 Amended Form S-4 and incorporated herein by reference)
3.16 By-laws of PackerWare (filed as Exhibit 3.16 to the 1998 Amended Form
S-4 and incorporated herein by reference)
3.17 Certificate of Incorporation of Berry Design (filed as Exhibit 3.17 to
the 1998 Amended Form S-4 and incorporated herein by reference)
3.18 By-laws of Berry Design (filed as Exhibit 3.18 to the 1998 Amended Form
S-4 and incorporated herein by reference)
3.19 Certificate of Incorporation of Venture Holdings (filed as Exhibit 3.19
to the 1998 Amended Form S-4 and incorporated herein by reference)
3.20 By-laws of Venture Holdings (filed as Exhibit 3.20 to the 1998 Amended
Form S-4 and incorporated herein by reference)
3.21 Articles of Incorporation of Venture Midwest (filed as Exhibit 3.21 to
the 1998 Amended Form S-4 and incorporated herein by reference)
3.22 Code of Regulations of Venture Midwest (filed as Exhibit 3.22 to the
1998 Amended Form S-4 and incorporated herein by reference)
3.23 Articles of Incorporation for a Statutory Close Corporation of Venture
Southeast (filed as Exhibit 3.23 to the 1998 Amended Form S-4 and
incorporated herein by reference)
3.24 By-laws of Venture Southeast (filed as Exhibit 3.24 to the 1998 Amended
Form S-4 and incorporated herein by reference)
3.25 Memorandum of Association of NIM Holdings (filed as Exhibit 3.25 to the
1998 Amended Form S-4 and incorporated herein by reference)
3.26 Articles of Association of NIM Holdings (filed as Exhibit 3.26 to the
1998 Amended Form S-4 and incorporated herein by reference)
3.27 Memorandum of Association of Norwich (filed as Exhibit 3.27 to the 1998
Amended Form S-4 and incorporated herein by reference)
3.28 Articles of Association of Norwich (filed as Exhibit 3.28 to the 1998
Amended Form S-4 and incorporated herein by reference)
3.29 Certificate of Incorporation of Knight Plastics (filed as Exhibit 3.29
to the 1998 Amended Form S-4 and incorporated herein by reference)
<PAGE>
3.30 By-laws of Knight Plastics (filed as Exhibit 3.30 to the 1998 Amended
Form S-4 and incorporated herein by reference)
3.31 Certificate of Incorporation of CPI Holding Corporation (filed as
Exhibit 3.31 to the 1998 Amended Form S-4 and incorporated herein by
reference)
3.32 By-laws of CPI Holding Corporation (filed as Exhibit 3.32 to the 1998
Amended Form S-4 and incorporated herein by reference)
3.33 Certificate of Incorporation of Cardinal Packaging, Inc. (filed as
Exhibit 3.33 to 1998 Amended Form S-4 and incorporated herein by
reference)
3.34 Code of Regulations of Cardinal Packaging, Inc. (filed as Exhibit 3.34
to the 1998 Amended Form S-4 and incorporated herein by reference)
3.35 Memorandum of Association of Norwich Acquisition Limited (filed as
Exhibit 3.35 to the 1998 Amended Form S-4 and incorporated herein by
reference)
3.36 Articles of Association of Norwich Acquisition Limited (filed as Exhibit
3.36 to the 1998 Amended Form S-4 and incorporated herein by reference)
3.37 Certificate of Incorporated of Berry Plastics Acquisitions Corporation
(filed as Exhibit 3.37 to the 1998 Amended Form S-4 and incorporated
herein by reference)
3.38 By-Laws of Berry Plastics Acquisition Corporation (filed as Exhibit 3.38
to the 1998 Amended Form S-4 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) (filed as Exhibit
4.1 to the Form S-1 and incorporated herein by reference)
4.2 Warrant Agreement between Holding and United States Trust Company of New
York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and
incorporated herein by reference)
4.3 Indenture dated as of June 18, 1996, between Holding and First Trust of
New York, National Association, as Trustee (the "Trustee"), relating to
Holding's Series A and Series B 12.5% Senior Secured Notes Due 2006
(filed as Exhibit 4.3 to the 1996 Form S-4 and incorporated herein by
reference)
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 Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
(filed as Exhibit 4.6 to the 1996 Form S-4 and incorporated herein by
reference)
<PAGE>
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 1998 Amended Form S-4 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 1998
Amended Form S-4 and incorporated herein by reference)
4.11 Indenture dated as of July 6, 1999 among the Company, the Guarantors and
United States Trust Company of New York , as trustee (filed as Exhibit
10.27 to the Registration Statement on Form S-4 (Registration No.
333-85739) filed on August 23, 1999 (the "1999 Form S-4") and
incorporated herein by reference)
4.12 Registration Rights Agreement dated as of July 6, 1999 by and among the
Company, the Guarantors, DLJ and Chase Securities, Inc. (filed as
Exhibit 10.28 to the 1999 Form S-4 and incorporated herein by reference)
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. (filed as
Exhibit 10.1 to the 1998 Amended Form S-4 and incorporated herein by
reference)
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)
<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 Employment Agreement dated as of January 21, 1997, between the Company
and Bruce J. Sims ("Sims")
10.15 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)
10.16 Letter of Credit of NationsBank, N.A. dated April 16, 1997 (filed as
Exhibit 10.15 to the 1998 Amended Form S-4 and incorporated herein by
reference)
10.17 Stockholders Agreement dated as of June 18, 1996, among Holding,
Atlantic Equity Partners International II, L.P., CVCA and the other
parties thereto (filed as Exhibit 10.23 to the 1996 Form S-4 and
incorporated herein by reference)
10.18 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to CVCA (Warrant No. 1) (filed as Exhibit 10.24 to the 1996 Form
S-4 and incorporated herein by reference)
10.19 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to CVCA (Warrant No. 2) (filed as Exhibit 10.25 to the 1996 Form
S-4 and incorporated herein by reference)
10.20 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to The Northwestern Mutual Life Insurance Company (Warrant No. 3)
(filed as Exhibit 10.26 to the 1996 Form S-4 and incorporated herein by
reference)
10.21 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996,
issued to The Northwestern Mutual Life Insurance Company (Warrant No. 4)
(filed as Exhibit 10.27 to the 1996 Form S-4 and incorporated herein by
reference)
10.22 Amended and Restated Stockholders Agreement dated June 18, 1996, among
Holding and certain stockholders of Holding (filed as Exhibit 10.28 to
the 1996 Form S-4 and incorporated herein by reference)
10.23 Second Amended and Restated Management Agreement dated June 18, 1996,
between First Atlantic Capital, Ltd. and the Company (filed as Exhibit
10.29 to the 1996 Form S-4 and incorporated herein by reference)
10.24 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding
Corporation, dated August 29, 1997, issued to Willard J. Rathbun (filed
as Exhibit 10.30 to the 1997 Form 10-K and incorporated herein by
reference)
<PAGE>
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 Tax Sharing Agreement dated April 20, 1994, between BPC Holding
Corporation and its subsidiaries
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)
*27 Financial Data Schedule
* Filed herewith.
EXHIBIT 10.14
EMPLOYMENT AGREEMENT dated as of January 21, 1997,
between PACKERWARE CORPORATION, a Kansas corporation (the
"Corporation"), and BRUCE J. SIMS (the "Employee").
Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of January 14, 1997 (the "Merger Agreement"), among Berry Plastics
Corporation, a Delaware corporation ("Berry"), PackerWare Acquisition
Corporation, a Kansas corporation ("Acquisition Sub"), PackerWare Corporation, a
Kansas corporation ("PackerWare"), and the stockholders of Packerware, on the
date hereof Acquisition Sub merged with and into PackerWare, with PackerWare
being the surviving corporation (for ease of reference, prior to the merger
PackerWare Corporation is referred to herein as "PackerWare" and after the
merger PackerWare Corporation is referred to herein as the "Corporation"). As a
result of such merger, the Corporation became a wholly-owned subsidiary of
Berry. Prior to the execution hereof, the Employee has been an officer of
Packerware, and after the date hereof, he will be an officer of the Corporation,
and as such has substantial experience that has value to the Corporation. The
Corporation desires to employ the Employee, and the Employee desires to accept
such employment, on the terms and subject to the conditions hereinafter set
forth. Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:
1. EMPLOYMENT; TERMINATION OF PREVIOUS AGREEMENT. (a) Effective as of
the date hereof (such date, the "Commencement Date," for all purposes hereof),
the Corporation shall employ the Employee, and the Employee shall accept
employment by the Corporation, upon the terms and conditions hereinafter set
forth.
(b) Reference is made to the Employment Agreement dated September 1994,
as amended on March 5, 1996 (the "Old Employment Agreement"), between the
Employee and PackerWare. The Employee, PackerWare and the Corporation agree that
the Old Employment Agreement is hereby terminated and of no further force or
effect. In addition, the Employee hereby releases and forever discharges
PackerWare and the Corporation from all claims and obligations arising out of
the Old Employment Agreement.
2. TERM. Subject to earlier termination as provided herein, the
employment of the Employee hereunder shall commence on the Commencement Date and
terminate on January __, 2002. Such period of employment is hereinafter referred
to as the "Employment Period."
3. DUTIES. During the Employment Period, the Employee shall be initially
employed by the Corporation as the Vice President-Sales and Marketing,
Housewares, and shall perform such duties and services consistent with such
position as may reasonably be assigned to the Employee by the Chief Executive
Officer of the Corporation or his designees. The Employee will be primarily
responsible for the housewares and lawn and garden sectors of the Corporation's
<PAGE>
business, as well as selected aspects of the drink cup business, all as
determined by the Chief Executive Officer of the Corporation.
4. TIME TO BE DEVOTED TO EMPLOYMENT. Except for vacation, absences due
to temporary illness and absences resulting from causes set forth in Section 7,
the Employee shall devote the Employee's business time, attention and energies
on a full-time basis to the performance of the duties and responsibilities
referred to in Section 3. The Employee shall not during the Employment Period be
engaged in any other business activity which, in the reasonable judgment of the
executive officers of the Corporation, would conflict with the ability of the
Employee to perform his duties under this Agreement, whether or not such
activity is pursued for gain, profit or other pecuniary advantage. The
Corporation understands that the Employee is a member of the Board of Directors
and a shareholder of Innovative Interactive Inc. ("Innovative"), a promotion
company, and the Corporation understands and agrees that the Employee may devote
some time and attention to Innovative; PROVIDED, HOWEVER, that the Employee is
still bound by, and must comply with, the provisions of this Agreement
(including, without limitation, this Section 4 and Section 11) notwithstanding
such involvement with Innovative.
5. COMPENSATION; BENEFITS; REIMBURSEMENT.
(A) BASE SALARY. During the Employment Period, the Corporation shall pay
to the Employee an annual base salary of $155,000, which shall be subject to
review and, at the option of persons having authority regarding such matters at
the Corporation, subject to increase (such salary, as the same may be increased
from time to time as aforesaid, being referred to herein as the "Base Salary").
The Base Salary shall be payable in such installments (but not less frequent
than monthly) as is the policy of the Corporation with respect to employees of
the Corporation at substantially the same level of employment as the Employee.
(B) BONUS. During the Employment Period, the Employee shall be entitled
to participate in all bonus and incentive programs of the Corporation (the
"Programs") generally available from time to time to employees of the
Corporation at substantially the same level of employment as the Employee, such
participation to be in substantially the same manner as the participation
therein by such employees.
(C) BENEFITS. During the Employment Period, the Employee shall be
entitled to four weeks vacation per year and such other benefits (together with
the Programs, the "Benefit Arrangements") as are generally made available from
time to time to other employees of the Corporation at substantially the same
level of employment as the Employee. The Benefit Arrangements shall include use
of a vehicle provided by the Corporation.
(D) REIMBURSEMENT OF EXPENSES. During the Employment Period, the
Corporation shall reimburse the Employee, in accordance with the policies and
practices of the Corporation in effect from time to time with respect to other
employees of the Corporation at substantially the same level of employment as
the Employee, for all reasonable and necessary traveling expenses and other
disbursements incurred by him for or on behalf of the Corporation in connection
with the performance of his duties hereunder upon presentation by the Employee
to the Corporation of appropriate documentation therefor.
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<PAGE>
(E) DEDUCTIONS. The Corporation shall deduct from any payments to be
made by it to the Employee under this Section 5 or Section 9 any amounts
required to be withheld in respect of any Federal, state or local income or
other taxes.
6. RELOCATION. In no event shall the Employee be required to relocate to
any location more than 50 miles outside of Lawrence, Kansas without the
Employee's prior consent.
7. DISABILITY OR DEATH OF THE EMPLOYEE. (a) If, during the Employment
Period, the Employee is incapacitated or disabled by accident, sickness or
otherwise (hereinafter, a "Disability") so as to render the Employee mentally or
physically incapable of performing the services required to be performed under
this Agreement for 90 days in any period of 360 consecutive days, the
Corporation may, at any time thereafter, at its option, terminate the employment
of the Employee under this Agreement immediately upon giving the Employee notice
to that effect, it being understood that upon such termination the Employee
shall be eligible for the disability benefits provided by the Corporation.
(b) If the Employee dies during the Employment Period, the Termination
Date (as defined below) shall be deemed to be the date of the Employee's death.
8. TERMINATION. (a) The Corporation may terminate the employment of the
Employee and all of the Corporation's obligations under this Agreement (except
as hereinafter provided) at any time for "cause" by giving the Employee notice
of such termination, with reasonable specificity of the grounds therefor. For
the purposes of this Section 8, "cause" shall mean (i) willful misconduct with
respect to the business and affairs of the Corporation or any subsidiary or
affiliate thereof, insubordination or willful neglect of duties (other than
neglect due solely to the Employee's illness or other involuntary mental or
physical disability), including the Employee's violation of any material
Corporation policy, (ii) material breach of any of the provisions of this
Agreement, (iii) conviction for a crime involving moral turpitude or fraud, or
(iv) the material untruth, inaccuracy or breach of any representation or
warranty of PackerWare contained in Section 5 of the Merger Agreement that (A)
results or could reasonably be expected to result in losses, expenses, damages
or other liability incurred by the Corporation in an amount greater than
$250,000 and (B) arose out of facts or circumstances of which the Employee had
knowledge or should have had knowledge in the exercise of his duties as
President of PackerWare. A termination pursuant to this Section 8(a) shall take
effect immediately upon the giving of the notice contemplated hereby.
(b) The Corporation may terminate the employment of the Employee and all
of the Corporation's obligations under this Agreement (except as hereinafter
provided) at any time during the Employment Period without "cause" by giving the
Employee written notice of such termination, to be effective 30 days following
the giving of such written notice.
(c) The Employee may terminate the employment of the Employee hereunder
at any time during the Employment Period by giving the Corporation at least 30
days' prior written notice of such termination, such termination to be effective
on the date specified in such notice, whereupon all of the Corporation's
obligations hereunder shall terminate (except as hereinafter provided). For
convenience of reference, the date upon which any termination of the
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<PAGE>
employment of the Employee pursuant to Section 7 or 8 hereof shall be effective
shall be hereinafter referred to as the "Termination Date."
9. EFFECT OF TERMINATION OF EMPLOYMENT. (a) Upon the effective date of
termination of the Employee's employment pursuant to Section 7, Section 8(a) or
Section 8(c) hereof, neither the Employee nor the Employee's beneficiaries or
estate shall have any further rights under this Agreement or any claims against
the Corporation arising out of this Agreement, except the right to receive,
within 30 days of the Termination Date:
(i) the unpaid portion of the Base Salary provided for in
Section 5(a), computed on a PRO RATA basis to the Termination Date;
(ii) reimbursement for any expenses for which the Employee shall
not have theretofore been reimbursed, as provided in Section 5(d); and
(iii) the unpaid portion of any amounts earned by the Employee
prior to the Termination Date pursuant to any Benefit Arrangement;
PROVIDED, HOWEVER, unless specifically provided otherwise in this
Section 9, the Employee shall not be entitled to receive any benefits
under a Benefit Arrangement that have accrued during a fiscal year if
the terms of such Benefit Arrangement require that the beneficiary be
employed by the Corporation as of the end of such fiscal year.
(b) Upon the termination of the Employee's employment pursuant to
Section 8(b), neither the Employee nor the Employee's beneficiaries or estate
shall have any further rights under this Agreement or any claims against the
Corporation arising out of this Agreement, except the right to receive:
(i) the unpaid portion of the Base Salary, computed on a PRO
RATA basis, for the period from the Commencement Date until the later to
occur of (A) the third anniversary of the Commencement Date or (B) the
first anniversary of the Termination Date (as defined in Section 8(c)),
payable in such installments as the Base Salary was paid prior to the
Termination Date (it being understood and agreed that all of such
installments shall be paid regardless of whether the Employee is
subsequently employed, provided that such employment does not violate
the provisions of Section 11 hereof);
(ii) the amount of the bonus payment, if any, attributable to
the fiscal year during which the Termination Date occurred, computed on
a PRO RATA basis, payable at such time as the bonus payment is
customarily paid by the Corporation to its employees; and
(iii) the payments, if any, referred to in Sections 9(a)(ii) and
(iii), to the extent not covered by Sections 9(b)(i) and (ii) above.
(c) The Employee's obligations under Sections 10, 11 and 12 of this
Agreement, and the Corporation's obligations under this Section 9, shall survive
the termination of this Agreement and the termination of the Employee's
employment hereunder.
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<PAGE>
10. DISCLOSURE OF INFORMATION. (a) From and after the date hereof, the
Employee shall not use or disclose to any person, firm, corporation or other
business entity (other than any officer, director, employee, affiliate or
representative of the Corporation), except as required in connection with the
performance of the Employee's duties under and in compliance with the terms of
this Agreement and as required by law or judicial process, any Confidential
Information (as hereinafter defined) for any reason or purpose whatsoever, nor
shall the Employee make use of any of the Confidential Information for the
Employee's purposes or for the benefit of any person or entity except the
Corporation or any subsidiary thereof.
(b) For purposes of this Agreement, "Confidential Information" shall
mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Corporation and its subsidiaries and (ii) all other information of a proprietary
or confidential nature relating to the Corporation or any subsidiary thereof, or
the business or assets of the Corporation or any such subsidiary, including,
without limitation, books, records, customer and registered user lists, vendor
lists, supplier lists, distribution channels, pricing information, cost
information, marketing plans, strategies, forecasts, financial statements,
budgets and projections, other than information which is generally within the
public domain at the time of the receipt thereof by the Employee or at the time
of use or disclosure of such Confidential Information by the Employee other than
as a result of the breach by the Employee of the Employee's agreement hereunder.
(c) As used herein, the term "Intellectual Property Rights" means all
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae,
inventions, development tools, marketing materials, instructions, confidential
information, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
11. RESTRICTIVE COVENANTS. (a) The Employee acknowledges and recognizes
that during the Employment Period he will be privy to Confidential Information
and further acknowledges and recognizes that the Corporation would find it
extremely difficult to replace the Employee. Accordingly, in consideration of
the premises contained herein and the consideration to be received by the
Employee hereunder (including, without limitation, the severance compensation
described in Section 9(b)(i), if any), without the prior written consent of the
Corporation, the Employee shall not, at any time during the employer/employee
relationship between the Corporation and the Employee and the period beginning
on the date of termination of such employer/employee relationship and ending on
the later to occur of (x) the third anniversary of the Commencement Date and (y)
the first anniversary of such date of termination, (i) directly or indirectly
engage in, represent in any way, or be connected with, any Competing Business
directly competing with the business of the Corporation or any subsidiary or
affiliate thereof within the state in which the Employee is employed or any
other state of the United States, whether such engagement shall be as an
officer, director, owner, employee, partner, affiliate or other participant in
any Competing Business, (ii) assist others in engaging in any Competing Business
in the manner described in clause (i) above, (iii) induce other employees of the
Corporation or any subsidiary or affiliate thereof to terminate their employment
with the Corporation or any such subsidiary or affiliate or to engage in any
Competing Business or (iv)
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<PAGE>
induce any entity or person with which the Corporation or any subsidiary or any
affiliate thereof has a business relationship, contractual or otherwise, to
terminate or alter such business relationship.
(b) As used herein, "Competing Business" shall mean any business
involving the sale of products in any city or county in any state of the United
States if such business or the products sold by it are competitive, directly or
indirectly, at the time of the Termination of Employment with (i) the business
of the Corporation or any subsidiary or affiliate thereof, (ii) any of the
products manufactured, sold or distributed by the Corporation or any subsidiary
or affiliate thereof or (iii) any products or business being developed or
conducted by the Corporation or any subsidiary or affiliate thereof.
(c) The Employee understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the business of the
Corporation or any subsidiary or affiliate thereof, but he nevertheless believes
that he has received and will receive sufficient consideration and other
benefits as an employee of the Corporation, under the terms of the Merger
Agreement and as otherwise provided hereunder to justify clearly such
restrictions which, in any event (given his education, skills and ability), the
Employee does not believe would prevent him from earning a living.
12. RIGHT TO INVENTIONS. The Employee shall promptly disclose, grant and
assign to the Corporation for its sole use and benefit any and all inventions,
improvements, technical information and suggestions reasonably relating to the
business of the Corporation or any subsidiary or affiliate thereof
(collectively, the "Inventions") which the Employee may develop or acquire
during the period of the employer/employee relationship between the Corporation
and the Employee (whether or not during usual working hours), together with all
patent applications, letters patent, copyrights and reissues thereof that may at
any time be granted for or upon the Inventions. In connection therewith:
(a) the Employee recognizes and agrees that the Inventions shall be the
sole property of the Corporation, and the Corporation shall be the sole owner of
all patent applications, letters patent, copyrights and reissues thereof that
may at any time be granted for or on the Inventions;
(b) the Employee hereby assigns to the Corporation any rights the
Employee may have in or acquire to the Inventions;
(c) the Employee shall, at the expense of the Corporation, promptly
execute and deliver such applications, assignments, descriptions and other
instruments as may be necessary or proper in the opinion of the Corporation to
vest title to the Inventions and any patent applications, patents, copyrights,
reissues or other proprietary rights related thereto in the Corporation and to
enable it to obtain and maintain the entire right and title thereto throughout
the world;
(d) the Employee recognizes and agrees that the Inventions to the extent
copyrightable shall constitute works for hire under the copyright laws of the
United States; and
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<PAGE>
(e) the Employee shall render to the Corporation, at its expense, all
such assistance as it may require in the prosecution of applications for said
patents, copyrights, reissues or other proprietary rights, in the prosecution or
defense of interferences which may be declared involving any said applications,
patents, copyrights or other proprietary rights and in any litigation in which
the Corporation may be involved relating to the Inventions.
13. MISCELLANEOUS PROVISIONS.
(A) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
agreements referred to herein contain the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements or understandings between the parties with respect thereto
(including, without limitation, the Old Employment Agreement). This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing signed by each of the parties hereto.
(B) DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
(C) NOTICES. All notices or other communications pursuant to this
Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(i) if to the Corporation, to:
PackerWare Corporation
c/o Berry Plastics Corporation
101 Oakley Street
Evansville, Indiana 47706
Attention: Martin R. Imbler
Telecopier: (812) 421-9604;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Michael Joseph O'Brien, Esq.
Telecopier: (212) 408-2420; and
(ii) if to the Employee, to:
Bruce J. Sims
12808 Sherwood
Leawood, Kansas 66209
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<PAGE>
All such notices and other communications shall be deemed to have been delivered
and received (A) in the case of personal delivery, on the date of such delivery,
(B) in the case of delivery by telecopy, on the date of such delivery, (C) in
the case of delivery by nationally-recognized, overnight courier, on the
Business Day following dispatch, and (D) in the case of mailing, on the third
Business Day following such mailing. As used herein, "Business Day" shall mean
any day that is not a Saturday, Sunday or a day on which banking institutions in
New York, New York are not required to be open.
(D) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(E) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the state of Kansas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Kansas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Kansas.
(F) BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, representatives, heirs and estate, as
applicable. Anything contained herein to the contrary notwithstanding, this
Agreement shall not be assignable by any party hereto without the consent of the
other party hereto.
(G) WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party must be in writing and shall not
operate or be construed as a waiver of any subsequent breach by such other
party.
(H) SEVERABILITY. In the event that any provision of this Agreement is
determined to be partially or wholly invalid, illegal or unenforceable in any
jurisdiction, then such provision shall, as to such jurisdiction, be modified or
restricted to the extent necessary to make such provision valid, binding and
enforceable, or if such provision cannot be modified or restricted, then such
provision shall, as to such jurisdiction, be deemed to be excised from this
Agreement; PROVIDED, HOWEVER, that the binding effect and enforceability of the
remaining provisions of this Agreement, to the extent the economic benefits
conferred upon the parties by virtue of this Agreement remain substantially
unimpaired, shall not be affected or impaired in any manner, and any such
invalidity, illegality or unenforceability with respect to such provisions shall
not invalidate or render unenforceable such provision in any other jurisdiction.
(I) REMEDIES. All remedies hereunder are cumulative, are in addition to
any other remedies provided for by law and may, to the extent permitted by law,
be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed to be an election of such remedy or to preclude the exercise
of any other remedy. The Employee acknowledges that in the event of a breach of
any of the Employee's covenants contained in Section 10, 11 or 12, the
Corporation shall be entitled to immediate relief enjoining such violations in
any court or before any judicial body having jurisdiction over such a claim.
-8-
<PAGE>
(J) SURVIVAL. Sections 9 through 12, this Section 13 and the defined
terms used in any section referred to in this Section 13(j), shall survive the
termination of the Employee's employment on the Termination Date and the
expiration of this Agreement.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.
PACKERWARE CORPORATION
By: /S/ JAMES M. KRATOCHVIL
-------------------------------------------
James M. Kratochvil
Vice President, Chief Financial Officer,
Secretary and Treasurer
THE EMPLOYEE:
/S/ BRUCE J. SIMS
--------------------------------------------------
Bruce J. Sims
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EXHIBIT 10.26
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, made as of April 20, 1994, by and among BPC
Holding Corporation, a Delaware corporation having its principal place of
business at 101 Oakley Street, Evansville, Indiana 47710, ("Holding"), and those
corporations that have executed this Agreement and whose names and principal
places of business are set forth on Exhibit A hereto (all of which are direct or
indirect domestic subsidiaries of Holding and are includible in the consolidated
Federal income tax return of the affiliated group (within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code")) of which
Holding is the common parent corporation (hereinafter, the "Holding Group") for
the fiscal year ended December 31, 1994), and such other parties as may become
members of the Holding Group in subsequent fiscal years for which Holding files
a consolidated Federal income tax return as the common parent corporation of an
affiliated group, and who execute this Agreement (hereinafter, sometimes
collectively referred to as the "Subsidiaries").
Holding and the Subsidiaries wish to provide for payment of the
consolidated Federal income tax and certain state and local tax liabilities of
the Holding Group by Holding; for the contribution to such payment by the
various members of the Holding Group, including Berry Plastics Corporation, a
Delaware corporation having its principal place of business at 101 Oakley
Street, Evansville, Indiana 47710 ("Berry"), and any direct and indirect
subsidiaries of Berry ("Berry Subsidiaries") that may be includible in the
Holding Group (hereinafter, Berry and such Berry Subsidiaries are sometimes
collectively referred to as the "Berry Group"), to which such liability may be
attributable in whole or in part; and for the reimbursement by Holding to those
Subsidiaries that produce losses or credits in any fiscal year in the amount of
the benefit that such Subsidiary would be entitled to with respect to such
losses or credits on a separate return basis, or for the benefit, in whole or in
part, that such losses or credits produce for the Holding Group.
In consideration of the foregoing, and of the mutual covenants and
promises herein contained, Holding and the Subsidiaries agree as follows:
1. ALLOCATION AND PAYMENT OF TAX LIABILITY OF MEMBERS OF GROUP
(a) For the fiscal year ended December 31, 1994 and for each
subsequent fiscal year for which this Agreement may remain in effect, each
Subsidiary shall be required to pay to Holding (in the manner provided in
Paragraph 1.3 hereof), as its share of the consolidated Federal income tax
liability of the Holding Group, an amount equal to the Federal income tax
liability that would have been payable by such Subsidiary for such year if it
had filed a separate income tax return for such year and all prior years;
provided, however, that in computing separate return tax liability, no account
shall be taken of any deduction, loss or credit of any Subsidiary to the extent
that such Subsidiary has previously received payment therefor, pursuant to
Section 3 hereof. Payments shall be required to be made in each fiscal year
pursuant to this Section without regard to the actual consolidated Federal
income tax liability, if any, of the Holding Group for such year.
<PAGE>
(b) For the purposes of this Agreement, if, in any fiscal year, one
or more Berry Subsidiaries are includible in the Holding Group, all members of
the Berry Group shall be deemed to constitute a single member of the Holding
Group, and any portion of the Holding Group consolidated Federal income tax
liability for any fiscal year that is apportioned to the Berry Group in
accordance with this Section shall be allocated among the members thereof in
such manner as they may agree. The amount of separate return tax liability
required to be paid to Holding by Berry or the Berry Group in any year pursuant
to this Section shall be determined as if Berry had filed a consolidated Federal
income tax return for such year and for all prior years, on behalf of itself and
all Berry Subsidiaries that were includible corporations described in Section
1504(a)(1) of the Code for such year or prior years, as the case may be.
(c) Each member (or group of members) of the Holding Group shall
make payment to Holding of any consolidated Federal income tax liability
allocated to it pursuant to this Section 1, and Holding shall have sole
responsibility for making any required payments to the Internal Revenue Service
(the "IRS") in satisfaction of the consolidated Federal income tax liability of
the Holding Group for each fiscal year. For each quarter of each fiscal year
after the year ended December 31, 1994, each member (or group of members) of the
Holding Group shall make payment to Holding of any amount required to be paid
pursuant to this Section no later than the date upon which such member (or group
of members) would be required to make an installment payment of estimated income
tax to the IRS for such quarter, in accordance with Section 6655 of the Code.
The amount of any overpayment or underpayment pursuant to this Section shall be
credited against or added to, as the case may be, the amount otherwise required
to be paid for the fiscal quarter within which the amount of such overpayment or
underpayment first becomes reasonably ascertainable; provided, however, that,
upon written request (including supporting schedules) of any member (or group of
members), made after the close of any fiscal year but within the period
described in Section 6425(a)(1) of the Code, Holding shall repay to such member
(or group of members), within the period described in Section 6425(b)(1) of the
Code, the amount of any net remaining overpayment of consolidated tax liability
made by such member (or group of members) for such year.
2. PAYMENT FOR TAX BENEFITS OF MEMBERS.
(a) From and after the date hereof, if any member (or group of
members) of the Holding Group would be entitled to a refund of Federal income
taxes previously paid in any prior fiscal year, computed on a separate return
basis (in the manner described in Section 1 hereof), as a result of any losses,
deductions or credits claimed by such member (or group of members) for any
fiscal year for which this Agreement may be in effect (any such entitlement to a
refund being referred to herein as a "Separate Return Tax Benefit"), whether by
reason of a carryback of a net operating loss, or a net capital loss or tax
credit, or otherwise, then, upon written request (including supporting
schedules) of such member (or group of members), made within the period
described in Section 6411(a) of the Code, Holding shall pay the amount of such
Separate Return Tax Benefit to such member, within the period described in
Section 6411(b) of the Code. In the case of Berry and Berry Subsidiaries, the
amount of the Separate Return Tax Benefit
2
<PAGE>
for any year shall be computed as if Berry had filed a consolidated Federal
income tax return for such year and for all prior years on behalf of itself and
all other Berry Subsidiaries that were includible corporations described in
Section 1504(a)(1) of the Code. The amount of any payment required to be made to
any member (or group of members) pursuant to this Section 2 shall be reduced by
any amount previously paid to such member (or group of members) with respect to
such losses, deductions or credits pursuant to Section 3 hereof.
3. PAYMENT FOR TAX BENEFITS OF GROUP.
(a) If, for any fiscal year during which this Agreement is in
effect, any member (or group of members) shall have a negative separate return
tax liability (hereinafter, a "Loss Member"), Holding intends to pay to such
Loss Member an amount equal to the tax benefit realized by the Holding Group for
such year (the "Group Tax Benefit") as a result of such negative separate return
tax liability. For purposes of this Agreement, the Group Tax Benefit for any
fiscal year shall be equal to the excess, if any, of (i) the sum of the separate
return tax liabilities of each member of the Holding Group having a positive
separate return tax liability for such year, over (ii) the actual consolidated
Federal income tax liability of the Holding Group for such year. For purposes of
this Section 3, "separate return tax liability" shall be computed in accordance
with, and subject to the exceptions and limitations provided in Treas. Reg. ss.
1.1552-1(a)(2)(ii). "negative separate return tax liability" shall similarly be
ascertained under the principles of Treas. Reg. ss. 1.1552-1(a)(2)(ii), as if
the Loss Member had filed a separate return for such fiscal year as its first
separate return year and allocated to such separate return year carryover and
carryback items of consolidated net operating loss, consolidated net capital
loss, consolidated unused investment credit, consolidated unused foreign tax
credit, and consolidated excess charitable contributions under the provisions of
Treas. Reg. ss. 1.1502-79. In the case of the Berry Group, separate return tax
liability and negative separate return tax liability shall be computed in
accordance with the principles set forth in this Section 3, on a consolidated
basis.
(b) Within 90 days after the beginning of each fiscal year for which
this Agreement may be in effect, Holding shall give written notice to each
Subsidiary of its intention to pay one or more Loss Members in an amount equal
to all, or any portion, of their proportionate part (determined in the manner
provided in paragraph 3.1) of any Group Tax Benefit that may be realized by the
Holding Group for such year. Holding intends to make such payments on a
quarterly basis, in the manner described in paragraph 1.3 hereof; provided,
however, that all payments made pursuant to this Section 3 shall be made in the
sole discretion of Holding, and Holding shall have no obligations or liability
whatsoever with respect thereto to any Loss Member; and provided, further, that
any payment made to any Loss Member in a fiscal year pursuant to this Section 3
shall be reduced by any amount previously paid to such Loss Member with respect
to such year under Section 2 hereof.
3
<PAGE>
4. ADJUSTMENTS.
(a) Any adjustment of income, deduction, or credit that results
after the fiscal year in question by reason of any carryback, amended return,
claim for refund, or audit shall be given effect by redetermining amounts
payable and reimbursable for such fiscal year hereunder as if such adjustment
had been part of the original determination hereunder, with interest payable in
the amounts provided in Section 6611 of the Code. Any increases in the
consolidated Federal income tax liability of the Holding Group, and any
penalties and interest imposed with respect to any consolidated Federal income
tax return filed on behalf of the Holding Group, shall be given effect by
redetermining amounts payable for such fiscal year as if such adjustment had
been part of the original determination hereunder.
5. ALTERNATIVE MINIMUM TAX.
(a) Each Subsidiary shall be required to pay to Holding, as its
share of any alternative minimum tax imposed on the Holding Group pursuant to
Section 55 of the Code, an amount of such liability that Holding shall allocate
to each Subsidiary, provided that any such amounts so allocated pursuant to this
Section 5.1 shall be allocated by Holding in a manner that is equitable and is
consistent with Section 55 and Section 1502 of the Code, and the Treasury
Regulations promulgated thereunder, including any amendments thereto and
consistent with the allocations of tax liability pursuant to Section 1 hereof.
6. STATE TAXES.
(a) If, at any time from and after the date hereof, the liability of
Holding and the Subsidiaries for any state or local income or franchise taxes is
determined on a consolidated or combined basis, this Agreement shall be applied
in like manner to determine liability for, and tax benefit payments with respect
to, such taxes.
7. TERMINATION.
(a) This Agreement may be terminated at any time upon mutual
agreement of the parties hereto; provided, however, that such termination shall
not relieve Holding of the obligation to make payments to any Subsidiary
pursuant to Section 2 hereof for any separate return tax benefit to which such
Subsidiary would have been entitled (if this Agreement had remained in effect)
as a result of any loss, deductions or credits taken by such Subsidiary for any
fiscal year for which this Agreement was in effect, nor will it relieve Holding
or the Subsidiaries of any obligations pursuant to Sections 1.3, 4, and 6
hereof.
8. EFFECTIVE DATE.
(a) This Agreement shall be effective for the taxable year of the
Holding Group ended December 31, 1994, and for all taxable years thereafter.
4
<PAGE>
9. CAPTIONS.
(a) All section captions contained in this Agreement are for
convenience only and shall not be deemed a part of this Agreement.
10. COUNTERPARTS.
(a) This Agreement may be executed in counterparts, each of which
shall constitute an original and all of which, when taken together, shall
constitute one agreement.
11. GOVERNING LAW.
(a) This Agreement shall be governed by the laws applicable to
contracts entered into and to be fully performed within the State of New York by
residents thereof.
12. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
5
<PAGE>
IN WITNESS WHEREOF, Holding and the Subsidiaries have executed this
Agreement as of the day and year first above written.
BPC Holding Corporation
By
/s/ James M. Kratochvil
Name: James M. Kratochvil
Title: Chief Financial Officer
Berry Plastics Corporation
By
/s/ James M. Kratochvil
Name: James M. Kratochvil
Title: Chief Financial Officer
Berry Iowa Corporation
By
/s/ James M. Kratochvil
Name: James M. Kratochvil
Title: Chief Financial Officer
Berry CPI Plastics Corporation
By
/s/ James M. Kratochvil
Name: James M. Kratochvil
Title: Chief Financial Officer
<PAGE>
EXHIBIT A
Name Principal Place of Business
- -------------- ------------------------------
Berry Plastics Corporation 101 Oakley Street
Evansville, Indiana 47710
Berry Iowa Corporation 101 Oaley Street
Evansville, Indiana 47710
Berry-CPI Plastics Corporation 101 Oakley Street
Evansville, Indiana 47710
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,546
<SECURITIES> 0
<RECEIVABLES> 37,507
<ALLOWANCES> 1,386
<INVENTORY> 46,692
<CURRENT-ASSETS> 88,872
<PP&E> 246,888
<DEPRECIATION> 100,096
<TOTAL-ASSETS> 340,807
<CURRENT-LIABILITIES> 78,345
<BONDS> 382,880
0
17,093
<COMMON> 6
<OTHER-SE> (150,570)
<TOTAL-LIABILITY-AND-EQUITY> 340,807
<SALES> 328,834
<TOTAL-REVENUES> 329,057
<CGS> 241,067
<TOTAL-COSTS> 296,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 324
<INTEREST-EXPENSE> 41,040
<INCOME-PRETAX> (8,584)
<INCOME-TAX> 554
<INCOME-CONTINUING> (9,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,138)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
