Pursuant to Rule 424(b)(3)
Registration No. 333-08313
PROSPECTUS
BPC HOLDING CORPORATION
OFFER TO EXCHANGE UP TO $105,000,000 OF ITS
12 1/2% SERIES B SENIOR SECURED NOTES DUE 2006
FOR ANY AND ALL OF ITS OUTSTANDING
12 1/2% SENIOR SECURED NOTES DUE 2006
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 27, 1996, UNLESS EXTENDED.
------------------------
BPC Holding Corporation ("Holding" or the "Issuer") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of 12 1/2% Series B Senior Secured
Notes due 2006 (the "New Notes") of the Issuer for each $1,000 principal amount
of the issued and outstanding 12 1/2% Senior Secured Notes due 2006 (the "Old
Notes," and the Old Notes and the New Notes, collectively, the "Notes" or the
"Senior Notes") of the Issuer from the Holders (as defined) thereof. As of the
date of this Prospectus, there is $105,000,000 aggregate principal amount of the
Old Notes outstanding. This Prospectus also relates to New Notes that may be
issued, at the option of the Issuer, to pay interest on the Senior Notes. See
"Description of Senior Notes-- Principal, Maturity and Interest." The terms of
the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for the payment
of liquidated damages to the holders of the Old Notes under certain
circumstances relating to the Registration Rights Agreement (as defined), which
provisions will terminate as to all of the Notes upon the consummation of the
Exchange Offer.
Interest on the New Notes will accrue from June 18, 1996 and will be payable
in cash semi-annually in arrears on June 15 and December 15 of each year,
commencing December 15, 1996. No interest will be payable on the Old Notes
accepted for exchange.
The New Notes will be senior secured obligations of Holding and will rank
senior in right of payment to all existing and future subordinated indebtedness
of Holding, including Holding's subordinated guarantee of the Existing Senior
Subordinated Notes (as defined), and pari passu in right of payment with all
senior indebtedness of Holding. The New Notes will be secured by a first
priority pledge of all shares of outstanding capital stock of Berry Plastics
Corporation ("Berry" or the "Company"). Upon the consummation of the Exchange
Offer, the New Notes will be the only outstanding indebtedness of Holding other
than guarantees of certain of Berry's existing indebtedness. Holding has no
operations of its own and holds 100% of the outstanding shares of capital stock
of Berry. Consequently, Holding will be dependent on sales of, and dividends or
distributions on, the stock of Berry held by Holding in order to meet its
obligations under the New Notes, other than interest payments through June 15,
2001. The New Notes will be effectively subordinated to all existing and future
liabilities of Berry and its subsidiaries. As of August 3, 1996, Berry and its
subsidiaries had approximately $132.2 million of total liabilities, including
approximately $111.1 million of indebtedness. See "Description of Senior Notes."
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Issuer contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Issuer believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Issuer within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of New Notes received in
exchange for such Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuer). The Issuer
has agreed that, for a period of one year after the date of this Prospectus, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. The Issuer does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Issuer will not receive any proceeds from the Exchange Offer. The Issuer
will pay all of the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn as provided herein at any
time prior to the Expiration Date (as defined). The Exchange Offer is subject to
certain customary conditions.
------------------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE EXCHANGE OFFER.
------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 28, 1996
<PAGE>
AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees.
The Issuer and the Company are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports and other information with the
Commission. Such material filed by the Issuer and the Company with the
Commission may be inspected, and copies thereof obtained, at the places, and in
the manner, set forth above.
In the event that the Issuer ceases to be subject to the informational
reporting requirements of the Exchange Act, the Issuer has agreed that, so long
as the Old Notes or the New Notes remain outstanding, it will file with the
Commission and distribute to holders of the Old Notes or the New Notes, as
applicable, copies of (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Issuer were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to annual information only, a report thereon by
the Issuer's independent public accountants and (ii) all reports that would be
required to be filed with the Commission on Form 8-K if the Issuer were required
to file such reports. The Issuer will also make such reports available to
prospective purchasers of the Old Notes or the New Notes, as applicable,
securities analysts and broker-dealers upon their request. In addition, the
Issuer has agreed that for so long as any of the Old Notes remain outstanding it
will make available to any prospective purchaser of the Old Notes or beneficial
owner of the Old Notes in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act, until such time as the
Issuer has either exchanged the Old Notes for securities identical in all
material respects which have been registered under the Securities Act or until
such time as the holders thereof have disposed of such Old Notes pursuant to an
effective registration statement filed by the Issuer.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Issuer and the Company pursuant to Section 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Issuer will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be submitted in writing to the Issuer at 101 Oakley Street, Evansville,
Indiana 47706, Attention: Secretary.
iii
<PAGE>
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
the terms the "Company" and "Berry" refer to Berry Plastics Corporation, its
subsidiaries and their respective operations, and the terms the "Issuer" and
"Holding" refer to BPC Holding Corporation. The fiscal year of Holding and the
Company is the 52 or 53 week period ending on the Saturday closest to December
31. All references in this Prospectus to "fiscal 1991," "fiscal 1992," "fiscal
1993," "fiscal 1994" and "fiscal 1995" refer to the fiscal years of the Company
ended on December 28, 1991, December 26, 1992, January 1, 1994, December 31,
1994 and December 30, 1995, respectively.
THE COMPANY
Berry, a wholly-owned subsidiary of the Issuer, is a leading domestic
manufacturer and marketer of plastic packaging products focused on three key
markets: aerosol overcaps, rigid open-top containers and drink cups. Within each
of these 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 abilities and
sophisticated multi-color printing capabilities. The Company believes that it is
the largest supplier of aerosol overcaps in the United States, with an estimated
44% domestic market share in fiscal 1995 and sales of over 1.3 billion overcaps.
Berry also believes that it is the largest domestic supplier of thinwall,
child-resistant, pry-off and polypropylene open top containers. In connection
with a recent acquisition, Berry has utilized its national sales force and
existing molding and printing capacity at multiple-plant locations to become a
leader in the high growth plastic drink cup market, which includes the Company's
innovative 32 ounce and 44 ounce Drive-Thru ("DT") cups, which fit in standard
vehicle cup holders.
In fiscal 1995, the Company had net sales of $140.7 million, of which
aerosol overcaps and containers constituted 31% and 51%, respectively. Drink
cups, a product line acquired in March 1995, accounted for approximately 12% of
total net sales in fiscal 1995. On a pro forma basis after giving effect to the
Tri-Plas Acquisition (as defined), in fiscal 1995 the Issuer had net sales of
approximately $156.4 million. On a historical basis, from the fiscal year ended
September 30, 1990 through fiscal 1995, the Issuer's net sales increased
steadily at a compound annual growth rate of 19.3% per year.
The Company supplies aerosol overcaps for a wide variety of products,
including such well-known brand names as WD-40 lubricant, Rustoleum and
Sherwin-Williams paints, Pam cooking spray, Gillette Foamy and Noxema shaving
creams, Dow Brand's oven cleaner, Lysol disinfectant, Faultless starch and S.C.
Johnson Wax products. Similarly, the Company's containers are used for packaging
a broad spectrum of commercial and consumer products, including Red Devil and
Quikrete building products, McDonald's and Burger King promotional children's
meals, Elmer's glue, Milliken adhesives, Super Bubble chewing gum, Haagen-Dazs
ice cream and Hershey chocolate. The Company's plastic drink cups are sold
primarily to fast food and convenience store chains. Drink cup customers include
McDonald's, Coca-Cola, Burger King, Circle K, Wal-Mart, 7-Eleven and Boston
Market. Berry's customer base is comprised of over 2,000 customers with
operations in a widely diversified range of markets, which reduces the Company's
vulnerability to fluctuations in the overall U.S. economy and mitigates the
effects of cyclicality and seasonality. The Company's top ten customers
accounted for approximately 23% of the Company's fiscal 1995 net sales, and no
customer accounted for more than 4% of net sales. Additionally, the Company
believes it is the single-source or largest supplier of overcaps, containers and
drink cups to a majority of its customers.
Berry's primary business objective is to continue its strong growth trends
in both net sales and operating profitability. In order to accomplish this
objective, the Company is committed to: (i)
<PAGE>
expanding its leading market positions in three key product categories: aerosol
overcaps, open top containers and drink cups; (ii) securing its low cost
position through continued technology investments and productivity gains; and
(iii) seeking selective acquisitions and joint ventures which offer market and
product extension or productivity improvement opportunities.
The Company intends to seek strategic acquisition opportunities as the
highly fragmented plastic packaging industry continues its recent trend of
consolidation. Building its acquisition record demonstrated by the successful
integration of the Mammoth Acquisition, the Sterling Products Acquisition and
the Tri-Plas Acquisition (each as defined) (see "Business--Recent
Acquisitions"), Berry intends to identify and acquire targets which offer market
and product extension or productivity improvement opportunities.
The address for each of Holding and the Company is 101 Oakley Street,
Evansville, Indiana 47710, and the telephone number is (812) 424-2904.
THE TRANSACTION
On June 18, 1996, concurrently with the closing of the offering of the Old
Notes, Holding consummated the Transaction (as defined). BPC Mergerco, Inc.
("Mergerco") 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 (as defined), each of International, CVCA and certain other
equity investors subscribed for shares of common stock of Mergerco. Pursuant to
the terms of a Preferred Stock Purchase Agreement (as defined), CVCA and an
additional institutional investor purchased shares of preferred stock of
Mergerco and warrants to purchase shares of common stock of Mergerco.
Immediately after the purchase of the common stock, the preferred stock and the
warrants of Mergerco, Mergerco merged with and into Holding, with Holding being
the surviving corporation. Upon the consummation of the merger: (i) each share
of the Class A Common Stock and Class B Common Stock of Holding and certain
privately-held warrants exercisable for such common stock were converted into
the right to receive cash; (ii) all other shares 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; and (iii) the holders of
the warrants issued in connection with the issuance of Berry's 12 1/4% Senior
Subordinated Notes due 2004 (the "Existing Senior Subordinated Notes") became
entitled to receive cash equal to the purchase price per share for the common
stock into which such warrants were exercisable less the amount of the exercise
price therefor. As used herein, the purchase and sale of the common stock, the
preferred stock and the warrants of Mergerco and the merger of Mergerco with and
into Holding are collectively referred to as the "Transaction." See "Description
of Common Stock" and "Description of Preferred Stock and Warrants."
The aggregate consideration paid to the holders of the Class A and Class B
Common Stock, the privately-held warrants to purchase such common stock of
Holding and the warrants issued in connection with the Existing Senior
Subordinated Notes was approximately $119.6 million in cash. In order to finance
the Transaction, including the payment of related fees and expenses: (i) Holding
issued the Old Notes for net proceeds of approximately $100.2 million (or $64.6
million after deducting the amount of such net proceeds used to purchase
Marketable Securities available for payment of interest on Senior Notes); (ii)
International, CVCA, members of management and certain other equity investors
made equity and rollover investments in the aggregate amount of $70.0 million
(which amount included rollover investments of approximately $7.1 million by
certain members of management and $3.0 million by an existing institutional
shareholder); and (iii) Holding received an aggregate of approximately $0.9
million in connection with the exercise of certain management stock options. See
"The Transaction."
2
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
REGISTRATION RIGHTS AGREEMENT........ The Old Notes were sold by the Issuer on June 18,
1996 to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), who placed
the Old Notes with institutional investors. In
connection therewith, the Issuer and the Initial
Purchaser executed and delivered for the benefit
of the holders of the Old Notes a registration
rights agreement (the "Registration Rights
Agreement") providing, among other things, for the
Exchange Offer.
THE EXCHANGE OFFER................... New Notes are being offered in exchange for a like
principal amount of Old Notes. As of the date
hereof, $105,000,000 aggregate principal amount of
Old Notes are outstanding. The Issuer will issue
the New Notes to Holders promptly following the
Expiration Date (as defined). See "Risk
Factors--Consequences of Failure to Exchange."
EXPIRATION DATE...................... 5:00 p.m., New York City time, on September 27, 1996,
unless the Exchange Offer is extended as provided
herein, in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
INTEREST............................. Each New Note will bear interest from June 18, 1996,
the date of original issuance of the Old Notes. No
interest will be paid on the Old Notes accepted
for exchange.
CONDITIONS TO THE EXCHANGE OFFER..... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Issuer. The
Issuer reserves the right to amend, terminate or
extend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. See "The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING OLD NOTES... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, or
an Agent's Message (as defined herein) in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes and any other required
documentation to the exchange agent (the "Exchange
Agent") at the address set forth herein. By
executing the Letter of Transmittal or delivering
an Agent's Message, each Holder will represent to
the Issuer, among other things, that (i) the New
Notes acquired pursuant to the Exchange Offer by
the Holder and any beneficial owners of Old Notes
are being obtained in the ordinary course of
business of the person receiving such New Notes,
(ii) neither the Holder nor such beneficial owner
has an arrangement with any person to participate
in the distribution of such New
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Notes, (iii) neither the Holder nor such
beneficial owner nor any such other person is
engaging in or intends to engage in a distribution
of such New Notes and (iv) neither the Holder nor
such beneficial owner is an "affiliate," as
defined under Rule 405 promulgated under the
Securities Act, of the Issuer. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities (other than Old Notes acquired directly
from the Issuer), may participate in the Exchange
Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in
the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such
New Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. See "The Exchange
Offer--Procedures for Tendering" and "Plan of
Distribution."
SPECIAL PROCEDURES FOR BENEFICIAL
OWNERS............................. Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal or delivering an Agent's
Message and delivering his Old Notes, either make
appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the
registered Holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer-- Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES....... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or an Agent's Message or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer-- Guaranteed
Delivery Procedures."
WITHDRAWAL RIGHTS.................... Tenders may be withdrawn as provided herein at any
time prior to 5:00 p.m., New York City time, on the
Expiration
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Date. See "The Exchange Offer--Withdrawal of
Tenders."
ACCEPTANCE OF OLD NOTES AND DELIVERY
OF NEW NOTES....................... The Issuer will accept for exchange any and all Old
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The New Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
EXCHANGE AGENT....................... First Trust of New York, National Association, is
serving as Exchange Agent in connection with the
Exchange Offer. See "The Exchange Offer--Exchange
Agent."
USE OF PROCEEDS...................... There will be no cash proceeds to the Issuer from
the exchange pursuant to the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES...... The exchange of Old Notes for New Notes will not be
a taxable exchange for Federal income tax purposes.
See "Certain Federal Income Tax Considerations."
CONSEQUENCES OF FAILURE TO
EXCHANGE............................. Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the
legend thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, Old Notes may
not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
</TABLE>
5
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $105,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except that the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer and will
not contain certain provisions providing for the payment of liquidated damages
to the holders of the Old Notes under certain circumstances relating to the
Registration Rights Agreement, which provisions will terminate as to all of the
Notes upon the consummation of the Exchange Offer. The New Notes will evidence
the same debt as the Old Notes and, except as set forth in the immediately
preceding sentence, will be entitled to the benefits of the Indenture, under
which both the Old Notes were, and the New Notes will be, issued. See
"Description of Senior Notes."
<TABLE>
<S> <C>
THE NEW NOTES........................ $105.0 million in aggregate principal amount at
maturity of 12 1/2% Series B Senior Secured Notes
due 2006.
MATURITY............................. December 15, 2006.
INTEREST............................. Except as provided below, interest on the New Notes
will be payable in cash semiannually in arrears on
June 15 and December 15 of each year, commencing
December 15, 1996. In addition, from December 15,
1999 until June 15, 2001, Holding may, at its
option, pay interest, at an increased interest
rate of .75% per annum, in additional New Notes
valued at 100% of the principal amount thereof.
SECURITY............................. The New Notes will be secured by a first priority
lien on all of the capital stock of Berry. In
addition, a portion of the net proceeds of the
offering of the Old Notes (the "Offering") were
used to purchase a portfolio of Marketable
Securities (as defined) that are pledged as
security for payment of interest on the Senior
Notes through June 15, 1999, and, under certain
circumstances, as security for repayment of
principal of the Senior Notes.
OPTIONAL REDEMPTION.................. The New Notes may be redeemed at the option of
Holding, in whole or in part, on or after June 15,
1999 at a premium above par as set forth herein,
and declining to par in 2004, plus accrued and
unpaid interest, if any, through the redemption
date.
In the event that Holding consummates a Strategic
Equity Sale (as defined) prior to June 15, 1999,
Holding may, at its option, redeem up to 33 1/3%
of the aggregate principal amount at maturity of
the Senior Notes with the net proceeds therefrom
at a price equal to 112.50% of the principal
amount thereof plus accrued and unpaid interest,
if any, to the date of redemption; provided,
however, that at least 66 2/3% of the aggregate
principal amount at maturity of the Senior Notes
remain outstanding following such redemption.
CHANGE OF CONTROL.................... In the event of a Change of Control (as defined),
the holders of the New Notes will have the right to
require Holding
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
to purchase all Notes at a price equal to 101% of
the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date
of repurchase.
RANKING.............................. The New Notes will be senior secured obligations of
Holding. The New Notes will rank pari passu in
right of payment with all existing and future
senior Indebtedness (as defined) of Holding and
senior in right of payment to all future
subordinated Indebtedness of Holding. The New
Notes are not guaranteed by any subsidiary of
Holding and as a result, will be structurally
subordinated to the indebtedness and other
obligations of Holding's subsidiaries. With
certain limited exceptions, the Indenture
prohibits the incurrence of additional
indebtedness by Holding.
COVENANTS............................ The indenture pursuant to which the Old Notes were,
and the New Notes will, be issued (the "Indenture")
contains certain covenants that, among other
things, limit the ability of Holding and its
subsidiaries to incur additional Indebtedness and
issue preferred stock, pay dividends or make other
distributions, repurchase Equity Interests (as
defined) or subordinated Indebtedness, create
certain liens, enter into certain transactions
with affiliates, sell assets of Holding or its
subsidiaries, issue or sell Equity Interests of
Holding's subsidiaries or enter into certain
mergers and consolidations. In addition, under
certain circumstances, Holding will be required to
offer to purchase Senior Notes at a price equal to
101% of the principal amount thereof outstanding,
plus accrued and unpaid interest, if any, to the
date of purchase, with the proceeds of certain
Asset Sales (as defined). See "Description of
Senior Notes--Certain Covenants."
</TABLE>
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth (i) summary consolidated historical financial
data of Holding and its subsidiaries and (ii) pro forma summary financial data
of Holding and its subsidiaries which gives effect to the Offering and the
Tri-Plas Acquisition, as of January 1, 1995 for operations statement data and
other data for fiscal 1995 and as of July 2, 1995 for operations statement data
and other data for the last 12 months ended June 29, 1996. The following
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Pro Forma Condensed
Consolidated Financial Statements," "Capitalization," and the consolidated
financial statements of Holding and its subsidiaries and the accompanying notes
thereto, which information is included elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
TWELVE
PRO FORMA MONTHS
FISCAL YEAR ENDED ENDED
------------------------------- DECEMBER 30, JUNE 29,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Net sales.................................. $87,830 $106,141 $140,681 $156,366 $151,763
Cost of goods sold......................... 65,652 73,997 102,484 115,068 111,283
------- -------- -------- ------------ ---------
Gross profit............................... 22,178 32,144 38,197 41,298 40,480
Operating expenses(a)...................... 13,222 15,044 16,803 18,081 18,972
------- -------- -------- ------------ ---------
Operating income........................... 8,956 17,100 21,394 23,217 21,508
Other expenses(b).......................... 4,005 300 994 994 1,011
Interest expense, net(c)................... 6,582 10,972 13,389 25,339 25,879
------- -------- -------- ------------ ---------
Income (loss) before income taxes
and extraordinary charge................. (1,631) 5,828 7,011 (3,116) (5,382 )
Net income (loss).......................... $(1,703) $ 2,165(d) $ 6,333 $ (3,211) $ (4,497 )
------- -------- -------- ------------ ---------
------- -------- -------- ------------ ---------
OTHER DATA:
EBITDA(e).................................. $20,840 $ 25,683 $ 30,716 $ 33,235 $ 31,968
Depreciation and amortization(f)........... 11,198 8,176 9,536 10,233 11,043
Capital expenditures....................... 5,586 9,118 11,247 11,247 11,829
Net cash interest expense(g)............... 4,966 9,794 12,439 23,909 24,485
Ratio of earnings to fixed charges......... (h) 1.5x 1.4x (h) (h )
CASH FLOWS PROVIDED BY (USED FOR)(I):
Operating Activities....................... $14,110 $ 15,555 $ 12,970 n/a n/a
Investing Activities....................... (3,821) (9,495) (25,385) n/a n/a
Financing Activities....................... (9,859) 2,184 11,124 n/a n/a
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 29, 1996
----------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................... $ 4,502
Marketable securities (available for payment of interest on Senior Notes).... 35,665
Working capital.............................................................. 14,915
Total assets................................................................. 148,665
Total long-term debt......................................................... 216,163
Stockholders' equity (deficit)............................................... (93,002)
</TABLE>
- ------------
<TABLE>
<S> <S>
(a) Operating expenses include selling, general and administrative expenses, amortization of
intangibles, research and development expenses and management fees. Operating expenses
also include non-cash charges (credits) for the effect of the market valuation
adjustments for management stock options and warrants as follows: 1993, $605; 1994,
$358; 1995, $(236).
</TABLE>
(Footnotes continued on following page)
8
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<S> <S>
(b) Other expenses include in fiscal 1993, $3,675 of non-recurring costs associated
principally with the shut-down and sale of a facility acquired in the Mammoth
Acquisition and $330 of costs related to an unsuccessful acquisition; in fiscal 1994, a
$184 loss on disposal of property and equipment and $116 in unsuccessful acquisition
costs; and in fiscal 1995 a $127 loss on disposal of property and equipment, $473 of
costs related to unsuccessful acquisition costs, $224 of costs related to the Tri-Plas
Acquisition and $170 of costs related to the Sterling Products Acquisition.
(c) Interest expense is stated net of interest income of $25, $580 and $642 earned in each
of fiscal 1993, 1994 and 1995, respectively, and of $2,634 and $3,431 on a pro forma
basis for the year ended December 30, 1995, and the twelve months ended June 29, 1996,
respectively.
(d) Includes extraordinary charge on extinguishment of debt of $3,652 in connection with the
issuance of the Existing Senior Subordinated Notes.
(e) EBITDA is defined as income (loss) before income taxes, net interest expense,
depreciation and amortization of intangibles adjusted to exclude (i) non-cash charges
relating to amortization of restricted stock awards, market value adjustments related to
stock options and the $2,717 of deferred payments to certain members of management in
connection with the Transaction and (ii) other non-recurring or "one-time" expenses as
described in note (b) above. EBITDA is presented to facilitate an investor's
understanding of the covenants in the Indenture. EBITDA should not be considered by
investors as an alternative to net income (loss) as an indicator of operating
performance or to cash flows as a measure of liquidity.
(f) Depreciation and amortization excludes non-cash amortization of deferred financing fees
and debt discount amortization which are included in interest expense.
(g) Does not include amortization of deferred financing fees or debt discount.
(h) Earnings were inadequate to cover fixed charges by the amount of $1,794 for fiscal 1995,
and by $3,466 and $4,998 on a pro forma basis for the year ended December 30, 1995 and
the twelve months ended June 29, 1996, respectively. For purposes of this computation,
earnings consist of (i) income (loss) before income taxes, plus (ii) fixed charges
consisting of interest on indebtedness (including amortization of deferred financing
fees), plus (iii) that portion of lease rental expense representative of the interest
factor.
(i) Cash flows from operating, investing and financing activities will be significantly
affected by the Offering. See "Consolidated Statements of Cash Flows" of Holding and its
subsidiaries and the notes included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
</TABLE>
9
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before making a
decision to tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuer does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Issuer believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Issuer within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Issuer). The Issuer has agreed that, for a period of one year from the
date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any Holder to resell the New Notes is
subject to applicable state securities laws as described in "--Blue Sky
Restrictions on Resale of New Notes."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal or an Agent's Message, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer--Exchange Agent" on
or prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the Holder must comply with the guaranteed delivery procedures
described herein. See "The Exchange Offer."
10
<PAGE>
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Issuer does not currently intend to register
or qualify the resale of the New Notes in any such jurisdictions. However, an
exemption is generally available for sales to registered broker-dealers and
certain institutional buyers. Other exemptions under applicable state securities
laws may also be available.
HOLDING COMPANY STRUCTURE; SIGNIFICANT LIMITATIONS ON ACCESS TO SUBSIDIARIES'
CASH FLOW
The New Notes will be obligations exclusively of the Issuer. The Issuer is a
holding company with no material assets other than the capital stock of Berry
and the Escrow Account (as defined). Because the operations of the Issuer are
conducted through Berry and its subsidiaries, the cash flow of the Issuer and
the consequent ability to service its indebtedness, including the New Notes, are
dependent upon the earnings of Berry and such subsidiaries and the distribution
of those earnings to the Issuer, or upon loans or other payments of funds made
by Berry or such subsidiaries to the Issuer. In addition, debt agreements
applicable to Berry and its subsidiaries, including the Revolving Credit
Facility (as defined) and the Indenture (the "Senior Subordinated Notes
Indenture") relating to Berry's 12 1/4% Senior Subordinated Notes due 2004 (the
"Existing Senior Subordinated Notes"), impose significant restrictions that
affect, among other things, the ability of Berry and its subsidiaries to pay
dividends or make other distributions or loans to the Issuer. Particularly, the
Revolving Credit Facility does not permit Berry to pay any dividend or make any
distribution of funds to the Issuer to satisfy interest and other obligations on
the New Notes. In general, the Senior Subordinated Notes Indenture prohibits the
payment of any dividend by Berry to Holding unless Berry meets certain cash flow
interest coverage ratios and the amount of such dividend (together with any
other dividends previously paid, including the $50 million paid in April 1994)
is less than the sum of 50% of the aggregate net income of Berry since the
issuance of the Existing Senior Subordinated Notes plus the amount of cash
equity proceeds received by Berry. 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 New Notes which begin after the depletion of the Escrow
Account and the expiration of Holding's option to pay interest by issuing
additional New Notes. In that event, management anticipates that such
obligations will only be met by refinancing the Existing Senior Subordinated
Notes or raising capital through equity offerings. No assurance can be given
that a refinancing or equity offering can be consummated on terms acceptable to
the Issuer and Berry, if at all. See "Description of Certain Indebtedness" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SUBORDINATION TO SUBSIDIARY LIABILITIES
Because the Issuer is a holding company, substantially all of the operating
assets are owned by Berry and its subsidiaries, effectively subordinating the
Notes to all existing and future liabilities of Berry and its subsidiaries,
including the Existing Senior Subordinated Notes, indebtedness outstanding under
the Revolving Credit Facility, trade payables, preferred stock, lease
obligations and guarantees. Therefore, the Issuer's rights and the rights of its
creditors, including the holders of the New Notes, to participate in the assets
of Berry or any of its subsidiaries upon the liquidation or recapitalization of
Berry or its subsidiaries will be subject to the prior claims of Berry's or its
subsidiaries' creditors, except to the extent that the Issuer may itself be a
creditor with recognized claims against Berry or its subsidiaries, as the case
may be, in which case the claims of the Issuer would still be effectively
subordinate to any security interests in or mortgages or other liens on the
assets of Berry or its
11
<PAGE>
subsidiaries and would be subordinate to any indebtedness of Berry or its
subsidiaries senior to that held by the Issuer.
SIGNIFICANT LEVERAGE OF BERRY AND HOLDING
As of June 29, 1996, the Senior Notes represented the Issuer's only
outstanding indebtedness, other than the Issuer's guarantees of the Revolving
Credit Facility, the Existing Senior Subordinated Notes and certain other
obligations of Berry. Excluding the Senior Notes, the outstanding indebtedness
of the Issuer and Berry on a consolidated basis consisted primarily of $100.0
million aggregate principal amount of the Existing Senior Subordinated Notes,
$5.5 million of the Nevada Industrial Revenue Bonds (the "Nevada Bonds") and
$5.4 million of the Iowa Industrial Revenue Bonds (the "Iowa Bonds"), and Berry
would have been able to draw $16.1 million under the Revolving Credit Facility,
subject to a borrowing base and other requirements. Although the Revolving
Credit Facility and the Senior Subordinated Notes Indenture impose limitations
on the incurrence of additional indebtedness, Berry and its subsidiaries will
retain the ability to incur substantial additional indebtedness. See
"Description of Certain Indebtedness." As of December 30, 1995, on a
consolidated basis the Issuer and Berry had an aggregate of $111.7 million of
outstanding indebtedness and stockholders' deficit of $32.5 million.
Since the ability of the Issuer to service the New Notes is dependent on the
earnings of Berry and its subsidiaries, the high degree of leverage could have
important consequences to holders of the New Notes, including, but not limited
to, the following: (i) a substantial portion of Berry's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to Berry for other purposes;
(ii) Berry's ability to obtain additional debt financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired; (iii) certain of Berry's borrowings will be
at variable rates of interest, which will expose Berry to the risk of higher
interest rates; (iv) the indebtedness outstanding under the Revolving Credit
Facility is secured by substantially all of the assets of Berry and matures
prior to the maturity of the New Notes; (v) the Existing Senior Subordinated
Notes mature prior to the New Notes; (vi) 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 (vii)
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.
The Issuer's ability to pay principal and interest on the New Notes will
depend on Berry's financial and operating performance, which in turn are subject
to prevailing economic conditions and to certain financial, business and other
factors beyond its control. However, if Berry cannot generate sufficient cash
flow from operations to meet its obligations, then it may be forced to take
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There is no assurance that any of these remedies could be effected on
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
COMPANY GROWTH AND RISKS RELATED TO FUTURE ACQUISITIONS
Berry's ability to increase revenues and operating cash flow over time
depends, in part, on its success in consummating future acquisitions upon
satisfactory terms and successfully integrating the acquired companies or assets
into Berry's operations. There can be no assurance that acquisition
opportunities will continue to be available or that if available, such
acquisitions could be consummated on terms acceptable to Berry, or that Berry
would be able to obtain financing on terms that it deems acceptable to
consummate any potential acquisition. See "Business--Business Strategy." In
addition, future acquisitions would place increasing demands on Berry's
management and operational resources. Berry's future performance will depend in
part on its ability to manage expanding operations and to
12
<PAGE>
adapt its operational systems to such expansions. The failure of Berry to
effectively manage its growth, if any, could have a material adverse effect on
Berry's business, financial condition and results of operations.
POSSIBLE ADVERSE EFFECT OF INCREASE IN RESIN PRICES
The primary materials used by Berry in the manufacture of its products are
various plastic resins, which in fiscal 1995 constituted approximately $45.0
million, or 43.4%, of Berry's total cost of goods sold. Accordingly, Berry's
financial performance is materially dependent on its ability to pass through
resin price increases to its customers. Plastic resins are subject to cyclical
price fluctuations, including those arising from supply shortages and as a
result of changes in the prices of natural gas, crude oil and other
petrochemical intermediates from which resins are produced. Although Berry has
been generally able to pass on increases in resin prices to its customers in the
past, no assurance can be given that this trend will continue or that a
significant increase in resin prices would not have a material adverse effect on
the Issuer's financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--General Economic Conditions and
Inflation" and "Business-- Sources and Availability of Raw Materials."
RELIANCE ON CERTAIN SUPPLIER
Berry purchases approximately 54% of its total resin requirements (in U.S.
dollars) from Dow Chemical Company ("Dow") pursuant to purchase orders issued
from time to time by Berry. Berry has a long-standing relationship with Dow, and
has worked closely with Dow to develop resins which yield maximum performance
from Berry's equipment. There can be no assurances, however, that Dow will
continue to be a supplier to Berry in the future. In the event that this
relationship terminates, however, Berry believes that alternative sources are
available for its resin requirements and could be utilized without materially
impacting its costs, deliveries or production efficiency.
CONTROLLING STOCKHOLDERS; MANAGEMENT STOCKHOLDERS
International owns approximately 51% of Holding's outstanding voting capital
stock on a fully-diluted basis. As majority stockholder, International is able,
subject to certain contractual limitations, to determine the outcome of any
corporate transaction or other matter submitted to the stockholders of Holding
or Berry for approval, including mergers, consolidations and the sale of Berry
or the Issuer or all or substantially all of Berry's assets. Atlantic Equity
Associates International II, L.P., a Delaware limited partnership ("AEA II"), is
the sole general partner of International. Roberto Buaron, the Chairman and a
director of the Issuer and Berry, is the sole shareholder of Buaron Holdings
Ltd. ("BHL"). BHL is the managing general partner of AEA II. Woland Limited, a
Cayman Islands corporation ("Woland") and indirect wholly owned subsidiary of
Akros Finanziaria, S.p.A., an Italian merchant bank based in Milan, Italy
("Akros"), is also a general partner of AEA II and shares with BHL voting and/or
investment power over investments made by International. Through their
respective affiliations with BHL, Woland and AEA II, Mr. Buaron and Akros
control the sole general partner of International and therefore have the
authority to control International's actions with respect to the capital stock
of Holding that it owns. In addition, pursuant to the terms of the New
Stockholders Agreement (as defined), International and Mr. Buaron together have
the ability to elect a majority of Holding's board of directors. See "Principal
Stockholders" and "Certain Transactions--Stockholders Agreements."
In addition to the shares of capital stock owned by International, members
of Berry's management own approximately 8% of Holding's outstanding voting
capital stock. See "Management" and "Principal Stockholders."
13
<PAGE>
COMPETITION
Most of Berry's products are sold in highly competitive markets in the
United States. Berry competes with a significant number of companies of varying
sizes, including divisions or subsidiaries of larger companies, on the basis of
price, service, quality and the ability to supply products to customers in a
timely manner. A number of Berry's competitors have financial and other
resources that are substantially greater than those of Berry. Competitive
pressures or other factors could cause Berry's products to lose market share or
could result in significant price erosion, either of which would have a material
adverse effect on the Issuer's results of operations. See "Business."
ENVIRONMENTAL MATTERS
Federal, state and local governments could enact laws or regulations
concerning environmental matters that increase the cost of producing, or
otherwise adversely affect the demand for, plastic products. The Issuer is aware
that certain local governments have adopted ordinances prohibiting or
restricting the use or disposal of certain plastic products that are among the
types of products produced by Berry. If such prohibitions or restrictions were
widely adopted, such regulatory and environmental measures or a decline in
consumer preference for plastic products due to environmental considerations
could have a material adverse effect upon the Issuer. In addition, certain of
Berry's operations are subject to federal, state and local environmental laws
and regulations that impose limitations on the discharge of pollutants into the
air and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes. While Berry has not been required historically to
make significant capital expenditures in order to comply with applicable
environmental laws and regulations, Berry cannot predict with any certainty its
future capital expenditure requirements because of continually changing
compliance standards and environmental technology. Furthermore, although Berry
is not aware of additional environmental issues, unknown contamination of sites
currently or formerly owned or operated by Berry (including contamination caused
by prior owners and operators of such sites) and the off-site disposal of
hazardous substances at facilities utilized by Berry may give rise to additional
compliance costs. Berry does not have insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future. See
"Business--Environmental Matters and Government Regulation."
INABILITY TO PURCHASE SENIOR NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Issuer is required to offer to repurchase all
outstanding Notes at 101% of the aggregate principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase. The source of funds for
any such repurchase will be a dividend or distribution from Berry to Holding,
which is prohibited by the Revolving Credit Facility and restricted by the
Senior Subordinated Notes Indenture, or a refinancing of the Notes. The source
of funds for any such dividend or distribution will be Berry's available cash or
cash generated from operating or other sources, including borrowing, sales of
assets, sales of equity or funds provided by a new controlling person. However,
there can be no assurance that sufficient funds will be available at the time of
any Change of Control to make any required repurchases of Notes tendered. See
"Description of Senior Notes--Offer to Purchase Upon Change of Control,"
"Description of Certain Indebtedness--Revolving Credit Facility" and
"Description of Certain Indebtedness--Existing Senior Subordinated Notes due
2004."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Although Holding currently has no material creditors other than pursuant to
its guarantees of the Existing Senior Subordinated Notes, the Revolving Credit
Facility and certain other obligations of Berry, a portion of the proceeds of
the Offering were used to purchase equity of Holding. As such, under relevant
federal and state fraudulent conveyance statutes in a bankruptcy, reorganization
or rehabilitation case or similar proceeding, if a court were to find that, at
the time the Old Notes were issued,
14
<PAGE>
(i) Holding issued the Old Notes with the intent of hindering, delaying or
defrauding current or future creditors or (ii)(A) Holding received less than
reasonably equivalent value or fair consideration for issuing the Old Notes and
(B) Holding (1) was insolvent or was rendered insolvent by reason of the
Offering, (2) was engaged, or about to engage, in a business or transaction for
which its assets constituted unreasonably small capital, (3) intended to incur,
or believed that it would incur, debts beyond its ability to pay as such debts
matured (as all of the foregoing terms are defined in or interpreted under such
fraudulent conveyance statutes) or (4) was a defendant in an action for money
damages, or had a judgment for money damages docketed against it (if, in either
case, after final judgment, the judgment is unsatisfied), such court could void
or subordinate the Notes to presently existing and future indebtedness of
Holding and take other action detrimental to the holders of the Notes,
including, under certain circumstances, invalidating the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however, Holding would be considered insolvent if, at the
time it incurs the indebtedness constituting the Notes, either (i) the fair
market value (or fair saleable value) of its assets is less than the amount
required to pay its total existing debts and liabilities (including the probable
liability on contingent liabilities) as they become absolute and matured or (ii)
it is incurring debts beyond its ability to pay as such debts mature.
15
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuer on June 18, 1996 to the Initial
Purchaser, who placed the Old Notes with institutional investors. In connection
therewith, Holding and the Initial Purchaser entered into the Registration
Rights Agreement, which provides that (i) Holding will file a Registration
Statement with the Commission on or prior to 45 days after the Issuance Date,
(ii) Holding will use its best efforts to have the Registration Statement
declared effective by the Commission on or prior to 90 days after the Issuance
Date, (iii) unless the Exchange Offer would not be permitted by applicable law
or Commission policy, Holding will commence the Exchange Offer and use its best
efforts to issue on or prior to 60 business days after the date on which the
Registration Statement was declared effective by the Commission, New Notes in
exchange for all Old Notes tendered prior thereto in the Exchange Offer and (iv)
if obligated to file the Shelf Registration Statement (as described below),
Holding will use its best efforts to file the Shelf Registration Statement with
the Commission on or prior to 30 days after such filing obligation arises (and
in any event within 180 days after the Closing Date) and to cause the Shelf
Registration to become effective by the Commission as promptly as possible after
such obligation arises. Promptly after the effectiveness of the Registration
Statement, Holding will offer, pursuant to this Prospectus, to the Holders of
the Old Notes the opportunity to exchange their Old Notes for a like principal
amount of New Notes, to be issued without a restrictive legend and which may,
generally, be reoffered and resold by the holder without restrictions or
limitations under the Securities Act. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Issuer or any other person who has obtained a properly completed
bond power from the registered holder.
The Issuer has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Issuer believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder of such New
Notes (other than any such holder that is an "affiliate" of the Issuer within
the meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holder's business, such Holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes and neither such
Holder nor any other such person is engaging in or intends to engage in a
distribution of such New Notes. Since the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Issuer or who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuer). The Issuer
has agreed that, for a period of one year
16
<PAGE>
after the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
If (i) Holding is not required to file the Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any holder of Transfer
Restricted Securities (as defined below) notifies Holding within the specified
time period that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Old Notes acquired directly from Holding or an affiliate of Holding,
Holding will file with the Commission a Shelf Registration Statement (the "Shelf
Registration Statement") to cover resales of the Old Notes by the holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. Holding will use its best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Note until (i) the date on which
such Old Note has been exchanged by a person other than a broker-dealer for a
New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer
in the Exchange Offer of an Old Note for a New Note, the date on which such New
Note is sold to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Old Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such Old Note is
distributed to the public pursuant to Rule 144 under the Act.
If (a) Holding fails to file any of the Registration Statements required by
the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) Holding fails to consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect to the
Registration Statement or (d) the Shelf Registration Statement or the
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then Holding will pay liquidated damages to each holder of Old Notes
("Liquidated Damages"), with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes held by such holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.50 per week per $1,000 principal amount of Notes. All
accrued Liquidated Damages will be paid by Holding on each interest payment date
to the Global Note Holder (as defined) either (i) in the form of additional
Notes or (ii) in cash, at the option of Holding. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to
Holding (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions set forth
above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all of the provisions of the
17
<PAGE>
Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuer will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuer will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
the payment of liquidated damages to holders of the Old Notes under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of the Old Notes are outstanding. The Issuer has fixed the close of business on
August 27, 1996 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indenture in connection with
the Exchange Offer. The Issuer intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
The Issuer shall be deemed to have accepted validly tendered Old Notes when,
as and if the Issuer has given oral notice (confirmed in writing) or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuer will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
18
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1996, unless the Issuer, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuer will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Issuer reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "The Exchange Offer-- Conditions" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) or written notice of such delay, extension or termination
to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any
manner. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Issuer to constitute a
material change, the Issuer will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Issuer will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
Without limiting the manner in which the Issuer may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Issuer shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from June 18, 1996, the date of original
issuance of the Old Notes. No interest will be paid on the Old Notes accepted
for exchange.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Issuer will
constitute a binding agreement between such Holder and the Issuer in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about August 28, 1996, to all Holders of Old Notes known
to the Issuer and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof (or an Agent's Message), including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Old Notes, Letter of
Transmittal (or an Agent's Message) and other required documents must be
received by the Exchange Agent at the
19
<PAGE>
address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date.
The term "Agent's Message" means a message transmitted by the Book Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book Entry Transfer Facility
has received an express acknowledgement from the participant in such Book Entry
Transfer Facility tendering Old Notes which are subject to Book-Entry
Confirmation that such party has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Issuer may enforce such agreement against
the participant.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE ISSUER.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such beneficial owner's own behalf, such beneficial owner
must, prior to completing and executing the Letter of Transmittal or deliver an
Agent's Message and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined) unless the
Old Notes tendered pursuant thereto are tendered (i) by a registered Holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves
the right to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Issuer's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final
20
<PAGE>
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuer shall determine. Although the Issuer intends to notify Holders of defects
or irregularities with respect to tenders of Old Notes, neither the Issuer, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that the Issuer determines are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
By tendering, each Holder will represent to the Issuer, among other things,
that (i) the New Notes acquired by the Holder and any beneficial owners of Old
Notes pursuant to the Exchange Offer are being obtained in the ordinary course
of business of the person receiving such New Notes, (ii) neither the Holder nor
such beneficial owner has an arrangement with any person to participate in the
distribution of such New Notes, (iii) neither the Holder nor such beneficial
owner nor any such other person is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither the Holder nor any such other
person is an "affiliate," as defined under Rule 405 promulgated under the
Securities Act, of the Issuer. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuer), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees or an Agent's Message and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of the addresses set forth below under "--Exchange Agent"
on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message or any other required documents to the
Exchange Agent prior to the Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after
21
<PAGE>
the Expiration Date, the Letter of Transmittal (or facsimile thereof) or an
Agent's Message together with the certificate(s) representing the Old Notes,
or a Book-Entry Confirmation, and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee (as
defined) with respect to the Old Notes register the transfer of such Old Notes
into the name of the persons withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuer in
its sole discretion, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuer shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
22
<PAGE>
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened in any court or
by any governmental agency that might materially impair the ability of the
Issuer to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Issuer; or
(c) any governmental approval has not been obtained, which approval the
Issuer shall deem necessary for the consummation of the Exchange Offer.
If the Issuer determines in its sole discretion that any of the conditions
are not satisfied, the Issuer may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Holders to withdraw such Old Notes (see "The Exchange
Offer-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Issuer will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Issuer will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered Holders, if the Exchange Offer would otherwise expire during
such five- to 10-business-day period.
EXCHANGE AGENT
First Trust of New York, National Association, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notices of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
If by Mail: If by Hand or Overnight Mail: If by Hand:
First Trust National First Trust National First Trust New York,
Association Association National Association
First Trust Center 180 East Fifth Street 100 Wall Street
P.O. Box 64111 4th Floor - Bond Drop Window Suite 2000 - Bond Drop Window
St. Paul, MN 55164-0111 St. Paul, MN 55101 New York, NY 10005
</TABLE>
<TABLE>
<S> <C>
By Telecopier: Confirm by Telephone:
(612) 244-1537 (612) 244-8162
Attention: Dave Haugen
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuer and its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
23
<PAGE>
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuer. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal or delivering an Agent's Message, or if
a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, if any, as reflected
in the Issuer's accounting records on the date of the exchange. Accordingly, no
gain or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer and the unamortized expenses related to the issuance of the Old
Notes will be amortized over the term of the New Notes.
24
<PAGE>
THE TRANSACTION
OVERVIEW
On June 18, 1996, concurrently with the closing of the offering of the Old
Notes, Holding consummated the Transaction. BPC Mergerco, Inc. ("Mergerco") was
organized by International, CVCA and certain other institutional investors to
effect the acquisition of a majority of the outstanding capital stock of
Holding. Pursuant to the terms of a Stock Purchase and Recapitalization
Agreement dated as of June 12, 1996 (the "Common Stock Purchase Agreement"),
each of International, CVCA and certain other equity investors (collectively,
the "Common Stock Purchasers") subscribed for shares of common stock of
Mergerco. In addition, pursuant to the terms of a Preferred Stock and Warrant
Purchase Agreement dated as of June 12, 1996 (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 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. See
"Description of Common Stock" and "Description of Preferred Stock and Warrants."
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 Units Offering (as defined) 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.
Following the consummation of the Transaction, International and CVCA hold
approximately 53% and 24%, respectively, of the voting common stock of Holding,
and approximately 23% and 37%, respectively, of all classes of common stock of
Holding on a fully-diluted basis.
The aggregate consideration paid to the sellers of the equity interests in
Holding, including the holders of the 1994 Warrants, was approximately $119.6
million in cash. In order to finance the Transaction, including the payment of
related fees and expenses: (i) Holding issued the Old Notes for net proceeds of
approximately $100.2 million (or $64.6 million after deducting the amount of
such net proceeds used to purchase Marketable Securities available for payment
of interest on Senior Notes); (ii) the Common Stock Purchasers, the Preferred
Stock Purchasers and certain members of management made equity and rollover
investments in the aggregate amount of $70.0 million (the "Equity Investments")
(which amount included rollover investments of approximately $7.1 million by
certain members of management and $3.0 million by an existing institutional
shareholder); and (iii) Holding received an aggregate of approximately $0.9
million in connection with the exercise of certain management stock options to
purchase common stock of Holding.
The Common Stock Purchase Agreement includes customary business and
financial representations and warranties regarding Holding and its subsidiaries.
Certain selling shareholders, and not Holding, have certain indemnification
obligations with respect to breaches of Holding's representations and
warranties. The Common Stock Purchase Agreement also contains customary
post-closing covenants obligating Holding, among other things, to use the
proceeds of the Transaction for specified purposes and to comply with all
agreements to which it is a party that are entered into in connection with the
Transaction. Holding agreed to pay all reasonable fees and out-of-pocket
expenses of the Common Stock Purchasers and certain selling shareholders
incurred in connection with the Transaction.
25
<PAGE>
In connection with the Transaction, Holding entered into the Preferred Stock
Purchase Agreement with the Preferred Stock Purchasers. Pursuant to the
Preferred Stock Purchase Agreement, the Preferred Stock Purchasers received
600,000 shares of Preferred Stock and the 1996 Warrants. See "Description of
Preferred Stock and Warrants." The Preferred Stock Purchase Agreement grants the
Preferred Stock Purchasers certain registration rights with respect to each of:
(i) the Preferred Stock; (ii) any securities issued by Holding in exchange for
the Preferred Stock; (iii) the 1996 Warrants; and (iv) the related Common Stock
issuable upon exercise of the 1996 Warrants. The Preferred Stock Purchase
Agreement also contains customary representations and warranties and
post-closing covenants obligating Holding, among other things, to use the
proceeds of the Transaction as specified therein and to comply with the terms of
all agreements entered into in connection with the Transaction. The Preferred
Stock Purchase Agreement further obligated Holding to pay all reasonable fees
and expenses of the Preferred Stock Purchaser incurred in connection with the
Transaction.
In connection with the Transaction, International, CVCA, certain other
institutional investors and certain members of management entered into a New
Stockholders Agreement pursuant to which certain stockholders, among other
things, (i) were granted certain registration rights and (ii) under certain
circumstances, have the right to force a sale of Holding. See "Certain
Transactions--Stockholders Agreements."
SOURCES AND USES OF FUNDS
Concurrently with the Offering, the Common Stock Purchasers, the Preferred
Stock Purchasers and certain members of management made the Equity Investments.
Proceeds from the Offering, the Equity Investments and the exercise of certain
stock options were used to fund the purchase price to be paid to the sellers of
equity interests of Holding, to fund the Escrow Account, to make deferred bonus
payments to certain members of management, to make net payments to holders of
the 1994 Warrants and to pay fees and expenses relating to the Offering and the
Transaction.
The sources and uses of funds in connection with the Transaction were as
follows (in thousands):
<TABLE>
<CAPTION>
SOURCES:
<S> <C>
Issuance of Old Notes.......................................................... $105,000
Issuance of Common Stock....................................................... 55,000
Issuance of Preferred Stock.................................................... 11,489
Issuance of warrants attached to Preferred Stock............................... 3,511
Exercise of management stock options........................................... 929
--------
Total Sources.............................................................. $175,929
--------
--------
USES:
Rollover investments and purchase of equity interests.......................... $125,219
Purchase of Marketable Securities (available for payment of interest on Senior
Notes)........................................................................... 35,600
Net payments to public warrant holders......................................... 4,502
Payment of deferred bonuses to management...................................... 2,717
Payment of estimated fees and expenses......................................... 7,800
Increase in cash............................................................... 91
--------
Total Uses................................................................. $175,929
--------
--------
</TABLE>
26
<PAGE>
USE OF PROCEEDS
The Issuer will not receive any proceeds from the Exchange Offer.
The net proceeds to Holding from the Offering were approximately $100.2
million, after deducting discounts and estimated offering expenses payable by
Holding. Approximately $64.5 million of the net proceeds were used to finance a
portion of the purchase price paid in the Transaction. Approximately $35.6
million of the net proceeds, representing funds when invested in U.S. government
securities will be sufficient to pay three years' interest on the Senior Notes,
was placed into the Escrow Account and, pending disbursement, the Trustee will
have a first priority lien on the Escrow Account for the benefit of the holders
of the Senior Notes. Funds may be disbursed from the Escrow Account only to pay
interest on the Senior Notes and, upon certain repurchases or redemptions of the
Senior Notes, to pay principal of and premium, if any, thereon. It is currently
contemplated that approximately $0.1 million will be retained and will be
available for working capital and general corporate purposes. See "The
Transaction" and "Description of Senior Notes--Security."
27
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the consolidated capitalization of Holding
and its subsidiaries at June 29, 1996 after giving effect to (i) the sale of the
Old Notes and the application of the proceeds thereof as described under "Use of
Proceeds" and (ii) the completion of the other transactions described in "The
Transaction." The information in the table below is qualified in its entirety
by, and should be read in conjunction with, the historical consolidated
financial statements of Holding and the related notes included elsewhere herein.
<TABLE>
<CAPTION>
AT JUNE 29, 1996
----------------
HISTORICAL
<S> <C>
Marketable Securities (available to pay interest on Senior Notes)............ $ 35,665
----------------
----------------
Current portion of long-term debt............................................ $ 727
----------------
----------------
Long-term debt, excluding current portion:
Revolving credit facility(a)................................................ $ 49
Nevada Bonds(b)............................................................. 5,000
Iowa Bonds(b)............................................................... 5,400
Capital lease obligations................................................... 669
12 1/4% Existing Senior Subordinated Notes.................................. 100,000
12 1/2% Senior Notes........................................................ 105,000
Debt discount............................................................... (682)
----------------
Total long-term debt.................................................... 215,436
----------------
Stockholders' Equity:
Preferred Stock(c).......................................................... 14,572
Less discount(d)............................................................ (3,511)
New Class A Common Stock, par value $0.01;
Voting; 500,000 shares authorized; 91,000 shares issued and outstanding... 1
Nonvoting; 500,000 shares authorized; 259,000 shares issued and
outstanding.................................................................. 2
New Class B Common Stock, par value $0.01;
Voting; 500,000 shares authorized; 145,058 shares issued and
outstanding.................................................................. 1
Nonvoting; 500,000 shares authorized; 54,942 shares issued and
outstanding.................................................................. 1
New Class C Common Stock, par value $0.01;
Nonvoting; 500,000 shares authorized, 17,000 shares issued................ --
Additional paid-in capital(e)............................................... 52,797
Warrants(d)................................................................. 3,511
Retained earnings (deficit)(f).............................................. (160,376)
----------------
Total stockholders' equity (deficit).................................... (93,002)
----------------
Total capitalization.................................................... $ 123,161
----------------
----------------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Berry has a revolving credit facility which provides $28.0 million of credit subject to
a borrowing base calculated on specified percentages of eligible assets, reduced by
outstanding letters of credit. At June 29, 1996, approximately $16.1 million was
available under the facility.
(b) Excludes $11.8 million relating to letters of credit issued with respect to the Nevada
Bonds and the Iowa Bonds.
(c) Stated net of fees and expenses attributable to the Transaction of $428.
(d) Represents the estimated fair market value of warrants issued which enable the holders
to acquire 6% of the Common Stock of the Issuer upon exercise thereof.
(e) Represents the excess of cash proceeds upon issuance of $55.0 million of common stock
in connection with the Transaction over the par value of the common stock issued, less
expenses attributed to the Offering of $2,203.
(f) Includes (i) the excess of the cash paid former equity holders of $129,721 (including
$10,115 of rollover investments by existing shareholders) and the payment of the
deferred bonuses to certain members of management of $2,717 over the cash received from
the exercise of management stock options of $929 less (ii) the net effect of the basis
of the warrants and treasury stock retired of $13,375.
</TABLE>
28
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The following unaudited pro forma consolidated statement of operations data
give effect to the Offering and the application of the proceeds therefrom after
giving effect to the Tri-Plas Acquisition, based upon unaudited financial
statement data of Tri-Plas, Inc., as if the acquisition had occurred as of
January 1, 1995 for the statement of operations data. The pro forma statements
of operations do not purport to represent what Holding's consolidated financial
position or results of operations would actually have been if such transactions
had in fact occurred on such dates or to project Holding's consolidated
financial position or results of operations for any future date or period. The
pro forma adjustments are based upon available information and upon assumptions
that Holding believes to be reasonable. The pro forma statements of operations
and accompanying notes should be read in conjunction with the historical
consolidated financial statements and other financial information pertaining to
Holding and related notes thereto which information is included elsewhere in
this Prospectus.
BPC HOLDING CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA THE TRI-PLAS
TRI-PLAS FOR THE ACQUISITION
HOLDING ACQUISITION TRI-PLAS OFFERING AND THE
HISTORICAL ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 140,681 $15,685 $ 156,366 $ -- $ 156,366
Cost of goods sold....................... 102,484 12,584 115,068 -- 115,068
---------- ----------- ----------- ----------- -------------
Gross profit............................. 38,197 3,101 41,298 -- 41,298
Operating expenses....................... 16,803 1,278 18,081 -- 18,081(a)
---------- ----------- ----------- ----------- -------------
Operating income......................... 21,394 1,823 23,217 -- 23,217
Other expenses........................... 994 -- 994 -- 994
Interest expense......................... 13,389 337 13,726 11,613 25,339
---------- ----------- ----------- ----------- -------------
Income (loss) before income taxes........ 7,011 1,486 8,497 (11,613) (3,116)
Provision for income taxes............... 678 559 1,237 (1,142) 95
---------- ----------- ----------- ----------- -------------
Net income (loss)........................ $ 6,333 $ 927 $ 7,260 $ (10,471) $ (3,211)
---------- ----------- ----------- ----------- -------------
---------- ----------- ----------- ----------- -------------
EBITDA................................... $ 30,716 $ 2,519 $ 33,235 $ -- $ 33,235
---------- ----------- ----------- ----------- -------------
---------- ----------- ----------- ----------- -------------
</TABLE>
- ------------
(a) Operating expenses of $18,081 exclude the effect of a charge of $2,717
relating to the one-time payment of deferred bonuses to certain members of
management. These bonuses, which were contingent upon a future transaction
and were paid from the proceeds of the Offering, were charged to operating
income in fiscal 1996. Operating expenses also exclude the effect of a
charge of $358 relating to the compensation element of management stock
options which was charged to operating income in 1996.
29
<PAGE>
BPC HOLDING CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
26 WEEKS ENDED JUNE 29, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HOLDING OFFERING PRO FORMA FOR
HISTORICAL ADJUSTMENTS THE OFFERING
<S> <C> <C> <C>
Net sales................................................. $ 73,872 $-- $73,872
Cost of goods sold........................................ 52,471(a) -- 52,471(a)
---------- ----------- -------------
Gross profit.............................................. 21,401 -- 21,401
Operating expenses........................................ 13,172 (3,075) 10,097
---------- ----------- -------------
Operating income.......................................... 8,229 3,075 11,304
Other expenses............................................ 489 -- 489
Interest expense, net..................................... 7,312 5,807 13,119
---------- ----------- -------------
Income (loss) before income taxes......................... 428 (2,732) (2,304)
Provision for income taxes................................ 209 (1,169) (960)
---------- ----------- -------------
Net income (loss)......................................... $ 219 $(1,563) $(1,344)
---------- ----------- -------------
---------- ----------- -------------
EBITDA.................................................... $ 16,678 $-- $16,678
---------- ----------- -------------
---------- ----------- -------------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Includes $362 of additional costs incurred related to mold inefficiencies and other
expenses associated with the transfer of the Tri-Plas business.
</TABLE>
30
<PAGE>
BPC HOLDING CORPORATION
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30,
1995
<S> <C> <C>
TRI-PLAS ACQUISITION ADJUSTMENTS:
(1) Net sales of Tri-Plas..................................................... $ 16,583
Deduct net sales to discontinued customer................................. (1,048)
Elimination of freight costs incurred by Tri-Plas to equalize production
at all facilities....................................................... 150
------------
Adjusted Tri-Plas net sales........................................... $ 15,685
------------
------------
(2) Cost of goods sold of Tri-Plas............................................ $ 15,483
Deduct costs related to products subcontracted for sale to discontinued
customer.................................................................. (1,643)
Deduct quantity purchase differential estimated to be saved on raw
materials used in production............................................ (534)
Deduct estimated savings for art and plate costs previously purchased from
outside contractors....................................................... (150)
Deduct costs related to closed operating facility, net of incremental
costs incurred.......................................................... (572)
------------
Adjusted Tri-Plas cost of goods sold.................................. $ 12,584
------------
------------
(3) Operating expenses of Tri-Plas............................................ $ 2,934
Deduct costs related to closed operating facility, net of incremental
costs incurred.......................................................... (1,716)
Add amortization of goodwill for the Tri-Plas Acquisition................. 60
------------
Adjusted operating expenses of Tri-Plas............................... $ 1,278
------------
------------
(4) Interest expense of Tri-Plas.............................................. $ 758
Deduct interest expense incurred by Tri-Plas in excess of interest earned
by Berry on funds used to acquire Tri-Plas.............................. (421)
------------
Adjusted interest expense of Tri-Plas................................. $ 337
------------
------------
(5) Provision for income taxes of Tri-Plas on income before taxes............. $ --
------------
Adjusted provision for income taxes of Tri-Plas....................... $ 559
------------
------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 26 WEEKS ENDED
DECEMBER 30, JUNE 29,
1995 1996
<S> <C> <C> <C>
OFFERING ADJUSTMENTS:
(1) Adjustment of operating expenses:
Payment of deferred bonuses to certain members of
management.................................................. $ -- $ (2,717)
Compensation element of management stock options which
became fully vested as a result of the Offering............. -- (358)
------------ -------
Change in operating expenses................................ $ -- $ (3,075)
------------
------------ -------
-------
(2) Adjustment of net interest expense:
Interest on Senior Notes.................................... $ 13,125 $ 6,563
Interest earned on Marketable Securities, available for
payment of interest on Senior Notes....................... (1,992) (996)
Amortization of deferred financing costs associated with the
Offering.................................................... 480 240
------------ -------
Change in net interest expense.......................... $ 11,613 $ 5,807
------------
------------ -------
-------
(3) Adjustment of income tax expense to reflect benefit of
change in operating expenses and net interest expense..... $ (1,142) $ (1,169)
------------
------------ -------
-------
</TABLE>
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following selected financial data of Holding and its subsidiaries as of
and for the five fiscal years ended December 30, 1995 are derived from the
consolidated financial statements of Holding which have been audited by Ernst &
Young LLP, independent auditors. The following selected financial data for the
26 weeks ended July 1, 1995 and June 29, 1996 are derived from the unaudited
consolidated financial statements of Holding and, in the opinion of Holding,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such data. Operating results for the 26
weeks ended June 29, 1996 are not necessarily indicative of the results that may
be achieved for the year ending December 28, 1996. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements, related
notes and other financial information included herein.
<TABLE>
<CAPTION>
26 WEEKS ENDED
FISCAL --------------------
------------------------------------------------- JULY 1, JUNE 29,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $58,650 $81,355 $87,830 $106,141 $140,681 $ 70,497 $ 73,872
Cost of goods sold....................... 45,994 63,452 65,652 73,997 102,484 49,781 52,471(a)
------- ------- ------- -------- -------- -------- ---------
Gross profit............................. 12,656 17,903 22,178 32,144 38,197 20,716 21,401
Operating expenses(b).................... 8,553 11,471 13,222 15,044 16,803 8,567 13,172
------- ------- ------- -------- -------- -------- ---------
Operating income......................... 4,103 6,432 8,956 17,100 21,394 12,149 8,229
Other expenses(c)........................ 343 1,716 4,005 300 994 472 489
Interest expense, net(d)................. 8,706 6,671 6,582 10,972 13,389 6,604 7,312
------- ------- ------- -------- -------- -------- ---------
Income (loss) before income taxes and
extraordinary charge...................... (4,946) (1,955) (1,631) 5,828 7,011 5,073 428
Net income (loss).................... $(4,956) $(1,981) $(1,703) $ 2,165(e) $ 6,333 $ 5,053 $ 219
------- ------- ------- -------- -------- -------- ---------
------- ------- ------- -------- -------- -------- ---------
OTHER DATA:
EBITDA(f)................................ $12,501 $16,890 $20,840 $ 25,683 $ 30,716 $ 16,821 $ 16,678
Depreciation and amortization(g)......... 8,150 10,241 11,198 8,176 9,536 4,511 5,301
Capital expenditures..................... 2,195 7,143 5,586 9,118 11,247 5,308 5,890
Net cash interest expense(h)............. 4,917 5,114 4,966 9,794 12,439 6,117 6,831
Ratio of earnings to fixed charges....... (i) (i) (i) 1.5x 1.4x 1.7x 1.0x
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 406 $ 652 $ 1,082 $ 9,327 $ 8,035 -- $ 4,502
Working capital (deficiency)............. (730) 1,978 384 13,393 13,012 -- 14,915
Total assets............................. 52,668 68,281 60,143 91,790 103,465 -- 148,665
Total long-term debt..................... 32,566 46,636 40,936 112,287 111,676 -- 216,163
Stockholders' equity (deficit)(j)........ 11,276 9,415 5,972 (38,838) (32,484) -- (93,002)
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Costs of goods sold includes $362 of additional costs incurred related to mold inefficiencies and
other expenses associated with the transfer of the Tri-Plas business.
(b) Operating expenses include selling, general and administrative expenses, amortization of
intangibles, research and development expenses and management fees. Charges (credits) for the
effect of the market valuation adjustments for management stock options and warrants included in
operating expenses were as follows: 1991, $0; 1992, $75; 1993, $605; 1994, $358; 1995, $(236);
July 1, 1995, $162 and June 29, 1996, $358. Operating expenses for the 26-week period ended June
29, 1996 include $2,717 of deferred bonus payments to certain members of management that were
contingent upon a future transaction and $512 relating to patent and other litigation expenses.
(c) Other expenses include a $343 loss on disposal of property and equipment in fiscal 1991; costs of
$891 incurred in fiscal 1992 in connection with the Mammoth Acquisition and an $825 loss on
disposal of property and equipment; in fiscal 1993, $3,675 of non-recurring costs associated
principally with the shutdown and sale of a facility acquired in the Mammoth Acquisition and $330
of costs related to an unsuccessful acquisition; in fiscal 1994, a $184 loss on disposal of
property and equipment and $116 in unsuccessful acquisition costs; and in fiscal 1995, a $127
loss on disposal of property and equipment, $473 of costs related to unsuccessful acquisition
costs, $224 of costs related to the Tri-Plas Acquisition and $170 of costs related to the
Sterling Products Acquisition.
(d) Interest expense is stated net of interest income of $126, $26, $25, $580 and $642 earned in each
of fiscal 1991, 1992, 1993, 1994 and 1995, respectively, and of $336 and $167 for the 26 weeks
ended each of July 1, 1995 and June 29, 1996.
</TABLE>
(Footnotes continued on following page)
32
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<C> <S>
(e) Includes extraordinary charge on extinguishment of debt of $3,652 in connection with the issuance
of the Existing Senior Subordinated Notes.
(f) EBITDA is defined as income (loss) before income taxes, net interest expense, depreciation and
amortization of intangibles adjusted to exclude (i) non-cash charges relating to amortization of
restricted stock awards, market value adjustments related to stock options and the $2,717 of
deferred payments to certain members of management in connection with the Transaction and (ii)
other non-recurring or "one-time" expenses as described in note (c) above. EBITDA is presented to
facilitate an investor's understanding of the covenants in the Indenture. EBITDA should not be
considered by investors as an alternative to net income (loss) as an indicator of operating
performance or to cash flows as a measure of liquidity.
(g) Depreciation and amortization excludes non-cash amortization of deferred financing fees and debt
discount amortization which are included in interest expense.
(h) Does not include amortization of deferred financing fees or debt discount.
(i) Earnings were inadequate to cover fixed charges for fiscal 1991, 1992 and 1993 by $4,971, $2,027
and $1,794, respectively. For purposes of this computation, earnings consist of (i) income (loss)
before income taxes, plus (ii) fixed charges consisting of interest on indebtedness (including
amortization of deferred financing fees), plus (iii) that portion of lease rental expense
representative of the interest factor.
(j) Stockholders' equity (deficit) includes the effect of a $50.0 million distribution paid to
holders of equity interests in 1994 and the effects of the Transaction described elsewhere in
this Prospectus.
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with "Selected
Historical Financial Data" and the Financial Statements and the notes thereto
included elsewhere in this Prospectus. Unless the context requires otherwise,
the "Company" as used in this Management's Discussion and Analysis of Financial
Condition and Results of Operations shall include Holding and its subsidiaries
on a consolidated basis.
OVERVIEW
The Company's management is focusing on three principal areas: (i) expanding
its leading market positions in three key product categories: aerosol overcaps,
open top containers and drink cups; (ii) securing its low cost position through
continued technology investments and productivity gains; and (iii) seeking
selective acquisitions and joint ventures which offer market and product
extension or productivity improvement opportunities.
In order to accomplish its objectives, management implemented a capital
investment program in fiscal 1991 which emphasizes the following: maintenance,
replacement and expansion of machinery, molds and automation equipment;
development and construction of molds and equipment for new products; and
enhanced management information and production systems to help ensure that the
Company's assets are being fully and efficiently utilized. In connection with
the program in 1993, the Company closed the former Mammoth Containers plant in
Forest City, North Carolina. The business from the Forest City plant was
transferred to the Company's other locations, resulting in a reduction of both
overhead and general and administrative expenses, greater production efficiency
and improved asset utilization. The program is on-going, and also includes plant
and system expansion at the Company's Evansville facility. The Company believes
that all of its facilities are operating efficiently and are capable of meeting
increased volume requirements arising from planned sales expansion.
Since fiscal 1991, management has also emphasized sales of higher margin
products using Company-owned molds while reducing sales of lower margin custom
molded products which are produced with customer-owned molds. In order to
accomplish this goal, the Company has added 23 salespeople since 1990, and has
focused its sales force along product lines. Although the Company continues to
produce certain custom molded products in order to utilize existing capacity,
the increased production demands of the Mammoth Acquisition and the Tri-Plas
Acquisition enable the Company to eliminate much of this volume in favor of
higher margin business. The Sterling Products Acquisition also facilitated the
Company's entrance into the plastic drink cup market. Management believes this
market offers significant opportunities for growth.
34
<PAGE>
The following table sets forth, for the periods indicated, certain statement
of operations and other data of the Company expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
26 WEEKS ENDED
FISCAL ---------------------
----------------------- JULY 1, JUNE 29,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Net sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................................. 74.7 69.8 72.8 70.6 71.0
----- ----- ----- -------- ---------
Gross profit........................................ 25.3 30.2 27.2 29.4 29.0
Operating expenses.................................. 15.1 14.2 11.9 12.2 17.9
----- ----- ----- -------- ---------
Operating earnings.................................. 10.2 16.0 15.3 17.2 11.1
Other expenses...................................... 4.6 0.3 0.7 0.6 0.6
Interest expense, net of interest income............ 7.5 10.3 9.5 9.4 9.9
----- ----- ----- -------- ---------
Income (loss) before income taxes................... (1.9) 5.4 5.1 7.2 0.6
Extraordinary charge................................ 0.0 3.4 0.0 0.0 0.0
Income taxes........................................ 0.0 0.0 0.6 0.0 0.3
----- ----- ----- -------- ---------
Net income (loss)................................... (1.9)% 2.0% 4.5% 7.2% 0.3%
----- ----- ----- -------- ---------
----- ----- ----- -------- ---------
</TABLE>
26 WEEKS ENDED JUNE 29, 1996 ("INTERIM 1996")
COMPARED TO 26 WEEKS ENDED JULY 1, 1995 ("INTERIM 1995")
Net Sales. Net sales increased $3.4 million, or 4.8%, to $73.9 million for
Interim 1996 from $70.5 million for Interim 1995, notwithstanding an approximate
4% decrease in net selling price due mainly to the impact of cyclical
adjustments in the price of plastic resin. The increase in net sales was
attributed to a combination of higher aerosol overcap sales of $1.3 million,
higher drink cup sales of $2.7 million and higher container sales of $3.2
million (including the introduction of polypropylene containers from the
Tri-Plas Acquisition). Sales of custom molded products were down $3.4 million
mainly due to the loss of a 1995 non-repeating plastic tumbler promotion for
Burger King, and sales of custom manufactured tools decreased $0.4 million.
Gross Margin. Gross margin increased by $0.7 million to $21.4 million for
Interim 1996 from $20.7 million for Interim 1995. This increase in gross margin
was attributed to a combination of the introduction of more efficient tooling in
certain of the container and drink cup products, strengthening operating
performance at the Company's manufacturing facilities, and stronger sales of
higher margin products. Gross margin also reflects the negative $0.8 million
impact of a non-repeating favorable resin forward buying program in the first
quarter of 1995.
Operating Expenses. Selling expenses increased by $0.6 million to $3.4
million for Interim 1996 from $2.8 million for Interim 1995 principally as a
result of the addition of the drink cup business and the Tri-Plas Acquisition.
General and administrative expenses increased by $4.2 million to $9.2 million
for Interim 1996 from $5.0 million for Interim 1995. The increase included
Transaction expenses of $3.1 million, including $2.7 million of deferred bonus
payments to certain members of management and a $0.3 million non-cash adjustment
to the value of vested incentive stock options. The increase also includes
additional expenses from the Tri-Plas Acquisition and the Sterling Products
Acquisition of $0.6 million, and patent and other litigation expenses of $0.5
million.
Interest Expense. Interest expense increased $0.5 million to $7.5 million
for Interim 1996 compared to $7.0 million for Interim 1995 due to the issuance
of the Notes.
35
<PAGE>
Income Tax. For Interim 1996, the Company had income tax of $0.2 million
which was determined using Federal and state statutory income tax rates. There
was minimal income tax for Interim 1995 due to the availability of loss
carryforwards.
Net Income. Net income for Interim 1996 of $0.2 million decreased $4.9
million from net income of $5.1 million for Interim 1995 for the reasons
discussed above.
YEAR ENDED DECEMBER 30, 1995
COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales increased 32.5% to $140.7 million in 1995, up $34.6
million from $106.1 million in 1994. Sales of aerosol overcaps increased $5.6
million (14%), including approximately 4% due to a strengthening of base
business and the addition of new products, and approximately 10% from the
pass-through to customers of increased raw material cost. Containers sales
increased $9.5 million in 1995 (15%), including approximately 10% from the
pass-through to customers of such cost increases, and approximately 5% due to
the continued market strength of base products and several new product
applications. The Sterling Products Acquisition (consummated in March 1995)
contributed $17.3 million of sales of drink cups in 1995 (compared to $6.1
million of net sales by the predecessor company in 1994, which are not included
in the Company's financials). Other product lines including custom molded
products and custom mold building reflected an increase of $2.1 million in 1995.
Other than $0.2 million of polypropylene containers subcontracted from Tri-Plas
in 1995, sales recorded from the Tri-Plas Acquisition were insignificant.
Gross Profit. Gross profit increased $6.1 million or 18.8% to $38.2 million
(27.2% of net sales) in 1995 from $32.1 million (30.3% of net sales) for 1994.
The increase in gross profit is primarily attributed to increased sales volume.
All of the Company's manufacturing plants produced at high operating levels
during 1995. Significant capacity was dedicated at all facilities to accommodate
the dynamic growth in the drink cup business.
Gross profit as a percent of sales decreased 3.1% from 30.3% in 1994 to
27.2% for 1995. Pass through of raw material cost increases contributed
approximately 2.4% of the decrease, as no additional profit was earned on such
incremental revenues. Additionally, most of the new high efficiency molds,
printing equipment, and injection molding machines required for the drink cup
business did not arrive until late in the summer season, forcing the Company to
produce on slower, less efficient drink cup tooling for the period of peak
demand. Outside subcontractors were used to print drink cups during peak
periods, resulting in lower gross profits. Although a fifty thousand square foot
warehouse facility was added in Evansville, the seasonality of the drink cup
business required leasing outside storage facilities at both the new Winchester,
Virginia plant and the Henderson, Nevada location.
Operating Expenses. Operating expenses during 1995 were $16.8 million,
compared with $15.0 million for 1994. As a percentage of sales, operating
expenses dropped from 14.2% of net sales in 1994 to 11.9% of net sales for 1995.
Sales related expenses, including the cost of expanded sales coverage, increased
$0.5 million. General and administrative expenses increased $1.0 million,
including $0.4 million associated with the Sterling Products Acquisition and a
$0.5 million increase in performance-based employee bonuses.
Other Expenses. Other expenses were $1.0 million in 1995 compared to $0.3
million in 1994, a increase of $0.7 million. This increase includes a charge of
$0.5 million associated with the discontinued pursuit of the acquisition of the
assets of CPI Plastics, Inc. and its affiliates and $0.2 million of costs
associated with the transfer of the Tri-Plas business.
Interest Expense and Income. Net interest expense, including amortization of
deferred financing costs for 1995, was $13.4 million (9.5% of net sales)
compared to $11.0 million (10.3% of net sales), an increase of $2.4 million.
This increase is primarily due to the full year effect in 1995 of expenses
relating
36
<PAGE>
to a recapitalization of the Company on April 21, 1994, when the Company
completed an offering of $100 million aggregate principal amount of Existing
Senior Subordinated Notes. The Existing Senior Subordinated Notes bear interest
at 12 1/4% and mature on April 15, 2004. Interest is payable semi-annually on
October 15 and April 15 of each year. Cash interest paid in 1995 was $13.4
million as compared to $8.0 million for 1994. Interest income was $0.6 million
in both 1995 and 1994.
Income Taxes. During the year ended December 30, 1995, the Company utilized
the last portion of certain net operating loss carryforwards and became a
taxpayer of federal income tax, incurring $0.7 million of federal income tax
liability compared to incurring no federal income tax for the year ended
December 31, 1995. Additionally, as of December 30, 1995, the Company recorded
$0.4 million of recoverable income taxes and $2.1 million of deferred income tax
credits resulting from payment of alternative minimum tax.
Extraordinary Charge. There were no extraordinary charges during 1995. The
Company incurred an extraordinary charge of $3.7 million ($3.2 million of which
related to non-cash charges) during 1994 as a result of the retirement of debt
concurrent with the issuance of the Existing Senior Subordinated Notes.
Net Income. Net income increased $4.2 million in 1995 to $6.3 million from
net income of $2.2 million in 1994 for the foregoing reasons.
YEAR ENDED DECEMBER 31, 1994
COMPARED TO YEAR ENDED JANUARY 1, 1994
Net Sales. Net sales increased 20.8% to $106.1 million in 1994, up $18.3
million from $87.8 million in 1993. Sales of aerosol overcaps increased $4.9
million due to both a strengthening of base business and the addition of new
products. Containers sales increased $11.8 million in 1994 due to a strong
demand for promotional containers, the continued market strength of base
products and several new product applications. Other product lines including
custom molded products, molds and artwork reflected an increase of $1.6 million
in 1994. Also contributing to the increase from 1993 was the pass-through to
customers of increased raw material cost, primarily plastic resin.
Gross Profit. Gross profit increased $9.9 million or 44.9% to $32.1 million
(30.3% of net sales) in 1994 from $22.2 million (25.3% of net sales) for 1993.
The increase in net sales contributed to this improvement, as well as additional
sales margin on increased volume and decreased cost due to higher operating
levels at all three then-existing manufacturing facilities. Additionally, the
Company completed construction and start-up of a state-of-the-art injection
molding facility at the existing Evansville, Indiana plant. The start-up of this
plant addition in mid-year coincided with peak capacity requirements for the
business, facilitating continued efficient production. The gross profit increase
was also partially due to a decrease of $3.0 million in the additional
depreciation originally incurred when the Company's assets were adjusted to fair
market value in December 1990 ($0.8 million in 1994 compared to $3.8 million in
1993). Increasing raw material prices did not materially affect gross profit
during 1994, as price increases to customers were implemented shortly after
price increases from resin suppliers.
Operating Expenses. Operating expenses during 1994 were $15.0 million (14.2%
of net sales), compared with $13.2 million (15.1% of net sales) for 1993. Sales
related expenses, including the cost of expanded sales coverage, increased $0.8
million. General and administrative expenses increased $1.0 million, due to $0.2
million of additional insurance costs and a $0.8 million increase in
performance-based employee bonuses.
Other Expenses. Other expenses were $0.3 million in 1994 compared to $4.0
million in 1993, a decrease of $3.7 million. This decrease is due to
non-recurring shutdown expenses and loss on fixed asset disposals incurred in
1993 associated with closing the Forest City, North Carolina plant.
37
<PAGE>
Interest Expense and Income. Net interest expense, including amortization of
deferred financing costs for 1994, was $11.0 million (10.3% of net sales)
compared to $6.6 million (7.5% of net sales), an increase of $4.4 million. This
increase is primarily due to expenses relating to a recapitalization of the
Company on April 21, 1994, when the Company completed an offering of $100
million aggregate principal amount of Existing Senior Subordinated Notes. The
Existing Senior Subordinated Notes bear interest at 12 1/4% and mature on April
15, 2004. Interest is payable semi-annually on October 15 and April 15 of each
year. Cash interest paid in 1994 was $8.0 million as compared to $5.3 million
for 1993. Interest income for 1994 was $0.6 million as compared to less than
$0.1 million in 1993. This increase is the result of the investment of cash and
cash held for acquisitions.
Extraordinary Charge. The Company incurred an extraordinary charge of $3.7
million (including a non-cash portion of $3.2 million) during 1994 as a result
of the retirement of debt concurrent with the 1994 Units Offering.
Net Income (Loss). Net Income increased $3.9 million in 1994 to $2.2 million
from a net loss of $1.7 million in 1993 for the foregoing reasons.
INCOME TAX MATTERS
In February 1995, the Internal Revenue Service completed an audit of the
1990 through 1993 income tax returns of the Company. The results of these
audits, combined with the provision for 1994 income taxes, resulted in net
operating loss carryforwards as of December 31, 1994 of $5.1 million. As of
December 30, 1995, the Company had no remaining net operating loss carryforward.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit facility provided by Fleet Capital Corporation
which provides for a revolving line of credit for general working capital needs
(based on a borrowing base formula) and a letter of credit supporting the
Company's outstanding Industrial Revenue Bonds (approximately $12.0 million).
See "Description of Certain Indebtedness--Revolving Credit Facility."
In connection with the 1994 Units Offering, the Company entered into the
Senior Subordinated Notes Indenture which restricts the Company's ability to
incur additional debt and contains other provisions which could limit the
liquidity of the Company.
Capital expenditures in 1995 were $11.2 million, an increase of $2.1 million
from $9.1 million in 1994. Included in capital expenditures during 1995 was $2.2
million relating to the addition of a new warehouse in the Evansville plant
necessary to support the production facility added in 1994. The new warehouse
became operational in the second quarter of 1995. Capital expenditures also
included investment of $5.2 million for molds, $0.6 million for molding
machines, $0.7 million for printing equipment and $2.5 million for miscellaneous
accessory equipment and systems. For Interim 1996, capital expenditures of $5.9
million included $2.0 million for molds and molding machines, $0.7 million for
printing-related equipment and $3.2 million for building and accessory
equipment. Additionally, the Company purchased the drink cup product line of
Alpha Products (as defined) during such period.
Net cash provided by operating activities in 1995 was $13.0 million, a
decrease of $2.6 million from $15.6 million in 1994. Net cash provided from
operating activities was $0.9 million for Interim 1996, a decrease of $1.2
million from the $2.1 million for the comparable prior year period. Increased
sales volume, a reduction of overdue accounts payable assumed in connection with
the Tri-Plas Acquisition, and increasing value of inventory due to rising raw
material prices all contributed to increasing working capital (defined as
accounts receivable, inventories, prepaid expenses, other receivables, accounts
payable and accrued expenses) by $5.3 million since 1995 year end. Working
capital increased $7.4 million for the same period in 1995. Cash flow from
operations, combined with cash on hand at December 31, 1994, was sufficient to
meet the Company's cash interest, working capital and capital
38
<PAGE>
expenditure requirements, and to make the mandatory principal payment on the
Nevada Bonds and Iowa Bonds during 1995.
The capital expenditure budget for 1996 is expected to be $12.8 million,
including approximately $3.5 million for building and systems, $3.6 million for
molds, $1.2 million for molding machines, $1.8 million for printing equipment
and $2.7 million for miscellaneous accessory equipment. 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 1996 will be satisfied through a
combination of funds generated from operating activities and cash on hand,
together with funds available under the Revolving Credit Facility. Management
bases such belief on historical experience and the substantial funds available
under the Revolving Credit Facility. However, the Company cannot predict its
future results of operations.
The Senior Subordinated Notes Indenture restricts, and the Revolving 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 Senior
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 Senior Notes
which begin after the depletion of the Escrow Account and the expiration of
Holding's option to pay interest by issuing additional Senior Notes. In that
event, management anticipates that such obligations will only be met by
refinancing the Existing Senior Subordinated Notes or raising capital through
equity offerings. See "Risk Factors--Holding Company Structure; Significant
Limitations on Access to Subsidiaries' Cash Flow" and "Description of Certain
Indebtedness."
At August 3, 1996, the Company's cash balance was approximately $3.0
million, and the Company had unused borrowing capacity under the Revolving
Credit Facility's borrowing base of approximately $16.2 million.
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company faces various economic risks ranging from an economic downturn
adversely impacting the Company's primary markets to market fluctuations in
plastic resin prices. In the short-term, rapid increases in resin cost, such as
those experienced in the second half of 1994, may not be fully recovered through
price increases to customers. Also, shortages of raw materials may, from time to
time, occur. In the long-term, however, raw material availability and price
changes generally do not have a material adverse effect on gross profit. 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.
39
<PAGE>
BUSINESS
GENERAL
Berry, a wholly-owned subsidiary of the Issuer, is a leading domestic
manufacturer and marketer of plastic packaging products focused on three key
markets: aerosol overcaps, rigid open-top containers and drink cups. Within each
of these 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 abilities and
sophisticated multi-color printing capabilities. The Company believes that it is
the largest supplier of aerosol overcaps in the United States, with an estimated
44% domestic market share in fiscal 1995 and sales of over 1.3 billion overcaps.
Berry also believes that it is the largest domestic supplier of thinwall,
child-resistant, pry-off and polypropylene open top containers. In connection
with a recent acquisition, Berry has utilized its national sales force and
existing molding and printing capacity at multiple-plant locations to become a
leader in the high growth plastic drink cup market, which includes the Company's
innovative 32 ounce and 44 ounce DT cups, which fit in standard vehicle cup
holders.
In fiscal 1995, the Company had net sales of $140.7 million, of which
aerosol overcaps and containers constituted 31% and 51%, respectively. Drink
cups, a product line acquired in March 1995, accounted for approximately 12% of
total net sales in fiscal 1995. On a pro forma basis after giving effect to the
Tri-Plas Acquisition, in fiscal 1995 the Issuer had net sales of approximately
$156.4 million. On a historical basis, from the fiscal year ended September 30,
1990 through fiscal 1995, the Issuer's net sales increased steadily at a
compound annual growth rate of 19.3% per year.
The Company supplies aerosol overcaps for a wide variety of products,
including such well-known brand names as WD-40 lubricant, Rustoleum and
Sherwin-Williams paints, Pam cooking spray, Gillette Foamy and Noxema shaving
creams, Dow Brand's oven cleaner, Lysol disinfectant, Faultless starch and S.C.
Johnson Wax products. Similarly, the Company's containers are used for packaging
a broad spectrum of commercial and consumer products, including Red Devil and
Quikrete building products, McDonald's and Burger King promotional children's
meals, Elmer's glue, Milliken adhesives, Super Bubble chewing gum, Haagen-Dazs
ice cream and Hershey chocolate. The Company's plastic drink cups are sold
primarily to fast food and convenience store chains. Drink cup customers include
McDonald's, Coca-Cola, Burger King, Circle K, Wal-Mart, 7-Eleven and Boston
Market. Berry's customer base is comprised of over 2,000 customers with
operations in a widely diversified range of markets, which reduces the Company's
vulnerability to fluctuations in the overall U.S. economy and mitigates the
effects of cyclicality and seasonality. The Company's top ten customers
accounted for approximately 23% of the Company's fiscal 1995 net sales, and no
customer accounted for more than 4% of net sales. Additionally, the Company
believes it is the single-source or largest supplier of overcaps, containers and
drink cups to a majority of its customers.
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 (79 aerosol overcaps, 153 containers, 17
drink cups) 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. Likewise, in the container market, an in-house graphic arts
department and sophisticated printing and decorating capabilities permit the
Company to offer extensive value-added decorating options. The Company's drink
cup product line is strengthened by its multi-year agreement with Coca-Cola and
by its innovative design for large size DT cups. The Company is also
characterized as 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.
40
<PAGE>
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.
BUSINESS STRATEGY
Berry's primary business objective is to continue its strong growth trends
in both net sales and operating profitability. To achieve this objective, the
Company has developed and implemented the following specific strategies:
. Expand leading market positions in three key product categories: aerosol
overcaps, open top containers and drink cups.
Maintain the leading market position in aerosol overcaps. According to
industry sources, the Company is the largest domestic producer of aerosol
overcaps with an estimated 44% domestic market share. An additional
one-third of this market is comprised of companies that produce overcaps for
their own needs. Berry believes that these companies will continue to
increase their outsourcing of production to high quality, low cost producers
such as the Company. For example, in 1993 Gillette decided to outsource
additional overcap production to Berry, and has steadily increased the
amount outsourced to Berry since that time. In 1995, the Company
manufactured a majority of Gillette's overcap requirements. The Company also
intends to continue to work with existing customers to develop new products
which increase product differentiation and performance, such as the recently
introduced "spray-through" caps, child resistant caps and whipped cream
caps. Both of these strategies are intended to capitalize on Berry's
strengths in this market, which include long-standing relationships with its
customers, technological ability to produce in-house over 3,000 colors
accurately, proprietary packing technology, a broad product line of
proprietary molds and high-speed, low-cost molding and decorating
capabilities. Based upon its estimates, the Company believes that it has
gained market share from its principal competitors in the overcap market in
recent years.
Develop and expand high margin niche container markets. Berry intends to
continue to grow its container product lines in excess of the overall U.S.
market growth rate. To accomplish this goal, the Company will seek to
develop new products for high-margin niches and will work closely with
national marketers such as McDonald's and Burger King to continue to
increase sales of promotional products. In addition, the Company intends to
develop markets and applications not currently utilizing molded plastic
containers to create new customers or niches for the Company's existing
container products. Recent examples of the Company's success in this area
include the use of plastic containers that can be resealed by Pillsbury to
replace the tubes currently used for its cookie dough, the use of printed
plastic containers by Lipton for its iced tea mix in place of composite
(paper and metal) containers, the replacement of round containers by various
customers with square or rectangular plastic containers that maximize
shipping and storage space, and the use of thinwall popcorn containers to
replace traditional paper packaging, which are being sold in movie theaters
to promote new movies such as "Flipper," "The Hunchback of Notre Dame," the
remake of "One Hundred and One Dalmatians" and "Mighty Ducks III."
Rapidly expand drink cup business. Plastic drink cups are providing a
significant growth opportunity for the Company. By utilizing its national
sales force and existing molding machines at multiple plant locations, Berry
was able to achieve sales in fiscal 1995 of $17.3 million, compared to sales
in fiscal 1994 of $6.1 million by Sterling Products (as defined) prior to
its acquisition by the
41
<PAGE>
Company. The Company intends to continue to capitalize on its low cost
production of drink cups (including the innovative DT cup design in 32 and
44 ounce sizes, as well as its rapidly growing 64 ounce straight-sided drink
cup which has been successful with convenience stores) by focusing on its
sophisticated printing and graphics capabilities. Berry is currently
upgrading its printing and graphics capability to provide some of the most
sophisticated and technologically advanced equipment in the industry,
including the first 10-color printing capability. In addition, promotional
opportunities will be pursued by combining drink cups with containers, an
opportunity that affords Berry a unique strategic advantage.
. Secure low cost position through continued technology investments and
productivity gains.
The Company believes that it is currently the industry's low cost
producer for many of its products and that it will continue to improve
productivity through its on-going program of upgrading equipment and
facilities and investing in new technology. Over the last five years,
management has improved asset utilization, increased manufacturing
productivity and reduced overhead by consolidating underperforming
facilities, such as the Forest City plant, streamlining its workforce and
investing in modern molds, equipment and systems. For example, in Berry's
two original plants, Evansville and Henderson, sales per employee have
increased by 22% from approximately $128,000 in 1990 to approximately
$156,000 in 1995.
. Seek selective acquisition and joint venture opportunities.
The Company intends to seek strategic acquisition opportunities as the
highly fragmented plastic packaging industry continues its recent trend of
consolidation. Building on its acquisition record demonstrated by the
successful integration of the Mammoth Acquisition, the Sterling Products
Acquisition and the Tri-Plas Acquisition, the Company intends to identify
and acquire targets which offer market and product extension or productivity
improvement opportunities. For example, the purchase in January 1996 of
certain assets relating to Alpha Products' drink cup business gave Berry a
low cost way to add capacity and further expand its drink cup product line.
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, Holding and the
Company were formed to purchase the assets of Old Berry. The Company acquired
substantially all of the assets (the "Mammoth Acquisition") of the Mammoth
Containers division of Genpak Corporation in February 1992 for approximately
$18.3 million, adding plants in Forest City, North Carolina (which was
subsequently sold by the Company) and Iowa Falls, Iowa. In March 1995, the
Company acquired the assets of Sterling Products, Inc. (the "Sterling Products
Acquisition"), a producer of injection molded plastic drink cups and lids, and
added a plant in Winchester, Virginia. In December 1995, the Company acquired
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. In January 1996, the Company
acquired the assets relating to the plastic drink cup product line of Alpha
Products, Inc., a subsidiary of Aladdin Industries, Inc. ("Alpha Products").
42
<PAGE>
RECENT ACQUISITIONS
The Sterling Products Acquisition
On March 10, 1995, Berry Sterling Corporation, a wholly-owned subsidiary of
the Company ("Berry Sterling"), acquired substantially all of the assets of
Sterling Products, Inc. ("Sterling Products") of Winchester, Virginia. Sterling
Products, a manufacturer and marketer of printed plastic drink cups, had fiscal
1994 net sales of $6.1 million. In 1994, Sterling Products introduced a new
drink cup design intended for use in vehicles which allows for larger-size cups
to fit standard vehicle drink cup holders. These drink cups also have unique
fitted lids to avoid spills. The acquired business also has a conventional line
of straight-sided plastic drink cups in sizes from 12 ounces to 64 ounces.
Management believes that the Sterling Products Acquisition gives the Company
immediate low cost penetration into the fast growing plastic drink cup market.
Since the integration of the plastic drink cup business entailed the addition of
a product line rather than the implementation of new technology, the Company was
able to achieve the dramatic increase in net sales by utilizing its national
sales force and its existing molding machines at multiple-plant locations. It
also provides the Company with a plant, located in Winchester, Virginia, that is
well-situated to service key Eastern markets. Customers for this product line
are primarily fast food and convenience store chains.
The Tri-Plas Acquisition
On December 21, 1995, Berry Tri-Plas Corporation, a wholly-owned subsidiary
of the Company ("Berry Tri-Plas"), acquired substantially all of the assets of
Tri-Plas, Inc. ("Tri-Plas") of Ontario, California. Tri-Plas, a manufacturer and
marketer of injection molded containers and lids, had fiscal 1995 net sales of
approximately $16.6 million. In connection with the transaction, Tri-Plas
transferred production from its Ontario, California facility (which was not
purchased by the Company) to the Company's Henderson, Nevada plant.
Additionally, Berry Tri-Plas continues to operate the former Tri-Plas plants in
York, Pennsylvania and Charlotte, North Carolina.
Management believes that the Tri-Plas Acquisition gives the Company an
immediate presence in the polypropylene container product line, which is mainly
used for food and "hot fill" applications. The Tri-Plas Acquisition also rounds
out the Company's open top container line and adds increased access to East
Coast markets with the addition of two manufacturing facilities.
The Alpha Products Drink Cup Product Line Acquisition
On January 23, 1996, the Company purchased the assets relating to the
plastic drink cup line and decorating equipment of Alpha Products. The addition
of these assets complements the drink cup product line acquired in the Sterling
Products Acquisition.
AEROSOL OVERCAP MARKET
The Company believes it is the leader in the U.S. market for aerosol
overcaps, which the Company estimates to be approximately $95 million per annum.
Overall, the market is mature with an annual growth rate of approximately 3%.
Approximately one-third of this market consists of national marketers who
produce overcaps in-house for their own needs. Management believes that a
portion of these in-house producers will increase the outsourcing of their
production to high technology, low cost manufacturers, such as the Company, as a
means of reducing manufacturing assets and focusing on their core marketing
objectives.
The Company's aerosol overcaps are used in a wide variety of end-use markets
including spray paints, household and personal care products, insecticides and a
myriad of other commercial and
43
<PAGE>
consumer products. The following chart illustrates the Company's fiscal 1995
overcap sales by market end-use:
[CHART]
Personal Care 15%
Industrial 4%
Miscellaneous 2%
Insect Sprays 6%
Automotive 13%
Food 5%
Household Chemicals 30%
Paint and Varnish 25%
Most U.S. manufacturers and contract fillers of aerosol products are
customers of the Company for some portion of their needs. In fiscal 1995, no
single overcap customer accounted for more than 4%, and the Company's top ten
overcap customers accounted for approximately 14%, of the Company's total net
sales.
Management believes that, over the years, the Company has developed several
significant competitive advantages, including a reputation for outstanding
quality, short lead-time requirements, long-standing relationships with major
customers, the ability to accurately reproduce over 3,000 colors, proprietary
packing technology that minimizes freight cost and warehouse space, high-speed,
low-cost molding and decorating capability and a broad product line of
proprietary molds. The Company continues to develop new products in the overcap
market, including the "spray-thru" line of aerosol overcaps.
The Company's major competitor in this product line is Knight Engineering.
In addition, a number of companies, including several of the Company's customers
(e.g., S.C. Johnson, Cheseborough-Ponds and Reckitt & Colman), currently produce
aerosol overcaps for their own use.
CONTAINER MARKET
The Company estimates the rigid plastic open-top container market in the
United States to be approximately $1.1 billion, of which approximately $600
million is large (primarily 5-gallon) industrial pails. The remaining $500
million encompasses a wide variety of containers which include all of the
Company's product lines other than industrial containers. Although growth rates
vary by product line, the overall market is growing faster than the economy due
in part to the conversion of paper, glass and metal packaging to plastic
packaging. Plastic is a preferred material for many applications due to its low
cost, functional performance, reusability and recyclability. In addition,
certain markets, such as dairy and food packaging, are shifting to injection
molded products from thermoformed containers made from polystyrene due to
environmental and performance advantages. Management believes the Company's
overall market share in the container market (excluding industrial containers)
is approximately 15%, and that the Company is the leading U.S. manufacturer in
the thinwall, pry-off, child-resistant and polypropylene product lines.
Management considers industrial containers to be a commodity market,
characterized by little product differentiation and an absence of higher margin
niches.
44
<PAGE>
The Company classifies its containers into six product lines: "thinwall,"
"child-resistant," "pry-off," "dairy," "polypropylene" and "industrial." The
following table describes each of the Company's six product lines.
<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION SIZES MAJOR END MARKETS
- ---------------- ------------------------------- ---------------- -------------------------------
<S> <C> <C> <C>
Thinwall Thinwalled, multi-purpose 6 oz. to Food, promotional products,
containers with or without 2 gallons toys and a wide variety of
handles and lids other uses
Child-resistant Containers that meet Consumer 2 lb. to Pool and other chemicals
Product Safety Commission 2 gallons
standards for child safety
Pry-off Containers having a tight 4 oz. to Building products, adhesives,
lid-fit and requiring an 2 gallons other industrial uses
opening device
Dairy Thinwall containers in 6 oz. to 5lbs., Cultured dairy products
traditional dairy market sizes Multi-pack including yogurt, cottage
and styles cheese, sour cream and dips
Polypropylene Usually clear containers in 6 oz. to 5lbs. Food, deli, sauces, salads
round, oblong or rectangular
shapes
Industrial Thick-walled, larger pails 2.5 to Building products, chemicals,
designed to accommodate heavy 5 gallons paints, other industrial uses
loads
</TABLE>
The largest end-uses for the Company's containers are food products,
building products, chemicals and dairy products. The Company has a diverse
customer base for its container lines, and no single container customer exceeded
4% of the Company's total net sales in fiscal 1995.
Management believes that no other container manufacturer in the U.S. has the
breadth of product line offered by the Company. The Company's container
capacities range from 4 ounces to 5 gallons and are offered in various styles
with accompanying lids, bails and handles, as well as a wide array of decorating
options. In addition to a complete product line, the Company has sophisticated
printing capabilities, an in-house graphic arts department, low cost
manufacturing capability with six plants strategically located throughout the
United States and a dedication to high quality products and customer service.
Ten product engineers, located in most of the Company's facilities, work with
customers to design and commercialize new containers.
The Company seeks to develop niche container products and new applications
by taking advantage of the Company's state-of-the-art decorating and graphic
arts capabilities and dedication to service and quality. Management believes
that these capabilities have given the Company a significant competitive
advantage in certain high-margin niche container applications for specialized
products. Examples include popcorn containers for new movie promotions and
professional and college sporting and entertainment events, where the ability to
produce sophisticated and colorful graphics is crucial to the product's success.
In order to identify new applications for existing products, the Company relies
extensively on its national sales force. Once these opportunities are
identified, the Company's sales force interfaces with product design engineers
to meet customers' needs. Finally, the quality and performance of the Company's
dairy product line have enabled the Company to establish a solid and growing
reputation in this market.
In non-industrial containers, the Company's strongest competitors include
Airlite, Sweetheart, Venture Packaging, Landis, Cardinal and Polytainers. The
Company also produces commodity industrial pails for a market which is dominated
by large volume competitors such as Letica, Plastican, Bennett 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.
45
<PAGE>
DRINK CUP MARKET
The Company estimates the total U.S. market for drink cups exceeds $1.0
billion per year, with approximately $110 million in plastic. As beverage
producers, convenience stores and fast food restaurants increase their marketing
efforts for larger sized drinks, the Company believes that the plastic drink cup
market will expand because of plastic's desirability over paper for larger drink
cups. Injection-molded plastic cups range in size from eight to 64 ounces, and
often come with lids. Primary markets are fast food restaurants, convenience
stores, sporting events, sit-down restaurants and retail. Virtually all cups are
decorated, often as a promotional item, and Berry is known in the industry for
innovative, state-of-the-art graphics capability.
Berry's innovative DT cup design in 32 and 44 ounce sizes, introduced by
Berry Sterling's predecessor in 1994, allows these large size cups to fit in a
standard vehicle cup holder. The design has been successful for the Company, as
exemplified by McDonald's awarding the Company its fall 1995 National Football
League cup promotion. The Company's position in this market is also enhanced by
virtue of its multi-year contract to supply DT cups to Coca-Cola's fast food and
convenience store customers.
Berry also supplies a full line of traditional straight-sided drink cups
from 12 to 64 ounces with and without leak-proof lids primarily to fast food and
convenience store chains. The 64 ounce cup, which has been highly successful
with convenience stores, is one of the Company's fastest growing drink cups. In
addition to a full product line, Berry has the advantage of being the only
supplier that can provide sophisticated printing and/or labeling capacity on a
nation-wide basis; in 1995, four different plants molded and decorated drink
cups. Major drink cup competitors are Packaging Resources Incorporated and
PackerWare Corporation.
CUSTOM MOLDED PRODUCTS MARKET
The Company also produces custom molded products, which totaled
approximately 6% of fiscal 1995 net sales, 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
marketing of custom molded products on those customers that are cognizant of the
Company's mold and product design expertise, superior color matching abilities
and sophisticated multi-color printing capabilities. The majority of the
Company's custom business in 1995 required specialized equipment and expertise,
supporting the Company's desire to pursue higher volume-added niche
opportunities in every market in which it participates.
MARKETING AND SALES
The Company reaches its large and diversified base of over 2,000 customers
primarily through its direct field sales force which has been expanded from 14
sales representatives in fiscal 1990 to 37 at the end of fiscal 1995. 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's commission structure for salespeople provides a strong
incentive to generate new business by paying separate commissions for new sales
in addition to commissions on total sales. 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 utilizes the services of a small number of sales
representative organizations, the largest of which is Wolf Container in
Pittsburgh, Pennsylvania, to augment its direct sales force.
The Company believes that it has a reputation for a high level of customer
satisfaction. Highly skilled customer service representatives are located in
each of the Company's facilities to support the national field sales force. In
addition, two telemarketing representatives, three market managers and
46
<PAGE>
three 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 (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, approximately 30% of
overcaps, 75% of containers and virtually all drink cups are either decorated
(printing, silkscreening, labeling) or assembled (e.g., bail handles fitted to
containers). The Company believes that its molding and decorating capabilities
are among the best in the industry.
Each of the Company's plants is managed by a local plant manager and is
treated as a profit center. The Company's overall manufacturing philosophy is to
be a low-cost producer by using high speed molding machines, modern multi-cavity
hot runner, cold runner and insulated runner molds, extensive material handling
automation and sophisticated printing technology. The Company utilizes state-of-
the-art robotic packaging processes for large volume products, which enables the
Company to deliver a higher quality product (due to reduced breakage) while
lowering warehousing and shipping costs (due to more efficient use of space).
Each plant has complete tooling maintenance capability to support molding and
decorating operations. The Company has historically made, and intends to
continue to make, significant capital investments in plant and equipment because
of the Company's objectives to grow, to improve productivity and to maintain
competitive advantages, as well as the asset-intensive nature of the injection
molding business.
The Company operates 101 molding machines ranging from 150 to 750 ton clamp
capacity. The Company's largest overcap machines are capable of producing 10
thousand to 15 thousand aerosol overcaps per hour. Due to the wide variety of
container and drink cup styles and sizes produced by the Company, production
rates vary significantly. The Company owns over 350 active molds.
Product Development
The Company has 10 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.
47
<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 plant and the Henderson plant were approved for ISO 9000 in 1994
and 1995, respectively, which certifies compliance by a company with a set of
shipping, trading and technology standards promulgated by the International
Standardization Organization. The Company is actively pursuing ISO certification
in all of the remaining facilities. Extensive testing of parts for size, color,
strength and material quality using statistical process control (SPC) techniques
and sophisticated technology is also an ongoing part of the Company's
traditional quality assurance activities.
Systems
Berry has an on-line, fully integrated computer software system at all of
its plants capable of producing complete financial and operational reports by
plant as well as by product line. This accounting and control system is easily
expandable to add new features and/or locations as the Company grows. In
addition, the Company has in place a sophisticated quality assurance system
based on ISO 9000 certification, a bar code-based material management system and
an integrated manufacturing system.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important raw material purchased by the Company is plastic resin.
The Company purchased approximately $43.0 million of resin in fiscal 1995
(excluding specialty resins), of which 80% was high density polyethylene
("HDPE"), 10% linear low density polyethylene and 10% polypropylene. The
Company's purchasing strategy is to deal with only high quality, dependable
suppliers, such as Dow, Union Carbide, Chevron, and Phillips. The Company
purchases raw materials pursuant to purchase orders issued from time to time by
the Company.
The Company does not anticipate having any material difficulties obtaining
raw materials in the foreseeable future. All resin suppliers commit to the
Company to provide uninterrupted supply at competitive prices. See "Risk
Factors--Reliance on Certain Supplier." 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.
EMPLOYEES
As of July 31, 1996, the Company had approximately 1,170 employees. No
employees of the Company are covered by collective bargaining agreements. There
have been no significant labor disputes in the past several years, and the
Company considers its employee relations to be excellent.
PATENTS AND TRADEMARKS
The Company has numerous patents and trademarks with respect to its
products. 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
48
<PAGE>
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 contamination of sites formerly or
currently owned or operated by the Company (including contamination caused by
prior owners and operators of such sites) and the off-site disposal of hazardous
substances.
The Food and Drug Administration (the "FDA") regulates the material content
of direct-contact food containers and packages, including certain thinwall
containers manufactured by the Company. The Company uses approved resins and
pigments in its direct contact food products and believes it is in material
compliance with all such applicable FDA regulations.
The plastics industry in general, and the Company in particular, also are
subject to existing and potential Federal, state, local and foreign legislation
designed to reduce solid wastes by requiring, among other things, plastics to be
degradable in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from time to
time for the implementation of these and other similar measures. The principal
resin used in the Company's products, HDPE, is recyclable, and, accordingly, the
Company believes that the legislation promulgated to date and such initiatives
to date have not had a material adverse effect on the Company. There can be no
assurance that any such future legislative or regulatory efforts or future
initiatives would not have a material adverse effect on the Company. On January
1, 1995, legislation in Oregon, California and Wisconsin went into effect
requiring products packaged in rigid plastic containers to comply with standards
intended to encourage recycling and increased use of recycled materials.
Although the regulations vary by state, the principal requirement is the use of
post consumer regrind ("PCR") as an ingredient in containers sold for non-food
uses. Additionally, Oregon and California allow lightweighting of the container
or concentrating the product sold in the container as options for compliance.
Oregon and California provide for an exemption from all such regulations if
statewide recycling reaches or exceeds 25% of rigid plastic containers. In 1995,
the Department of Environmental Quality calculated that Oregon had exceeded its
recycling goal of 25% which puts them in compliance for the 1995 and 1996
calendar years. In California, however, the rate committees hope to announce a
rate during the summer of 1996. Experts are skeptical as to whether California
can meet the 25% rate. If it does, there is no guarantee it will do so every
year. There are currently no permanent exceptions. The Company, in order to
facilitate individual customer compliance with these regulations, is providing
customers the option of purchasing containers which contain PCR or using
containers with reduced weight.
PROPERTIES
The following table sets forth the Company's principal facilities:
<TABLE>
<CAPTION>
LOCATION ACRES SQUARE FOOTAGE USE OWNER
- --------------------- ----- -------------- -------------------------------- ---------------
<S> <C> <C> <C> <C>
Evansville, IN....... 9.3 380,000 Headquarters and manufacturing The Company
Henderson, NV........ 12.0 106,000 Manufacturing The Company
Iowa Falls, IA....... 14.0 101,000 Manufacturing Berry Iowa
Winchester, VA....... 5.0 30,000 Manufacturing Berry Sterling
Charlotte, NC........ 32.0 48,000 Manufacturing Berry Tri-Plas
York, PA............. 10.0 40,000 Manufacturing Leased
</TABLE>
The Company believes that its property and equipment are well-maintained, in
good operating condition and adequate for its present needs.
49
<PAGE>
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.
In February 1995, the Internal Revenue Service completed an audit of the
1990 through 1993 income tax returns of the Company. The results of these
audits, combined with the provision for 1994 income taxes, resulted in net
operating loss carryforwards as of December 31, 1994 of $5.1 million. There were
no remaining unutilized loss carryforwards as of December 30, 1995.
The Company and/or Berry Sterling are currently litigating three lawsuits
that involve United States Patent No. Des. 362,368 (the " '368 Patent"). The
'368 Patent claims an ornamental design for a cup that fits an automobile cup
holder. On September 21, 1995, Berry Sterling filed suit in United States
District Court, Eastern District of Virginia, against Pescor Plastics, Inc.
("Pescor Plastics") for infringement of the '368 Patent. Pescor Plastics filed
counterclaims seeking a declaratory judgment of invalidity and non-infringement,
and damages under the Lanham Act. On December 28, 1995, Berry Sterling filed
suit against Packaging Resources Incorporated ("Packaging Resources") in United
States District Court, Southern District of New York, for infringement of the
'368 Patent. Packaging Resources has filed counterclaims against Berry Sterling
alleging violation of the Lanham Act, tortious interference with Packaging
Resources's prospective business advantage, consumer fraud and requesting a
declaratory judgment that its "Drive-N-Go" cup does not infringe the '368
Patent. On October 12, 1995, PackerWare Corporation ("PackerWare") filed suit
against Berry Sterling in United States District Court, District of Kansas,
alleging unfair competition and seeking a declaratory judgment that a plastic
drink cup manufactured by PackerWare does not infringe the '368 Patent, and
attorney fees for the action. Berry Sterling has filed a counterclaim alleging
infringement by PackerWare of the '368 Patent. On April 25, 1996, the Virginia
Court granted Pescor Plastics' motion for summary judgment invalidating the '368
Patent on the grounds that the design was "functional." On May 14, 1996, the
court entered a judgment dismissing the action and dismissing Pescor Plastics'
counterclaim without prejudice. On May 22, 1996, Berry Sterling filed a Notice
of Appeal from this judgment to the Court of Appeals for the Federal Circuit. On
August 9, 1996, Berry Sterling filed the Brief for Plaintiff--Appellant Berry
Sterling Corporation with the Federal Circuit. Berry Sterling and Packaging
Resources have agreed to an order entered in the New York action, staying trial
of that action until the Federal Circuit has ruled on Berry Sterling's pending
appeal from the Virginia action. The court in the Kansas action has not yet
decided whether that action will be stayed or proceed pending Berry Sterling's
appeal from the Virginia action.
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of the date of this
Prospectus with respect to the executive officers, directors and certain key
personnel of Holding and its subsidiaries:
<TABLE>
<CAPTION>
NAME AGE TITLE ENTITY
- ------------------------------- --- ------------------------------- --------------------
<S> <C> <C> <C>
Roberto Buaron................. 50 Chairman and Director Company and Holding
Martin R. Imbler............... 48 President, Chief Executive Company
Officer and Director
President and Director Holding
Douglas E. Bell................ 44 Executive Vice President, Sales Company
and Marketing and Director
Ira G. Boots................... 42 Executive Vice President, Company
Operations and Director
James M. Kratochvil............ 39 Vice President, Chief Financial Company
Officer, Treasurer and
Secretary
Vice President, Chief Financial Holding
Officer and Secretary
R. Brent Beeler................ 43 Executive Vice President, Sales Company
and Marketing
Ruth Richmond.................. 33 Vice President, Planning and Company
Administration
David Weaver................... 33 Vice President and Plant Company
Manager--Iowa Falls
Robert J. Bielecki............. 36 Vice President and Plant Company
Manager--Henderson
Randall J. Becker.............. 40 Vice President and Plant Berry Sterling
Manager--Winchester
George A. Willbrandt........... 51 Vice President--Sales and Berry Sterling
Marketing
Lawrence G. Graev.............. 51 Director Company and Holding
James A. Long.................. 53 Vice President, Assistant Company
Secretary and Director
Vice President, Treasurer and Holding
Director
Donald J. Hofmann.............. 38 Director Company and Holding
Robert L. Egan................. 32 Director Company and Holding
David M. Clarke................ 45 Director Company and Holding
</TABLE>
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.
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
51
<PAGE>
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.
DOUGLAS E. BELL has been Executive Vice President, Sales and Marketing, and
a Director of the Company since March 1991. From December 1990 to March 1991,
Mr. Bell was Chief Operating Officer of the Company. Mr. Bell was employed by
Old Berry, acting as interim Chief Operating Officer from July 1990 to December
1990, and prior to July 1990, as Vice President, Sales of Imperial Plastics.
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 Vice President, Chief Financial Officer and
Secretary of the Company since 1991, and as Treasurer of the Company since May
1996. He has also served as Vice President, Chief Financial Officer and
Secretary of Holding since 1991. Mr. Kratochvil was employed by Old Berry from
1985 to 1991 as Controller.
R. BRENT BEELER was promoted to Executive Vice President, Sales and
Marketing in February, 1996. He formerly served as Vice President, Sales and
Marketing of the Company since December 1990. Mr. Beeler was employed by Old
Berry from October 1988 to December 1990 as Vice President, Sales and Marketing.
RUTH RICHMOND has been Vice President, Planning and Administration of the
Company since January 1995. From January 1994 to December 1994, Ms. Richmond was
Vice President and Plant Manager-Henderson. Ms. Richmond was Plant
Manager-Henderson from February 1993 to January 1994 and Assistant General
Manager-Henderson from February 1991 to February 1993. Ms. Richmond joined the
accounting department of Old Berry in 1986.
DAVID WEAVER has been Vice President and Plant Manager-Iowa Falls of the
Company since January 1993. From February 1992 to January 1993, Mr. Weaver was
Plant Manager-Iowa Falls and, prior to that, he was Maintenance Engineering
Supervisor from July 1990 to February 1992. Mr. Weaver was a Project Engineer
from January 1989 to July 1990 for Old Berry.
ROBERT J. BIELECKI has been Vice President and Plant Manager-Henderson of
the Company since January 1995. From January 1992 to December 1995, Mr. Bielecki
served as Customer Service and Materials Manager for the Company. Prior to that,
Mr. Bielecki served as Customer Service Manager for the Company from January
1990 to December 1991.
RANDALL J. BECKER has been Vice President and Plant Manager-Winchester of
Berry Sterling since March 1995. From 1991 to March 1995, he served as Product
Development/Marketing Manager of the Company.
GEORGE A. WILLBRANDT has been Vice President, Sales and Marketing of Berry
Sterling since 1995. Prior to that he was President and co-owner of Sterling
Products, which he founded in 1983.
LAWRENCE G. GRAEV has been a Director of the Company and Holding since
August 1995. Mr. Graev is the Chairman of the law firm of O'Sullivan Graev &
Karabell, LLP of New York, where he has been a partner since 1974. Mr. Graev is
also a Director of First Atlantic.
JAMES A. LONG has been Vice President, Assistant Secretary and a Director of
the Company since 1991. He has also served as Vice President, Treasurer and a
Director of Holding since 1991. He has
52
<PAGE>
been an Executive Vice President of First Atlantic since March 1991. From
January 1990 to February 1991, Mr. Long was an Executive Vice President at
Kleinwort Benson N.A., Inc., an equity leveraged buyout fund. Prior to 1989, he
was an Executive Vice President and a member of various executive and operating
committees of Primerica Corporation.
DONALD J. HOFMANN 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.
ROBERT L. EGAN has been a director of Holding and the Company since June
1996. Mr. Egan has been a Vice President of Chase Capital Partners since April
1996. From June 1994 to March 1996, he was with Chase Manhattan Capital
Corporation and, prior to that, he was a Vice President 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 has been a Vice President in the Investment Group of Aetna Life
Insurance Company since 1988.
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 1995, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FISCAL -------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- -------------------------------------------------- ------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Martin R. Imbler.................................. 1995 $275,625 $157,500 $ 1,394
President and Chief Executive Officer 1994 262,500 117,000 1,394
1993 250,000 79,971 1,369
Douglas E. Bell................................... 1995 137,525 124,428 1,394
Executive Vice President, Sales and Marketing 1994 130,977 85,433 1,394
1993 124,740 69,187 1,369
Ira G. Boots...................................... 1995 137,525 124,428 1,394
Executive Vice President, Operations 1994 130,977 85,433 1,394
1993 124,740 85,888 1,369
James M. Kratochvil............................... 1995 106,270 96,150 1,394
Vice President, Chief Financial Officer and 1994 101,210 66,027 1,394
Secretary 1993 96,390 55,158 1,369
R. Brent Beeler................................... 1995 106,270 96,150 1,394
Executive Vice President, Sales and Marketing 1994 101,210 66,027 1,394
1993 96,390 63,888 1,369
</TABLE>
- ------------
(1) Amounts shown reflect contributions by the Company under the 401(k) plan.
53
<PAGE>
FISCAL YEAR-END OPTION HOLDINGS
The following table provides information on the number of exercisable and
unexercisable management stock options at December 30, 1995. No options were
granted to, and no options were exercised by, the Named Executive Officers in
fiscal 1995. In connection with the Transaction, (i) the vesting of options that
would vest on or prior to the end of fiscal 1996 was accelerated and (ii) all
such outstanding stock options were exercised prior to consummation of the
Offering and the Transaction.
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) (2) (2)
- ------------------------------------------------ ------------------------- -------------------------
<S> <C> <C>
Martin R. Imbler................................ 22,752/0 $56,334/0
Douglas E. Bell................................. 9,104/0 22,542/0
Ira G. Boots.................................... 9,104/0 22,542/0
James M. Kratochvil............................. 4,552/0 11,271/0
R. Brent Beeler................................. 4,552/0 11,271/0
</TABLE>
- ------------
(1) None of Holding's capital stock is currently publicly traded. Market value
reflects the sale price of warrants previously held by an investor of
Holding representing 2% of total ownership of Holding, sold in a third party
transaction late in 1995.
(2) Prior to consummation of the Transaction, all options granted to management
of the Company were exercisable for shares of Class A Common Stock, par
value $.00005 per share, of Holding.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of Holding, the Company and its
subsidiaries receive no annual fees but are reimbursed for reasonable
out-of-pocket expenses incurred in their capacity 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 1996 is $289,406. 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. Bell, Boots,
Kratochvil and Beeler (each, an "Employment Agreement" and, collectively, the
"Employment Agreements"), each of which expires on June 30, 2001. The Employment
Agreements provide for fiscal 1996 base compensation of $144,402, $144,402,
$111,584 and $111,584 respectively. Salaries are subject in each case to annual
adjustment at the discretion 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),
54
<PAGE>
the Employment Agreements require the Company to pay certain amounts to the
terminated executive, including (i) the greater of (A) one year's salary or (B)
1/12 of one year's salary for each year (not to exceed 24 years in the
aggregate) of employment with the Company, and (ii) certain benefits under
applicable incentive compensation plans. Each Employment Agreement also includes
customary noncompetition, nondisclosure and nonsolicitation provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has not historically used a compensation committee to determine
executive officer compensation. The annual salary and bonus paid to Messrs.
Imbler, Bell, Boots, Kratochvil and Beeler are determined by the Board of
Directors of the Company 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 Company's Board of Directors.
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 $816,900 for fiscal 1995 and $777,700
for fiscal 1994. First Atlantic also received a $100,000 advisory fee in both
March and December 1995 for originating, structuring and negotiating the
Sterling Products Acquisition and the Tri-Plas Acquisition, respectively, and a
fee of $1,500,000 in April 1994 for advisory services rendered in connection
with the 1994 Units Offering, including originating, structuring and negotiating
such offering. In connection with the Transaction, the FACL Management Agreement
was amended to provide for a fee for services rendered in connection with
certain transactions equal to the lesser of (i) 1% of the total transaction
value and (ii) $1,250,000 for any such transaction consummated plus
out-of-pocket expenses in respect of such transaction, whether or not
consummated. Also in connection with the Transaction and the Offering, Holding
will pay a fee of $1,250,000 plus reimbursement for out-of-pocket expenses to
First Atlantic for advisory services, including originating, structuring and
negotiating the Transaction and the Offering. See "Certain Transactions."
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a director,
and Mr. Long is an officer, of First Atlantic. As a stockholder of First
Atlantic, Mr. Buaron is entitled to receive a portion of any dividends declared
by First Atlantic on its capital stock, including any dividends paid out of the
$1,250,000 fee to be paid by Holding to First Atlantic in connection with the
Transaction. First Atlantic is engaged by International to provide certain
financial and management consulting services for which it receives annual fees.
First Atlantic and International have completely distinct ownership and equity
structures. See "Certain Transactions."
Atlantic Equity Partners, L.P. (the "Fund"), a stockholder of Holding prior
to the consummation of the Transaction, will be receiving 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 general
partner of AEA. RETNI Limited, a Cayman Islands corporation ("RETNI") and an
indirect wholly-owned subsidiary of Akros, is also a general partner of AEA. By
virtue of their direct and indirect ownership interests in the Fund, Buaron
Capital, RETNI and Mr. Long were entitled to receive a portion of the proceeds
from the sale of the equity interests in Holding. See "Certain Transactions."
55
<PAGE>
In connection with the Transaction, Mr. Imbler, a director of the Company
and Holding, and Messrs. Bell and Boots, directors of the Company, received
approximately $5.9 million, $2.5 million and $2.4 million, respectively, from
their sale of certain equity interests in Holding. In connection with the 1994
Units Offering, the Company paid a $50.0 million dividend on its common stock to
Holding, and Holding distributed that amount to its holders of equity interests.
In connection therewith, Holding agreed to pay cash bonuses, upon the occurrence
of certain events, to the members of management who held options under Holding's
1991 Stock Option Plan in amounts equal to the amounts they would have been
entitled to had the shares of common stock underlying their unvested options
been outstanding at the time of the declaration of the $50.0 million dividend by
Holding. As a result of the Transaction, such bonuses were paid to Messrs.
Imbler, Bell and Boots in the amounts of approximately $594,000, $238,000 and
$238,000, respectively. See "Certain Transactions."
In connection with the 1994 Units Offering and the distribution by Holding
of the $50.0 million dividend received from the Company, Messrs. Imbler, Bell
and Boots received net distributions from Holding of approximately $1.9 million,
$1.08 million and $1.01 million, respectively. See "Certain Transactions."
Chase Securities Inc. ("Chase Securities"), an affiliate of CVCA and Messrs.
Hofmann and Egan, who will become members of the Board of Directors of Holding
and the Company upon the consummation of the Transaction, received a fee of
$500,000 for arranging the sale of $15.0 million of the Holding Common Stock to
certain of the Common Stock Purchasers and the sale of $15.0 million of the
Holding Preferred Stock to CVCA. Chase Manhattan Investment Holdings, Inc.
("CMIHI"), an affiliate of Chase Securities and Messrs. Hofmann and Egan,
received approximately $13.6 million from the sale of equity interests of
Holding in the Transaction. In connection with the 1994 Units Offering, CMIHI
received a distribution of approximately $5.7 million on equity interests in
Holding and Chase Securities was paid a fee of $625,000 by the underwriter of
the 1994 Units Offering for financial advisory services rendered to the Company
and Holding. In addition, Chase Securities received a fee of $200,000 from the
Company in April 1994 for arranging the Revolving Credit Facility. See "Certain
Transactions."
Mr. Graev, a member of the Board of Directors of Holding and the Company, is
the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP, New York, New
York. O'Sullivan Graev & Karabell, LLP provides legal services to the Company
and Holding in connection with certain matters, principally relating to
transactional, securities law, general corporate and litigation matters. See
"Certain Transactions."
EMPLOYEE STOCK OPTION PLAN
It is currently anticipated that the Board of Directors of Holding will
adopt a stock option plan in the near future. Holding currently contemplates
that employees, directors and certain independent contractors of Holding and its
subsidiaries will be entitled to participate in the stock option plan, which
will provide 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. Holding is currently
contemplating that the total number of shares of capital stock for which options
may be granted under the stock option plan will be a number equal to
approximately 7% of Holding's capital stock on a fully-diluted basis.
56
<PAGE>
PRINCIPAL STOCKHOLDERS
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 as of the date of this Prospectus with respect to (i)
each person known by Holding to own beneficially more than 5% of the outstanding
shares of any class of its voting capital stock, (ii) each of Holding's
directors, (iii) the Named Executive Officers and (iv) all directors and
officers as a group. Except as otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned.
Unless otherwise indicated, the address for each stockholder is c/o BPC Holding
Corporation, 101 Oakley Street, Evansville, Indiana 47710.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF SHARES OF OF
VOTING PERCENTAGE NONVOTING ALL CLASSES
COMMON STOCK(1) OF COMMON STOCK(1) 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>
Atlantic Equity
Partners International
II, L.P.(2)............ -- 125,750 53.3% -- -- 10,688 22.5%
Chase Venture Capital
Associates, L.P.(3).... 52,000 5,623(4) 23.8 148,000 17,837(4) -- 36.9
BPC Equity, LLC(5)..... 31,200 -- 13.2 88,800 -- -- 19.8
Roberto Buaron(6)...... -- 125,750 53.3 -- -- 10,688 22.5
Martin R. Imbler....... -- 5,494 2.3 -- 15,636 1,795 3.8
James A. Long(7)....... -- 195 * -- 555 64 *
Lawrence G. Graev(8)... -- -- -- -- -- -- --
Donald J. Hofmann(9)... 52,000 5,623(4) 23.8 148,000 17,837(4) -- 36.9
Robert L. Egan(10)..... 52,000 5,623(4) 23.8 148,000 17,837(4) -- 36.9
David M. Clarke(11).... 31,200 -- 13.2 88,800 -- -- 19.8
Douglas E. Bell........ -- 2,392 1.0 -- 6,808 782 1.6
Ira G. Boots........... -- 2,280 1.0 -- 6,490 744 1.6
James M. Kratochvil.... -- 1,196 * -- 3,404 391 *
R. Brent Beeler........ -- 1,196 * -- 3,404 391 *
All officers and
directors as a group
(16 persons)........... 83,200 146,419 95.0 236,800 60,661 15,604 89.5
</TABLE>
- ------------
* Less than one percent.
(1) The authorized capital stock of Holding consists of 3,500,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value
(the "Holding Common Stock"), and 1,000,000 shares of Preferred Stock, $.01
par value (the "Holding Preferred Stock"). Of the 2,500,000 shares of
Holding Common Stock, 500,000 shares are designated Class A Voting Common
Stock (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"). Of the 1,000,000 shares of
Preferred Stock, 600,000 shares are designated Series A Senior Cumulative
Exchangeable Preferred Stock (the "Senior Preferred Stock").
(2) Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman,
Cayman Islands, British West Indies. 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 BHL. BHL is the managing general
partner of AEA II. Woland, an indirect wholly owned subsidiary of Akros, is
also a general partner of AEA II. As general partners of AEA II, BHL and
Woland share voting and/or investment power over, and may be deemed to
beneficially own, the International Shares. BHL and Woland disclaim any
beneficial ownership of any shares of capital stock owned by International,
including the International Shares. Through their respective affiliations
with BHL, Woland and AEA II, Mr. Buaron and Akros control the sole general
partner of International and therefore have the authority to control voting
and/or investment
57
<PAGE>
power over, and may be deemed to beneficially own, the International
Shares. Mr. Buaron and Akros disclaim 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 to be held by
CVCA which are currently exercisable.
(5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U,
151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance
Company exercises voting and/or investment power over shares of capital
stock owned by BPC Equity, LLC ("BPC Equity"), including shares of Holding
Common Stock held by BPC Equity.
(6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022. Represents shares of Holding Common Stock owned by
International. Mr. Buaron is the sole shareholder of BHL. BHL is the
managing general partner of AEA II. AEA II is the sole general partner of
International and as such, exercises voting and/or investment power over
shares of capital stock owned by International, including the International
Shares. Mr. Buaron, as the sole shareholder and Chief Executive Officer of
BHL, and Woland, as a general partner of AEA II, control the sole general
partner of International and therefore share 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) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022.
(8) Address is c/o O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New
York, New York 10112.
(9) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares to be 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.
(10) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares to owned by CVCA. Mr. Egan is a
Vice President of Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of
CVCA. Mr. Egan disclaims any beneficial ownership of the shares of Holding
Common Stock held by CVCA.
(11) 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 Vice President in the Investment Group 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.
58
<PAGE>
CERTAIN TRANSACTIONS
FIRST ATLANTIC
Pursuant to the FACL Management Agreement, First Atlantic provides the
Company with financial advisory and management consulting services in exchange
for an annual fee of $750,000 and reimbursement for out-of-pocket costs and
expenses. In consideration of such services, the Company paid First Atlantic
fees and expenses of $816,900 for fiscal 1995 and $777,700 for fiscal 1994.
First Atlantic also received a $100,000 advisory fee in both March and December
1995 for originating, structuring and negotiating the Sterling Products
Acquisition and the Tri-Plas Acquisition, respectively, and a fee of $1,500,000
in April 1994 for advisory services rendered in connection with the 1994 Units
Offering, including originating, structuring and negotiating such offering. In
connection with the Transaction, the FACL Management Agreement was amended to
provide for a fee for services rendered in connection with certain transactions
equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000
for any such transaction consummated plus out-of-pocket expenses in respect of
such transaction, whether or not consummated. Also in connection with the
Transaction and the Offering, Holding will pay a fee of $1,250,000 plus
reimbursement for out-of-pocket expenses to First Atlantic for advisory
services, including originating, structuring and negotiating the Transaction and
the Offering.
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. As a stockholder of
First Atlantic, Mr. Buaron is entitled to receive a portion of any dividends
declared by First Atlantic on its capital stock, including any dividends paid
out of the $1,250,000 fee to be paid by Holding to First Atlantic in connection
with the Transaction. Mr. Long is also an officer of First Atlantic and Mr.
Graev is a director. 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 stockholder of Holding prior
to the consummation of the Transaction, received approximately $67.6 million
from the sale of its common stock in Holding and warrants to purchase common
stock. First Atlantic is engaged by the 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 general partner of AEA.
RETNI, an indirect wholly-owned subsidiary of Akros, is also a general partner
of the Fund. By virtue of their direct and indirect ownership interests in the
Fund, Mr. Long, Buaron Capital and RETNI are entitled to receive a portion of
the proceeds from the sale of the equity interests in Holding.
MANAGEMENT
In connection with the Transaction, Messrs. Imbler, Bell, Boots, Kratochvil
and Beeler received approximately $5.9 million, $2.5 million, $2.4 million, $1.3
million and $1.3 million, respectively, from their sale of certain equity
interests in Holding. In connection with the 1994 Units Offering, the Company
paid a $50.0 million dividend on its common stock to Holding, and Holding
distributed that amount to its holders of equity interests. In connection
therewith, Holding agreed to pay cash bonuses, upon the occurrence of certain
events, to the members of management who held options under Holding's 1991 Stock
Option Plan in amounts equal to the amounts they would have been entitled to had
the shares of common stock underlying their unvested options been outstanding at
the time of the declaration of the $50.0 million dividend by Holding. As a
result of the Transaction, such bonuses were paid to Messrs. Imbler, Bell,
Boots, Kratochvil and Beeler in the amounts of approximately $594,000, $238,000,
$238,000, $119,000 and $119,000, respectively.
In connection with the 1994 Units Offering and the distribution by Holding
of the $50.0 million dividend received from the Company, Messrs. Imbler, Bell,
Boots, Kratochvil and Beeler received net
59
<PAGE>
distributions from Holding of approximately $1.9 million, $1.08 million, $1.01
million, $0.54 million and $0.54 million, respectively.
STOCKHOLDERS AGREEMENTS
In connection with the Transaction, Holding entered into a Stockholders
Agreement dated as of June 18, 1996 (the "New Stockholders Agreement") with the
Common Stock Purchasers, certain Management Stockholders (as defined) and, for
limited purposes thereunder, the Preferred Stock Purchasers. The New
Stockholders Agreement grants the Common Stock Purchasers certain rights and
obligations, including the following: (i) until the occurrence of certain events
specified in the New Stockholders Agreement, to designate the members of a seven
person Board of Directors as follows: (A) one director will be Roberto Buaron or
his designee; (B) International will have the right to designate three
directors; (C) CVCA will have the right to designate two directors; and (D) the
institutional holders (excluding International and CVCA) will have the right to
designate one director; (ii) in the case of certain Common Stock Purchasers, to
subscribe for a proportional share of future equity issuances by Holding; (iii)
under certain circumstances and in the case of International or CVCA, to cause
the initial public offering of equity securities of Holding or a sale of Holding
subsequent to the fifth anniversary of the closing of the Transaction and (iv)
under certain circumstances and in the case of a majority in interest of the
institutional holders, to cause the initial public offering of equity securities
of Holding or a sale of Holding subsequent to the sixth anniversary of the
closing of the Transaction. Provisions under the New Stockholders Agreement also
(i) prohibit Holding from taking certain actions without the consent of holders
of a majority of voting stock held by CVCA and the institutional holders other
than International (or, following the occurrence of certain events,
International's consent), including certain transactions between Holding and any
subsidiary, on the one hand, and First Atlantic or any of its affiliates, on the
other hand; (ii) obligate Holding to provide certain Common Stock Purchasers
with financial and other information regarding Holding and to provide access and
inspection rights to all Common Stock Purchasers; and (iii) restrict transfers
of equity by the Common Stock Purchasers, subject to certain exceptions
(including for transfers of up to 10% of the equity (including warrants to
purchase equity) held by each Common Stock Purchaser on the date of the New
Stockholders Agreement). Pursuant to the New Stockholders Agreement, under
certain circumstances the Preferred Stock Purchasers (and their transferees)
have tag-along rights with respect to the 1996 Warrants and the Holding Common
Stock issuable upon exercise of the 1996 Warrants. Under specified circumstances
and subject to certain exceptions, the Preferred Stock Purchasers (and their
transferees) are entitled to include a pro rata share of their Preferred Stock
in a transaction (or series of related transactions) involving the transfer by
International, CVCA and the Institutional Holders (as defined in the New
Stockholders Agreement) of more than 50% of the aggregate amount of securities
held by them immediately following the closing of the Transaction.
The New Stockholders Agreement grants registration rights, under certain
circumstances and subject to specified conditions, to the Common Stock
Purchasers. International and CVCA each have the right, on three occasions, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. Under certain circumstances, a majority in interest of the institutional
holders (excluding International and CVCA) have the right, on one occasion, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. The New Stockholders Agreement will provide that if Holding proposes to
register any of its securities, either for its own account or for the account of
other stockholders, Holding will be required to notify all Common Stock
Purchasers and to include in such registration the shares of Holding Common
Stock requested to be included by them. All shares of Holding Common Stock owned
by the Common Stock Purchasers requested to be included in a registration will
be subject to cutbacks under certain circumstances in connection with an
underwritten public offering.
The provisions of the New Stockholders Agreement regarding voting rights,
negative covenants, information/inspection rights, the right to force a sale of
Holding, preemptive rights and transfer
60
<PAGE>
restrictions generally will expire on the earlier to occur of (i) the later of
(A) the fifth anniversary of the closing of the Transaction if an underwritten
public offering of equity securities of Holding resulting in gross proceeds of
at least $20.0 million occurs prior to such fifth anniversary and (B) the
occurrence of such underwritten public offering that occurs subsequent to such
fifth anniversary of the closing of the Transaction; (ii) the twentieth
anniversary of the closing of the Transaction; and (iii) a sale of Holding. In
addition, the New Stockholders Agreement provides that certain rights of a
Common Stock Purchaser (to the extent such rights apply to such Common Stock
Purchaser) to designate members of the Board of Directors of Holding and/or to
approve certain actions by Holding will terminate if certain circumstances
occur.
Holding is also party to the Amended and Restated Stockholders Agreement
dated June 18, 1996 (the "Management Stockholders Agreement"), with
International and all management shareholders including, among others, Messrs.
Imbler, Bell, Boots, Kratochvil and Beeler (collectively, the "Management
Stockholders"). The Management Stockholders Agreement contains provisions (i)
limiting transfers of equity by the Management Stockholders; (ii) requiring the
Management Stockholders to sell their shares as designated by Holding or
International upon the consummation of certain transactions; (iii) granting the
Management Stockholders certain rights of co-sale in connection with sales by
International; (iv) granting Holding rights to repurchase capital stock from the
Management Stockholders upon the occurrence of certain events; and (v) requiring
the Management Stockholders to offer shares to Holding prior to any permitted
transfer.
CHASE SECURITIES, INC.
Chase Securities, an affiliate of CVCA and Messrs. Hofmann and Egan, who are
members of the Board of Directors of Holding and the Company, received a fee of
$500,000 for arranging the sale of $15.0 million of the Holding Common Stock to
certain of the Common Stock Purchasers and the sale of $15.0 million of the
Holding Preferred Stock to CVCA. CMIHI, an affiliate of Chase Securities and
Messrs. Hofmann and Egan, received approximately $13.6 million from the sale of
equity interests of Holding in the Transaction. In connection with the 1994
Units Offering, CMIHI received a distribution of approximately $5.7 million on
equity interests in Holding and Chase Securities was paid a fee of $625,000 by
the underwriter of the 1994 Units Offering for financial advisory services
rendered to the Company and Holding. In addition, Chase Securities received a
fee of $200,000 from the Company in April 1994 for arranging the Revolving
Credit Facility.
LEGAL SERVICES
Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell,
LLP, New York, New York. O'Sullivan Graev & Karabell, LLP provides legal
services to the Company and Holding in connection with certain matters,
principally relating to transactional, securities law, general corporate and
litigation matters.
TRANSACTIONS WITH AFFILIATES
The Indenture, the New Stockholders Agreement, the Senior Subordinated Notes
Indenture and the Revolving Credit Facility restrict the Company's and its
affiliates' ability to enter into transactions with their affiliates, including
their officers, directors and principal stockholders.
DESCRIPTION OF COMMON STOCK
As of the date of this Prospectus, the issued and outstanding shares of
Holding Common Stock consist of Class A Voting and Nonvoting Common Stock, par
value $.01 per share, Class B Voting and Nonvoting Common Stock, par value $.01
per share, and Class C Nonvoting Common Stock, par value
61
<PAGE>
$.01 per share. The Class A Voting Common Stock and Class B Voting Common Stock
have one vote per share on all matters on which Holding's stockholders are
entitled to vote. The Class A Nonvoting Common Stock, Class B Nonvoting Common
Stock and Class C Nonvoting Common Stock have no voting rights, except as
required by law. All distributions of any cash or property to the holders of
Holding Common Stock (except in connection with a recapitalization or exchange
of Holding Common Stock or any subdivision or combination of Holding Common
Stock) shall be paid in the following order of priority: (a) first, ratably, to
the holders of Class A Voting and Nonvoting Common Stock until such holders have
received $100 per share and (b) second, ratably, to the holders of Class B
Voting and Nonvoting Common Stock until such holders have received $100 per
share. Thereafter, all distributions shall be paid ratably to the holders of
Class C Nonvoting Common Stock until such time as the aggregate of all
distributions paid to the holders of Holding Common Stock is equal to $100 per
share of Holding Common Stock held by such holders. After such time, each
distribution shall be paid ratably to the holders of all Holding Common Stock
(based upon the number of shares of Holding Common Stock held by each such
holder at the time of such distribution). Upon the occurrence of certain events,
all shares of Holding Common Stock will automatically convert to voting stock,
and the holders thereof will be entitled to one vote per share on all matters on
which Holding's stockholders are entitled to vote. In addition, upon the
occurrence of an underwritten public offering at a price per share of Holding
Common Stock that is equal to or greater than $250 generating gross proceeds to
Holding of at least $50.0 million, all classes of Holding Common Stock will
automatically convert into a single class of Holding Common Stock with identical
voting and distribution rights.
DESCRIPTION OF PREFERRED STOCK AND WARRANTS
In connection with the Transaction, for aggregate consideration of $15.0
million, Mergerco issued units (the "Units") comprised of Series A Senior
Cumulative Exchangeable Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and detachable warrants to purchase shares of Class B Common
Stock (voting and non-voting) constituting 6% of the issued and outstanding
Common Stock of all classes, determined on a fully-diluted basis (the
"Warrants").
Dividends accrue at a rate of 14% per annum, payable quarterly in arrears
(each date of payment, a "Dividend Payment Date") and will accumulate until
declared and paid. Dividends declared and accruing prior to the first Dividend
Payment Date occurring after the sixth anniversary of the issue date (the "Cash
Dividend Date") may, at the option of Holding, be paid in cash in full or in
part or accrue quarterly on a compound basis. Thereafter, all dividends are
payable in cash in arrears. The dividend rate is subject to increase to a rate
of (i) 16% per annum if (and for so long as) Holding fails to declare and pay
dividends in cash for any quarterly period following the Cash Dividend Date and
(ii) 15% per annum if (and for so long as) Holding fails to comply with its
obligations relating to the rights and preferences of the Preferred Stock. If
Holding fails to pay in full, in cash, (a) all accrued and unpaid dividends on
or prior to the twelfth anniversary of the issue date or (b) all accrued
dividends on any Dividend Payment Date following the twelfth anniversary of the
issue date, the holders of Preferred Stock will be permitted to elect a majority
of the Board of Directors of Holding.
The Preferred Stock ranks prior to all other classes of stock of Holding
upon liquidation and is entitled to receive, out of assets available for
distribution, cash in the aggregate amount of $15.0 million, plus all accrued
and unpaid dividends thereon. The Preferred Stock does not have any voting
rights except as described above and except that upon the occurrence of certain
circumstances, a majority of the holders of Preferred Stock will have the right
to elect two directors (in which case International will have the right, under
certain circumstances, to elect up to two additional directors). Under certain
circumstances, the Preferred Stock may be redeemed by Holding, at its option, at
specified redemption prices.
62
<PAGE>
Subject to the terms of the 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.
DESCRIPTION OF CERTAIN INDEBTEDNESS
EXISTING SENIOR SUBORDINATED NOTES DUE 2004
On April 21, 1994, Berry completed the offering of 100,000 Units consisting
of $100,000,000 aggregate principal amount of 12 1/4% Existing Senior
Subordinated Notes due 2004 and 100,000 warrants each to purchase 1.13237 shares
of Class A Common Stock, $.00005 par value, of Holding ("1994 Units Offering").
The Existing Senior Subordinated Notes mature on April 15, 2004, and interest is
payable semi-annually on October 15 and April 15 of each year and commenced on
October 15, 1994. The Existing Senior Subordinated Notes are unconditionally
guaranteed on a senior subordinated basis by Holding, Berry Iowa (as defined),
Berry Sterling and Berry Tri-Plas.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the Existing Senior Subordinated Notes. However, at any time
prior to April 15, 1997, Berry may redeem up to 25% of the initial principal
amount of the Existing Senior Subordinated Notes originally issued from the net
proceeds of one or more public offerings of the Common Stock of Holding, to the
extent such net proceeds are contributed or otherwise transferred to Berry as a
capital contribution or are used to purchase common equity securities of Berry,
at a redemption price equal to 111.25% of the principal amount thereof plus
accrued interest, to the redemption date; provided that at least 75% of the
principal amount of Existing Senior Subordinated Notes originally issued remain
outstanding immediately after the occurrence of any redemption and that any such
redemption occurs within 60 days following the closing of any such public
offering. Subsequent to April 15, 1999, the Existing Senior Subordinated Notes
may be redeemed at the option of Berry, in whole or in part, at redemption
prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a
change of control, as defined in the Senior Subordinated Notes Indenture, each
holder of Existing Senior Subordinated Notes will have the right to require
Berry to repurchase all or any part of such holder's Existing Senior
Subordinated Notes at a repurchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued interest.
The Existing Senior Subordinated Notes rank pari passu with or senior in
right of payment to all existing and future subordinated indebtedness of Berry.
The Existing Senior Subordinated Notes rank junior in right of payment to all
existing and future senior indebtedness of Berry, including borrowings under the
Revolving Credit Facility, the Nevada Bonds and the Iowa Bonds.
The Senior Subordinated Notes Indenture contains certain covenants which,
among other things, limit Berry's and its subsidiaries' ability to (i) retain
proceeds from asset sales, (ii) incur additional indebtedness or issue
disqualified stock, (iii) make restricted payments, including, without
limitation, payments to Holding, (iv) enter into transactions with affiliates,
(v) permit liens, (vi) place limitations on dividends and other payments
affecting subsidiaries, (vii) consummate a merger, consolidation or sale of
assets. With respect to the restriction on Berry's ability to make any dividend
or distribution to
63
<PAGE>
Holding, the Senior Subordinated Notes Indenture generally prohibits the payment
of any dividend by Berry to Holding unless Berry meets certain cash flow
interest coverage ratios and the amount of such dividend (together with any
other dividends previously paid, including the $50 million paid in April 1994)
is less than the sum of 50% of the aggregate net income of Berry since the
issuance of the Existing Senior Subordinated Notes plus the amount of cash
equity proceeds received by Berry. See "Risk Factors -- Holding Company
Structure; Significant Limitations on Access to Subsidiaries' Cash Flow."
REVOLVING CREDIT FACILITY
General. Simultaneously with the 1994 Units Offering, the Company entered
into the Loan and Security Agreement dated April 21, 1994 (the "Revolving Credit
Facility") with Fleet Capital Corporation (by assignment from Shawmut Capital
Corporation, by assignment from Barclays Business Credit, Inc.) ("Fleet"). The
Revolving Credit Facility provides for loans to the Company and the issuance of
letters of credit on behalf of the Company in an aggregate amount not to exceed
$28.0 million. All indebtedness of the Company under the Revolving Credit
Facility is guaranteed by each subsidiary of the Company and by Holding. The
Revolving Credit Facility consists of (i) a $28.0 million revolving credit
facility (the "Revolver"), (ii) a $12.8 million reducing standby letter of
credit facility (the "IRB Letter of Credit Subfacility"), which is available to
issue letters of credit to secure the Nevada Bonds and the Iowa Bonds, (iii) a
$3.0 million letter of credit facility (the "Documentary Letter of Credit
Subfacility"), which is available for general corporate purposes, (iv) a $7.0
million machinery and equipment acquisition facility (the "Machinery
Subfacility") and (v) a term facility to refinance any drawing under the IRB
Letter of Credit Subfacility (the "IRB Term Facility").
Availability. Borrowings under the Revolver are subject to a borrowing base
equal to 85% of "eligible accounts" plus the lesser of (i) $8.5 million or (ii)
65% of "eligible inventory" (as such terms are defined in the Revolving Credit
Facility) less a fixed $3.0 million reserve plus additional reserves which may
be required by Fleet.
Security. The Revolving Credit Facility is secured by a lien on
substantially all of the assets of the Company and its subsidiaries.
Maturity. The Revolving Credit Facility matures on April 21, 1999, and will
be automatically renewed unless terminated by (i) the Company or (ii) Fleet upon
one year advance notice to the Company prior to the expiration of the original
term or upon six months' advance notice thereafter.
Interest Rates. The interest rate applicable to the Revolving Credit
Facility is (i) prime rate plus 1.0% or LIBOR plus 3.0%, at the Company's
option, in the case of borrowings on the Revolver, (ii) prime rate plus 1.5% or
LIBOR plus 3.5%, at the Company's option, in the case of borrowings under the
Machinery Subfacility, (iii) 2.5% per annum on the average outstanding face
amount of letters of credit under the IRB Letter of Credit Subfacility (reduced
to 2.25% for certain standby letters of credit), (iv) 1.75% per annum on the
average outstanding face amount of letters of credit under the Documentary
Letter of Credit Subfacility and (v) prime rate plus 1.5% or LIBOR plus 3.5%, at
the Company's option, in the case of borrowings under the IRB Term Facility.
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation, minimum tangible net
worth, restrictions on mergers and acquisitions, limitation on the incurrence of
additional indebtedness, minimum current ratio, minimum cash flow ratio and
dividend and capital expenditure restrictions.
Events of Default. The Revolving Credit Facility contains events of default
customary for working capital financings, including an event of default upon a
"change of control" of Holding or the Company.
64
<PAGE>
NEVADA BONDS
The Company is party to a Financing Agreement (the "Financing Agreement")
with the City of Henderson, Nevada Public Improvement Trust (the "Nevada
Issuer") pursuant to which the Company has agreed to pay to the Nevada Issuer
amounts sufficient to pay principal, interest and any premium on the Nevada
Bonds. The Company's obligations under the Financing Agreement are secured by a
letter of credit provided by Barclay's Bank PLC, New York Branch.
The Nevada Bonds mature in April 2007. Since fiscal 1992, the Company has
been required to pay $500,000 each year to the Nevada Issuer in order to permit
mandatory sinking fund redemptions of the Nevada Bonds. The Nevada Bonds bear
interest at a floating rate depending on prevailing market conditions.
IOWA BONDS
Berry Iowa Corporation, a Delaware corporation and wholly-owned subsidiary
of Berry ("Berry Iowa"), is party to a Loan and Trust Agreement (the "Loan and
Trust Agreement") with The City of Iowa Falls, Iowa (the "Iowa Issuer"),
pursuant to which Berry Iowa has agreed to pay to the Iowa Issuer amounts
sufficient to pay principal, interest and any premium on the Iowa Bonds. Berry
Iowa's obligations under the Loan and Trust Agreement are secured by a letter of
credit provided by Fleet National Bank of Connecticut.
The Iowa Bonds mature in August 1998 and are not subject to any sinking fund
or similar payments. The Iowa Bonds bear interest at a floating rate depending
on prevailing market conditions.
65
<PAGE>
DESCRIPTION OF SENIOR NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an
Indenture dated as of June 18, 1996 (the "Indenture") between Holding and First
Trust of New York, National Association, as trustee (the "Trustee"). The terms
of the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting their transfer and will not contain certain
provisions providing for the payment of Liquidated Damages under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer.
The terms of the Senior Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(the "Trust Indenture Act"). The Senior Notes are subject to all such terms, and
holders of Senior Notes are referred to the Indenture and the Trust Indenture
Act for a statement thereof. The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. A copy of the Indenture is available as set forth under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." As used in
this section, the term "Holding" refers only to BPC Holding Corporation and not
to its subsidiaries.
RANKING
The Senior Notes rank senior in right of payment to all subordinated
Indebtedness of Holding, including senior in right of payment to Holding's
subordinated guarantee of the Existing Senior Subordinated Notes of Berry
Plastics Corporation ("Berry"), a subsidiary of Holding. The Senior Notes rank
pari passu in right of payment with all senior borrowings of Holding. Currently,
there is no other senior indebtedness of Holding other than Holding's guarantee
of the Berry Revolving Credit Facility and certain other Guarantees of Berry's
Indebtedness and, subject to certain exceptions, the Indenture prohibits Holding
from incurring any Indebtedness other than the Senior Notes. However, the Senior
Notes are effectively senior to such unsecured Guarantees because the Senior
Notes are secured by a first priority pledge of the Capital Stock of Berry. See
"--Security."
The operations of Holding are conducted through Berry and its Subsidiaries
and, therefore, Holding is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Senior Notes. The
Berry Revolving Credit Facility prohibits the payment of dividends to Holding.
The terms of the Existing Senior Subordinated Notes limit the ability of Berry
to pay dividends or otherwise make cash available to pay interest, principal or
premium on the Senior Notes. The Senior Notes are effectively subordinated to
all indebtedness (including the Existing Senior Subordinated Notes) and other
liabilities and commitments (including trade payables and lease obligations) of
Holding's Subsidiaries. Any right of Holding to receive assets of any of its
Subsidiaries upon such Subsidiary's liquidation or reorganization (and the
consequent right of the holders of the Senior Notes to participate in those
assets) is effectively subordinated to the claims of that Subsidiary's creditors
except to the extent that Holding is itself recognized as a creditor of such
Subsidiary, in which case the claims of Holding would still be subordinate to
any security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by Holding. As of August 3, 1996, Berry and its
subsidiaries had approximately $132.2 million of total liabilities, including
approximately $111.1 million of Indebtedness. See "Risk Factors--Holding Company
Structure; Significant Limitations on Access to Subsidiaries' Cash Flow."
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are general obligations of Holding, limited in aggregate
principal amount to $105.0 million plus such principal amount of additional
Senior Notes as may be issued in lieu of cash interest, and will mature on
December 15, 2006. Interest on the Senior Notes accrue at a rate of 12 1/2% per
annum and are payable in cash semi-annually in arrears on June 15 and December
15 of each year,
66
<PAGE>
commencing on December 15, 1996, to holders of record on the immediately
preceding June 1 and December 1. Interest on the Senior Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid on any Senior Note, from the date of original issuance of such Senior Note.
Beginning with the first interest payment date after the third anniversary date
of the issuance of the Senior Notes, and until and including the interest
payment date on June 15, 2001, Holding may, at its option and subject to a .75%
increase in the stated interest rate on the Senior Notes, elect to pay interest
on the Senior Notes in additional Senior Notes valued at 100% of the principal
amount thereof. After June 15, 2001, interest on the Senior Notes may be paid
only in cash. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
Principal, premium, if any, and interest on the Senior Notes will be payable
at the office or agency of Holding maintained for such purpose within the City
and State of New York or, at the option of Holding, payment of interest may be
made by check mailed to the holders of the Senior Notes at their respective
addresses set forth in the register of holders of Senior Notes; provided that
all payments with respect to Senior Notes the holders of which have given wire
transfer instructions to Holding will be required to be made by wire transfer of
same day funds to the accounts specified by the holders thereof. Until otherwise
designated by Holding, Holding's office or agency in New York will be the office
of the Trustee maintained for such purpose. The Senior Notes are issued in
denominations of $1,000 and integral multiples thereof, except to the extent
required to pay interest or liquidated damages on the Senior Notes in accordance
with the terms of the Indenture.
SECURITY
The Senior Notes are secured by a first priority pledge of the Capital Stock
of Berry.
Holding has entered into a pledge and security agreement (the "Holding
Pledge Agreement") providing for the pledge by Holding to the Trustee, as
collateral agent (in such capacity, the "Collateral Agent") for the holders of
the Senior Notes, of the Capital Stock of Berry. Holding's pledge secures the
payment and performance when due of all of the Obligations of Holding under the
Indenture and the Senior Notes as provided in the Holding Pledge Agreement.
So long as (i) no Default (as defined) or Event of Default (as defined)
shall have occurred and be continuing and (ii) the outstanding principal of the
Senior Notes is not then due and payable, and subject to certain terms and
conditions in the Indenture and the Holding Pledge Agreement, Holding will be
entitled to receive all cash dividends and other payments made upon or with
respect to the collateral pledged by it and to exercise any voting and other
consensual rights pertaining to the collateral pledged by it. Upon the
acceleration of the maturity of the Senior Notes or the failure to pay all
obligations under the Senior Notes on or before December 15, 2006, (a) all
rights of Holding to exercise such voting or other consensual rights shall
cease, and all such rights shall become vested in the Collateral Agent, which,
to the extent permitted by law, shall have the sole right to exercise such
voting and other consensual rights, (b) all rights of Holding to receive all
cash dividends and other payments made upon or with respect to the pledged
collateral will cease and such cash dividends and other payments will be paid to
the Collateral Agent and (c) the Collateral Agent may sell the pledged
collateral or any part thereof in accordance with the terms of the Holding
Pledge Agreement. All funds distributed under the Holding Pledge Agreement and
received by the Collateral Agent for the benefit of the holders of the Senior
Notes will be distributed by the Collateral Agent in accordance with the
provisions of the Indenture.
Under the terms of the Holding Pledge Agreement, the Collateral Agent will
determine the circumstances and manner in which the pledged collateral shall be
disposed of, including, but not limited to, the determination of whether to
release all or any portion of the pledged collateral from the Liens created by
the Holding Pledge Agreement and whether to foreclose on the pledged collateral
following an acceleration of the Senior Notes. Moreover, upon the full and final
payment and performance of all Obligations of Holding under the Indenture and
the Senior Notes, the Holding Pledge Agreement shall terminate and the pledged
collateral shall be released.
67
<PAGE>
In addition, certain of Holding's obligations under the Senior Notes are
secured pending disbursement pursuant to the Escrow and Disbursement Agreement
by a pledge of the Escrow Account. Approximately $35.6 million will remain in
the Escrow Account and be used to purchase a portfolio of Marketable Securities
that are pledged as security for payment of interest on the Senior Notes through
June 15, 1999.
The Escrow and Disbursement Agreement provides for the grant by Holding to
the Trustee of a security interest in the Collateral for the benefit of the
holders of the Senior Notes. All such security interests secure the payment and
performance when due of the Obligations of Holding under the Indenture with
respect to the Senior Notes and under such Senior Notes, as provided in the
Escrow and Disbursement Agreement. The Liens created by the Escrow and
Disbursement Agreement are first priority security interests in the Collateral.
The ability of holders to realize upon any such funds or securities may be
subject to certain bankruptcy law limitations in the event of a bankruptcy of
Holding.
The Escrow Account contains an amount sufficient to pay three years'
interest on the Senior Notes, approximately $35.6 million. Funds will be
disbursed from the Escrow Account only to pay interest on the Senior Notes and
upon certain repurchases or redemptions of the Senior Notes, to pay principal of
and premium, if any, thereon, or if so paid with other proceeds, such funds may
be released to Holding. Pending such disbursements, all funds contained in the
Escrow Account will be invested in Marketable Securities. Upon the acceleration
of the maturity of the Senior Notes or the failure to pay principal at maturity
or upon certain redemptions and repurchases of the Senior Notes, the Escrow and
Disbursement Agreement provides for the foreclosure by the Trustee upon the net
proceeds of the Escrow Account. Under the terms of the Indenture, the proceeds
of the Escrow Account shall be applied, first, to amounts owing to the Trustee
in respect of fees and expenses of the Trustee and second, to the Obligations
under the Senior Notes and the Indenture.
OPTIONAL REDEMPTION
The Senior Notes are not redeemable at Holding's option prior to June 15,
1999. Thereafter, the Senior Notes are subject to redemption at the option of
Holding, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
1999.......................................................... 110.00%
2000.......................................................... 110.00%
2001.......................................................... 108.00%
2002.......................................................... 105.33%
2003.......................................................... 102.67%
2004 and thereafter........................................... 100.00%
</TABLE>
Notwithstanding the foregoing, prior to June 15, 1999, Holding may redeem up
to a maximum of 33 1/3% of the aggregate principal amount of the Senior Notes
then outstanding at a redemption price of 112.50% of the principal amount
thereof, plus accrued and unpaid interest to the date of redemption, if any,
with the net proceeds of a Strategic Equity Sale of the common stock of Holding;
provided that at least 66 2/3% in aggregate principal amount of the Senior Notes
remain outstanding immediately after the occurrence of such redemption; and
provided further that such redemption shall occur within 90 days of the date of
the closing of such Strategic Equity Sale.
MANDATORY REDEMPTION
Except as set forth below under the captions "--Offer to Purchase Upon
Change of Control" and "Certain Covenants--Asset Sales," Holding is not required
to make mandatory redemption or sinking fund payments with respect to the Senior
Notes.
68
<PAGE>
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, Holding will be required to make
an offer (the "Change of Control Offer") to each holder of Senior Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such holder's Senior Notes at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase, in accordance with the procedures
set forth in the Indenture. Within 10 days following any Change of Control,
Holding will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Senior Notes pursuant to the procedures required by the Indenture and described
in such notice. Holding will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Notes as a result of a Change of Control.
Berry's indebtedness including the Existing Senior Subordinated Notes and
the Berry Revolving Credit Facility contain provisions that may limit or prevent
certain events that would constitute a Change of Control. In addition, the
exercise by the holders of Senior Notes of their right to require Holding to
repurchase the Senior Notes (or the effect of such repurchases on the financial
condition of Holding) could cause a default under such other indebtedness, even
if the Change of Control itself does not. Finally, Holding's ability to pay cash
to the holders of Senior Notes upon a repurchase in the event of a Change of
Control may be limited by Holding's then existing financial resources.
SELECTION AND NOTICE
If fewer than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 in face principal
amount or less shall be redeemed in part. Notices of redemption shall be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each holder of Senior Notes to be redeemed at its registered address. If
any Senior Note is to be redeemed in part only, the notice of redemption that
relates to such Senior Note shall state the portion of the principal amount
thereof to be redeemed. A new Senior Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Senior Note. On and after the redemption date,
interest ceases to accrue on Senior Notes or portions of them called for
redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that Holding will not, and will not permit any of its
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of Holding's or any of its
Subsidiaries' Equity Interests (other than: dividends or distributions payable
in Equity Interests of the Person making such dividend or distribution, other
than Disqualified Stock; or dividends or distributions payable to Holding or any
Wholly Owned Subsidiary of Holding); (ii) purchase, redeem or otherwise acquire
or retire for value any Equity Interests of Holding or any Subsidiary (other
than any such Equity Interests owned by Holding or any Wholly Owned Subsidiary
of Holding); (iii) purchase, redeem or otherwise acquire or retire for value,
any Indebtedness of Holding which ranks subordinated in right to payment to the
Senior Notes other than Guarantees of the Existing Senior Subordinated Notes; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments") unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
69
<PAGE>
(b) Holding would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock;" and
(c) such Restricted Payment, (A) in the case of any Restricted Payment
other than as defined by clause (i) above, together with the aggregate of
all other Restricted Payments made by Holding and its Subsidiaries after the
Issuance Date (including Restricted Payments permitted by the next
succeeding paragraph) or (B) in the case of any Restricted Payment defined
by clause (i) above, together with the aggregate of all other Restricted
Payments made by Holding and its Subsidiaries after the Issuance Date
(including Restricted Payments permitted by the next succeeding paragraph)
is less than the sum of: (x) 50% of the sum of the Consolidated Net Income
and Consolidated Step-Up Depreciation and Amortization of Holding for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter that begins after the Issuance Date to the end of Holding's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income plus Consolidated Step-Up Depreciation and
Amortization for such period is a deficit, 100% of such deficit) plus (y)
100% of the aggregate net cash proceeds received by Holding from the issue
or sale since the Issuance Date of Equity Interests of Holding or of debt
securities of Holding that have been converted into such Equity Interests
(other than (1) Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company, (2) Disqualified Stock or debt securities that
have been converted into Disqualified Stock and (3) Equity Interests issued
in connection with the Transaction).
The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) the redemption, repurchase,
retirement or other acquisition of any Equity Interests of Holding in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Subsidiary of Holding) of other Equity Interests of Holding (other than
Disqualified Stock); (iii) the defeasance, redemption or repurchase of pari
passu or subordinated Indebtedness in a Permitted Refinancing; (iv) the
repurchase, redemption or other acquisition or retirement for value of an Equity
Interest of Holding pursuant to any management equity subscription, shareholder
or stock option agreement in effect as of the Issuance Date; provided, however,
that (a) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests shall not exceed $1.0 million in any fiscal year and
(b) no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (v) Investments in joint venture or similar
projects in a business similar to that conducted by Holding and its Subsidiaries
on the Issuance Date in an amount not to exceed $1.0 million; (vi) any
Restricted Payment to pay cash dividends on the New Preferred Stock (as defined
in the Indenture) after the sixth anniversary of the Issuance Date excluding any
dividends due, not paid and cumulated prior to the sixth anniversary of the
Issuance Date, provided no Default or Event of Default has occurred and is
continuing; and (vii) any Restricted Payment in connection with the consummation
of the Transaction.
The amount of all Restricted Payments (including, without limitation, all
Restricted Payments permitted to be made under this covenant), other than cash,
shall be the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) on the
date of such Restricted Payment of the asset(s) proposed to be transferred by
Holding or such Subsidiary, as the case may be, pursuant to such Restricted
Payment. Not later than the date of making any Restricted Payment (other than
any such Restricted Payment permitted by the immediately preceding paragraph),
Holding shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations may be based upon Holding's latest available financial statements.
70
<PAGE>
ASSET SALES
The Indenture provides that Holding will not, and will not permit any of its
Subsidiaries to, directly or indirectly, conduct an Asset Sale unless: (i)
Holding (or the Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of Holding set forth in an Officer's
Certificate delivered to the Trustee no later than immediately prior to the
consummation of such proposed Asset Sale with respect to any Asset Sale
involving aggregate payments in excess of $1.0 million) of the shares or assets
sold or otherwise disposed of; and (ii) at least 75% of such consideration
therefor received by Holding or such Subsidiary is in the form of cash,
provided, however, that the amount of (A) any liabilities (as shown on Holding's
or such Subsidiary's most recent balance sheet or in the notes thereto), of
Holding or any Subsidiary (other than liabilities that are by their terms
subordinated to the Senior Notes) that are assumed by the transferee of any such
assets and (B) any notes or other obligations received by Holding or any such
Subsidiary from such transferee that are immediately converted by Holding or
such Subsidiary into cash (to the extent of the cash received), shall be deemed
to be cash for purposes of this provision.
The Indenture also provides that within 180 days after any Asset Sale,
Holding may apply the Net Proceeds from such Asset Sale to either (a)
permanently reduce Senior Indebtedness of Holding or Indebtedness of Berry or of
any Subsidiary of Berry, or (b) make an investment in another business or
capital expenditure or other long-term/tangible assets, in each case, in the
same or a similar line of business as Holding or any Subsidiary thereof was
engaged in on the Issuance Date. Pending the final application of any such Net
Proceeds, Holding or any Subsidiary thereof may temporarily reduce Senior Bank
Indebtedness or otherwise invest such Net Proceeds in Cash Equivalents. Any Net
Proceeds from the Asset Sale that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
If the aggregate amount of Excess Proceeds exceeds $5.0 million, Holding shall
make an offer to all holders of Senior Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Senior Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate purchase
price of Senior Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, Holding may use such deficiency for general corporate purposes.
If the aggregate principal amount of Senior Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
to be purchased in the manner described under the caption "Selection and Notice"
above. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset to zero. The Indenture will also provide that Holding will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Senior Notes in
connection with an Asset Sale.
Notwithstanding the foregoing, Holding will not, and will not permit Berry
to, directly or indirectly, sell, transfer, lease, convey, dispose of or issue
any Equity Interests of Berry except to Holding.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that Holding will not be permitted to (i) incur any
Indebtedness other than (a) the Senior Notes, (b) subordinated Guarantees of the
Existing Senior Subordinated Notes or (c) unsecured Guarantees of the
Obligations under the Berry Revolving Credit Facility or any other Indebtedness
permitted to be incurred by any subsidiary of Holding under the Indenture or
(ii) issue shares of Disqualified Stock.
71
<PAGE>
The Indenture provides that Holding will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable with respect to (collectively, "incur" and
correlatively, an "incurrence" of) any Indebtedness (including, without
limitation, Acquired Debt) and that Holding will not permit any of its
Subsidiaries to issue any shares of Disqualified Stock; provided, however, that
Subsidiaries of Holding may incur Indebtedness or issue shares of Disqualified
Stock if after giving effect to such incurrence or issuance, the Fixed Charge
Coverage Ratio for Holding and its Subsidiaries, taken together on a
consolidated basis, for the most recently ended four full fiscal quarters for
which internal financial statements are available as of the date on which such
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 1.75 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom and including the earnings of any
business acquired with the proceeds therefrom), as if the additional
Indebtedness is incurred, or the Disqualified Stock had been issued, as the case
may be, at the beginning of such four-quarter period.
The provisions in the immediately preceding paragraph and, with respect to
(c), (g) and (h) below, the provisions in the two immediately preceding
paragraphs do not apply to: (a) revolving credit Indebtedness and letters of
credit pursuant to the Berry Revolving Credit Facility in an aggregate principal
amount not to exceed at any one time outstanding the greater of (i) $28.0
million in principal amount (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of Berry thereunder),
less the aggregate amount of all repayments after the Issuance Date that
permanently reduce the commitment under the Berry Revolving Credit Facility, and
(ii) the Borrowing Base; (b) the Existing Indebtedness; (c) the Senior Notes,
including any additional Senior Notes issued in respect of the payment of
interest on outstanding Senior Notes or for the payment of Liquidated Damages;
(d) the incurrence of Refinancing Indebtedness; provided, however, that such
Refinancing Indebtedness is a Permitted Refinancing; (e) Hedging Obligations
that are incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding; (f) incurrence of Indebtedness (including Acquired
Debt) or issuance of shares of Disqualified Stock of Berry or its Subsidiaries,
if after giving effect to such incurrence or issuance, the Fixed Charge Coverage
Ratio for Berry, taken together on a consolidated basis with all of the
Subsidiaries of Berry, for the most recently ended four full fiscal quarters for
which internal financial statements are available as of the date on which such
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.25 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom and including the earnings of any
business acquired with the proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four quarter period; provided that
such Indebtedness is incurred or shares of Disqualified Stock are issued, as the
case may be, for the purpose of financing Acquisitions or Capital Expenditures;
(g) the incurrence of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed $1.0 million and (h)
Indebtedness between or among Holding and any of its Subsidiaries.
For purposes of the Indenture, the accretion or amortization of original
issue discount, or the issuance of additional Indebtedness in respect of the
payment of interest on Indebtedness or the payment of Liquidated Damages shall
not be deemed an "incurrence" of Indebtedness if a corresponding amount is taken
into account for purposes of determining Consolidated Interest Expense at such
time.
LIENS
The Indenture provides that Holding will not directly or indirectly create,
incur, assume or suffer to exist any Lien on the Capital Stock of Berry other
than liens arising pursuant to the Holding Pledge Agreement. In addition,
Holding will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
72
<PAGE>
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that Holding will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distributions to Holding or
any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to Holding or any of its Subsidiaries, (ii) make loans or
advances to Holding or any of its Subsidiaries, or (iii) transfer any of its
properties or assets to Holding or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the Issuance Date including the Existing Senior
Subordinated Notes, (b) Indebtedness of Berry or of Berry's subsidiaries
permitted to be incurred under the Indenture, (c) the Indenture and the Senior
Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital
Stock of a Person acquired by Holding or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that the Consolidated Cash Flow of such Person, to
the extent of such restriction, is not taken into account in determining whether
such acquisition was permitted by the terms of the Indenture, (f) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices or (g) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that Holding may not consolidate or merge with or
into (whether or not Holding is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) Holding is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation or merger
(if other than Holding) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than Holding) or the entity or Person to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of Holding under the Senior Notes and
the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of Holding
with or into a Wholly Owned Subsidiary of Holding, Holding or the entity or
Person formed by or surviving any such consolidation or merger (if other than
Holding), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of Holding immediately preceding the transaction and (B) will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant entitled
"--Incurrence of Indebtedness and Issuance of Disqualified Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that Holding will not, and will not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless: (a) such Affiliate Transaction is on terms that are no
less favorable to Holding or the relevant Subsidiary than
73
<PAGE>
those that would have been obtained in a comparable transaction by Holding or
such Subsidiary with a Person who was not an Affiliate and (b) Holding delivers
to the Trustee (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $2.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above and such Affiliate Transaction is approved by a
majority of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate payments in excess of $5.0 million, an opinion
as to the fairness to Holding or such Subsidiary from a financial point of view
issued by an investment banking firm of national standing; provided, however,
that the following will not be deemed Affiliate Transactions: (i) any employment
agreement entered into by Holding or any of its Subsidiaries in the ordinary
course of business and consistent with the past practice of Holding or such
Subsidiary, (ii) transactions between or among Holding and/or its Subsidiaries,
(iii) Restricted Payments permitted by the provisions of the Indenture described
above under the covenant "--Restricted Payments," (iv) management fees payable
to First Atlantic in an amount not to exceed $750,000 per annum plus out-of-
pocket expenses, (v) a fee payable to First Atlantic not to exceed $1,250,000 in
respect of the Transaction, (vi) any transaction fee payable to First Atlantic
pursuant to the terms of the New Stockholders Agreement not to exceed $1,250,000
for any transaction consummated and out-of-pocket expenses in respect of any
such transaction (whether or not consummated) and (vii) a fee payable to Chase
Securities Inc. not to exceed $500,000 in respect of the Transaction.
LIMITATION ON CREATION OF NEW PARENT COMPANY
The Indenture provides that Holding will not permit a New Parent Company to
consummate a Leveraged Recapitalization.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding,
Holding will furnish to the Trustee and to all the holders of Senior Notes (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Holding were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by Holding's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if Holding were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, Holding will file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, Holding has agreed that, for so
long as any Senior Notes remain outstanding, it will furnish to the holders and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as Holding has either exchanged the Senior Notes
for the New Senior Notes or until such time as the holders thereof have disposed
of such Senior Notes pursuant to an effective registration statement filed by
Holding.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an event of
default (each an "Event of Default"): (i) default for 30 days in the payment
when due of interest on the Senior Notes; (ii) default in payment when due of
the principal of or premium, if any, on the Senior Notes; (iii) failure by
Holding to comply with the provisions described under the captions "--Offer to
Purchase Upon Change of Control," "--Asset Sales," "--Restricted Payments" or
"--Incurrence of Indebtedness and Issuance of Disqualified Stock;" (iv) failure
by Holding for 60 days after notice to comply with any of its other agreements
in the Indenture or the Senior Notes; (v) default under any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any
74
<PAGE>
Indebtedness for money borrowed by Holding or any of its Subsidiaries (or the
payment of which is guaranteed by Holding or any of its Subsidiaries) whether
such Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $2.0 million or more; (vi) failure by Holding or any
of its Subsidiaries to pay final judgments aggregating in excess of $2.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) breach or default by Holding in the performance of any covenant set
forth in the Holding Pledge Agreement which continues for 60 days after notice
to comply, or repudiation by Holding of its obligations under the Holding Pledge
Agreement or the unenforceability of the Holding Pledge Agreement against
Holding for any reason; and (viii) certain events of bankruptcy or insolvency
with respect to Holding or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Holding or any of its Subsidiaries,
all outstanding Senior Notes will become due and payable without further action
or notice. Under certain circumstances, the holders of at least a majority in
principal amount of the outstanding Senior Notes may rescind any acceleration
with respect to the Senior Notes and its consequences. Holders of the Senior
Notes may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Senior Notes may direct the Trustee in
its exercise of any trust or power including the enforcement of the Escrow and
Disbursement Agreement. The Trustee may withhold from holders of the Senior
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Holding with the
intention of avoiding payment of the premium that Holding would have had to pay
if Holding then had elected to redeem the Senior Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Senior Notes. If an Event of Default occurs prior to June
15, 1999, by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of Holding with the intention of avoiding the prohibition on
redemption of the Senior Notes prior to June 15, 1999, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Senior Notes.
Holding is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and Holding is required upon becoming aware of
any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of Holding, as such, shall have any liability for any obligations of
Holding under the Senior Notes, the Indenture, the Holding Pledge Agreement or
the Escrow and Disbursement Agreement or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each holder of Senior Notes
by accepting a Senior Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
75
<PAGE>
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Holding may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Senior Notes when such payments are due from the trust referred to
below, (ii) Holding's obligations with respect to the Senior Notes concerning
issuing temporary Senior Notes, registration of Senior Notes, mutilated,
destroyed, lost or stolen Senior Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and Holding's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, Holding may, at its option and at any time, elect to
have the obligations of Holding released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Senior Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holding must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Senior Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Senior Notes on the stated maturity or on the applicable
redemption date, as the case may be, and Holding must specify whether the Senior
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, Holding shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) Holding has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the Issuance Date, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, Holding shall have delivered
to the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that the holders of the outstanding Senior Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which Holding or
any of its Subsidiaries is a party or by which Holding or any of its
Subsidiaries is bound; (vi) Holding must have delivered to the Trustee an
opinion of counsel to the effect that after the day on which all applicable
preference periods have run, the trust funds will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) Holding must deliver to the Trustee
an Officers' Certificate stating that the deposit was not made by Holding with
the intent of preferring the holders of Senior Notes over the other creditors of
Holding with the intent of defeating, hindering, delaying or defrauding
creditors of Holding or others; and (viii) Holding must deliver to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
76
<PAGE>
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar for the Notes and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and Holding
may require a holder to pay any taxes and fees required by law or permitted by
the Indenture. Holding is not required to transfer or exchange any Senior Note
selected for redemption. Also, Holding is not required to transfer or exchange
any Senior Note for a period of 15 days before a selection of Senior Notes to be
redeemed.
The registered holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the holders
of at least a majority in aggregate outstanding principal amount of the Senior
Notes (including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Senior Notes), and any
existing default or compliance with any provision of the Indenture or the Senior
Notes may be waived with the consent of the holders of a majority in principal
amount of the then outstanding Senior Notes (including consents obtained in
connection with a tender offer or exchange offer for Senior Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting holder): (i) reduce
the principal amount of Senior Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "--Offer to Repurchase Upon Change of Control" or "Certain
Covenants--Asset Sales"), (iii) reduce the rate of or change the time for
payment of interest on any Note, (iv) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Senior Notes
(except a rescission of acceleration of the Senior Notes by the holders of at
least a majority in aggregate principal amount of the Senior Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any
Senior Note payable in money other than that stated in the Senior Notes, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Senior Notes to receive payments of
principal of or premium, if any, or interest on the Senior Notes, (vii) waive a
redemption payment with respect to any Senior Note (other than a payment
required by the covenants described above under the captions "--Offer to
Purchase Upon Change of Control" or "--Certain Covenants--Asset Sales"), or
(viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Senior
Notes, Holding and the Trustee may amend or supplement the Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of Holding's obligations to holders of
Senior Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the holders of Senior Notes
or that does not adversely affect the legal rights under the Indenture of any
such holder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of Holding, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
77
<PAGE>
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Senior Notes, unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to BPC Holding Corporation; 101 Oakley Street; P.O.
Box 959; Evansville, Indiana 47706-0959; Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Senior Notes will initially
be issued in the form of one Global Note (the "Global Note"). The Global Note
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Senior Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only thorough the Depositary's Participants or the Depositary's
Indirect Participants.
Holding expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Note and (ii) ownership of the Senior Notes evidenced by
the Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Senior Notes evidenced by the Global Note will be limited to such
extent.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole holder under the
Indenture of any Senior Notes evidenced by the
78
<PAGE>
Global Note. Beneficial owners of Senior Notes evidenced by the Global Note will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Neither Holding nor the Trustee will have
any responsibility or liability for any aspect of the records of the Depositary
or for maintaining, supervising or reviewing any records of the Depositary
relating to the Senior Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Senior Notes registered in the name of the Global Note Holder on the
applicable record date will be payable by the Trustee to or at the direction of
the Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, Holding and the Trustee may treat
the persons in whose names Senior Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither Holding nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Senior Notes. Holding believes, however, that it is currently the policy of
the Depositary to immediately credit the accounts of the relevant Participants
with such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depositary. Payments by the Depositary's Participants and the Depositary's
Indirect Participants to the beneficial owners of Senior Notes will be governed
by standing instructions and customary practice and will be the responsibility
of the Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). All such certificated Senior Notes would be subject
to the legend requirements described herein under "Notice to Investors." In
addition, if (i) Holding notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and Holding is unable to locate
a qualified successor within 90 days or (ii) Holding, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Senior Notes in
the form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Senior Notes in such form will be
issued to each person that the Global Note Holder and the Depositary identify as
being the beneficial owner of the related Senior Notes.
Neither Holding nor the Trustee will be liable for any delay by the Global
Note Holder or the Depositary in identifying the beneficial owners of Senior
Notes and Holding and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY PAYMENT
The Indenture requires that payments in respect of the Senior Notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of same day funds to the accounts specified
by the Global Note Holder. With respect to Certificated Securities, Holding will
make all payments of principal, premium, if any, and interest by wire transfer
of same day funds to the accounts specified by the holders thereof or, if no
such account is specified, by mailing a check to each such holder's registered
address.
79
<PAGE>
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquisition" means any acquisition of a controlling interest in any
business or enterprise or any assets constituting any business or line of
business and all fees and expenses related thereto.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control. Neither CVCA nor its Affiliates will be deemed an
Affiliate of Holding or any of its Subsidiaries for purposes of this definition
solely by reason of such entities' direct or indirect beneficial ownership of
30% or less of the voting Common Stock of Holding or by reason of any employee
of such entities being appointed to the Board of Directors of Holding.
"Asset Sale" means (i) the sale, lease, conveyance, transfer or other
disposition of any property or assets of Holding or any Subsidiary (including by
way of a sale-and-leaseback) other than sales of inventory in the ordinary
course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of Holding shall be
governed by the provisions of the Indenture described above under the caption
"--Offer to Purchase Upon Change of Control" and the provisions described below
under the caption "--Certain Covenants--Merger, Consolidation or Sale of
Assets"), or (ii) the issuance or sale of Equity Interests of any of its
Subsidiaries, in the case of either clause (i) or (ii) above, whether in a
single transaction or a series of related transactions, (a) that have a fair
market value in excess of $250,000, or (b) for net proceeds in excess of
$250,000. For purposes of this definition, the term "Asset Sale" shall not
include (i) the transfer of assets by Holding to a Wholly Owned Subsidiary of
Holding or by a Wholly Owned Subsidiary of Holding to Holding or to another
Wholly Owned Subsidiary of Holding, (ii) any Restricted Payment, dividend or
purchase or retirement of Equity Interests permitted under the covenant entitled
"Restricted Payments" or (iii) the issuance or sale of Equity Interests of any
Subsidiary of Holding, provided that such Equity Interests are issued or sold in
consideration for the acquisition of assets by such Subsidiary or in connection
with a merger or consolidation of another Person into such Subsidiary.
"Berry Revolving Credit Facility" means the Berry Revolving Credit Facility,
dated as of April 21, 1994, by and among Berry and Fleet Capital Corporation
providing for up to $28.0 million of borrowings, including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time which includes the addition,
substitution or replacement of any or all lenders thereunder under the same or
any replacement agreement.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by Holding and its
Subsidiaries as of such date that are not more than 90 days past due, and (b)
65% of the book value (calculated on a FIFO basis) of all inventory
80
<PAGE>
owned by Holding and its Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable or inventory as of a
specific date, Holding may utilize the most recent available information for
purposes of calculating the Borrowing Base.
"Capital Expenditure" means any expenditure to acquire or lease property,
plant or equipment useful, ancillary or related to the business of Berry or any
Subsidiary thereof and expenditures to pay related fees and expenses.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet prepared in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months from
the date of acquisition and overnight bank deposits, in each case with any
lender party to the Berry Revolving Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause (iii)
above and (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of Holding and its Subsidiaries (or of Berry and
its Subsidiaries) to any person or group (as such term is used in Section
13(d)(3) of the Exchange Act) (other than the Principals and their Related
Parties (as defined below)), (ii) the adoption of a plan relating to the
liquidation or dissolution of Holding or Berry, (iii) the acquisition by any
person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
(other than by the Principals and their Related Parties) of a direct or indirect
interest in more than 35% of the voting power of the voting stock of Holding by
way of purchase, merger or consolidation or otherwise if (a) such person or
group (as defined above) (other than the Principals and their Related Parties)
owns, directly or indirectly, more of the voting power of the voting stock of
Holding than the Principals and their Related Parties and (b) such acquisition
occurs prior to the Initial Public Offering, (iv) the acquisition by any person
or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other
than by the Principals and their Related Parties) of a direct or indirect
interest in more than 50% of the voting power of the voting stock of Holding by
way of purchase, merger or consolidation or otherwise if such acquisition occurs
subsequent to the Initial Public Offering, (v) such time as Holding ceases to be
the direct owner of all of the outstanding Equity Interests, including options,
warrants or similar rights, of Berry, and (vi) the first day on which a majority
of the members of the Board of Directors of Holding are not Continuing
Directors.
"Collateral Agent" means First Trust of New York, National Association, as
Collateral Agent under the Holding Pledge Agreement or any successor thereto
appointed pursuant to such Agreement.
81
<PAGE>
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing Consolidated
Net Income), plus (b) provision for taxes based on income or profits of such
Person for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense of
such Person for such period to the extent such expense was deducted in computing
Consolidated Net Income, plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period to the extent such expense was deducted
in computing Consolidated Net Income, plus (e) other non-cash charges
(including, without limitation, repricing of stock options, to the extent
deducted in computing Consolidated Net Income; but excluding any non-cash charge
that requires an accrual or reserve for cash expenditures in future periods or
which involved a cash expenditure in a prior period), in each case, on a
consolidated basis and determined in accordance with GAAP.
"Consolidated Depreciation and Amortization Expense" means, with respect to
any Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) of such
Person for such period on a consolidated basis as determined in accordance with
GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (a) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, non-cash interest payments, the
interest component of capital leases, and net payments (if any) pursuant to
Hedging Obligations), (b) commissions, discounts and other fees and charges paid
or accrued with respect to letters of credit and bankers' acceptance finance,
and (c) interest actually paid by such Person or its Subsidiaries under a
Guarantee of Indebtedness of any other Person.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions actually paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Person that is a Subsidiary (other than a Wholly Owned Subsidiary) shall be
included only to the extent of the amount of dividends or distributions paid to
the referent Person or a Wholly Owned Subsidiary thereof, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded and (iv) the cumulative
effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issuance Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
82
<PAGE>
"Consolidated Step-Up Depreciation and Amortization" means, with respect to
any Person for any period, the total amount of depreciation related to the
write-up of assets and amortization of such Person for such period on a
consolidated basis as determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of Holding who (i) was a member of such Board of
Directors on the Issuance Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such board at the time of such
nomination or election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any Capital Stock to which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to December
31, 2006; provided, however, that any Capital Stock that would otherwise be
Disqualified Stock will not be Disqualified Stock solely as a result of a
maturity or redemption event that is conditioned upon and subject to compliance
with the covenant entitled "--Restricted Payments."
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500.0 million or its equivalent
in foreign currency, whose debt (or the debt of whose holding company) rates "A"
(or higher) according to S&P or "A2" (or higher) by Moody's at the time of which
any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Escrow Account" means the Escrow Account for the initial deposit of
approximately $35.5 million dollars of the net proceeds from the sale of the
Senior Notes under the Escrow and Disbursement Agreement.
"Escrow Agent" means First Trust of New York, National Association, as
Escrow Agent under the Escrow and Disbursement Agreement, or any successor
thereto appointed pursuant to such Agreement.
"Escrow and Disbursement Agreement" means the Pledge, Escrow and
Disbursement Agreement, dated as of the date of the Indenture, by and among the
Escrow Agent, the Trustee and Holding, governing the disbursement of funds from
the Escrow Account, as amended.
"Existing Indebtedness" means Indebtedness of Holding and its Subsidiaries
(including the Existing Senior Subordinated Notes) in existence on the Issuance
Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person for such period, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income and (b) the product of (i) all cash dividend payments (and non-cash
dividend payments in the form of securities (other than Disqualified Stock) of
an issuer) on any series of preferred stock of such Person, times (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such
83
<PAGE>
period. In the event that Holding or any of its Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues Disqualified Stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above,
acquisitions, dispositions and discontinued operations (as determined in
accordance with GAAP) that have been made by Holding or any of its Subsidiaries,
including all mergers and consolidations, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be calculated on a pro forma basis assuming that all such
acquisitions, dispositions, discontinued operations, mergers and consolidations
(and the reduction of any associated fixed charge obligations resulting
therefrom) had occurred on the first day of the four-quarter reference period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and also includes, to the extent not otherwise included,
the Guarantee of any Indebtedness of such Person or any other Person.
"Initial Public Offering" means a public offering of the common stock of
Holding that first results in the common stock of Holding becoming listed for
trading on a Stock Exchange.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers, directors, consultants and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
84
<PAGE>
"Issuance Date" means the closing date for the sale and original issuance of
the Senior Notes.
"Leveraged Recapitalization" means any dividend or distribution to any or
all of the equity holders of a New Parent Company or any redemption or
repurchase of the Equity Interests of such equity holders that is funded
directly or indirectly by the incurrence of $10.0 million or more of
Indebtedness.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Marketable Securities" means (a) Government Securities having a maturity
date on or before the date on which the payments of interest on the Senior Notes
to which such Government Securities are pledged to secure occur; (b) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution, (c)
commercial paper maturing not more than 270 days after the date of acquisition
of an issuer (other than an Affiliate of Holding) with a rating, at the time as
of which any investment therein is made, of "A-1" (or higher) according to S&P
or "P-1" (or higher) according to Moody's or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments, (d) any bankers acceptances or money
market deposit accounts issued by an Eligible Institution and (e) any fund
investing exclusively in investment of the type described in clauses (a) through
(d) above.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Holding or any
of its Subsidiaries in respect of any Asset Sale (including, without limitation,
any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a lien on the asset or assets that are the subject of such Asset Sale
and any reserve for indemnification or adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"New Notes" means the 12 1/2% Series B Senior Secured Notes due 2006 of
Holding, issued pursuant to the Registration Rights Agreement.
"New Parent Company" means any corporation, partnership, limited liability
company or similar entity, all or substantially all of whose assets consist of a
direct or indirect interest in at least a majority of the outstanding Capital
Stock of Holding; provided, however, that this definition shall not include any
corporation, partnership, limited liability company or similar entity, all or
substantially all of whose assets consist of a direct or indirect interest in at
least a majority of the outstanding Capital Stock of Holding immediately
subsequent to the consummation of the Transaction.
85
<PAGE>
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investments in Holding or in a Wholly
Owned Subsidiary of Holding and that is engaged in the same or a similar line of
business as Holding and its Subsidiaries were engaged in on the Issuance Date
and (b) any Investments in Cash Equivalents.
"Permitted Liens" means (i) Liens on the assets of any Subsidiary of Holding
to secure Indebtedness of any Subsidiary of Holding that may be incurred
pursuant to the Indenture; (ii) Liens in favor of Holding; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with Holding or any Subsidiary of Holding; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with Holding; (iv) Liens on property existing at the time of
acquisition thereof by Holding or any Subsidiary of Holding, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens existing on the date of the Indenture;
(vii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (viii) Liens incurred in the ordinary course
of business of Holding or any Subsidiary of Holding that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by Holding or such
Subsidiary; and (ix) Liens securing Obligations under the Senior Notes and the
Indenture.
"Permitted Refinancing" means Refinancing Indebtedness if (a) the principal
amount of refinancing Indebtedness does not exceed the principal amount of
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums, accrued interest and reasonable expenses incurred
in connection therewith); (b) the Refinancing Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (c) the Refinancing Indebtedness is pari passu or
subordinated in right of payment to the Senior Notes on terms at least as
favorable to the holders of Senior Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential right in the
payment of dividends or liquidation or any Disqualified Stock.
"Principal" means each of Roberto Buaron and Akros Finanziaria, S.p.A.
"Refinancing Indebtedness" means Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness referred to in the second paragraph or in clauses (b), (c)
or (f) of the third paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock."
"Related Party" means with respect to a Principal (A) in the case of an
individual, any spouse, sibling or descendant of such Principal (whether or not
such relationship arises from birth, adoption or marriage or despite such
relationship being dissolved by divorce) or (B) any trust, corporation,
86
<PAGE>
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately preceding
clause (A).
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Senior Bank Indebtedness" means the Indebtedness outstanding under the
Berry Revolving Credit Facility as such agreement may be restated, further
amended, supplemented or otherwise modified or replaced from time to time
hereafter, together with any refunding or replacement of any such Indebtedness.
"Senior Indebtedness" means the Senior Bank Indebtedness. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness shall not include
(w) any liability for federal, state, local or other taxes owed or owing by
Holding, (x) any Indebtedness of Holding, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Indenture.
"Stock Exchange" means the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market.
"Strategic Equity Sale" means any sale of Equity Interests of Holding that
are not Disqualified Stock in a sale to one or more investors provided that the
net proceeds to Holding from such sale exceed $10 million.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
87
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
considerations relevant to the exchange of Old Notes for New Notes pursuant to
the Exchange Offer, and of the ownership of the New Notes. The discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change at any time
by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a Holder of the
New Notes. The succeeding discussion assumes that Holders will acquire the New
Notes as capital assets.
Holding has not sought and will not seek any rulings from the IRS with
respect to the positions of Holding discussed below. There can be no assurance
that the IRS will not take a different position concerning the tax consequences
of the purchase, ownership or disposition of the New Notes or that any such
position would not be sustained.
The tax treatment of a Holder of New Notes may vary depending on his or its
particular situation or status. This summary does not address the tax
consequences to taxpayers who are subject to special rules such as insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
persons holding New Notes as part of a hedging or conversion transaction, and
foreign entities and individuals, or aspects of Federal income taxation that may
be relevant to a prospective investor based upon such investor's particular tax
situation. In addition, the description does not consider the effect of any
applicable foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES
PURSUANT TO THE EXCHANGE OFFER AND OF THE OWNERSHIP OF NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for a New Note pursuant to the Exchange Offer should not be treated as an
exchange or otherwise as a taxable event for Federal income tax purposes.
Accordingly, the New Notes should have the same issue price as the Old Notes and
each Holder should have the same adjusted basis and holding period in the New
Notes as it had in the Old Notes immediately before the consummation of the
Exchange Offer. It is assumed, for purposes of the following discussion, that
the consummation of the Exchange Offer will not be treated as a taxable event to
Holders.
NEW NOTES
Original Issue Discount. Because the Old Notes were issued with "original
issue discount" ("OID"), the New Notes will also bear OID that Holders will be
required to include in income on a yield-to-maturity basis over the term of the
New Notes. As a result, a Holder will generally realize taxable income with
respect to the New Notes as the OID accrues, regardless of the Holder's method
of accounting.
The amount of original issue discount with respect to each New Note will be
the excess of the "stated redemption price at maturity" of such New Note over
its "issue price." The "issue price" of a New Note will be equal to the issue
price of the Old Note it was exchanged for, which is equal to the first price at
which a substantial amount of Old Notes was sold to the public. For this
purpose, the public does not include bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers.
88
<PAGE>
The "stated redemption price at maturity" of each New Note will be the sum
of all cash payments, including principal and interest (other than "qualified
stated interest"), required to be made thereunder until maturity. Qualified
stated interest is stated interest that is unconditionally payable in cash at
least annually at a single fixed rate that appropriately takes into account the
length of the interval between payments. Because interest on the New Notes may
be paid in the form of Additional New Notes, interest on the New Notes will not
be considered "qualified stated interest." Accordingly, all interest on the New
Notes will be included in the stated redemption price at maturity along with
principal on the New Notes.
Holding has the option, starting from the third anniversary of the issuance
date of the Old Notes until June 15, 2001, to issue additional New Notes
("Additional New Notes"), as interest in lieu of cash at an interest rate that
exceeds the cash interest rate. The Treasury Regulations dealing with OID (the
"OID Regulations") provide that an issuer of a debt instrument that has the
option of paying interest in the form of additional debt instruments will, for
purposes of calculating OID, be assumed not to elect to pay such interest in
additional debt instruments unless so doing would reduce the yield to maturity
of such debt instrument. If an issuer is assumed not to elect to pay such
interest in additional debt instruments under this rule but in fact does issue
the debt instruments as interest, then the OID Regulations provide that, solely
for purposes of the accrual of OID, the yield and maturity of the debt
instruments are redetermined by treating the debt instruments as reissued on the
date of the issuance of the additional debt instruments for an amount equal to
its adjusted issue price on that date.
In the case of the New Notes, Holding may elect to pay interest in the form
of Additional New Notes, but only at an increased interest rate. As such, it is
assumed, for OID calculation purposes, that Holding will not issue Additional
New Notes, because so doing would increase the yield to maturity of the New
Notes. Accordingly, the stated redemption price will initially include an amount
of interest assuming cash interest is paid. If, however, Holding does in fact
issue Additional New Notes in lieu of cash interest, then on each such date on
which Additional Notes are issued, the New Notes will be deemed reissued at
their adjusted issue price, and the yield, maturity and OID on the New Notes
will be appropriately redetermined. In addition, although it is not entirely
clear, the deemed reissuance of the New Notes would require the re-testing of
the New Notes for HYDO purposes, as described below in "Deductibility of
Original Issue Discount and Certain Federal Income Tax Consequences to Corporate
Holders."
The issuance of an Additional New Note will not be treated as a payment of
interest on the New Notes. The Additional New Notes will instead be treated as
aggregated with the New Notes, and any payments made with respect to the
Additional New Notes will be treated as payments on the New Notes. Holders will
allocate their adjusted basis and adjusted issue price in their New Notes
between the New Notes and Additional New Notes received by them based on the
respective principal amounts of such New Notes and Additional New Notes, and
accrue the redetermined OID on such New Notes and Additional New Notes and
calculate any gain or loss on such securities based on such allocation. For
purposes of the following discussion, "New Notes" will refer to New Notes
originally issued pursuant to the Exchange Offer and any Additional New Notes
issued with respect thereto.
Taxation of Original Issue Discount. Each Holder of a New Note will be
required to include in gross income an amount equal to the sum of the "daily
portions" of the original issue discount of the New Note for all days during the
taxable year in which such Holder holds the New Note ("accrued original issue
discount") without regard to when the cash attributable to such income is
received. The daily portion of original issue discount is determined by
allocating to each day in any "accrual period" a pro rata portion of the
original issue discount allocable to that accrual period. The "accrual period"
for a New Note may be of any length and may vary in length over the term of the
New Note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the final
day of an accrual period. The amount of original issue discount allocable to any
accrual period is an amount equal to the product of the New Note's adjusted
issue price
89
<PAGE>
at the beginning of such accrual period and its yield to maturity (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period). Original issue discount
allocable to a final accrual period is the difference between the amount payable
at maturity and the adjusted issue price at the beginning of the final accrual
period. Special rules apply for calculating original issue discount for an
initial short accrual period. The "adjusted issue price" of a New Note at the
beginning of any accrual period is equal to its issue price increased by the
accrued original issue discount for each prior accrual period (determined
without regard to the amortization of any acquisition premium, as described
below) and reduced by any cash payments made on such New Note on or before the
first day of the accrual period. Under these rules, a Holder of a New Note will
have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
Holding is required to furnish certain information to the IRS, and will
furnish annually to record Holders of the New Notes, information with respect to
original issue discount accruing during the calendar year, as well as interest
paid during that year. This information will be based upon the adjusted issue
price of the debt instrument as if the Holder were the original holder of the
debt instrument. In addition, each New Note will bear a legend setting forth the
issue date, issue price, total amount of original issue discount, the yield to
maturity and certain other information, or such legend will indicate how a
Holder can receive such information.
If Holding fails to register the Exchange Offer, or the Exchange Offer is
not consummated within a required period of time, and in certain other
circumstances, Holding will pay Liquidated Damages described in "Description of
Senior Notes-Registration Rights." Although it is not entirely clear, Holding
intends to take the position that such payment will be taxable to the holder as
ordinary income in accordance with the Holder's method of accounting. However,
the IRS may take a different position with respect to such payment that could
affect the timing of the holder's income.
Effect of Original Issue Discount on Optional Redemption and Offer to
Redeem. In the event of a Change of Control, Holding may be required to redeem
all of the New Notes. The OID Regulations provide that a required redemption
upon the occurrence of a contingent event such as a change of control will not
affect the yield or maturity date of the New Notes unless, based on all of the
facts and circumstances as of the issue date, it is more likely than not that
the contingent event will occur. Holding has no present intention of treating
the redemption provisions of the New Notes as affecting the computation of the
yield to maturity of any New Note.
Holding may redeem the New Notes at any time on or after June 15, 1999. The
OID Regulations set forth special rules for determining the yield to maturity
and maturity date of a debt instrument that may be redeemed prior to its stated
maturity date at the option of the issuer. The application of these rules
depends in part on the prices at which the New Notes may be redeemed. It is
currently anticipated that these rules should not affect the determination of
the yield to maturity of the New Notes.
Acquisition Premium of a Subsequent Purchaser. An acquisition premium will
exist if a subsequent purchaser purchases a New Note at a cost that is in excess
of its "adjusted issue price (as defined above), but less than or equal to the
sum of all amounts payable on the New Note after the purchase date. A subsequent
holder of a New Note who purchases the New Note at an acquisition premium may
reduce the OID otherwise includible in gross income. This reduction of OID for a
taxable period is equal to the product of (i) the OID includible in gross income
for such taxable period (as otherwise determined) and (ii) a fraction, the
numerator of which is the excess of the cost of the New Note over its adjusted
issue price and the denominator of which is the excess of the sum of all amounts
payable on the New Note after the purchase date, other than qualified stated
interest, over the New Note's adjusted issue price. The Holder of a New Note
purchased at an acquisition premium is permitted to elect to compute OID
accruals by treating the purchase as a purchase at original issue and applying a
constant yield method.
90
<PAGE>
Market Discount of a Subsequent Holder. If a subsequent Holder of a New Note
that was purchased at a "market discount" thereafter realizes gain upon its
disposition or retirement, such gain will be taxed as ordinary income to the
extent of the market discount that has accrued on a straight-line basis (or on a
constant interest rate basis, if such basis of accrual has been elected by the
Holder under Section 1276(b) of the Code) while the debt instrument was held by
such Holder. "Market discount" with respect to a New Note is the amount by which
the "revised issue price" of a New Note (i.e., the issue price increased by the
portion of OID previously included in the gross income of prior holders,
determined without regard to any reduction of OID attributable to any
acquisition premium) exceeds the Holder's basis in the New Note immediately
after acquisition (unless such excess is less than 0.25% of the stated
redemption price at maturity of the New Note multiplied by the number of
complete years from acquisition by such Holder to maturity, in which case there
is no "market discount"). If a subsequent Holder makes a gift of a New Note,
accrued market discount, if any, will be recognized as if such Holder had sold
such New Note for a price equal to its fair market value. The market discount
rules also provide that a Holder who acquires a New Note at a market discount
may be required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
New Note until the Holder disposes of the New Note in a taxable transaction.
The New Notes provide for optional redemption, in whole or in part, and, in
the case of Change of Control, a mandatory offer to redeem, prior to maturity.
If the New Notes were redeemed, a Holder generally would be required to include
in gross income as ordinary income, for Federal income tax purposes, the portion
of the payment that is attributable to accrued market discount on the New Notes,
if any.
A Holder of New Notes acquired at a market discount may elect to include
market discount in gross income, for Federal income tax purposes, as the
discount accrues either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a Holder of New Notes makes such an election the foregoing rules
with respect to the recognition of ordinary income on sales and other
dispositions of such debt instruments, and with respect to the deferral of
interest deductions on indebtedness incurred or maintained to purchase or carry
such debt instruments, would not apply.
Sale, Exchange, Redemption, Retirement or other Disposition of New Notes. In
general, subject to the market discount provisions discussed above, the Holder
of a New Note will recognize gain or loss upon the sale, exchange, redemption,
retirement or other disposition of such debt instrument measured by the
difference between (i) the amount of cash and fair market value of property
received in exchange therefor and (ii) the Holder's adjusted tax basis in such
debt instrument.
A Holder's initial tax basis in a New Note received in exchange for an Old
Note will be equal to the basis such Holder had in the Old Note. With respect to
Holders who purchase New Notes other than at their original issuance, their tax
basis in the New Notes will generally be equal to their purchase price. The
Holder's initial tax basis in a New Note will be increased from time to time by
the portion of original issue discount previously included in gross income to
the date of disposition and decreased from time to time to reflect the receipt
of any payments on such New Note.
Any gain or loss on the sale, exchange, redemption, retirement or other
disposition of a New Note should be capital gain or loss, provided the New Note
was a capital asset in the hands of the Holder. Any capital gain or loss will be
long-term capital gain or loss if the debt instrument had been held for more
than one year and otherwise will be short-term capital gain or loss.
Deductibility of Original Issue Discount and Certain Federal Income Tax
Consequences to Corporate Holders. The New Notes will constitute "applicable
high yield discount obligations" ("AHYDOs") if their yield to maturity is equal
to or greater than the sum of the applicable Federal
91
<PAGE>
rate (the "AFR") for debt instruments issued in June, 1996 (namely 6.92%), plus
five percentage points, and the New Notes are issued with significant original
issue discount. If the New Notes are AHYDOs, Holding will not be entitled to
deduct original issue discount that accrues with respect to such New Notes until
amounts attributable to such original issue discount are paid in cash. In
addition, if the yield to maturity of the New Notes exceeds the sum of the
relevant AFR plus six percentage points (the "Excess Yield"), the "disqualified
portion" of the original issue discount accruing on the New Notes will not be
deductible by Holding. In general, the "disqualified portion" of the original
issue discount for any accrual period will be equal to the product of (i) a
percentage determined by dividing the Excess Yield by the yield to maturity and
(ii) the original issue discount for the accrual period.
Subject to otherwise applicable limitations, Holders that are U.S.
corporations will be entitled to a dividends received deduction with respect to
the disqualified portion of the accrued original issue discount to the extent of
Holding 's current and accumulated earnings and profits, and the excess will
continue to be taxed as ordinary original issue discount income in accordance
with the rules described above in "Taxation of Original Issue Discount."
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(i) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (ii) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (iii) the payee has failed to report properly the receipt of
"reportable payments" on several occasions and the IRS has notified the payor
that withholding is required or (iv) there has been a failure of the payee to
certify under the penalty of perjury that the payee is not subject to
withholding under Section 3406 of the Code. If any one of the events discussed
above occurs, Holding, its paying agent or other withholding agent will be
required to withhold a tax equal to 31% of any "reportable payment" made in
connection with the New Notes. A "reportable payment" includes, among other
things, interest actually paid and original issue discount in respect of a New
Note and amounts paid through brokers in sale or retirement of a New Note. Any
amounts withheld from a payment to a Holder under the backup withholding rules
will be allowed as a refund or credit against such holder's Federal income tax,
provided that the required information is furnished to the IRS. Certain Holders
(including, among others, corporations and certain tax exempt organizations) are
not subject to the backup withholding and information reporting requirements.
Each Holder should consult his or its tax advisor as to his or its qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption.
92
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of the Issuer within the
meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Issuer or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Issuer). The Issuer has agreed that, for a period of one year from the
date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until November 26, 1996 (90 days from the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Issuer will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker-dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of one year from the date of this Prospectus, the Issuer will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Issuer will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Issuer has agreed
to indemnify the Initial Purchaser and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
93
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes will be
passed upon for the Issuer by O'Sullivan Graev & Karabell, LLP, New York, New
York.
EXPERTS
The consolidated financial statements, including schedules of BPC Holding
Corporation at December 31, 1994 and December 30, 1995, and for each of the
three years in the period ended December 30, 1995, appearing in this Prospectus
and the Registration Statement to which this Prospectus forms a part, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
94
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets at December 31, 1994 and December 30, 1995............... F-3
Consolidated Statements of Operations for the years ended January 1, 1994, December
31, 1994 and December 30, 1995..................................................... F-5
Consolidated Statements of Changes in Stockholders' Equity for the years ended
January 1, 1994, December 31, 1994 and December 30, 1995........................... F-6
Consolidated Statements of Cash Flows for the years ended January 1, 1994, December
31, 1994 and December 30, 1995..................................................... F-7
Notes to Consolidated Financial Statements........................................... F-8
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheet at June 29, 1996.......................................... F-20
Consolidated Statements of Operations for the Twenty Six Weeks ended June 29, 1996
and July 1, 1995................................................................... F-22
Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the Twenty
Six Weeks ended June 29, 1996...................................................... F-23
Consolidated Statements of Cash Flows for the Twenty Six Weeks ended June 29, 1996
and July 1, 1995..................................................................... F-24
Notes to Consolidated Financial Statements........................................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
BPC Holding Corporation
We have audited the accompanying consolidated balance sheets of BPC Holding
Corporation and subsidiaries as of December 31, 1994 and December 30, 1995, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
30, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BPC Holding Corporation and subsidiaries at December 31, 1994 and December 30,
1995, and the consolidated results of operations and cash flows for each of the
three years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Indianapolis, Indiana
February 16, 1996
F-2
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets (Note 5):
Cash and cash equivalents (Note 11).......................... $ 9,326,671 $ 8,034,986
Accounts receivable (less allowance for doubtful accounts of
$503,000 at December 31, 1994 and $737,000 at December 30,
1995).......................................................... 11,555,787 15,943,736
Inventories:
Finished goods............................................. 4,761,079 7,742,798
Raw materials and supplies................................. 5,401,095 3,897,323
Custom molds............................................... 455,463 256,880
------------ ------------
10,617,637 11,897,001
Prepaid expenses and other receivables....................... 573,686 1,592,653
Income taxes recoverable..................................... -- 411,220
------------ ------------
Total current assets........................................... 32,073,781 37,879,596
Cash held for acquisitions (Notes 3 and 5)..................... 12,000,000 --
Property and equipment (Notes 5 and 6):
Land......................................................... 2,492,097 3,882,095
Buildings and improvements................................... 12,136,106 15,711,743
Machinery, equipment and tooling............................. 52,425,975 68,801,103
Automobiles and trucks....................................... 391,571 496,190
Construction in progress..................................... 3,048,909 4,094,436
------------ ------------
70,494,658 92,985,567
Less accumulated depreciation................................ 32,391,786 40,544,072
------------ ------------
38,102,872 52,441,495
Intangible assets (Note 4):
Deferred financing and origination fees...................... 6,647,628 5,962,290
Covenants not to compete..................................... 686,535 72,917
Excess of cost over net assets acquired...................... 679,190 4,782,325
Patents...................................................... -- 138,634
Deferred acquisition costs................................... 389,937 --
------------ ------------
8,403,290 10,956,166
Deferred income taxes (Note 7)................................. 1,092,319 2,055,819
Other.......................................................... 118,012 132,326
------------ ------------
Total assets................................................... $ 91,790,274 $103,465,402
------------ ------------
------------ ------------
</TABLE>
F-3
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................. $ 8,886,416 $ 14,073,750
Accrued expenses and other liabilities....................... 2,184,760 2,806,841
Accrued interest............................................. 2,652,316 2,652,218
Employee compensation and payroll taxes...................... 4,112,284 4,618,340
Income taxes (Note 7)........................................ 147,319 --
Current portion of long-term debt (Notes 5 and 11)........... 697,805 716,918
------------ ------------
Total current liabilities...................................... 18,680,900 24,868,067
Long-term debt, less current portion (Notes 5 and 11).......... 111,589,026 110,959,186
Deferred compensation (Note 9)................................. 358,210 121,788
------------ ------------
130,628,136 135,949,041
Stockholders' equity (deficit) (Note 9):
Preferred Stock; $.001 par value; authorized -- 100,000
shares; none issued........................................ -- --
Class A Common Stock; $.00005 par value:
Authorized: 3,000,000 shares...............................
Issued: 1,308,680 shares................................... 65 65
Class B Common Stock; $.00005 par value:
Authorized: 1,000,000 shares...............................
Issued: 355,940 shares..................................... 18 18
Class A treasury stock: 5,212 shares......................... (57,766) (57,766)
Additional paid-in capital................................... 870,750 959,727
Warrants..................................................... 4,123,906 4,034,050
Deferred cost-restricted stock plan.......................... (21,632) --
Retained earnings (deficit).................................. (43,753,203) (37,419,733)
------------ ------------
Total stockholders' equity (deficit)........................... (38,837,862) (32,483,639)
------------ ------------
Total liabilities and stockholders' equity (deficit)......... $ 91,790,274 $103,465,402
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
Net sales......................................... $87,829,719 $106,140,906 $140,681,087
Cost of goods sold................................ 65,652,320 73,996,922 102,484,494
----------- ------------ ------------
Gross margin...................................... 22,177,399 32,143,984 38,196,593
Operating expenses:
Selling......................................... 4,256,672 5,083,177 5,617,205
General and administrative...................... 7,544,436 8,523,324 9,499,440
Research and development........................ 617,129 694,875 717,686
Amortization of intangibles (Note 4)............ 802,643 742,450 968,424
----------- ------------ ------------
Operating income.................................. 8,956,519 17,100,158 21,393,838
Other expenses:
Loss on disposal of property and equipment...... 2,780,051 183,870 127,073
Loss on plant closing........................... 895,290 -- --
Other........................................... 329,917 115,695 866,284
----------- ------------ ------------
Income before interest, taxes and extraordinary
charge............................................ 4,951,261 16,800,593 20,400,481
Interest (Notes 4 and 5):
Expense......................................... (6,607,564) (11,552,075) (14,031,273)
Income.......................................... 25,310 579,757 642,179
----------- ------------ ------------
Income (loss) before income taxes and
extraordinary charge............................ (1,630,993) 5,828,275 7,011,387
Income taxes (Note 7)............................. 72,150 11,211 677,917
----------- ------------ ------------
Income (loss) before extraordinary charge......... (1,703,143) 5,817,064 6,333,470
Extraordinary charge on extinguishment of debt
(Note 5).......................................... -- 3,652,197 --
----------- ------------ ------------
Net income (loss)................................. $(1,703,143) $ 2,164,867 $ 6,333,470
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK DEFERRED
ISSUED ADDITIONAL COST- RETAINED
----------------- TREASURY PAID-IN RESTRICTED EARNINGS
CLASS A CLASS B STOCK CAPITAL WARRANTS STOCK (DEFICIT)
------- ------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 26, 1992..... $57 $18 $ -- $ 10,486,982 $6,015,375 $ (151,424) $ (6,936,418)
Net loss......................... -- -- -- -- -- -- (1,703,143)
Amortization of deferred
cost-restricted stock............ -- -- -- -- -- 81,120 --
Repurchase stock warrants........ -- -- -- -- (1,780,644) -- --
Market value
adjustment--warrants............. -- -- -- (6,646,587) 6,646,587 -- --
Purchase vested options from
management....................... -- -- -- (7,187) -- -- --
Purchase of treasury stock from
management....................... -- -- (59,175) -- -- -- --
Sale of treasury stock to
management....................... -- -- 26,776 -- -- -- --
-- --
-------- ------------ ---------- ---------- ------------
Balance at January 1, 1994....... 57 18 (32,399) 3,833,208 10,881,318 (70,304) (8,639,561)
Net income....................... -- -- -- -- -- -- 2,164,867
Amortization of deferred
cost-restricted stock............ -- -- -- -- -- 48,672 --
Warrants issued.................. -- -- -- 870,750 -- -- --
Market value
adjustment--warrants............. -- -- -- 6,757,412 (6,757,412) -- --
Distributions on common stock and
other equity interests.......... -- -- -- (12,721,491) -- -- (37,278,509)
Exercise of stock options........ 8 -- -- 2,130,871 -- -- --
Purchase treasury stock from
management....................... -- -- (25,367) -- -- -- --
-- --
-------- ------------ ---------- ---------- ------------
Balance at December 31, 1994..... 65 18 (57,766) 870,750 4,123,906 (21,632) (43,753,203)
Net income....................... -- -- -- -- -- -- 6,333,470
Amortization of deferred
cost-restricted stock............ -- -- -- 40 -- 21,632 --
Market value
adjustment--warrants............. -- -- -- 89,856 (89,856) -- --
Purchase vested options from
management....................... -- -- -- (919) -- -- --
-- --
-------- ------------ ---------- ---------- ------------
Balance at December 30, 1995..... $65 $18 $(57,766) $ 959,727 $4,034,050 $ -- $(37,419,733)
-- --
-- --
-------- ------------ ---------- ---------- ------------
-------- ------------ ---------- ---------- ------------
<CAPTION>
TOTAL
------------
<S> <C>
Balance at December 26, 1992..... $ 9,414,590
Net loss......................... (1,703,143)
Amortization of deferred
cost-restricted stock............ 81,120
Repurchase stock warrants........ (1,780,644)
Market value
adjustment--warrants............. --
Purchase vested options from
management....................... (7,187)
Purchase of treasury stock from
management....................... (59,175)
Sale of treasury stock to
management....................... 26,776
------------
Balance at January 1, 1994....... 5,972,337
Net income....................... 2,164,867
Amortization of deferred
cost-restricted stock............ 48,672
Warrants issued.................. 870,750
Market value
adjustment--warrants............. --
Distributions on common stock and
other equity interests.......... (50,000,000)
Exercise of stock options........ 2,130,879
Purchase treasury stock from
management....................... (25,367)
------------
Balance at December 31, 1994..... (38,837,862)
Net income....................... 6,333,470
Amortization of deferred
cost-restricted stock............ 21,672
Market value
adjustment--warrants............. --
Purchase vested options from
management....................... (919)
------------
Balance at December 30, 1995..... $(32,483,639)
------------
------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................. $(1,703,143) $ 2,164,867 $ 6,333,470
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 11,198,426 8,175,580 9,536,046
Non-cash interest expense....................... 1,616,977 1,177,648 949,994
Extraordinary charge on extinguishment of
debt.............................................. -- 3,652,197 --
Non-cash compensation........................... 686,410 406,882 (214,750)
Write-off of deferred acquisition costs......... -- -- 389,937
Loss on sale of property and equipment.......... 2,780,051 183,870 127,073
Deferred income taxes........................... -- (1,092,319) (963,500)
Income taxes payable............................ 15,000 132,319 (147,319)
Changes in operating assets and liabilities:
Accounts receivable, net...................... (310,347) (2,776,372) (1,988,987)
Inventories................................... (293,103) (2,624,464) 926,155
Prepaid expenses and other receivables........ (150,250) 295,388 (963,603)
Accounts payable and accrued expenses......... 383,589 5,858,872 (1,000,600)
Other assets.................................. (113,178) 452 (14,314)
----------- ------------ ------------
Net cash provided by operating activities......... 14,110,432 15,554,920 12,969,602
INVESTING ACTIVITIES
Additions to property and equipment............... (5,586,084) (9,118,290) (11,247,029)
Proceeds from disposal of property and
equipment......................................... 1,764,908 13,555 20,345
Acquisition costs................................. -- (389,937) (394,488)
Purchase of Sterling Products..................... -- -- (7,245,816)
Purchase of Tri-Plas.............................. -- -- (6,517,997)
----------- ------------ ------------
Net cash used for investing activities............ (3,821,176) (9,494,672) (25,384,985)
FINANCING ACTIVITIES
Proceeds from long-term borrowings................ 750,000 99,129,250 --
Payments on long-term borrowings.................. (8,612,627) (29,684,044) (500,000)
Distributions on common stock and equity
interests......................................... -- (50,000,000) --
Exercise of management stock options.............. -- 1,450,963 --
Proceeds from issuance of warrants................ -- 870,750 --
Payments on capital leases........................ (176,396) (180,371) (197,802)
Debt issuance costs............................... -- (7,376,901) (177,581)
Purchase of outstanding warrants.................. (1,780,644) -- --
Reclassification of cash held for acquisition..... -- (12,000,000) 12,000,000
Other............................................. (39,586) (25,366) (919)
----------- ------------ ------------
Net cash provided by (used for) financing
activities........................................ (9,859,253) 2,184,281 11,123,698
Net increase (decrease) in cash and cash
equivalents....................................... 430,003 8,244,529 (1,291,685)
Cash and cash equivalents at beginning of year.... 652,139 1,082,142 9,326,671
----------- ------------ ------------
Cash and cash equivalents at end of year.......... $ 1,082,142 $ 9,326,671 $ 8,034,986
----------- ------------ ------------
----------- ------------ ------------
SUPPLEMENTAL DISCLOSURE
Financing and investing activities not affecting
cash and cash equivalents:
Acquisition of property and equipment by capital
lease............................................. $ 1,556,000 $ -- $ --
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
BPC Holding Corporation ("Holding"), through its subsidiaries Berry Plastics
Corporation ("Berry"), Berry Iowa Corporation, Berry Sterling Corporation and
Berry Tri-Plas Corporation, manufactures and markets plastic packaging products
through its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa
Falls, Iowa; Winchester, Virginia; Charlotte, North Carolina; and York,
Pennsylvania. Atlantic Equity Partners, L.P. ("AEP"), an investment partnership
advised by First Atlantic Capital, Ltd. ("First Atlantic"), is a majority
stockholder of Holding.
Holding's fiscal year is a 52/53 week period ending generally on the
Saturday closest to December 31. All references herein to "1993," "1994" and
"1995" relate to the fiscal years ended January 1, 1994, December 31, 1994 and
December 30, 1995, respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation and Business
The consolidated financial statements include the accounts of Holding and
its subsidiaries all of which are wholly-owned. Intercompany accounts and
transactions have been eliminated in consolidation. Holding, through its
wholly-owned subsidiaries, operates in one industry segment. Holding is a
domestic manufacturer and marketer of plastic packaging, with sales concentrated
in three product groups within this market: aerosol overcaps, rigid open-top
containers and plastic drink cups. Holding's customers are located principally
throughout the United States, without significant concentration in any one
region or any one customer. Holding performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
Purchase of various densities of plastic resin used in the manufacture of
Holding's products aggregated approximately $43 million in 1995 (excluding
specialty resins). Dow Chemical Corporation is the principal supplier (over 50%)
of Holding's total resin material requirements. Holding also uses other
suppliers such as Union Carbide, Chevron and Phillips to meet its resin
requirements. Holding 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,
both the price and availability of the principal raw material used in the
manufacture of Holding's products could result in financial disruption to
Holding.
Holding is subject to existing and potential federal, state, local and
foreign legislation designed to reduce solid wastes in landfills. While the
principal resin used by Holding is recyclable and, therefore, reduces Holding'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 Holding. Legislation, if promulgated, requiring plastics to be
degradable in landfills or to have minimum levels of recycled content would have
a significant impact on Holding's business as would legislation providing for
disposal fees or limiting the use of plastic products.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
F-8
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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
The origination fee relating to the 12.25% Existing Senior Subordinated
Notes due 2004 issued by Berry and deferred financing fees are being amortized
using the straight-line method over the lives of the respective debt agreements.
The costs in excess of net assets acquired represents the excess purchase
price over the fair value of the net assets acquired in the original acquisition
of the assets of Berry Plastics, Inc. and the subsequent acquisitions of the
assets of Sterling Products, Inc. and Tri-Plas, Inc. and are being amortized by
the straight-line method over 20 and 15 years, respectively.
Holding periodically evaluates the value of intangible assets to determine
if an impairment has occurred. This evaluation is based on various analyses
including reviewing anticipated cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual amounts could differ from those estimates.
Earnings Per Share
Earnings per share are presented on a per common and common equivalent share
and fully diluted basis. Both primary and fully diluted shares are based on the
modified treasury stock method, which includes the number of common shares
outstanding at year end plus the share equivalent effect of dilutive and
antidilutive stock options and warrants.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also addresses
assets that are expected to be disposed of. Holding will adopt Statement 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material.
In October 1995, the FASB issued Statement 123, Accounting for Stock-Based
Compensation, which 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
expects
F-9
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
to continue using the existing accounting requirements for its stock-based
awards and to provide the pro forma disclosures in its 1996 financial statements
of net income and earnings per share using the fair value method prescribed by
the Statement.
NOTE 3. ACQUISITIONS
On March 10, 1995, Holding acquired substantially all of the assets and
assumed certain liabilities of Sterling Products, Inc. through its newly-formed,
indirectly wholly-owned subsidiary, Berry Sterling Corporation, for a purchase
price of $7,300,000. The operations of Berry Sterling Corporation are included
in Holding's operations since the acquisition date using the purchase method of
accounting.
On December 21, 1995, Holding acquired substantially all of the assets and
assumed certain liabilities of Tri-Plas, Inc. through its indirectly
wholly-owned subsidiary Berry Tri-Plas Corporation (formerly Berry-CPI Plastics
Corp.) for a purchase price of $6,600,000. The operations of Berry Tri-Plas
Corporation are included in Holding's operations since the acquisition date
using the purchase method of accounting.
The pro-forma results listed below are unaudited and reflect purchase price
accounting adjustments assuming the acquisitions occurred at the beginning of
each year presented.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Net sales...................................................... $130,041,723 $158,217,544
Income before income taxes and extraordinary charge............ 5,494,825 4,805,464
Net income..................................................... 1,831,417 4,618,794
Earnings per common share:
Primary...................................................... 0.88 2.22
Fully diluted................................................ 0.87 2.22
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisitions been consummated at the above 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 effect.
F-10
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Senior subordinated notes origination fee (less accumulated
amortization of $427,308 at December 31, 1994 and $1,039,699 at
December 30, 1995)................................................ $5,689,062 $ 5,084,211
Deferred financing fees (less accumulated amortization of $97,533
at December 31, 1994 and $294,907 at December 30, 1995)......... 600,498 573,165
Nevada bond fees (less accumulated amortization of $72,096 at
December 31, 1994 and $91,756 at December 30, 1995)............... 235,921 216,261
Iowa bond fees (less accumulated amortization of $95,563 at
December 31, 1994 and $129,057 at December 30, 1995).............. 122,147 88,653
------------ ------------
6,647,628 5,962,290
Covenant not to compete (less accumulated amortization of
$3,527,083 at December 30, 1995 and $2,813,465 at December 31,
1994)............................................................. 686,535 72,917
Costs in excess of net assets acquired (less accumulated
amortization of $169,798 at December 31, 1994 and $424,603 at
December 30, 1995).............................................. 679,190 4,782,325
Patents........................................................... -- 138,634
Deferred acquisition costs........................................ 389,937 --
------------ ------------
$8,403,290 $ 10,956,166
------------ ------------
------------ ------------
</TABLE>
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
12.25% Existing Senior Subordinated Notes...................... $100,000,000 $100,000,000
Nevada Industrial Revenue Bonds................................ 6,500,000 6,000,000
Iowa Industrial Revenue Bonds.................................. 5,400,000 5,400,000
Capital lease obligation payable through December 1999......... 1,199,531 1,001,729
Debt discount.................................................. (812,700) (725,625)
------------ ------------
112,286,831 111,676,104
Less current portion of long-term debt......................... 697,805 716,918
------------ ------------
$111,589,026 $110,959,186
------------ ------------
------------ ------------
</TABLE>
Berry 12.25% Existing Senior Subordinated Notes
On April 21, 1994, Berry completed an offering (the "1994 Units Offering")
of 100,000 Units consisting of $100,000,000 aggregate principal amount of 12.25%
Existing Senior Subordinated Notes due 2004 (the "Existing Senior Subordinated
Notes") and 100,000 warrants each to purchase 1.13237 shares of Class A Common
Stock, $.00005 par value, of Holding. The Existing Senior Subordinated Notes
mature on April 15, 2004 and interest is payable semi-annually on October 15 and
April 15 of
F-11
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. LONG-TERM DEBT--(CONTINUED)
each year and commenced on October 15, 1994. The Existing Senior Subordinated
Notes are unconditionally guaranteed on a senior subordinated basis by Holding,
Berry Iowa, Berry Sterling and Berry Tri-Plas. The net proceeds to Berry from
the sale of the Existing Senior Subordinated Notes, after underwriting
discounts, commissions and other offering expenses, were approximately
$93,000,000. Berry applied the net proceeds as follows: (i) to repay in full all
amounts outstanding under Berry's then-existing credit facility, which together
with all accrued interest and prepayment fees was $31,000,000 and included all
of Berry's outstanding long-term debt, except for the Nevada and Iowa Industrial
Revenue Bonds and its capital lease obligation, (ii) to pay a $50,000,000
dividend on Berry's Common Stock and (iii) to invest approximately $12,000,000
to finance and provide machinery and equipment for acquisitions.
In connection with the repayment of all amounts outstanding under Berry's
then-existing credit facility, Berry incurred a net loss in the amount of
$3,652,200, which includes the write-off of a portion of unamortized financing
fees and prepayment penalties. This loss is reflected in the 1994 statement of
operations as an extraordinary charge on extinguishment of debt.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the Existing Senior Subordinated Notes. However, at any time
prior to April 15, 1997, Berry may redeem up to 25% of the initial principal
amount of the Existing Senior Subordinated Notes originally issued from the net
proceeds of one or more public offerings of the Common Stock of Holding, to the
extent such net proceeds are contributed or otherwise transferred to Berry as a
capital contribution or are used to purchase common equity securities of Berry,
at a redemption price equal to 111.25% of the principal amount thereof plus
accrued interest, to the redemption date; provided that at least 75% of the
principal amount of Existing Senior Subordinated Notes originally issued remain
outstanding immediately after the occurrence of any redemption and that any such
redemption occurs within 60 days following the closing of any such public
offering. Subsequent to April 15, 1999, the Existing Senior Subordinated Notes
may be redeemed at the option of Berry, in whole or in part, at redemption
prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a
change of control, as defined in the Indenture (the "Senior Subordinated Notes
Indenture") covering the Existing Senior Subordinated Notes, each holder of
Existing Senior Subordinated Notes will have the right to require Berry to
repurchase all or any part of such holder's Existing Senior Subordinated Notes
at a repurchase price in cash equal to 101% of the aggregate principal amount
thereof plus accrued interest.
The Existing Senior Subordinated Notes rank pari passu with or senior in
right of payment to all existing and future subordinated indebtedness of Berry.
The Existing Senior Subordinated Notes rank junior in right of payment to all
existing and future senior indebtedness of Berry, including borrowings under the
Revolving Credit Facility and the Nevada and Iowa Industrial Revenue Bonds.
The Senior Subordinated Notes Indenture contains certain covenants which,
among other things, limit Berry's and its subsidiaries' ability to incur debt,
merge or consolidate, sell, lease or transfer assets, make dividend payments and
engage in transactions with affiliates.
Credit Facility
Simultaneous with the 1994 Units Offering, Berry entered into a revolving
credit facility (the "Revolving Credit Facility") with Fleet Capital Corporation
(by assignment from Shawmut Capital Corporation, by assignment from Barclays
Business Credit, Inc.) dated April 21, 1994. The Revolving Credit Facility
provides for a total of $28,000,000 in revolving credit, subject to specified
percentages of
F-12
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. LONG-TERM DEBT--(CONTINUED)
eligible assets reduced by outstanding letters of credit ($12,300,000 at
December 30, 1995) and a $7,000,000 machinery and equipment acquisition facility
(no amount outstanding at December 30, 1995).
The Revolving Credit Facility is guaranteed by Holding and is collateralized
by a lien on substantially all of the assets of Berry, Berry Iowa Corporation,
Berry Sterling Corporation and Berry Tri-Plas Corporation and will expire on
April 20, 1999. The Revolving Credit Facility will be automatically renewed for
one year periods unless terminated by Berry or Fleet.
The Revolving Credit Facility loans bear interest at floating rates ranging
from bank prime plus 1.0% to 1.5% or a Eurodollar rate (LIBOR) plus 3.0% or
3.5%. Commitment fees during the Credit Facility period are 0.25% of the average
monthly unused portion of the available credit. Letter of credit fees range from
1.75% to 2.5% per annum on the outstanding amount.
The Revolving 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, (iii) limitations on dividends, (iv) limitations on
transactions with affiliates and (v) limitations on capital expenditures.
Nevada Industrial Revenue Bonds
The Nevada Industrial Bonds bear interest at a variable rate (5.7% and 5.6%
at December 31, 1994 and December 30, 1995, respectively), require annual
principal payments of $500,000 on April 1, are collateralized by irrevocable
letters of credit issued by Fleet under the Revolving Credit Facility and mature
in April 2007.
Iowa Industrial Revenue Bonds
The Iowa Industrial Bonds bear interest at a variable rate (4.2% and 4.0% at
December 31, 1994 and December 30, 1995, respectively), require no periodic
principal payments, are collateralized by irrevocable letters of credit issued
by Fleet under the Revolving Credit Facility and mature in August 1998.
Other
Future maturities of long-term debt are as follows: 1996, $716,900; 1997,
$737,900; 1998, $6,160,900; 1999, $786,000; 2000, $500,000 and $103,500,000
thereafter.
Interest paid was $5,313,000, $7,999,100 and $13,431,500 for 1993, 1994 and
1995, respectively. Interest capitalized was $163,300, $228,900 and $350,200 for
1993, 1994 and 1995, respectively.
NOTE 6. LEASE AND OTHER COMMITMENTS
Certain property and equipment are leased using capital and operating
leases. Capitalized lease property consisted of manufacturing equipment with a
cost of $1,661,100 and related accumulated amortization of $332,200 and $498,300
at December 31, 1994 and December 30, 1995, respectively. Lease amortization is
included in depreciation expense. Total rental expense for operating leases was
approximately $705,000, $979,100 and $1,514,508 for 1993, 1994 and 1995,
respectively.
F-13
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. LEASE AND OTHER COMMITMENTS--(CONTINUED)
At December 30, 1995, future minimum lease payments for capital leases and
noncancellable operating leases with initial terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
OPERATING
LEASE
ENTERED INTO
SUBSEQUENT TO
OPERATING DECEMBER 30,
CAPITAL LEASES LEASES 1995
-------------- ---------- -------------
<S> <C> <C> <C>
1996.................................................. $ 300,612 $2,185,161 $ 120,262
1997.................................................. 300,612 1,700,674 131,194
1998.................................................. 300,612 1,338,465 131,194
1999.................................................. 300,612 1,096,869 131,194
Thereafter............................................ -- 3,044,104 535,910
-------------- ---------- -------------
1,202,448 $9,365,273 $ 1,049,556
-------------- ---------- -------------
-------------- ---------- -------------
Less: amount representing interest.................... 200,719
--------------
Present value of net minimum lease payments........... $1,001,729
--------------
--------------
</TABLE>
In addition to lease commitments, at December 30, 1995, Holding had
committed $2,000,000 to outside vendors for certain capital projects.
NOTE 7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax liabilities and assets at December 31, 1994 and December 30, 1995
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation....................................... $1,312,457 $1,177,234
Other............................................................ 8,342 48,650
------------ ------------
Total deferred tax liabilities................................. 1,320,799 1,225,884
Deferred tax assets:
Inventory........................................................ 338,526 271,939
Allowance for doubtful accounts.................................. 193,459 311,010
Compensation and benefit accruals................................ 568,117 556,075
Insurance reserves............................................... 149,697 134,788
Net operating loss carryforwards................................. 1,939,956 --
Alternative minimum tax (AMT) credit carryforwards............... 1,092,319 2,007,891
------------ ------------
Total deferred tax assets...................................... 4,282,074 3,281,703
------------ ------------
Net deferred tax assets............................................ 2,961,275 2,055,819
Valuation allowance for net deferred tax assets.................... (1,868,956) --
------------ ------------
Net deferred tax................................................... $1,092,319 $2,055,819
------------ ------------
------------ ------------
</TABLE>
F-14
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INCOME TAXES--(CONTINUED)
Income tax expense (credit) consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Current
Federal............................................... $ 346,665 $628,040 $1,404,695
State................................................. -- 9,851 236,722
Deferred
Federal............................................... (274,515) (626,680) (900,470)
State................................................. -- -- (63,030)
---------- ------------ ------------
$ 72,150 $ 11,211 $ 677,917
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
During 1994, Holding reached a settlement agreement with the Internal
Revenue Service ("IRS") relating to Holding's 1990 through 1993 income tax
returns. The settlement resulted in additional alternative minimum tax of
approximately $217,000 and adjustment of the tax basis of certain depreciable
assets and the net operating loss carryforwards.
Net operating loss carryforwards of approximately $5,100,000 at December 31,
1994 were fully utilized in 1995. AMT credit carryforwards are available to
Holding indefinitely to reduce future years' federal income taxes.
Income taxes paid during 1993, 1994 and 1995 approximated $57,000, $992,000
and $2,001,000, respectively.
A reconciliation of income tax expense, computed at the federal statutory
rate, to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Federal income tax expense (benefit) at statutory
rate.................................................... $ (554,538) $1,981,614 $2,383,872
Extraordinary charge on extinguishment of debt.......... -- (1,241,747) --
State income tax expense (benefit), net of federal
benefit................................................. (78,786) 199,508 114,636
Amortization of costs in excess of net assets
acquired................................................ 28,727 14,433 13,151
Expenses not deductible for income tax purposes......... 26,642 127,168 19,306
Change in valuation allowance for deferred tax assets... 915,207 (708,133) (1,868,956)
Increase in AMT credit carryforwards.................... (274,514) (749,277) --
Internal Revenue Service agent's examination adjustment
to deferred tax asset................................. -- 380,246 --
Other................................................... 9,412 7,399 15,908
---------- ------------ ------------
$ 72,150 $ 11,211 $ 677,917
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
F-15
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
$307,600, $344,000 and $384,000 for 1993, 1994 and 1995, respectively.
NOTE 9. STOCKHOLDERS' EQUITY
Common Stock
As of January 1, 1994, Holding's authorized Class A and Class B Common Stock
consisted of 250,000 shares of $.001 par value stock for each class. In
connection with the 1994 Units Offering (see Note 5) and following stockholder
approval, Holding effected a 20-for-1 stock split for all of the Common Stock
and simultaneously increased its authorized shares of Class A and Class B Common
Stock to 20,000,000 and 20,000,000, which were subsequently reduced to 3,000,000
and 1,000,000, respectively. All references in the consolidated financial
statements to share data have been adjusted to give effect to the 20-for-1 stock
split. Also, in connection with the 1994 Units Offering, Berry paid a
$50,000,000 dividend on its outstanding Common Stock. The entire $50,000,000
dividend was paid to Holding as Holding is the sole shareholder of Common Stock
of Berry. Holding in turn utilized the $50,000,000 dividend to pay a
distribution on its Common Stock and certain other equity interests.
Class A Common Stock has one vote per share. Class B Common Stock is
non-voting except with respect to certain matters affecting the rights and
preferences of that class. Each share of Class B Common Stock is convertible at
the option of the holder into one share of Class A Common Stock upon the
occurrence of a merger, consolidation, liquidation or similar transaction.
Warrants
Warrants (the "Old Warrants") to purchase 534,700 shares of Holding's Common
Stock were issued to its lenders in connection with the original acquisition of
the assets of Berry Plastics, Inc. On December 31, 1992, Holding purchased
155,560 Old Warrants from the primary lender at $11.25 per warrant with
financing provided by the lender. The remaining 379,140 Old Warrants expire on
December 31, 2000 and are exercisable at nominal amounts upon the sale of
Holding or a public offering and under various instances in the event of a
refinancing of Holding's indebtedness. In addition, the remaining Old Warrants
contained certain put rights enabling the holders to mandate the repurchase of
such Old Warrants at a fair market value determined by agreement of Holding and
the Old Warrant holders. However, on March 29, 1994, Holding and the Old Warrant
holders finalized an agreement whereby the holders of the put rights
relinquished their right to mandate the repurchase of their shares of Common
Stock of Holding. The put rights were relinquished in exchange for agreement by
Holding to undertake a public offering of equity securities or to sell the stock
or consolidated assets of Holding on or prior to April 21, 1999. As of the date
the put rights were relinquished, the market value was estimated to be $11.00
per share. During November 1995, a third party private sale of a portion of
outstanding private warrants resulted in a current valuation of $10.64 per share
as of December 30, 1995.
In connection with the 1994 Units Offering (see Note 5), Holding issued
100,000 warrants (the "New Warrants") each to purchase 1.13237 shares of Class A
Common Stock, $.00005 par value, of Holding. The New Warrants, which became
detachable on October 15, 1994, represent the right to
F-16
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. STOCKHOLDERS' EQUITY--(CONTINUED)
purchase an aggregate of approximately 5% of the fully diluted common stock of
Holding (based on the common stock, warrants and options outstanding as of
December 30, 1995). The New Warrants are exercisable at $18.797 per share,
subject to adjustment upon the occurrence of certain events and become
exercisable as of the date of the earliest of: (i) a change of control, (ii) an
initial public offering or (iii) October 15, 2003. The New Warrants expire on
April 15, 2004.
Stock Option Plan
Pursuant to the provisions of the BPC Holding Corporation 1991 Stock Option
Plan which reserved 290,000 shares for future issuance, Holding has granted
options to certain officers and key employees to acquire shares of Class A
Common Stock. These options are subject to various option agreements, which
among other things, set forth the class of stock, option price and performance
thresholds to determine exercisability and vesting requirements. The Plan
expires in January 1998. As of December 30, 1995, the vested portion of stock
options was valued at $10.64 per share based on a third party sale of common
stock equivalents.
Plan option activity is summarized below:
<TABLE>
<CAPTION>
SHARES OF
OPTION CLASS A
PRICE COMMON STOCK
--------------- ------------
<S> <C> <C>
1993
Outstanding at December 26, 1992........................... $8.1566--$11.25 287,800
Lapsed..................................................... 8.1566--11.25 (22,760)
------------
Outstanding at January 1, 1994............................. 8.1566--11.25 265,040
1994
Granted.................................................... 11.25--25.00 19,860
Exercised.................................................. 8.1566--11.25 (174,260)
Lapsed..................................................... 11.25 (4,788)
------------
Outstanding at December 31, 1994........................... 8.1566--25.00 105,852
1995
Granted.................................................... 26.41 11,130
Purchase of vested options from management................. 25.00 (2,460)
------------
Outstanding at December 30, 1995........................... 8.1566--26.41 114,522
------------
------------
Exercisable at December 30, 1995........................... $8.1566--26.41 90,858
------------
------------
</TABLE>
In addition, using a restricted stock plan, 68,200 shares of Class A Common
Stock were issued to certain key management employees. Shares issued vest
ratably over the period from December 24, 1990 to December 23, 1995. Amounts
related to the compensation element for these plans for 1995 was income of
$214,800 and expense for 1993 and 1994 of $686,400 and $406,900, respectively.
The market value of stock used for valuing the compensation element of these
plans is determined by either a third party transaction of Holding's equity or
equity equivalents (private warrants were sold in November, 1995 at $10.64 per
share), or an estimate of value as determined by Holding's Board of Directors.
F-17
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. STOCKHOLDERS' EQUITY--(CONTINUED)
Stockholders Agreement
Holding has an agreement with its management stockholders whereby it may (i)
require the management stockholders to sell shares as designated by Holding or
Atlantic Equity Partners, L.P. (the "Fund") upon consummation of certain
transactions, (ii) grant the management stockholders certain rights of co-sale
in connection with the sales by the Fund, (iii) grant Holding rights to
repurchase stock of the management stockholders upon the occurrence of certain
events, (iv) grant the management stockholders rights to sell their shares to
Holding upon the occurrence of certain events and (v) require the management
stockholders to offer shares to the Fund or Holding prior to any permitted
transfer of shares.
NOTE 10. RELATED PARTY TRANSACTIONS
In connection with the 1994 Units Offering and simultaneously with the
negotiation of the Revolving Credit Facility, First Atlantic and Chase
Securities, Inc., an affiliate of Chase Manhattan Investment Holdings, Inc.
("CMIHI"), received advisory fees of $1,500,000 and $200,000, respectively.
Also, Whirlpool Financial Corporation, a lender and warrant holder in the
original acquisition of the assets of Berry Plastics, Inc., received
approximately $478,000 in prepayment penalties upon repayment of the outstanding
amounts under the existing credit facility (see Note 5).
The CIT Group/Equity Investments, Inc. ("CITEI") received fees of $150,000
and $37,500 in 1993 and 1994, respectively, for financial advisory services.
First Atlantic received fees of $625,000, $730,000 and $750,000 in 1993, 1994
and 1995, respectively, for financial and management consulting services and
fees of $200,000 in 1995 for financial services provided in connection with the
acquisition of Sterling Products, Inc. and Tri-Plas, Inc.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION
Holding's financial instruments generally consist of cash and cash
equivalents and Holding's long-term debt. The carrying amounts of Holding's
financial instruments approximate fair value at December 30, 1995, except for
Berry's Existing Senior Subordinated Notes for which the fair value exceeds the
carrying value by approximately $7,000,000.
F-18
<PAGE>
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS)
The following summarizes financial information of Holding's wholly-owned
subsidiary, Berry Plastics Corporation and subsidiaries:
<TABLE>
<CAPTION>
AS OF
----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS
Current assets..................................................... $ 32,074 $ 37,880
Property and equipment--net of accumulated depreciation............ 38,103 52,441
Other noncurrent assets............................................ 21,614 13,144
Current liabilities................................................ 21,551 27,672
Noncurrent liabilities............................................. 111,589 110,959
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales................................................... $ 87,830 $106,141 $140,681
Cost of goods sold.......................................... 65,652 73,997 102,484
Income (loss) before income taxes and extraordinary
charge...................................................... (1,014) 6,342 6,861
Extraordinary charge........................................ -- 3,652 --
Net income (loss)........................................... (942) 2,678 6,183
</TABLE>
F-19
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 4,502 $ 8,035
Accounts receivable (less allowance for doubtful accounts of $612
and $737)........................................................ 19,749 15,944
Inventories:
Finished goods................................................... 10,085 7,743
Raw materials and supplies....................................... 4,392 3,897
Custom molds..................................................... 724 257
-------- ------------
15,201 11,897
Prepaid expenses and other receivables............................. 901 1,593
Income taxes recoverable........................................... 793 411
-------- ------------
Total current assets................................................. 41,146 37,880
Assets held in trust................................................. 35,665
Property and equipment:
Land............................................................... 4,289 3,882
Buildings and improvements......................................... 16,177 15,712
Machinery, equipment and tooling................................... 74,471 68,801
Automobiles and trucks............................................. 565 496
Construction in progress........................................... 3,866 4,094
-------- ------------
99,368 92,985
Less accumulated depreciation...................................... 45,548 40,544
-------- ------------
53,820 52,441
Intangible assets:
Deferred financing and origination fees (net of accumulated
amortization of $1,993 and $1,555)................................... 10,899 5,962
Excess of cost over net assets acquired (net of accumulated
amortization of $609 and $425)....................................... 4,838 4,782
Patents (net of accumulated amortization of $4 and $0)............. 135 139
Covenants not to compete (net of accumulated amortization of $44
and $27)......................................................... 56 73
-------- ------------
15,928 10,956
Deferred income taxes................................................ 1,884 2,056
Other................................................................ 222 132
-------- ------------
Total assets......................................................... $148,665 $103,465
-------- ------------
-------- ------------
</TABLE>
F-20
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................... $ 12,811 $ 14,074
Accrued expenses and other liabilities............................. 4,612 2,807
Accrued interest................................................... 3,113 2,652
Employee compensation and payroll taxes............................ 4,968 4,618
Current portion of long-term debt.................................. 727 717
-------- ------------
Total current liabilities............................................ 26,231 24,868
Long-term debt, less current portion................................. 215,436 110,959
Deferred compensation................................................ -- 122
-------- ------------
Total liabilities.................................................... 241,667 135,949
Stockholders' equity (deficit):
Preferred stock; 1,000,000 shares authorized; 600,000 shares issued
and outstanding (net of discount of $3,511)...................... 11,061 --
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 91,000 shares issued and
outstanding.......................................................... 1 --
Nonvoting; 500,000 shares authorized; 259,000 shares issued and
outstanding.......................................................... 2 --
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized: 145,058 shares issued and
outstanding.......................................................... 1 --
Nonvoting; 500,000 shares authorized; 54,942 shares issued and
outstanding.......................................................... 1 --
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000 shares issued and
outstanding.......................................................... -- --
Treasury stock: 0 and 5,212 shares, respectively................... -- (58)
Additional paid-in capital......................................... 52,797 959
Warrants........................................................... 3,511 4,034
Retained earnings (deficit)........................................ (160,376) (37,419)
-------- ------------
Total stockholders' equity (deficit)................................. (93,002) (32,484)
-------- ------------
Total liabilities and stockholders' equity (deficit)................. $148,665 $103,465
-------- ------------
-------- ------------
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
ENDED
-------------------
JUNE 29, JULY 1,
1996 1995
-------- -------
(UNAUDITED)
<S> <C> <C>
Net sales................................................................ $ 73,872 $70,497
Cost of goods sold....................................................... 52,471 49,781
-------- -------
Gross margin............................................................. 21,401 20,716
Operating expenses:
Selling................................................................ 3,409 2,759
General and administrative............................................. 9,165 4,994
Research and development............................................... 393 358
Amortization of intangibles............................................ 205 456
-------- -------
Operating income......................................................... 8,229 12,149
Other expenses:
Loss (gain) on disposal of property and equipment...................... (23) 14
Other.................................................................. 512 458
-------- -------
Income before interest and income taxes.................................. 7,740 11,677
Interest:
Expense................................................................ (7,479) (6,970)
Income................................................................. 167 366
-------- -------
Income before income taxes............................................... 428 5,073
Income tax expense (benefit)............................................. 209 20
-------- -------
Net income (loss)........................................................ $ 219 $ 5,053
-------- -------
-------- -------
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ISSUED ADDITIONAL RETAINED
--------------------------- PREFERRED TREASURY PAID-IN EARNINGS
CLASS A CLASS B CLASS C STOCK STOCK CAPITAL WARRANTS (DEFICIT) TOTAL
------- ------- ------- --------- -------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995..................... -$- -$- -$- $ -- $(58) $ 960 $ 4,034 $ (37,419) $ (32,483)
Net income............... -- -- -- -- -- -- -- 219 219
Market value adjustment--
warrants................. -- -- -- -- -- (1,145) 9,399 (8,254) --
Exercise of stock
options.................. -- -- -- -- -- 1,130 -- -- 1,130
Distribution on sale of
equity interests........ -- -- -- -- 58 (1,424) (13,433) (114,922) (129,721)
Proceeds from newly
issued equity........... 3 2 -- 14,572 -- 52,797 -- -- 67,374
Payment of deferred
compensation............. -- -- -- -- -- 479 -- -- 479
Issuance of private
warrants................. -- -- -- (3,511) -- -- 3,511 -- --
-- -- --
--------- --- ---------- -------- --------- ---------
Balance at June 29,
1996..................... $ 3 $ 2 $-- $ 11,061 $-- $ 52,797 $ 3,511 $(160,376) $ (93,002)
-- -- --
-- -- --
--------- --- ---------- -------- --------- ---------
--------- --- ---------- -------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
ENDED
---------------------
JUNE 29, JULY 1,
1996 1995
--------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................ $ 219 $ 5,053
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 5,302 4,500
Non-cash interest expense........................................... 481 487
Write-off of deferred acquisition costs............................. -- 390
Non-cash compensation............................................... 358 173
Loss (gain) on sale of property and equipment....................... (23) 14
Deferred income taxes............................................... 172 (1,149)
Changes in operating assets and liabilities:
Accounts receivable, net.......................................... (3,824) (5,565)
Inventories....................................................... (3,304) (1,818)
Prepaid expenses and other receivables............................ 219 (549)
Accounts payable and accrued expenses............................. 1,309 579
Other assets...................................................... (6) (24)
--------- --------
Net cash provided by operating activities............................. 903 2,091
INVESTING ACTIVITIES
Additions to property and equipment................................... (5,890) (5,308)
Proceeds from disposal of property and equipment...................... 43 13
Purchase of assets of Sterling Products, Inc., net of cash acquired... -- (7,246)
Purchase of Alpha and other acquisition costs......................... (776) (395)
--------- --------
Net cash used for investing activities................................ (6,623) (12,936)
FINANCING ACTIVITIES
Payments on long-term borrowings...................................... (500) (500)
Net proceeds from long-term borrowings................................ 49 --
Payments on capital lease............................................. (106) (97)
Exercise of management stock options.................................. 1,130 --
Proceeds from senior secured notes.................................... 105,000 --
Proceeds from issuance of common stock................................ 52,797 --
Proceeds from issuance of preferred stock and warrants................ 14,572 --
Rollover investments and share repurchases............................ (125,219) --
Assets held in trust.................................................. (35,600) --
Net payments to public warrant holders................................ (4,502) --
Debt issuance costs................................................... (5,369) (178)
Interest income applied to the assets held in trust................... (65) --
Reclassification of cash held for acquisition......................... -- 12,000
--------- --------
Net cash provided by financing activities............................. 2,187 11,225
--------- --------
Net increase (decrease) in cash and cash equivalents.................. (3,533) 380
Cash and cash equivalents at beginning of period...................... 8,035 9,327
--------- --------
Cash and cash equivalents at end of period............................ $ 4,502 $ 9,707
--------- --------
--------- --------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of BPC Holding
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the periods presented are not necessarily
indicative of the results that may be expected for the full fiscal year. The
accompanying financial statements include the results of the Company's
wholly-owned subsidiary, Berry Plastics Corporation ("Berry"), and its
wholly-owned subsidiaries: Berry Iowa Corporation; Berry Tri-Plas Corporation;
and Berry Sterling Corporation. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-K filed with the Securities and Exchange Commission for the
year ended December 30, 1995.
2. COMPANY RECAPITALIZATION
On June 18, 1996, BPC Mergerco, Inc. ("Mergerco"), a company organized by
Atlantic Equity Partners International II, L.P., Chase Venture Capital
Associates, L.P., certain other institutional investors and management, effected
the acquisition of a majority of the outstanding capital stock of BPC Holding
Corporation ("Holding") by way of merger with Holding, with Holding being the
surviving corporation (the "Transaction"). Sources of funds for the new capital
structure included the issuance of $55.0 million of common stock, $15.0 million
of preferred stock and warrants to purchase common shares of Holding, $105.0
million of 12.5% Senior Secured Notes due 2006 (the "Notes") described below,
and exercise of management stock options of approximately $0.9 million.
Approximately $125.2 million of the proceeds were used for rollover investments
and purchase of equity interests, and the remaining proceeds were used to make
payments of approximately $4.5 million to public warrant holders, to establish
an escrow account of $35.6 million to pay the first three years' interest on the
Notes, to make deferred payments to certain members of management of
approximately $2.7 million, to pay fees and expenses related to the Transaction
of approximately $7.8 million and $0.1 million was held in cash.
In connection with the Transaction, Holding retired its old class A and
class B common stock and authorized the creation of 500,000 shares each of new
class A voting and non-voting common stock, 500,000 shares each of new class B
voting and non-voting common stock, and 500,000 shares of new class C non-voting
common stock.
3. ISSUANCE OF SENIOR SECURED NOTES
In connection with the Transaction mentioned above, Holding completed a 144A
private placement of the Notes. The Notes bear interest at 12 1/2% and mature on
June 15, 2006. These Notes are senior secured obligations of Holding and are
secured by a first priority pledge of all shares of outstanding capital stock of
Berry. Except as provided below, interest on the Notes will be payable in cash
semi-annually in arrears on June 15 and December 15 of each year, commencing
December 15, 1996.
F-25
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. ISSUANCE OF SENIOR SECURED NOTES--(CONTINUED)
Proceeds of the Notes (net of fees and expenses of approximately $5.4
million) were used to finance $64.0 million of the purchase of equity interests
(see Note 2) and establish an escrow of $35.6 million to pay the first three
years' interest on the Notes.
In addition, from December 15, 1999 until June 15, 2001, the Company may, at
its option, pay interest, at an increased rate of .75% per annum, in the form of
additional Notes valued at 100% of the principal amount thereof.
4. ACQUISITIONS
On December 21, 1995, the Company acquired substantially all of the assets
and assumed certain liabilities of Tri-Plas, Inc. (the "Tri-Plas Acquisition")
through its subsidiary Berry Tri-Plas Corporation (formerly Berry-CPI Plastics
Corp.) for $6,600,000. The operations of Berry Tri-Plas Corporation are included
in the Company's operations since the acquisition date using the purchase method
of accounting.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Tri-Plas Acquisition occurred on January 1,
1995.
<TABLE>
<CAPTION>
JULY 1,
1995
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C>
Net sales..................................................... $78,788
Income before income taxes.................................... 3,705
Net income.................................................... 3,685
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated at the above date, nor are they
necessarily indicative of future operating results. Further, the information
gathered on the acquired company is based upon unaudited internal financial
information and reflects only pro forma adjustments for additional interest
expense and amortization of the excess of the cost over the underlying net
assets acquired, net of the applicable income tax effect.
F-26
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
12.50% Senior Secured Notes....................................... $105,000 --
12.25% Senior Subordinated Notes.................................. $100,000 $100,000
Nevada Industrial Revenue Bonds................................... 5,500 6,000
Iowa Industrial Revenue Bonds..................................... 5,400 5,400
Capital lease obligation.......................................... 896 1,002
Revolving loan.................................................... 49 --
Debt discount..................................................... (682) (726)
-------- ------------
216,163 111,676
Less current portion of long-term debt............................ 727 717
-------- ------------
$215,436 $110,959
-------- ------------
-------- ------------
</TABLE>
The current portion of long-term debt is limited to a $0.5 million repayment
of the industrial revenue bonds and the monthly principal payments related to a
capital lease obligation. The Company also maintains a $28 million revolving
line of credit with Fleet Capital Corporation ("Fleet Capital"). As of June 29,
1996, approximately $12 million of this credit line was used to provide a letter
of credit for the outstanding industrial revenue bonds. Based on the borrowing
formula as of June 29, 1996, the Company had approximately $16 million of
additional available credit under the Fleet Capital credit line.
6. PATENT INFRINGEMENT LITIGATION
On April 25, 1996, in connection with the patent infringement lawsuit filed
by Berry Sterling Corporation ("Berry Sterling") against Pescor Plastics, Inc.,
the United States District Court for the Eastern District of Virginia entered an
order that held that Berry Sterling's patent for the design of a drink cup was
not valid. The Company is currently appealing this ruling.
F-27
<PAGE>
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER
PERSON IS AUTHORIZED IN CONNECTION WITH
ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT $105,000,000
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES BPC HOLDING CORPORATION
OFFERED HEREBY, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES 12 1/2% SERIES B SENIOR SECURED
OFFERED HEREBY TO ANY PERSON IN ANY NOTES DUE 2006
JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. ------------
PROSPECTUS
------------------- ------------
TABLE OF CONTENTS
PAGE
----
Available Information............. ii
Incorporation of Certain Documents
by Reference................... iii
Summary of Prospectus............ 1
Risk Factors..................... 10
The Exchange Offer............... 16
The Transaction.................. 25
Use of Proceeds.................. 27
Capitalization................... 28
Pro Forma Condensed Consolidated
Financial Statements............. 29
Selected Historical Financial
Data........................... 32
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 34
Business......................... 40
Management....................... 51
Principal Stockholders........... 57
Certain Transactions............. 59 August 28, 1996
Description of Common Stock...... 61
Description of Preferred Stock and
Warrants......................... 62
Description of Certain
Indebtedness................... 63
Description of Senior Notes...... 66
Certain Federal Income Tax
Considerations................... 88
Plan of Distribution............. 93
Legal Matters.................... 94
Experts.......................... 94
Index to Financial Statements.... F-1
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
