-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HFElB9f0lAfRG4zSwkXYaByKGgIT5gvqYFf/orS08klbwlYk00JFyLuSK0MhhTku pHQtr25R6EdnuUOX40C7Ow== 0000890566-99-001204.txt : 19990825 0000890566-99-001204.hdr.sgml : 19990825 ACCESSION NUMBER: 0000890566-99-001204 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990823 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739 FILM NUMBER: 99697408 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BPC HOLDING CORP CENTRAL INDEX KEY: 0000919465 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351814673 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-01 FILM NUMBER: 99697409 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY IOWA CORP CENTRAL INDEX KEY: 0000919467 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 421382173 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-02 FILM NUMBER: 99697410 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 BUSINESS PHONE: 8124242904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY TRI PLAS CORP CENTRAL INDEX KEY: 0001011391 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561949250 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-03 FILM NUMBER: 99697411 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST CITY: EVANSVILLE STATE: IN ZIP: 47710 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY STERLING CORP CENTRAL INDEX KEY: 0001075619 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 541749681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-04 FILM NUMBER: 99697412 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACKERWARE CORP CENTRAL INDEX KEY: 0001075620 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 480759852 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-05 FILM NUMBER: 99697413 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS DESIGN CORP CENTRAL INDEX KEY: 0001075621 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 621689708 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-06 FILM NUMBER: 99697414 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VENTURE PACKAGING INC CENTRAL INDEX KEY: 0001075622 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 510368479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-07 FILM NUMBER: 99697415 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VENTURE PACKAGING MIDWEST INC CENTRAL INDEX KEY: 0001075623 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-08 FILM NUMBER: 99697416 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VENTURE PACKAGING SOUTHEAST INC CENTRAL INDEX KEY: 0001075624 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-09 FILM NUMBER: 99697417 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NIM HOLDINGS LTD CENTRAL INDEX KEY: 0001075625 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-10 FILM NUMBER: 99697418 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNIGHT PLASTICS INC CENTRAL INDEX KEY: 0001075626 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 352056610 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-11 FILM NUMBER: 99697419 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROCON INC /DE/ CENTRAL INDEX KEY: 0001075629 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351948748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-12 FILM NUMBER: 99697420 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORWICH INJECTION MOULDERS LTD CENTRAL INDEX KEY: 0001075630 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351948748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-13 FILM NUMBER: 99697421 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL PACKAGING INC CENTRAL INDEX KEY: 0001093665 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 341396561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-14 FILM NUMBER: 99697422 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CPI HOLDING CORP CENTRAL INDEX KEY: 0001093666 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 341820303 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85739-15 FILM NUMBER: 99697423 BUSINESS ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 S-4 1 As filed with the Securities and Exchange Commission on August 20, 1999 Registration No. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- BERRY PLASTICS CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 35-1813706 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BPC HOLDING CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 35-1814673 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BERRY IOWA CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 42-1382173 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BERRY TRI-PLAS CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 56-1949250 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BERRY STERLING CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 54-1749681 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) AEROCON, INC. (Exact name of registrant as specified in charter) Delaware 3089 35-1948748 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) PACKERWARE CORPORATION (Exact name of registrant as specified in charter) Kansas 3089 48-0759852 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) PACKERWARE CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BERRY PLASTICS DESIGN CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 62-1689708 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) VENTURE PACKAGING, INC. (Exact name of registrant as specified in charter) Delaware 3089 51-0368479 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) VENTURE PACKAGING MIDWEST, INC. (Exact name of registrant as specified in charter) Delaware 3089 34-1809003 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) VENTURE PACKAGING SOUTHEAST, INC. (Exact name of registrant as specified in charter) South Carolina 3089 57-1029638 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) VENTURE PACKAGING SOUTHEAST, INC. (Exact name of registrant as specified in charter) Delaware 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) NIM HOLDINGS LIMITED (Exact name of registrant as specified in charter) England and Wales 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) NORWICH INJECTION MOULDERS LIMITED (Exact name of registrant as specified in charter) England and Wales 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) KNIGHT PLASTICS, INC. (Exact name of registrant as specified in charter) _______________ Delaware 3089 35-2056610 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) CPI HOLDING CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 34-1820303 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) CARDINAL PACKAGING, INC. (Exact name of registrant as specified in charter) Ohio 3089 34-1396561 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) NORWICH ACQUISITION LIMITED (Exact name of registrant as specified in charter) England and Wales 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) BERRY PLASTICS ACQUISITION CORPORATION (Exact name of registrant as specified in charter) Delaware 3089 N/A (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
101 Oakley Street Evansville, Indiana 47710 (812) 424-2904 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) _______________ Martin R. Imbler President and Chief Executive Officer Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 (812) 424-2904 (Name, address, including zip code, and telephone number, including area code, of agent for service of process) _______________ WITH COPIES TO: James M. Lurie, Esq. O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 (212) 408-2400 _______________ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________________ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _______________
CALCULATION OF REGISTRATION FEE ================================================================================================= PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OFFERING AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE(1) FEE - ------------------------------------------------------------------------------------------------- 11% Series B Senior Subordinated Notes due 2007..... $75,000,000 100% $75,000,000 $20,850 - ------------------------------------------------------------------------------------------------- Guarantees of Senior Subordinated Notes due 2007..... (2) (2) (2) (2) =================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee. (2) BPC Holding Corporation and each of the domestic and foreign subsidiaries of Berry Plastics Corporation will guarantee on an unconditional basis the obligations of Berry Plastics Corporation under the 11% Senior Subordinated Notes due 2007. Pursuant to Rule 457(n), no additional registration fee is being paid in respect of the guarantees. __________________ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. Subject to Completion, dated August ___, 1999 PROSPECTUS BERRY PLASTICS CORPORATION OFFER TO EXCHANGE ALL OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE 2007 $75,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING, FOR 11% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 ------------------------------------------------------------------------ | THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, | | ON , 1999, UNLESS EXTENDED. | ------------------------------------------------------------------------ o We will exchange all notes that you validly tender and do not validly withdraw. o You may withdraw your tender of notes any time before the expiration of the exchange offer. o The exchange offer is not subject to any condition, other than that it not violate any applicable law or interpretation of the staff of the Securities and Exchange Commission. o Neither us nor our guarantors will receive any proceeds from the exchange offer. o Based on the advice of our counsel, we believe the exchange of notes will not be a taxable exchange for U.S. federal income tax purposes. o The terms of the exchange notes are substantially identical to the outstanding notes, except for the transfer restrictions and registration rights relating to the outstanding notes and preferred stock. o There is no existing market for the exchange notes, and we do not intend to apply for their listing on any securities exchange. o Each broker-dealer that receives exchange notes must deliver a prospectus in connection with any resales of the exchange notes or the new preferred stock. o Each broker-dealer that acquired exchange notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. SEE "RISK FACTORS" COMMENCING ON PAGE 11 FOR A DISCUSSION OF FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OUTSTANDING NOTES IN THE EXCHANGE OFFER. ------------------- THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS AUGUST , 1999 TABLE OF CONTENTS PAGE PAGE Where You Can Find More Information.. i Principal Stockholders......... 61 Prospectus Summary................... 1 Certain Transactions........... 63 Risk Factors ........................ 11 Description of Certain Other Exchange Offer....................... 20 Debt......................... 68 Capitalization....................... 29 Description of Notes........... 70 Pro Forma Condensed Consolidated Certain Federal Income Tax Financial Statements............... 30 Considerations............... 107 Selected Historical Financial Data... 36 Plan of Distribution........... 111 Management's Discussion and Analysis Legal Matters.................. 112 of Financial Condition and Results Experts........................ 112 of Operations...................... 38 Index to Financial Statements.. F-1 Business............................. 44 Management......................... 54 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act of 1933 with respect to the exchange notes. This prospectus, which is a part of that registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the exchange notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have included copies of these documents as exhibits to our registration statement. Upon effectiveness of the registration statement of which this prospectus is a part, we will be subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith will file reports and other information with the SEC. You may inspect any such material, without charge, at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices located at Seven World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition we will file electronic versions of these documents with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The SEC maintains a World Wide Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act including, in particular, the statements about our plans, strategies, and prospects under the headings "Prospectus Summary", "Management's Discussion and Analysis of Financial Condition and Results of Operations and Business." Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including under the heading "Risk Factors." All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this prospectus. ---------------- Certain of the names and logos of our products referenced in this prospectus are our trademarks. Each trade name, trademark or servicemark of any other company appearing in this prospectus is the property of its holder. i PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, "BERRY PLASTICS," "WE," "US," "OUR" AND SIMILAR TERMS REFER TO BERRY PLASTICS CORPORATION, ITS SUBSIDIARIES AND THEIR RESPECTIVE OPERATIONS, AND THE TERM "BPC HOLDING" REFERS TO BPC HOLDING CORPORATION. THE FISCAL YEAR OF BPC HOLDING AND BERRY PLASTICS IS THE 52 OR 53 WEEK PERIOD ENDING ON THE SATURDAY CLOSEST TO DECEMBER 31. ALL REFERENCES IN THIS PROSPECTUS TO "FISCAL 1994," "FISCAL 1995," "FISCAL 1996," "FISCAL 1997" AND "FISCAL 1998" REFER TO THE FISCAL YEARS OF BERRY PLASTICS AND BPC HOLDING ENDED ON JANUARY 1, 1994, DECEMBER 31, 1994, DECEMBER 30, 1995, DECEMBER 28, 1996, DECEMBER 27, 1997 AND JANUARY 2, 1999, RESPECTIVELY. ALSO, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE INFORMATION CONTAINED IN THIS PROSPECTUS GIVES PRO FORMA EFFECT TO THE ACQUISITION BY US OF NORWICH INJECTION MOULDERS LIMITED, THE KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC., AND CARDINAL PACKAGING, INC. AS OF THE BEGINNING OF THE PERIOD STATED FOR INCOME STATEMENT DATA AND AT THE DATE STATED FOR BALANCE SHEET DATA. THE COMPANY We are the nation's leading manufacturer and supplier of plastic injection-molded aerosol overcaps, drink cups and rigid thinwall open-top containers for a wide variety of end-use markets. We are also a leading manufacturer and supplier of plastic injection-molded semi-disposable housewares. In addition, with sales of over two billion aerosol overcaps in fiscal 1998, we believe that we are the largest supplier of plastic aerosol overcaps in the world. In our plastic packaging business, we focus primarily on three markets: aerosol overcaps, rigid thinwall open-top containers and drink cups. Our housewares business produces home products such as dinnerware, tumblers and garden items. We concentrate on manufacturing high-quality items sold to image-conscious marketers of consumer and industrial products. With over 1,000 proprietary molds, superior color matching capabilities, sophisticated multi-color printing techniques and nationwide plant locations, we consistently produce and deliver mass quantities of high-quality products on a cost-efficient basis. Our total net sales among our product categories is as follows:
FISCAL -------------------------------------------------- 1994 1995 1996 1997 1998 ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) PLASTIC PACKAGING PRODUCTS: Aerosol overcaps ........ $ 38.0 $ 43.6 $ 49.7 $ 47.1 $ 49.1 Rigid open-top containers 61.6 71.1 80.8 111.5 145.9 Drink cups .............. 17.3 14.1 37.6 39.9 Other ................... 6.5 8.7 6.5 13.3 15.3 PLASTIC HOUSEWARES PRODUCTS . 17.5 21.6 ------ ------ ------ ------ ------ Total net sales ............. $106.1 $140.7 $151.1 $227.0 $271.8 ====== ====== ====== ====== ======
We supply aerosol overcaps to a wide variety of customers and for a wide variety of products, including such well-known brand names as Faultless starch, Gillette personal care products, Pam cooking spray, Pledge furniture polish, Raid insect repellants, Rustoleum and Sherwin-Williams paints and Sure deodorant. Similarly, our containers are used for packaging a broad spectrum of consumer and commercial products, including Arch (Olin) pool chemicals, Elmer's home repair products, Hershey's cocoa, McDonald's children's meals, Milliken adhesives, Pillsbury cookie dough and promotional containers for a variety of customers, including the National Football League, Walt Disney and Warner- Brothers. Our drink cups are sold to fast food and family-dining restaurants, convenience stores, stadiums and retail stores. Our largest drink cup customers are Circle K, Coca-Cola, McDonald's, Pepsi-Cola and Steak' n Shake. Our housewares products are primarily seasonal, semi-disposable housewares and lawn and garden items such as plates, bowls, pitchers, tumblers and flower pots. Our largest housewares customer, Wal-Mart, named us their housewares "Supplier of the Year" for 1998. 1 COMPETITIVE STRENGTHS We believe that we are a strong competitor in our industry for the following reasons: o SUCCESSFUL INTEGRATION OF NUMEROUS STRATEGIC ACQUISITIONS. o HIGH-CAPACITY, STATE-OF-THE-ART PRODUCTION CAPABILITIES. o FULL PRODUCT LINES AND STRONG MARKET POSITION. o LARGE, DIRECT SALES FORCE. o IN-HOUSE PRODUCT DESIGN AND GRAPHIC ARTS CAPABILITIES. o DEDICATION TO SERVICE AND QUALITY. o LARGE, DIVERSE CUSTOMER BASE. For a complete discussion of our competitive strengths, see "Business -- Competitive Strengths." GROWTH STRATEGY Our goal is to maintain and enhance our market position and leverage our core strengths to increase profitability. Our strategy to achieve this goal includes the following elements: o PURSUE STRATEGIC ACQUISITIONS IN OUR CORE BUSINESSES. o DESIGN AND INTRODUCE INNOVATIVE NEW PRODUCTS TO PENETRATE NEW MARKETS. o EMPHASIZE OUTSTANDING PRODUCT QUALITY AND CUSTOMER SERVICE. For a complete discussion of our growth strategy, see "Business -- Growth Strategy." Our address is 101 Oakley Street, Evansville, Indiana 47710. Our telephone number is (812) 424-2904. ACQUISITIONS CARDINAL Cardinal, which is headquartered in Streetsboro, Ohio, operates three manufacturing locations and is the nation's leading producer and marketer of plastic containers for ice cream and other frozen desserts. Cardinal also sells containers for other consumer products, such as refrigerated dairy products and non-dairy foods. Cardinal has filling equipment in many of its customers' plants and provides the services needed to operate this equipment. By providing its customers with both containers and the filling machine equipment, Cardinal significantly increases customer retention. In July 1999, we acquired Cardinal for about $72.0 million, including related acquisition costs. For the year ended November 30, 1998, Cardinal reported net sales of $54.0 million. As in our nine previous acquisitions, we believe that we can lower Cardinal's costs by consolidating plants, purchasing resin in greater volume, using larger, more cost-efficient injection-molding equipment and improving Cardinal's operating systems. 2 1998 ACQUISITIONS In October 1998, we acquired the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for about $18 million. Knight, which is headquartered in Woodstock, Illinois, manufactures and markets plastic injection- molded aerosol overcaps. We believe that this acquisition enhanced our aerosol overcap business and better positioned us to meet the needs of our domestic customers. For the year ended March 31, 1998, Knight reported net sales of $23.8 million. Since the acquisition, we have significantly reduced Knight's manufacturing and operating costs, principally by closing one of its two manufacturing plants. In July 1998, we acquired Norwich Injection Moulders Limited for about $14 million. Norwich, which is headquartered in Norwich, England, manufactures and markets plastic injection-molded overcaps and closures for the European market. For the year ended October 31, 1997, Norwich reported net sales of about $13.4 million. Norwich provides us with a European production platform that allows us to better serve our global overcap customers and to introduce our other product lines in Europe. 1997 ACQUISITIONS During 1997 we completed four acquisitions, including PackerWare Corporation and Venture Packaging, Inc. PackerWare, which is headquartered in Lawrence, Kansas, is a major producer of drink cups and housewares. For the year ended October 31, 1996, PackerWare reported net sales of $42.8 million. The acquisition of PackerWare enabled us to enter the housewares business and strengthened our position in the plastic drink cup market. Venture, which is headquartered in Monroeville, Ohio, reported net sales of $42.3 million for the year ended September 30, 1996 and is one of the nation's largest producers of plastic injection-molded containers for the food and dairy markets. 3 THE EXCHANGE OFFER REGISTRATION RIGHTS AGREEMENT......... The outstanding notes were sold by us on July 6, 1999 to Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc. (the "Initial Purchasers"), who placed the outstanding notes with institutional investors. In connection therewith, we and the Initial Purchasers executed and delivered for the benefit of the holders of the outstanding notes a registration rights agreement (the "Registration Rights Agreement") providing, among other things, for the exchange offer. THE EXCHANGE OFFER.................... Exchange notes are being offered in exchange for a like principal amount of outstanding notes. As of the date of this prospectus, $75,000,000 aggregate principal amount of notes are outstanding. We will issue the exchange notes to holders promptly following the expiration date. See "Risk Factors-- Your ability to resell your notes will remain restricted if you fail to exchange them in the exchange offer." EXPIRATION DATE....................... The exchange offer will expire at 5:00 p.m., New York City time, on , 1999, unless we decide to extend the expiration date. INTEREST.............................. Each exchange note will bear interest from January 15, 2000. Interest will be payable on the outstanding notes accepted for exchange to, but not including, January 15, 2000. CONDITIONS TO THE EXCHANGE OFFER...... The exchange offer is subject to certain customary conditions, which we may waive. We reserve the right to amend, terminate or extend the exchange offer at any time prior to the expiration date upon the occurrence of any such condition. See "The Exchange Offer-- Conditions." PROCEDURES FOR TENDERING OUTSTANDING If you wish to accept the exchange NOTES............................... offer, you must complete, sign and date the letter of transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the letter of transmittal, or facsimile, or an Agent's Message (as defined herein) together with the outstanding 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, you will represent to us, among other things, that o the exchange notes acquired pursuant to the exchange offer by you and any beneficial owners of outstanding notes are being obtained in the ordinary course of business of the person receiving the exchange notes; o neither you nor such beneficial owner has an arrangement with any person to participate in the distribution of the exchange notes; 4 o neither you nor such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such exchange notes; and o neither you nor such beneficial owner is our "affiliate," as defined under Rule 405 promulgated under the Securities Act. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than outstanding notes acquired directly from us), may participate in the exchange offer but may be deemed an "underwriter" under the Securities Act and, therefore, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer-- Procedures for Tendering" and "Plan of Distribution." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS. If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender you should contact such registered person promptly and instruct that registered person to tender on your behalf. If you wish to tender on your own behalf you must, prior to completing and executing the letter of transmittal or delivering an Agent's Message and delivering his outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES........... If you wish to tender your outstanding notes and: o time will not permit your notes or other required documents to reach the notes exchange agent by the expiration date; or o the procedure for book-entry transfer cannot be completed on time; you may tender your notes in compliance with the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer -- Withdrawal of Tenders." WITHDRAWAL RIGHTS..................... You may withdraw your tender as provided in this prospectus at any time prior to 5:00 p.m., New York City time, on the expiration date. See "The Exchange Offer -- Withdrawal of Tenders." 5 ACCEPTANCE OF OUTSTANDING NOTES AND We will accept for exchange any and all DELIVERY OF EXCHANGE NOTES............ outstanding notes that are properly tendered in the exchange offer prior to 5:00 p.m., New York City time, on the expiration date. The exchange notes issued pursuant to the exchange offer will be delivered promptly following the expiration date. See "The Exchange Offer -- Terms of the Exchange Offer." EXCHANGE AGENT........................ United States Trust Company of New York is serving as exchange agent in connection with the exchange offer. See "The Exchange Offer -- Exchange Agent." USE OF PROCEEDS....................... There will be no cash proceeds to us or the guarantors from the exchange pursuant to the exchange offer. FEDERAL INCOME TAX CONSEQUENCES....... The exchange of outstanding notes for exchange notes will not be a taxable exchange for Federal income tax purposes. See "Certain Federal Income Tax Considerations." CONSEQUENCES OF FAILURE TO EXCHANGE... If you do not exchange your outstanding notes for exchange notes pursuant to the exchange offer you will continue to be subject to the restrictions on transfer of such outstanding notes as set forth in the legend thereon as a consequence of the issuance of the outstanding notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. SUMMARY DESCRIPTION OF THE EXCHANGE NOTES The exchange offer applies to $75,000,000 aggregate principal amount of outstanding notes. The terms of the exchange notes are identical in all material respects to the outstanding notes, except that the exchange notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions providing for an increase in the interest rate on the outstanding 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 exchange notes will evidence the same debt as the outstanding notes and, except as set forth in the immediately preceding sentence, will be entitled to the benefits of the Indenture, under which both the outstanding notes were, and the exchange notes will be, issued. See "Description of Notes." THE EXCHANGE NOTES.................... $75 million in aggregate principal amount of 11% Series B Senior Subordinated Notes due 2007 (the "1999 Notes"). MATURITY DATE......................... July 15, 2007. INTEREST PAYMENT DATES................ January 15 and July 15 of each year, commencing on January 15, 2000. MANDATORY REDEMPTION.................. We are not required to make mandatory redemption or sinking fund payments with respect to the exchange notes. 6 OPTIONAL REDEMPTION................... On or after , the exchange notes will be redeemable at any time at our option, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. CHANGE OF CONTROL..................... In the event of a Change of Control, each holder of the notes will have the right to require us to repurchase such holder's notes, in whole or in part, at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. GUARANTEES............................ The exchange notes will be guaranteed by our parent corporation, BPC Holding, and each of our domestic and foreign subsidiaries. The note guarantees will be unconditional joint and several obligations of each guarantor and will be subordinated as described below under "Ranking." RANKING............................... The exchange notes will be unsecured senior subordinated obligations of Berry Plastics, will rank PARI PASSU with our $100 million principal amount of 121/4% Senior Subordinated Notes due 2004 (the "1994 Notes") and our $25 million principal amount of 121/4% Senior Subordinated Notes due 2004 (the "1998 Notes") and will be subordinate in right of payment to all our Senior Indebtedness, which will include borrowings under our credit facility. The exchange notes will be senior to any indebtedness which by its terms is subordinate to the exchange notes, regardless of when such indebtedness is incurred. Each note guarantee will be subordinate in right of payment to all Senior Indebtedness of each guarantor. Our Senior Indebtedness consists of borrowings under our credit facility and our Nevada Industrial Revenue Bonds. Senior Indebtedness of the guarantors consists of their joint and several guarantee of our obligations under our credit facility and obligations with respect to our Nevada Industrial Revenue Bonds and, in the case of BPC Holding, the 1996 Notes. As of July 3, 1999, the aggregate amount of our outstanding Senior Indebtedness would have been $89.0 million, the aggregate amount of our outstanding total indebtedness, including the 1994 Notes and the 1998 Notes, would have been $290.5 million, and the indebtedness of the guarantors senior to the note guarantees would have been $395.5 million. As of July 3, 1999, all of our indebtedness other than the Senior Indebtedness was PARI PASSU in right of payment to the exchange notes, and there was no indebtedness subordinated to the exchange notes. CERTAIN COVENANTS..................... The Indenture pursuant to which the outstanding notes were, and the exchange notes will be, issued (the "Indenture") contains covenants, including, but not limited to, covenants with respect to the following matters: 7 o limitations on the retention of proceeds from asset sales; o limitations on the incurrence of additional indebtedness and the issuance of disqualified stock; o limitations on restricted payments; o limitations on transactions with affiliates; o limitations on liens; o limitations on dividends and other payment restrictions affecting subsidiaries; and o limitations on mergers, consolidations and sales of assets. In addition, while the Indenture contains, among other things, the foregoing covenants as well as a requirement to offer to purchase exchange notes upon a Change of Control, the Indenture does not contain any provisions specifically intended to protect holders of the exchange notes in the event of a future highly leveraged transaction involving us or any guarantor. See "Description of Notes." RISK FACTORS SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING OUTSTANDING NOTES IN THE EXCHANGE OFFER. 8 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following table presents summary financial data for BPC Holding and its subsidiaries. The summary historical financial data for fiscal 1994, fiscal 1995, fiscal 1996, fiscal 1997 and fiscal 1998 come from BPC Holding's audited consolidated financial statements. BPC Holding's and its subsidiaries' audited consolidated financial statements for fiscal 1997 and fiscal 1998 and the audited consolidated statement of operations and cash flows for fiscal 1996 are included in this prospectus. The summary unaudited pro forma financial data give effect to our acquisitions of Cardinal, Knight and Norwich, and issuance of the notes. The summary unaudited pro forma financial data are not necessarily indicative of the operating results or the financial position that would have been achieved had the events given effect therein been consummated and should not be construed as representative of future operating results or financial position.
FISCAL --------------------------------------------------------------------- 1994 1995 1996 1997 1998 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) CONSOLIDATED OPERATIONS STATEMENT DATA: Net sales ................................. $ 106,141 $ 140,681 $ 151,058 $ 226,953 $ 271,830 Cost of goods sold ........................ 73,997 102,484 110,110 180,249 199,227 --------- --------- --------- --------- --------- Gross margin .............................. 32,144 38,197 40,948 46,704 72,603 Operating expenses ........................ 15,160 17,670 23,679 30,505 44,001 --------- --------- --------- --------- --------- Operating income .......................... 16,984 20,527 17,269 16,199 28,602 Other expenses(1) ......................... 184 127 302 226 1,865 Interest expense, net (2) ................. 10,972 13,389 20,075 30,246 34,556 --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary charge ................ 5,828 7,011 (3,108) (14,273) (7,819) Income taxes (benefit) .................... 11 678 239 138 (249) --------- --------- --------- --------- --------- Income (loss) before extraordinary charge .................................. 5,817 6,333 (3,347) (14,411) (7,570) Extraordinary charge(3) ................... 3,652 -- -- -- -- --------- --------- --------- --------- --------- Net income (loss) ......................... $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (7,570) ========= ========= ========= ========= ========= CONSOLIDATED OTHER DATA: Adjusted EBITDA(4) ........................ $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 Adjusted EBITDA margin(5) ................. 24.9% 22.4% 23.0% 17.7% 22.0% Cash provided by operating activities ............................. 15,556 12,969 14,426 14,154 34,131 Cash used for investing activities ........ (9,495) (25,385) (14,639) (102,102) (52,120) Cash provided by financing activities ............................. 2,184 11,124 2,370 80,444 17,619 Depreciation and amortization(6) .......... 8,176 9,536 11,331 19,026 24,830 Capital expenditures ...................... 9,118 11,247 13,581 16,774 22,595 Ratios of earnings to fixed charges (7) ............................... 1.5x 1.5x -- -- -- BERRY PLASTICS DATA: Cash interest expense, net ...................... $ 9,795 $ 12,439 $ 12,854 $ 17,187 $ 20,569 Ratio of Adjusted EBITDA to cash interest expense, net ......................... 2.9x Ratio of net debt to Adjusted EBITDA ............ 3.6x
PRO FORMA 26 PRO FORMA WEEKS ENDED FISCAL JULY 3, 1998 1999 --------- ------------ CONSOLIDATED OPERATIONS STATEMENT DATA: Net sales ................................. $ 352,670 $ 188,317 Cost of goods sold ........................ 265,079 136,189 --------- --------- Gross margin .............................. 87,591 52,128 Operating expenses ........................ 55,851 30,079 --------- --------- Operating income .......................... 31,740 22,049 Other expenses(1) ......................... 1,861 778 Interest expense, net (2) ................. 45,604 22,174 --------- --------- Income (loss) before income taxes and extraordinary charge ................ (15,725) (903) Income taxes (benefit) .................... 90 482 --------- --------- Income (loss) before extraordinary charge .................................. (15,815) (1,385) Extraordinary charge(3) ................... -- -- --------- --------- Net income (loss) ......................... $ (15,815) $ (1,385) ========= ========= CONSOLIDATED OTHER DATA: Adjusted EBITDA(4) ........................ $ 77,526 $ 42,964 Adjusted EBITDA margin(5) ................. 22.0% 22.8% Cash provided by operating activities ............................. 47,745 20,876 Cash used for investing activities ........ (133,059) (90,258) Cash provided by financing activities ............................. 84,944 79,943 Depreciation and amortization(6) .......... 32,496 16,350 Capital expenditures ...................... 28,759 15,666 Ratios of earnings to fixed charges (7) ............................... -- -- BERRY PLASTICS DATA: Cash interest expense, net ...................... $ 31,243 $ 14,699 Ratio of Adjusted EBITDA to cash interest expense, net ......................... 2.5x 2.9x Ratio of net debt to Adjusted EBITDA ............ 3.8x --
AT JULY 3, 1999 -------------------------- HISTORICAL PRO FORMA ------------ ------------ BERRY PLASTICS CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents ....................... $ 2,622 $ 2,622 Working capital ................................. 12,597 24,620 Total assets .................................... 254,331 336,453 Total long-term debt, including current portion . 215,484 290,484 Stockholders' equity (deficit) .................. (17,456) (17,456) 9 - -------------- (1) Other expenses consist of loss on disposal of property and equipment for the respective periods. (2) Includes non-cash interest expense of $1,178 in fiscal 1994, $950 in fiscal 1995, $1,212 in fiscal 1996, $2,005 in fiscal 1997, $1,765 in fiscal 1998 and $884 and $872 for the 26 weeks ended June 27, 1998 and July 3, 1999. (3) During 1994, an extraordinary charge of $3.7 million was recognized as a result of the retirement of debt concurrently with the issuance of the 1994 Notes. (4) Adjusted EBITDA should not be considered in isolation or as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. In addition, our calculation of Adjusted EBITDA differs from that presented by certain other companies and thus is not necessarily comparable to similarly titled measures used by other companies. The following table reconciles operating income to EBITDA and Adjusted EBITDA for each respective period:
FISCAL ---------------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- - (DOLLARS IN THOUSANDS) Operating income ............................. $ 16,984 $ 20,527 $ 17,269 $ 16,199 $ 28,602 Depreciation and amortization ................ 8,176 9,536 11,331 19,026 24,830 -------- -------- -------- -------- -------- EBITDA ....................................... 25,160 30,063 28,600 35,225 53,432 One-time expenses: 1996 transaction compensation expenses . -- -- 2,762 -- -- Plant shutdown expenses ................ -- -- 907 848 2,559 Acquisition integration expenses ....... 116 867 692 3,267 1,525 Litigation expenses related to drink cup patent .............................. -- -- 650 100 631 Corporate expenses: Non-cash compensation expenses (benefit) 358 (214) 358 -- 749 Management fees and expenses ........... 746 853 749 828 872 Pro Forma adjustments relating to the acquisitions: Raw material savings ................... Plant consolidations ................... Tooling consolidation .................. Discontinued sales ..................... Expense reductions (i.e. legal, management fees) .................... Staff reductions ...................... -------- -------- -------- -------- -------- Adjusted EBITDA .............................. $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 ======== ======== ======== ======== ========
PRO FORMA PRO FORMA 26 WEEKS FISCAL ENDED 1998 JULY 3, 1999 -------- ------------ (DOLLARS IN THOUSANDS) Operating income ............................. $ 31,740 $ 22,049 Depreciation and amortization ................ 32,496 16,350 -------- -------- EBITDA ....................................... 64,236 38,399 One-time expenses: 1996 transaction compensation expenses . -- -- Plant shutdown expenses ................ 2,559 576 Acquisition integration expenses ....... 1,525 1,091 Litigation expenses related to drink cup patent .............................. 631 -- Corporate expenses: Non-cash compensation expenses (benefit) 749 197 Management fees and expenses ........... 872 437 Pro Forma adjustments relating to the acquisitions: Raw material savings ................... 3,368 1,256 Plant consolidations ................... 1,906 508 Tooling consolidation .................. 416 -- Discontinued sales ..................... (340) -- Expense reductions (i.e. legal, management fees) .................... 766 500 Staff reductions ...................... 838 -- -------- -------- Adjusted EBITDA .............................. $ 77,526 $ 42,964 ======== ======== (5) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net sales. (6) Depreciation and amortization excludes non-cash amortization of deferred financing and origination fees and debt premium/discount amortization which are included in interest expense. (7) In calculating the ratio of earnings to fixed charges, earnings consist of (i) income (loss) before income taxes, plus (ii) fixed charges consisting of interest on debt (including amortization of deferred financing fees), plus (iii) that portion of lease rental expense representative of the interest factor. Earnings were inadequate to cover fixed charges by $2,883 in fiscal 1996, by $13,932 in fiscal 1997, by $7,042 in fiscal 1998, by $14,948 in pro forma fiscal 1998 and by $1,644 for the pro forma twenty-six weeks ended July 3, 1999. 10 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CONSIDER THE FACTORS BELOW BEFORE MAKING A DECISION TO TENDER OUTSTANDING NOTES IN THE EXCHANGE OFFER. THE FOLLOWING RISKS MAY CAUSE OUR BUSINESS, RESULT OF OPERATIONS OR FINANCIAL CONDITION TO DECLINE. WE HAVE A SIGNIFICANT AMOUNT OF DEBT. We have now and, after this offering, will continue to have a large amount of debt. As of July 3, 1999, our aggregate amount of total indebtedness was about $290.5 million. We may also incur additional debt from time to time to finance acquisitions or capital expenditures or for other purposes subject to the restrictions in our credit facility and the indentures governing the notes, the 1994 Notes and the 1998 Notes. See "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Description of Certain Other Debt" and "Description of Notes." Our high degree of debt has important consequences for us, including the following: o It may be more difficult for us to satisfy our obligations under the notes; o Our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; o We will need a substantial portion of our cash flow to pay the principal and interest on our debt, including debt that we may incur in the future; o Payments on our debt will reduce the funds that would otherwise be available for our operations and future business opportunities; o A substantial decrease in our net operating cash flows could make it difficult for us to meet our debt service requirements and force us to modify our operations; o We may be more highly leveraged than our competitors, which may place us at a competitive disadvantage; and o We may be more vulnerable to a downturn in our business or the economy generally. If we are unable to service our debt or obtain additional financing, as needed, our business and financial condition would be materially adversely affected. WE MAY NOT BE ABLE TO SERVICE OR REFINANCE OUR DEBT. Our ability to pay principal and interest on the notes and to satisfy our other obligations will depend upon: o Our future financial and operating performance, which performance will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond our control; and o The future availability of revolving credit borrowings under our credit facility or any successor facility, the availability of which is dependent or may depend on, among other things, our complying with certain covenants and meeting certain specified borrowing base prerequisites. See "Description of Certain Other Debt -- The Credit Facility." 11 Based on our current and expected levels of operations, we expect that our operating cash flow and borrowings under our credit facility should be sufficient for us to meet our operating expenses, to make necessary capital expenditures and to service our debt requirements as they become due. However, our operating results and borrowings under our credit facility may not be sufficient to service our debt, including the notes. If we cannot service our debt, we will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing our debt (which could include the notes), or seeking additional equity capital or bankruptcy protection. We cannot assure you that any of these remedies can be effected on satisfactory terms, if at all. RESTRICTIVE DEBT COVENANTS IN OUR INDENTURES AND CREDIT FACILITY MAY ADVERSELY AFFECT US. The indenture governing the notes restricts, among other things, our ability to: o incur additional debt; o pay dividends; o redeem capital stock; o create liens, dispose of certain assets, engage in mergers; o make contributions, loans or advances; and o enter into certain transactions with affiliates. Our credit facility and the indentures governing the 1994 and the 1998 Notes contain similar restrictions. If our cash flow and existing working capital are insufficient to fund our expenditures or to service our debt, including the notes, the 1994 Notes, the 1998 Notes and borrowings under our credit facility, we would have to raise additional funds through capital contributions from BPC Holding, or by refinancing all or a part of our debt or by a sale of assets or subsidiaries. The restrictions contained in the indentures governing the notes, the 1994 Notes and the 1998 Notes and the credit facility, in combination with our high level of debt, could severely limit our ability to raise such additional funds, respond to changing market and economic conditions, provide for capital expenditures or take advantage of business opportunities that may arise. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Description of Certain Other Debt" and "Description of Notes." OUR ACQUISITION STRATEGY MAY BE UNSUCCESSFUL. As part of our growth strategy, we plan to pursue the acquisition of other companies, assets and product lines that either complement or expand our existing business. We continually evaluate potential acquisition opportunities, particularly those that could be material in size and scope. Acquisitions involve a number of special risks and factors, including: o the focus of management's attention to the assimilation of the acquired companies and their employees and on the management of expanding operations; o the incorporation of acquired products into our product line; o the increasing demands on our operational systems; 12 o adverse effects on our reported operating results; o the amortization of acquired intangible assets; and o the loss of key employees and the difficulty of presenting a unified corporate image. We may be unable to make appropriate acquisitions because of competition for the specific acquisition. In pursuing acquisitions, we compete against other plastic product manufacturers, some of which are larger than we are and have greater financial and other resources than we have. We compete for potential acquisitions based on a number of factors, including price, terms and conditions, size and ability to offer cash, stock or other forms of consideration. In addition, the negotiation of potential acquisitions may require members of management to divert their time and resources away from our operations. THE INTEGRATION OF ACQUIRED BUSINESSES MAY RESULT IN SUBSTANTIAL COSTS, DELAYS OR OTHER PROBLEMS. We may not be able to successfully integrate our acquisitions without substantial costs, delays or other problems. We will have to continue to expend substantial managerial, operating, financial and other resources to integrate our businesses. The costs of such integration could have an adverse effect on short-term operating results. Such costs include non-recurring acquisition costs including accounting and legal fees, investment banking fees, recognition of transaction-related obligations and various other acquisition-related costs. In addition, the rapid pace of our acquisitions of other businesses may adversely affect our efforts to integrate acquisitions and manage those acquisitions profitably. We may seek to recruit additional managers to supplement the incumbent management of the acquired businesses, but we may not have the ability to recruit additional candidates with the necessary skills. Once we acquire a business, we are faced with risks, including: o the possibility that it will be difficult to integrate the operations into our other operations; o the possibility that we have acquired substantial undisclosed liabilities; o the risks of entering markets or offering services for which we have no prior experience; and o the potential loss of customers as a result of changes in management. We may not be successful in overcoming these risks. BPC HOLDING HAS EXPERIENCED CONSOLIDATED NET LOSSES, AND EXPECTS TO CONTINUE TO DO SO. BPC Holding has not generated enough revenue on a consolidated basis to make a profit. Consolidated earnings have been insufficient to cover fixed charges by $2.9 million for fiscal 1996, by $13.9 million for fiscal 1997 and by $7.0 million for fiscal 1998. In addition, BPC Holding has experienced consolidated net losses during each of such periods principally as a result of expenses and charges incurred in connection with our acquisitions. These net losses were $3.3 million for fiscal 1996, $14.4 million for fiscal 1997 and $7.6 million for fiscal 1998. BPC Holding expects that it will continue to experience consolidated net losses for the foreseeable future. 13 BPC HOLDING RELIES ON DIVIDENDS FROM US TO MEET ITS DEBT OBLIGATIONS AND MAY NOT BE ABLE TO SATISFY ITS OBLIGATIONS UNDER ITS GUARANTEE OF THE NOTES. BPC Holding is a holding company and is entirely dependent on our paying it dividends to pay its obligations, including its obligations under its guarantee. Under the terms of our credit facility, there are severe restrictions on our ability to declare dividends to BPC Holding. In addition, the indenture governing the $105 million aggregate principal amount of BPC Holding's 12 1/2% Senior Secured Notes due 2006 (the "1996 Notes") limits the ability of BPC Holding to make certain payments, including payments under its Guarantee. Accordingly, absent a substantial increase in our operating results and a refinancing of the 1996 Notes or an equity offering, we do not expect BPC Holding to be able to perform under its guarantee. In addition, without a substantial increase in our net income above historical levels, we anticipate that we will be unable to generate sufficient cash flow to permit a dividend to BPC Holding under the limitations placed on us by our debt indentures in an amount sufficient to meet BPC Holding's interest payment obligations under the 1996 Notes. We must pay the interest obligations of the 1996 Notes in cash beginning December 15, 2001. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR SENIOR DEBT, WHICH BEARS INTEREST AT FLUCTUATING RATES, AND POSSIBLY OUR FUTURE INDEBTEDNESS. Under the indenture, payments on the notes will be subordinated to the prior payment of all of our senior debt, totaling $89.0 million on July 3, 1999. Our senior debt currently includes borrowings under our credit facility and our Nevada Industrial Revenue Bonds (which bear interest at a variable rate, require annual principal payments of $0.5 million on April 1, and mature in April 2007). As of July 3, 1999, $35.8 million was available for borrowing under the credit facility (subject to applicable borrowing base limitations), and there was no debt subordinated to the Notes. See "Description of Certain Other Debt--The Credit Facility." The indenture permits us to incur additional senior debt under our credit facility provided that certain conditions are met. See "Description of Notes." By reason of such subordination, in the event of our insolvency, liquidation, reorganization, dissolution or winding up, or in the event that the senior debt is otherwise accelerated, holders of senior debt must be paid in full before we may pay you. In such event, there may be insufficient assets remaining to satisfy claims. In addition, we will not be permitted to make any payment with respect to the notes or our other senior subordinated debt for a substantial period of time if defaults under our credit facility or certain other senior debt exist and are continuing and certain other conditions are satisfied. The notes rank PARI PASSU with the 1998 Notes and the 1994 Notes and PARI PASSU with, or senior to, all other future subordinated debt of the Company. In addition, the guarantees are subordinated to all existing and future senior debt of each guarantor, including the guarantees under our credit facility, and, in the case of BPC Holding, the 1996 Notes. In addition, Berry Plastics' and the guarantors' respective obligations under our credit facility and our Nevada Industrial Revenue Bonds bear interest at rates that may be expected to fluctuate over time. Accordingly, a substantial increase in interest rates could adversely affect our ability to service our debt obligations, including our obligations with respect to the notes. THE NOTES ARE NOT SECURED BY ANY OF OUR ASSETS. The notes and guarantees are unsecured obligations of Berry Plastics and the guarantors, respectively. The indenture will permit us to incur certain secured debt, including debt under our credit facility, which is secured by a lien on substantially all of the assets of Berry Plastics and the guarantors. The holders of any secured debt will have a claim prior to the holders of the notes with respect to any assets pledged by us as security for such debt. Upon an event of default under the credit facility, the lender would be entitled to foreclose on the assets of Berry Plastics and the guarantors. In such event, the assets of Berry Plastics and the guarantors remaining after repayment of such secured debt may be insufficient to satisfy our obligations with respect to the notes. 14 WE HAVE $125 MILLION IN PRINCIPAL AMOUNT OF NOTES OUTSTANDING THAT WILL BE PAID BEFORE THE NOTES IN THE EVENT OF CERTAIN ASSETS SALES. The 1994 Notes and the 1998 Notes have a priority upon the payment of proceeds pursuant to certain asset sales. See "Description of Notes--Repurchase at the Option of Holders--Asset Sales." WE DO NOT HAVE FIRM CONTRACTS WITH PLASTIC RESIN SUPPLIERS. We source plastic resin primarily from major industry suppliers, such as Dow Chemical, Chevron, Mobil and Equistar. We have long-standing relationships with certain of these suppliers but have not entered into a firm supply contract with any of our resin vendors. We may not be able to arrange for other sources of resin in the event of an industry-wide general shortage of resins used by us, or a shortage or discontinuation of certain types of grades of resin purchased from one or more of our suppliers. IF MARKET CONDITIONS DO NOT PERMIT US TO PASS ON THE COST OF PLASTIC RESINS TO OUR CUSTOMERS ON A TIMELY BASIS, IF AT ALL, OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL SUFFER. To produce our products we use various plastic resins, which in fiscal 1998 cost us about $62 million, or 31% of our total cost of goods sold. In order for us to do well financially we must pass this cost on to our customers in a timely manner. Plastic resins are subject to cyclical price fluctuations, including those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which resins are produced. Historically, we have been able to pass on increases in resin prices to our customers over a period of time. However, we may not be able to continue to do so on a timely basis, if at all, or there could be a significant increase in resin prices, which would have a material adverse effect on our financial performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--General Economic Conditions and Inflation" and "Business--Sources and Availability of Raw Materials." WE ARE CONTROLLED BY A SMALL GROUP OF STOCKHOLDERS. Atlantic Equity Partners International II, L.P., a Delaware limited partnership, owns about 54% (on a voting common stock equivalent basis) of BPC Holding's outstanding voting capital stock. As such, subject to the terms of our Stockholders Agreement, Atlantic Equity Partners International II has the ability to elect all of the members of BPC Holding's board of directors and can determine the outcome of any corporate transaction or other matter submitted to the stockholders of BPC Holding or Berry Plastics for approval, including mergers, consolidations and the sale of Berry Plastics or all or substantially all of our assets. See "Certain Transactions--Stockholders Agreements." Atlantic Equity Associates International II, L.P., a Delaware limited partnership, is the sole general partner of Atlantic Equity Partners International II. Roberto Buaron, the Chairman and a director of Berry Plastics, is the sole shareholder of Buaron Holdings Ltd. Buaron Holdings is the sole general partner of Atlantic Equity Associates International II. Through his affiliations with Buaron Holdings and Atlantic Equity Associates International II, Mr. Buaron may be deemed to control Atlantic Equity Partners International II. Including the shares of capital stock owned by Atlantic Equity Partners International II, all executive officers and directors of Berry Plastics as a group beneficially own about 96.3% (on a voting common stock equivalent basis) of BPC Holding's outstanding voting capital stock. WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS AND MAY BE ADVERSELY AFFECTED BY NEW ENVIRONMENTAL LAWS OR THE COSTS OF COMPLIANCE WITH ANY SUCH LAWS. Federal, state and local governments could enact laws or regulations concerning environmental matters that increase the cost of producing, or otherwise adversely affect the demand for, plastic products. We are aware that certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain plastic products that are among the types of products that we produce. If such prohibitions or restrictions were widely adopted, they could have a material adverse effect on us. Furthermore, a decline in consumer preference for plastic 15 products due to environmental considerations could have a negative effect on our business. In addition, certain of our operations are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. While we have not been required historically to make significant capital expenditures in order to comply with applicable environmental laws and regulations, we cannot predict with any certainty our future capital expenditure requirements because of continually changing compliance standards and environmental technology. Furthermore, violations or contaminated sites that we do not know about (including contamination caused by prior owners and operators of such sites) could result in additional compliance or remediation costs or other liabilities. We do not have insurance coverage for environmental liabilities and do not anticipate obtaining such coverage in the future. See "Business--Environmental Matters and Governmental Regulation." WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. In the event of certain change of control events, we will be required, subject to certain conditions, to offer to purchase all outstanding notes, 1994 Notes and 1998 Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued interest and any liquidated damages to the date of repurchase. In addition, BPC Holding will also be required, subject to certain conditions, to offer to purchase all outstanding 1996 Notes at a purchase price equal to 101% of the principal amount thereof (or 101% of $105,000,000), plus accrued interest to the date of repurchase. There can be no assurance that we will have sufficient funds available to make the required purchases. Moreover, our credit facility and the indenture governing the 1996 Notes restrict such a purchase and the offer would require the approval of the lender or securityholders thereunder, as the case may be. As a result of this potential lack of funds and the restrictions contained in our credit facility and the indenture governing the 1996 Notes, the indenture governing the Notes may offer little, if any, protection to you in the event of a change of control. If we failed to purchase Notes tendered upon a change of control it would constitute an event of default under the indenture. Our credit facility provides that events similar to a change of control will constitute an event of default thereunder. Upon the occurrence of an event of default under our credit facility, all amounts outstanding thereunder may become due and payable. All debt of Berry Plastics under our credit facility is senior debt, which, as of July 3, 1999, on a pro forma basis giving effect to the acquisition of Cardinal and a $20.0 million concurrent increase in our credit facility, could have been as much as $132.5 million under the borrowing base calculation. The subordination provisions contained in the Indenture will prohibit us (if the holders of senior debt issue a notice to us to such effect) from making any payment on the notes until such event of default is cured or upon the expiration of 179 days (unless the holders of senior debt accelerate the maturity of the senior debt). We could, in the future enter into certain transactions, including acquisitions, refinancings or other recapitalizations or highly leveraged transactions, that would not result in a change of control but would increase the amount of debt outstanding or otherwise affect our capital structure or credit ratings or otherwise adversely affect holders of the notes. See "Description of Certain Other Debt" and "Description of Notes--Repurchase at the Option of Holders--Change of Control." WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY. We face intense competition in the sale of our products. We compete with several companies, including divisions or subsidiaries of larger companies, on the basis of price, service, quality and the ability to supply products to customers in a timely manner. Many of our competitors have financial and other resources that are substantially greater than ours. Our customers may opt to purchase a different production type of product, such as those made by thermoforming. We may not be able to compete successfully with respect to any of the foregoing factors. Competition could result in our products losing market share or our having to reduce our prices, either of which would have a material adverse effect on our business and results of operations. UNDER SPECIFIC CIRCUMSTANCES, THE NOTES AND GUARANTEES MAY BE VOIDED. Federal and state statutes allow courts, under specific circumstances, to void the notes and the guarantees and require you to return payments received from us or the Guarantors. If a court of competent jurisdiction in a suit by an unpaid creditor or a representative of creditors (such as a trustee in bankruptcy or a debtor-in-possession) were 16 to find that, at the time of the incurrence of the debt represented by the notes and the Guarantees, Berry Plastics or a Guarantor: o was insolvent or was rendered insolvent by reason of such incurrence; o was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; o intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured; o intended to hinder, delay or defraud its creditors; or o incurred the debt for less than reasonably equivalent value or fair consideration; then such court could, among other things: o void all or a portion of our or such Guarantor's obligations to the holders of the Notes, the effect of which could be that you might not be repaid in full; and/or o subordinate our or such Guarantor's obligations to the holders of the notes to other existing and future debt of Berry Plastics or such Guarantor, as the case may be, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made to you. The measure of insolvency for purposes of the foregoing will vary depending upon the law applied in such case. Generally, however, we would be considered insolvent if: o the sum of our debts, including contingent liabilities, was greater than all of our assets at a fair valuation or if the present fair saleable value of our assets was less than the amount that would be required to pay the probable liabilities on our existing debts, including contingent liabilities, as they become absolute and matured; or o we could not pay our debts as they became due. THERE IS NO PUBLIC MARKET FOR THE EXCHANGE NOTES. The exchange notes will be new securities for which currently there is no trading market. We do not intend to list the exchange notes on any national securities exchange or to seek the admission thereof to trading in the Nasdaq National Market. The outstanding notes are designated for trading in the PORTAL market. We have been advised by the Initial Purchasers that they currently intend to make a market. The Initial Purchasers are not obligated to do so, however, and any market-making activities with respect to the exchange notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act, and may be limited during the exchange offer and while any shelf registration statement is pending. Accordingly, we cannot assure you that an active public or other market or liquidity will develop for the exchange notes. If a trading market does not develop or is not maintained, you may experience difficulty in reselling the exchange notes or may be unable to sell them at all. If a market develops for the exchange notes, future trading prices of the exchange notes will depend on many factors, including among other things: o our financial performance or prospects; o prevailing interest rates; 17 o the overall market for high yield securities; o the prospects for companies in our industry generally; and o the number of holders of the exchange notes. Depending on those and other factors, the exchange notes may trade at a discount from their principal amount. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. We cannot assure you that the market for the exchange notes, if any, will not be subject to similar disruptions. Any such disruptions may adversely affect you as a holder of the exchange notes. YOUR ABILITY TO RESELL YOUR NOTES WILL REMAIN RESTRICTED IF YOU FAIL TO EXCHANGE THEM IS THE EXCHANGE OFFER. If you do not exchange the outstanding notes for exchange notes pursuant to the exchange offer you will continue to be subject to the restrictions on transfer of the outstanding notes as set forth in the legend thereon as a consequence of the issuance of the outstanding notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the outstanding notes under the Securities Act. In addition, any trading market for the outstanding notes not exchanged for exchange notes will be adversely affected to the extent that outstanding notes are tendered and accepted in the exchange offer. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold or otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of Berry Plastics within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, PROVIDED that the exchange notes are acquired in the ordinary course of the holder's business, the holder has no arrangement with any person to participate in the distribution of such exchange notes and neither the holder nor any such other person is engaging in or intends to engage in a distribution of the exchange notes. Notwithstanding the foregoing, each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than outstanding notes acquired directly from Berry Plastics). Berry Plastics and the guarantors have agreed that, for a period of one year from the date of this prospectus, they will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, your ability to resell the exchange notes is subject to applicable state securities laws as described in "Risk Factors -- There are state securities laws restrictions on the resale of exchange notes." TO PARTICIPATE IN THE EXCHANGE OFFER YOU MUST COMPLY WITH THE PROCEDURES DISCUSSED IN THIS PROSPECTUS. To participate in the exchange offer, and to avoid the restrictions on transfer of the outstanding notes, holders of outstanding notes must transmit a properly completed letter of transmittal or an Agent's Message, including all other documents required by the letter of transmittal, to the exchange agent at one of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on or prior to the expiration date. In addition, either (i) certificates for the outstanding notes must be received by the Exchange Agent along with the letter of transmittal; (ii) a timely confirmation of a book-entry transfer of such outstanding notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company pursuant to the procedure for book-entry transfer 18 described herein, must be received by the Exchange Agent prior to the Expiration Date; or (iii) you must comply with the guaranteed delivery procedures described in this prospectus. The method of delivery of the outstanding notes and the letter of transmittal and all other required documents to the Exchange Agent is at the your election and risk. Neither Berry Plastics, the Exchange Agent nor any other person shall incur any liability for failure to notify you of defects or irregularities with respect to tenders of outstanding notes. See "The Exchange Offer." THERE ARE STATE SECURITIES LAWS RESTRICTIONS ON THE RESALE OF EXCHANGE NOTES. In order to comply with the securities laws of certain jurisdictions, the exchange notes may not be offered or resold by you unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the requirements of such exemption have been satisfied. We do not currently intend to register or qualify the resale of the exchange notes in any such jurisdictions. However, an exemption is generally available for sales to registered broker-dealers and certain institutional buyers. Other exemptions under applicable state securities laws may also be available. 19 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The outstanding notes were sold by Berry Plastics on July 6, 1999 to the Initial Purchasers, who placed the outstanding notes with institutional investors. In connection therewith, Berry Plastics, the guarantors and the Initial Purchasers entered into the Registration Rights Agreement, pursuant to which Berry Plastics and the guarantors agreed, for the benefit of the holders of the outstanding notes, that Berry Plastics and the guarantors would, at their sole cost, among other things: (i) within 45 days following the original issuance of the outstanding notes, file with the Commission the Registration Statement (of which this prospectus is a part) under the Securities Act with respect to an issue of a series of new notes of Berry Plastics identical in all material respects to the series of outstanding notes (except that such exchange notes would not contain terms with respect to transfer restrictions); and (ii) cause such Registration Statement to be declared effective under the Securities Act within 210 days following the original issuance of the outstanding notes. Upon the effectiveness of the Registration Statement, Berry Plastics will offer, pursuant to this prospectus, to the holders of Transfer Restricted Securities (as defined herein) who are able to make certain representations the opportunity to exchange their Transfer Restricted Securities for a like principal amount of exchange notes, to be issued without a restrictive legend and which may, generally, be reoffered and resold by the holder without restrictions or limitations under the Securities Act. The term "Holder" with respect to the exchange offer means any person in whose name outstanding notes are registered on the books of Berry Plastics or any other person who has obtained a properly completed bond power from the registered holder. Berry Plastics has not requested, and does not intend to request, an interpretation by the staff of the Commission with respect to whether the exchange notes issued pursuant to the exchange offer in exchange for the Transfer Restricted Securities may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Instead, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, Berry Plastics believes that exchange notes issued pursuant to the exchange offer in exchange for Transfer Restricted Securities may be offered for resale, resold and otherwise transferred by any holder of the exchange notes (other than any such holder that is an "affiliate" of Berry Plastics within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, PROVIDED that the exchange notes are acquired in the ordinary course of such holder's business, such holder has no arrangement or understanding with any person to participate in the distribution of such exchange notes and neither such holder nor any other such person is engaging in or intends to engage in a distribution of the exchange notes. Since the Commission has not considered the exchange offer in the context of a no-action letter, there can be no assurance that the staff of the Commission would make a similar determination with respect to the exchange offer. Any holder who is an affiliate of Berry Plastics or who tenders in the exchange offer for the purpose of participating in a distribution of the exchange notes cannot rely on such interpretations by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for Transfer Restricted Securities where such Transfer Restricted Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company). Berry Plastics and the guarantors have agreed that, for a period of one year after the date of this prospectus, they will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." If (i) Berry Plastics and the Guarantors are not permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or Commission policy or (ii) any holder of Transfer Restricted Securities notifies Berry Plastics prior to the 20th day following consummation of the exchange offer that (A) it is prohibited by law or Commission policy from participating in the exchange offer or (B) that it may not resell the 20 exchange notes acquired by it in the exchange offer to the public without delivering a prospectus and this prospectus is not appropriate or available for such resales or (C) that it is a broker-dealer and owns notes acquired directly from Berry Plastics or an affiliate of Berry Plastics, Berry Plastics and the guarantors will file with the Commission a shelf registration statement (the "Shelf Registration Statement") to cover resales of the notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. Berry Plastics and the guarantors will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each outstanding note (together with any related note guarantees) until (i) the date on which the outstanding note has been exchanged by a person other than a broker-dealer for an exchange note in the exchange offer, (ii) following the exchange by a broker-dealer in the exchange offer of an outstanding note for an exchange note, the date on which the exchange note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of this prospectus, (iii) the date on which the outstanding note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which the outstanding note is distributed to the public pursuant to Rule 144 under the Securities Act. The Registration Rights Agreement provides that (i) Berry Plastics and the guarantors will file the Registration Statement with the Commission on or prior to 45 days after the original issuance of the outstanding notes, (ii) Berry Plastics will use its best efforts to have the Registration Statement declared effective by the Commission on or prior to 210 days after the original issuance of the outstanding notes, (iii) unless the exchange offer would not be permitted by applicable law or Commission policy, Berry Plastics and the guarantors will commence the exchange offer and use their best efforts to issue, on or prior to 30 business days after the date on which the Registration Statement was declared effective by the Commission, exchange notes in exchange for all outstanding notes tendered prior thereto in the exchange offer and (iv) if obligated to file the Shelf Registration Statement, Berry Plastics and the guarantors will use their best efforts to file the Shelf Registration Statement with the Commission on or prior to 45 days after such filing obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 90 days after such obligation arises. If (a) Berry Plastics and the guarantors fail to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing, (b) any of such registration statements is not declared effective by the Commission on or prior to the dated specified for such effectiveness (the "Effectiveness Target Date"), or (c) Berry Plastics and the guarantors fail to consummate the exchange offer within 30 business days of the Effectiveness Target Date with respect to the Registration Statement, or (d) the Shelf Registration Statement or the Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), then Berry Plastics and the Guarantors will pay Liquidated Damages to each holder of outstanding notes with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to $.05 per week per $1,000 principal amount of outstanding notes held by such holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of outstanding notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages for all Registration Defaults of $.50 per week per $1,000 principal amount of outstanding notes. All accrued Liquidated Damages will be paid by Berry Plastics and the Guarantors on each Damages Payment Date to the Global Note Holder (as defined herein) by wire transfer of immediately available funds or by Federal funds check and to Holders of Certificated Securities (as defined herein) by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Holders of outstanding notes will be required to make certain representations to Berry Plastics and the guarantors in order to participate in the exchange offer and will be required to deliver certain information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their outstanding notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights 21 Agreement, a copy of which has been filed as an exhibit to the Registration Statement of which this prospectus forms a part. The outstanding notes are designated for trading in the PORTAL market. To the extent outstanding notes are tendered and accepted in the exchange offer, the principal amount of outstanding notes will decrease with a resulting decrease in the liquidity in the market therefor. Following the consummation of the exchange offer, holders of outstanding notes who were eligible to participate in the exchange offer but who did not tender their outstanding notes will not be entitled to certain rights under the Registration Rights Agreement and those outstanding notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the outstanding notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, Berry Plastics will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. Berry Plastics will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their outstanding notes pursuant to the exchange offer. However, outstanding notes may be tendered only in integral multiples of $1,000. The form and terms of the exchange notes will be identical in all material respects to the form and terms of the outstanding notes, except that the exchange notes have been registered under the Securities Act and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for an increase in the interest rate on the outstanding notes under certain circumstances relating to the Registration Rights Agreement, which provisions will terminate upon the consummation of the exchange offer. The exchange notes will evidence the same debt as the outstanding notes and will be entitled to the benefits of the Indenture under which the outstanding notes were, and the exchange notes will be, issued. As of the date of this prospectus, $75,000,000 aggregate principal amount of the outstanding notes. Berry Plastics has fixed the close of business on , 1999 as the record date for the exchange offer for purposes of determining the persons to whom this prospectus, together with the letter of transmittal, will initially be sent. As of such date, there were registered holders of the outstanding notes. Holders of the outstanding notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law (the "DGCL") or the Indenture in connection with the exchange offer. Berry Plastics intends to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder. Berry Plastics shall be deemed to have accepted validly tendered outstanding notes when, as and if Berry Plastics has given oral notice (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 outstanding notes. If any tendered outstanding 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 outstanding notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the expiration date. Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes pursuant to the exchange offer. Berry Plastics will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "The Exchange Offer -- Fees and Expenses." 22 EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "expiration date" shall mean 5:00 p.m., New York City time, on , 1999, unless Berry Plastics, in its sole discretion, extends the exchange offer, in which case the term "expiration date" shall mean the latest date and time to which the exchange offer is extended. In order to extend the exchange offer, Berry Plastics will notify the Exchange Agent of any extension by oral notice (confirmed in writing) or written notice and will make a public announcement thereof prior to 9:00 a.m., New York City time, on the next business day after each previously scheduled expiration date. Berry Plastics reserves the right, in its sole discretion, (i) to delay accepting any outstanding notes, to extend the exchange offer or, if any of the conditions set forth below under "The Exchange Offer -- Conditions" shall not have been satisfied, to terminate the exchange offer, by giving oral notice (confirmed in writing) or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the exchange offer is amended in a manner determined by Berry Plastics to constitute a material change, Berry Plastics will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders, and Berry Plastics will extend the exchange offer for a period of five to 10 business days, depending upon the significance of the amendment and the manner of disclosure to the registered Holders, if the exchange offer would otherwise expire during such five- to 10-business-day period. Without limiting the manner in which Berry Plastics may choose to make public announcement of any delay, extension, termination or amendment of the exchange offer, Berry Plastics shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from January 15, 2000. Interest will be payable on the outstanding notes accepted for exchange to, but not including, January 15, 2000. PROCEDURES FOR TENDERING The tender of outstanding notes by a Holder thereof pursuant to one of the procedures set forth below and the acceptance thereof by Berry Plastics will constitute a binding agreement between such Holder and Berry Plastics in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. This prospectus, together with the letter of transmittal, will first be sent on or about August , 1999, to all Holders of outstanding notes known to Berry and the Exchange Agent. Only a Holder of the outstanding notes may tender such outstanding notes in the exchange offer. A Holder who wishes to tender any outstanding notes for exchange pursuant to the exchange offer must transmit a properly completed and duly executed letter of transmittal, or a facsimile thereof, or an Agent's Message, including any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, either (i) the certificates for such outstanding 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 outstanding notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the outstanding notes, letter of transmittal or Agent's Message and other required documents must be received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. 23 The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering outstanding notes which are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the letter of transmittal, and that Berry Plastics may enforce such agreement against such participant. THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO BERRY. Any beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing the letter of transmittal or delivering an Agent's Message and delivering such beneficial owner's outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in such beneficial owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined herein) unless the outstanding notes tendered pursuant thereto are tendered (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 outstanding notes listed therein, such outstanding notes must be endorsed or accompanied by a properly completed bond power, signed by such registered Holder as such registered Holder's name appears on such outstanding notes. If the letter of transmittal or any outstanding notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by Berry Plastics, evidence satisfactory Berry Plastics of their authority to so act must be submitted with the letter of transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered outstanding notes will be determined by Berry Plastics in its sole discretion, which determination will be final and binding. Berry Plastics reserves the absolute right to reject any and all outstanding notes not properly tendered or any Old Berry's acceptance of which would, in the opinion of counsel for Berry Plastics, be unlawful. Berry Plastics also reserves the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Berry's interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured within such time as Berry Plastics shall determine. Although Berry Plastics intends to notify Holders of defects or irregularities with respect to tenders of outstanding notes, neither Berry Plastics, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of outstanding notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any outstanding notes received by the Exchange Agent that Berry Plastics determines are not properly tendered and as to which the defects or irregularities have not been cured or waived will 24 be returned by the Exchange Agent to the tendering Holders, unless otherwise provided in the letter of transmittal, as soon as practicable following the Expiration Date. By tendering, each Holder will represent to Berry Plastics, among other things, that (i) the exchange notes acquired by the Holder and any beneficial owners of outstanding notes pursuant to the exchange offer are being obtained in the ordinary course of business of the persons receiving such exchange notes, (ii) neither the Holder nor such beneficial owner has an arrangement with any person to participate in the distribution of such exchange notes, (iii) neither the Holder nor such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such exchange notes and (iv) neither the Holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Berry Plastics. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than outstanding notes acquired directly from Berry Plastics), may participate in the exchange offer but may be deemed an "underwriter" under the Securities Act and, therefore, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution." BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the outstanding notes at the Book-Entry Transfer Facility for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of outstanding notes by causing the Book-Entry Transfer Facility to transfer such outstanding notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of outstanding notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the letter of transmittal or facsimile thereof, or an Agent's Message, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their outstanding notes and (i) whose outstanding notes are not immediately available or (ii) who cannot deliver their outstanding notes, the letter of transmittal or any other required documents to the Exchange Agent prior to the Expiration Date may effect a tender if: (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 outstanding notes and the principal amount of outstanding notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the letter of transmittal (or facsimile thereof) or an Agent's Message, together with the certificate(s) representing the outstanding notes, or a Book-Entry Confirmation, and any other documents required by the letter of transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (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 outstanding notes in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other document required by the letter of 25 transmittal are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their outstanding notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS To withdraw a tender of outstanding notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the outstanding notes to be withdrawn (the "Depositor"), (ii) identify the outstanding notes to be withdrawn (including the certificate number or numbers and principal amount of such outstanding notes), (iii) be signed by the Holder in the same manner as the original signature on the letter of transmittal by which such outstanding notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the outstanding notes register the transfer of such outstanding notes into the name of the persons withdrawing the tender and (iv) specify the name in which any such outstanding notes are to be registered, if different from that of the Depositor. If certificates for outstanding notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing Holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Holder is an Eligible Institution. If outstanding notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn outstanding notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by Berry in its sole discretion, which determination shall be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer and no exchange notes will be issued with respect thereto unless the outstanding notes so withdrawn are validly rendered. Properly withdrawn outstanding notes may be rendered by following one of the procedures described above under "The Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration Date. Any outstanding notes which have been tendered but which are not accepted for payment due to withdrawal, rejection of tender or termination of the exchange offer will be returned as soon as practicable to the Holder thereof without cost to such Holder (or, in the case of outstanding notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such outstanding notes will be credited to an account maintained with such Book-Entry Transfer Facility for the outstanding notes). CONDITIONS Notwithstanding any other term of the exchange offer, Berry Plastics shall not be required to accept for exchange, or exchange notes for, any outstanding notes, and may terminate the exchange offer as provided herein before the acceptance of such outstanding notes, if: (a) the exchange offer shall violate applicable law or any applicable interpretation of the staff of the Commission; or (b) any action or proceeding is instituted or threatened in any court or by any governmental agency that might materially impair the ability of Berry Plastics to proceed with the exchange offer or any material adverse development has occurred in any existing action or proceeding with respect to Berry Plastics; or (c) any governmental approval has not been obtained, which approval Berry Plastics shall deem necessary for the consummation of the exchange offer. 26 If Berry Plastics determines in its sole discretion that any of the conditions are not satisfied, Berry Plastics may (i) refuse to accept any outstanding notes and return all tendered outstanding notes to the tendering Holders (or, in the case of outstanding notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such outstanding notes will be credited to an account maintained with such Book-Entry Transfer Facility), (ii) extend the exchange offer and retain all outstanding notes tendered prior to the expiration of the exchange offer, subject, however, to the rights of Holders to withdraw such outstanding notes (see "The Exchange Offer -- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the exchange offer and accept all properly tendered outstanding notes which have not been withdrawn. If such waiver constitutes a material change to the exchange offer, Berry Plastics will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and Berry Plastics will extend the exchange offer for a period of five to 10 business days, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, if the exchange offer would otherwise expire during such five- to 10-business-day period. EXCHANGE AGENT The United States Trust Company of New York has been appointed as Exchange Agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: To: United States Trust Company of New York, as Exchange Agent BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE: BY HAND BEFORE 4:30 P.M.: United States Trust Company of (212) 780-0592 United States Trust Company of New York Attention: New York P.O. Box 843 Customer Service 111 Broadway Cooper Station New York, New York 10006 New York, New York 10276 Attention: Lower Level Attention: Corporate Trust Corporate Trust Window Services CONFIRM BY BY OVERNIGHT COURIER AND BY TELEPHONE TO: HAND AFTER 4:30 P.M. ON THE (800) 548-6565 EXPIRATION DATE: United States Trust Company of New York 770 Broadway New York, New York 10003
FEES AND EXPENSES The expenses of soliciting tenders will be borne by Berry Plastics. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of Berry and our affiliates. Berry has not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. Berry Plastics, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the exchange offer will be paid by Berry Plastics. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. Berry Plastics will pay all transfer taxes, if any, applicable to the exchange of outstanding notes pursuant to the exchange offer. If, however, certificates representing exchange notes or outstanding notes for principal amounts 27 not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the outstanding notes tendered, or if tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of outstanding notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the outstanding notes as reflected in Berry Plastic's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the exchange offer and the unamortized expenses related to the issuance of the outstanding notes will be amortized over the term of the exchange notes. 28 CAPITALIZATION The following table sets forth the consolidated capitalization of BPC Holding and its subsidiaries at July 3, 1999 and the pro forma capitalization of BPC Holding and its subsidiaries as of such date after giving effect to the acquisition of Cardinal and the notes. You should read the information in the table below in conjunction with the historical consolidated financial statements of BPC Holding and the related notes included elsewhere in this prospectus.
AT JULY 3, 1999 -------------------------- HISTORICAL PRO FORMA ------------ ----------- (DOLLARS IN THOUSANDS) Long-term debt, including current portion: BERRY PLASTICS CORPORATION: Revolving credit facility ......................................... $ 23,835 $ 23,835 Term loans ........................................................ 61,151 61,151 Nevada Industrial Revenue Bonds ................................... 4,000 4,000 Capital lease obligations ......................................... 740 740 1994 Notes ........................................................ 100,000 100,000 1998 Notes ........................................................ 25,000 25,000 1999 Notes ........................................................ -- 75,000 Debt premium ...................................................... 758 758 --------- --------- Total Berry Plastics long-term debt, including current portion 215,484 290,484 BPC HOLDING: 1996 Notes ........................................................ 105,000 105,000 --------- --------- Total consolidated long-term debt, including current portion 320,484 395,484 Total stockholders' equity (deficit) .................................... (120,667) (120,667) --------- --------- Total capitalization .............................................. $ 199,817 $ 274,817 ========= =========
29 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated statement of operations and condensed consolidated balance sheet of BPC Holding (collectively, the "Pro Forma Statements") give effect to (1) the issuance of the notes, (2) the offering of our 1998 Notes and the applications of the proceeds therefrom and (3) our acquisitions of Cardinal, Knight and Norwich, as if the transactions had occurred as of the beginning of the respective period for the statement of operations data and other data, and in the case of the issuance of the notes and our acquisition of Cardinal, as if the transactions had occurred on July 3, 1999 for the balance sheet data. Fiscal year data reflect Cardinal's financial data for its fiscal year ended November 30, 1998. Twenty-six week period data reflect Cardinal's financial data for its period ended May 31, 1999. The Pro Forma Statements do not purport to represent what BPC Holding's consolidated financial position or results of operations would actually have been if such transactions had in fact occurred on such dates or to project BPC Holding's consolidated financial position or results of operations for any future date or period. The pro forma adjustments are based on information and upon assumptions that management believes to be reasonable. The Pro Forma Statements and accompanying notes should be read in conjunction with the historical consolidated financial statements and other financial information pertaining to BPC Holding and related notes thereto included elsewhere in this prospectus. BPC HOLDING PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FISCAL YEAR ENDED JANUARY 2, 1999
PRO FORMA FOR THE CARDINAL 1998 PRO FORMA ACQUISITIONS BPC HOLDING ACQUISITION ACQUISITIONS FOR THE 1999 NOTES AND THE HISTORICAL ADJUSTMENTS ADJUSTMENTS ACQUISITIONS ADJUSTMENTS 1999 NOTES -------------- ------------- --------------- -------------- -------------- ------------- (DOLLARS IN THOUSANDS) Net sales ........................... $ 271,830 $ 53,971 $ 26,869 $ 352,670 $ -- $ 352,670 Cost of goods sold .................. 199,227 43,066 22,786 265,079 -- 265,079 --------- --------- --------- --------- --------- --------- Gross margin ........................ 72,603 10,905 4,083 87,591 -- 87,591 Operating expenses .................. 44,001 8,166(1) 3,684(6) 55,851 -- 55,851 --------- --------- --------- --------- --------- --------- Operating income .................... 28,602 2,739 399 31,740 -- 31,740 Other expenses (income) ............. 1,865 (6) 2 1,861 -- 1,861 Interest expense, net ............... 34,556 --(2) 2,423(7) 36,979 8,625(11) 45,604 --------- --------- --------- --------- --------- --------- Income (loss) before income taxes ... (7,819) 2,745 (2,026) (7,100) (8,625) (15,725) Income taxes (benefit) .............. (249) --(3) 339(8) 90 -- 90 --------- --------- --------- --------- --------- --------- Net income (loss) ................... $ (7,570) $ 2,745 $ (2,365) $ (7,190) $ (8,625) $ (15,815) ========= ========= ========= ========= ========= ========= OTHER DATA: Depreciation and amortization ....... $ 24,830 $ 5,828(4) $ 1,838(9) $ 32,496 $ -- $ 32,496 BERRY PLASTICS DATA: Cash interest expense, net .......... $ 20,569 $ --(5) $ 2,423(10) $ 22,993 $ 8,250 $ 31,243 Total interest expense, net ......... 21,835 -- 2,423 24,258 8,625(11) 32,883
30 BPC HOLDING PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 26 WEEKS ENDED JULY 3, 1999
FOR THE CARDINAL PRO FORMA FOR ACQUISITION AND BPC HOLDING ACQUISITION THE CARDINAL 1999 NOTES THE HISTORICAL ADJUSTMENTS ACQUISITION ADJUSTMENTS 1999 NOTES -------------- -------------- ---------------- -------------- --------------------- (DOLLARS IN THOUSANDS) Net sales ............................ $ 159,852 $ 28,465 $ 188,317 -- $ 188,317 Cost of goods sold ................... 112,782 23,407 136,189 -- 136,189 --------- --------- --------- --------- --------- Gross margin ......................... 47,070 5,058 52,128 -- 52,128 Operating expenses ................... 25,828 4,251(1) 30,079 -- 30,079 --------- --------- --------- --------- --------- Operating income ..................... 21,242 807 22,049 -- 22,049 Other expenses ....................... 778 -- 778 -- 778 Interest expense, net ................ 17,860 --(2) 17,860 4,314(11) 22,174 --------- --------- --------- --------- --------- Income (loss) before income taxes .... 2,604 807 3,411 (4,314) (903) Income taxes ......................... 482 --(3) 482 -- 482 --------- --------- --------- --------- --------- Net income (loss) .................... $ 2,122 $ 807 $ 2,929 $ (4,314) $ (1,385) ========= ========= ========= ========= ========= OTHER DATA: Depreciation and amortization ........ $ 14,110 $ 3,372(4) $ 16,350 $ -- $ 16,350 BERRY PLASTICS DATA: Cash interest expense, net ........... $ 10,574 $ -- $ 10,574 $ 4,125 $ 14,699 Total interest expense, net .......... 11,196 --(5) 11,196 4,314(11) 15,510
31 BPC HOLDING NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL 26 WEEKS YEAR ENDED ENDED JANUARY 2, 1999 JULY 3, 1999 ------------------ -------------- (DOLLARS IN THOUSANDS) CARDINAL ACQUISITION ADJUSTMENTS: (1) Actual operating expenses................................................. $ 6,291 $ 3,119 Add amortization of goodwill resulting from the acquisition............... 1,875 1,132 -------- --------- Adjusted operating expenses............................................... $ 8,166 $ 4,251 ======== ========= (2) Actual interest expense................................................... $ 3,384 $ 1,400 Deduct interest on extinguished debt...................................... (3,384) (1,400) -------- --------- Adjusted interest expense................................................. $ -- $ -- ======== ========= (3) Actual provision for income taxes......................................... $ 439 $ 202 Adjust taxes for the acquisition.......................................... (439) (202) -------- --------- Adjusted income tax expense............................................... $ -- $ -- ======== ========= (4) Actual depreciation and amortization acquisition.......................... $ 3,953 $ 2,240 Add amortization of goodwill resulting from the acquisition............... 1,875 1,132 -------- --------- Adjusted depreciation and amortization.................................... $ 5,828 $ 3,372 ======== ========= (5) Actual net cash interest expense.......................................... $ 3,170 $ 1,292 Deduct interest on extinguished debt...................................... (3,170) 1,292 -------- --------- Adjusted net cash interest expense........................................ $ -- $ -- ======== ========= NORWICH AND KNIGHT ACQUISITIONS ADJUSTMENTS: (6) Actual operating expenses................................................. $ 3,350 Add amortization of goodwill resulting from the acquisitions.............. 334 -------- Adjusted operating expenses............................................... $ 3,684 ======== (7) Actual interest expense................................................... $ 48 Add incremental interest expense from the acquisitions.................... 2,375 -------- Adjusted interest expense................................................. $ 2,423 ======== (8) Actual provision for income taxes......................................... $ 196 Adjust taxes for the acquisitions......................................... 143 -------- Adjusted tax expense...................................................... $ 339 ======== (9) Actual depreciation and amortization...................................... $ 1,504 Add amortization of goodwill resulting from the acquisitions.............. 334 -------- Adjusted depreciation and amortization.................................... $ 1,838 ========
32
FISCAL 26 WEEKS YEAR ENDED ENDED JANUARY 2, 1999 JULY 3, 1999 ----------------- --------------- (10) Actual net cash interest expense.................................. $ 48 Add incremental net cash interest expense from acquisitions....... 2,375 -------- Adjusted net cash interest expense................................ $ 2,423 ======== OFFERING ADJUSTMENTS: (11) Adjustment of net interest expense: Interest on the 1999 Notes at 11%................................. $ 8,250 $ 4,125 Amortization of deferred financing costs associated with this Offering...................................................... 375 189 -------- --------- Change in net interest expense.................................... $ 8,625 $ 4,314 ======== =========
33 BPC HOLDING PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT JULY 3, 1999
PRO FORMA PRO FORMA FOR THE CARDINAL FOR THE CARDINAL BPC HOLDING ACQUISITION CARDINAL 1999 NOTES ACQUISITION AND HISTORICAL ADJUSTMENTS(1) ACQUISITION ADJUSTMENTS(2) THE 1999 NOTES ------------- --------------- -------------- --------------- ---------------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents .............. $ 2,993 $ 31 $ 3,024 $-- $ 3,024 Accounts receivable .................... 40,842 6,910 47,752 -- 47,752 Inventories ............................ 32,314 8,043 40,357 -- 40,357 Other current assets ................... 2,658 628 3,286 -- 3,286 --------- --------- --------- --------- --------- Total current assets ............ 78,807 15,612 94,419 -- 94,419 Assets held in trust ....................... 252 -- 252 -- 252 Property and equipment ..................... 120,271 31,956 152,227 -- 152,227 Intangible assets .......................... 55,950 31,596 87,546 3,000 90,546 Investment in subsidiary ................... -- (72,000) (72,000) 72,000 -- Other assets ............................... 3,129 112 3,241 -- 3,241 --------- --------- --------- --------- --------- Total assets .................... $ 258,409 $ 7,276 $ 265,685 75,000 340,685 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ...... $ 20,297 $-- $ 20,297 $-- $ 20,297 Accounts payable ....................... 20,664 4,205 24,869 -- 24,869 Accrued liabilities .................... 26,075 157 26,232 -- 26,232 --------- --------- --------- --------- --------- Total current liabilities ....... 67,036 4,362 71,398 -- 71,398 Long-term debt: Industrial revenue bonds (Nevada) ...... 4,000 -- 4,000 -- 4,000 Term loans ............................. 61,151 -- 61,151 -- 61,151 Revolving line of credit ............... 23,835 -- 23,835 -- 23,835 Capital lease obligations .............. 740 -- 740 -- 740 1994 Notes ............................. 100,000 -- 100,000 -- 100,000 1998 Notes ............................. 25,000 -- 25,000 -- 25,000 1999 Notes ............................. -- -- -- 75,000 75,000 1996 Notes ............................. 105,000 -- 105,000 -- 105,000 Debt premium ........................... 758 -- 758 -- 758 Less: current portion .................. (20,297) -- (20,297) -- (20,297) --------- --------- --------- --------- --------- Total long-term debt ............ 300,187 -- 300,187 75,000 375,187 Other liabilities .......................... 11,853 2,914 14,767 -- 14,767 --------- --------- --------- --------- --------- Total liabilities ............... 379,076 7,276 386,352 75,000 461,352 Stockholders' equity: Total stockholders' equity (deficit) ....................... (120,667) -- (120,667) -- (120,667) --------- --------- --------- --------- --------- Total liabilities and stockholders' equity (deficit) ..................... $ 258,409 $ 7,276 $ 265,685 $ 75,000 $ 340,685 ========= ========= ========= ========= =========
34 BPC HOLDING NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (1) The aggregate purchase price of the Cardinal acquisition is expected to be $72,000 (including $2,500 of fees and expenses related to the acquisition). The preliminary allocation of the purchase price to historical assets and liabilities of Cardinal was as follows: AT JULY 3, 1999 (Dollars in thousands) ---------------------- Net assets at predecessor historical costs.... $ 19,814 Elimination of intangible assets.............. (14,743) Extinguishment of debt........................ 33,065 Decrease in other liabilities................. 2,268 Excess of cost over net assets acquired....... 31,596 ---------- $ 72,000 ========== (2) Deferred debt issuance costs.................. 3,000 Acquisition of Cardinal, including fees and expenses.................................. 72,000 ---------- $ 75,000 ========== 35 SELECTED HISTORICAL FINANCIAL DATA The following selected financial data of BPC Holding and its subsidiaries as of and for the five fiscal years ended January 2, 1999 are derived from the consolidated financial statements of BPC Holding that have been audited by Ernst & Young LLP, independent auditors. The following selected consolidated financial data for the 26 weeks ended June 27, 1998 and July 3, 1999 are derived from the unaudited condensed consolidated financial statements of BPC Holding and, in our opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such data. Operating results for the 26 weeks ended July 3, 1999 are not necessarily indicative of the results that may be achieved for BPC Holding's fiscal year ending January 1, 2000. You should read this selected financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements, related notes and other financial information included in this prospectus.
FISCAL --------------------------------------------------------------------- 1994 1995 1996 1997 1998 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales ........................ $ 106,141 $ 140,681 $ 151,058 $ 226,953 $ 271,830 Cost of goods sold ............... 73,997 102,484 110,110 180,249 199,227 --------- --------- --------- --------- --------- Gross margin ..................... 32,144 38,197 40,948 46,704 72,603 Operating expenses ............... 15,160 17,670 23,679 30,505 44,001 --------- --------- --------- --------- --------- Operating income ................. 16,984 20,527 17,269 16,199 28,602 Other expenses(1) ................ 184 127 302 226 1,865 Interest expense, net (2) ........ 10,972 13,389 20,075 30,246 34,556 --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary charge ...... 5,828 7,011 (3,108) (14,273) (7,819) Income taxes (benefit) ........... 11 678 239 138 (249) --------- --------- --------- --------- --------- Income (loss) before extraordinary charge .......... 5,817 6,333 (3,347) (14,411) (7,570) Extraordinary charge(3) .......... 3,652 -- -- -- -- --------- --------- --------- --------- --------- Net income (loss) ............. $ 2,165 $ 6,333 $ (3,347) $ (14,411) $ (7,570) ========= ========= ========= ========= ========= Preferred stock dividends ..... $ -- $ -- $ 1,116 $ 2,558 $ 3,551 Common stock dividends ........ 50,000 -- -- -- -- BALANCE SHEET DATA (AT END OF PERIOD): Working capital .................. $ 13,393 $ 13,012 $ 15,910 $ 20,863 $ 4,762 Fixed assets ..................... 38,103 52,441 55,664 108,218 120,005 Total assets ..................... 91,790 103,465 145,798 239,444 255,317 Total debt ....................... 112,287 111,676 216,046 306,335 323,298 Stockholders' equity (deficit) ... (38,838) (32,484) (97,550) (108,975) (120,357) OTHER DATA: Adjusted EBITDA(4) ............... $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 Adjusted EBITDA margin ........... 24.9% 22.4% 23.0% 17.7% 22.0% Cash provided by operating activities .................... 15,556 12,969 14,426 14,154 34,131 Cash used for investing activities (9,495) (25,385) (14,639) (102,102) (52,120) Cash provided by (used for) financing activities .......... 2,184 11,124 2,370 80,444 17,619 Depreciation and amortization(5) . 8,176 9,536 11,331 19,026 24,830 Capital expenditures ............. 9,118 11,247 13,581 16,774 22,595 Ratio of earnings to fixed charges(6) .................... 1.5x 1.5x -- -- --
TWENTY-SIX WEEKS ENDED ------------------------ JUNE 27, JULY 3, 1998 1999 --------- --------- STATEMENT OF OPERATIONS DATA: Net sales ........................ $ 136,317 $ 159,852 Cost of goods sold ............... 100,016 112,782 --------- --------- Gross margin ..................... 36,301 47,070 Operating expenses ............... 20,725 25,828 --------- --------- Operating income ................. 15,576 21,242 Other expenses(1) ................ 430 778 Interest expense, net (2) ........ 16,866 17,860 --------- --------- Income (loss) before income taxes and extraordinary charge ...... (1,720) 2,604 Income taxes (benefit) ........... 26 482 --------- --------- Income (loss) before extraordinary charge .......... (1,746) 2,122 Extraordinary charge(3) .......... -- -- --------- --------- Net income (loss) ............. $ (1,746) $ 2,122 ========= ========= Preferred stock dividends ..... $ 1,783 $ 1,962 Common stock dividends ........ -- -- BALANCE SHEET DATA (AT END OF PERIOD): Working capital .................. $ 18,763 $ 11,771 Fixed assets ..................... 105,260 120,271 Total assets ..................... 231,171 258,409 Total debt ....................... 299,855 320,484 Stockholders' equity (deficit) ... (112,563) (120,667) OTHER DATA: Adjusted EBITDA(4) ............... $ 30,066 $ 37,653 Adjusted EBITDA margin ........... 22.1% 23.6% Cash provided by operating activities .................... 14,380 16,136 Cash used for investing activities (7,759) (13,053) Cash provided by (used for) financing activities .......... (6,629) (2,402) Depreciation and amortization(5) . 11,783 14,110 Capital expenditures ............. 7,854 13,461 Ratio of earnings to fixed charges(6) .................... -- 1.1x (1) Other expenses consist of loss on disposal of property and equipment for the respective periods. (2) Includes non-cash interest expense of $1,178 in fiscal 1994, $950 in fiscal 1995, $1,212 in fiscal 1996, $2,005 in fiscal 1997, $1,765 in fiscal 1998 and $884 and $872 for the 26 weeks ended June 27, 1998 and July 3, 1999. (3) During 1994, an extraordinary charge of $3.7 million was recognized as a result of the retirement of debt concurrently with the issuance of the 1994 Notes. 36
TWENTY-SIX WEEKS ENDED FISCAL ---------------------- --------------------------------------------------------- JUNE 27, JULY 3, 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Operating Income ............................. $ 16,984 $ 20,527 $ 17,269 $ 16,199 $ 28,602 $ 15,576 $ 21,242 Depreciation and amortization ................ 8,176 9,536 11,331 19,026 24,830 11,783 14,110 -------- -------- -------- -------- -------- -------- -------- EBITDA ....................................... 25,160 30,063 28,600 35,225 53,432 27,359 35,352 One-time expenses related to acquisitions: 1996 transaction compensation expenses . -- -- 2,762 -- -- -- -- Acquisition integration expenses ....... 116 867 692 3,267 1,525 1,035 1,091 Plant shutdown expenses ................ -- -- 907 848 2,559 1,328 576 Litigation expenses related to drink cup patent ................................ -- -- 650 100 631 -- -- Corporate expenses: Non-cash compensation expenses (benefit) 358 (214) 358 -- 749 (91) 197 Management fees and expenses ........... 746 853 749 828 872 435 437 -------- -------- -------- -------- -------- -------- -------- Adjusted EBITDA .............................. $ 26,380 $ 31,569 $ 34,718 $ 40,268 $ 59,768 $ 30,066 $ 37,653 ======== ======== ======== ======== ======== ======== ========
(4) Adjusted EBITDA should not be considered in isolation or as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. In addition, our calculation of Adjusted EBITDA differs from that presented by certain other companies and thus is not necessarily comparable to similarly titled measures used by other companies. The following table reconciles operating income to EBITDA and Adjusted EBITDA for each respective period: (5) Depreciation and amortization excludes non-cash amortization of deferred financing and origination fees and debt premium/discount amortization which are included in interest expense. (6) In calculating the ratio of earnings to fixed charges, earnings consist of (i) income (loss) before income taxes, plus (ii) fixed charges consisting of interest on debt (including amortization of deferred financing fees), plus (iii) that portion of lease rental expense representative of the interest factor. Earnings were inadequate to cover fixed charges by $2,883 in fiscal 1996, by $13,932 in fiscal 1997, by $7,042 in fiscal 1998 and by $2,046 for the twenty-six weeks ended June 27, 1998. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with "Selected Historical Financial Data" and the consolidated financial statements and the notes thereto included elsewhere in this prospectus. RESULTS OF OPERATIONS 26 WEEKS ENDED JULY 3, 1999 COMPARED TO 26 WEEKS ENDED JUNE 27, 1998 NET SALES. Net sales increased $23.6 million, or 17%, to $159.9 million for the 26 weeks ended July 3, 1999 from $136.3 million for the 26 weeks ended July 27, 1998 with an approximate 2% decrease in net selling prices due primarily to contractual decreases associated with lower raw material costs. Plastic packaging product net sales increased $19.6 million from the 26 weeks ended July 27, 1998. Within this segment, the addition of Norwich and Knight provided net sales for the 26 weeks ended July 3, 1999 of $7.3 million and $9.6 million, respectively. In addition, overcaps sales, excluding Knight, increased $2.1 million. Drink cup sales for the 26 weeks ended July 3, 1999 were $3.0 million off the 26 weeks ended July 27, 1998 due to a $3.5 million promotion during the 26 weeks ended July 27, 1998. Container sales increased $0.1 million from the 26 weeks ended July 27, 1998 despite the Company's decision to exit certain low margin business. Custom sales, including tooling, increased $3.4 million from the 26 weeks ended July 27, 1998 with a large promotion in the 26 weeks ended July 3, 1999. Plastic housewares product sales for the 26 weeks ended July 27, 1998 increased $4.0 million from the 26 weeks ended July 3, 1999 due to strong internal growth including several new products. GROSS MARGIN. Gross margin increased by $10.8 million to $47.1 million (29% of net sales) for the 26 weeks ended July 3, 1999 from $36.3 million (27% of net sales) from the 26 weeks ended July 27, 1998. This increase of 30% includes the combined impact of the added Norwich and Knight sales volume, acquisition integration, productivity improvement initiatives, and the cyclical impact of lower raw material costs compared to the 26 weeks ended July 27, 1998. A major focus continues to be the consolidation of products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, we closed the Anderson, South Carolina facility in 1998 with the majority of the business being transferred to the Charlotte, North Carolina plant. In addition, we closed the Arlington Heights, Illinois facility, which was acquired in the Knight acquisition, in 1999 with the majority of the business being transferred to the Woodstock, Illinois plant. Also, significant productivity improvements have been made, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of our facilities. OPERATING EXPENSES. Selling expenses increased by $1.5 million to $8.6 million for the 26 weeks ended July 3, 1999 from $7.1 million for the 26 weeks ended July 27, 1998 principally as a result of expanded sales coverage and increased marketing expenses. General and administrative expenses increased by $3.1 million to $11.9 million for the 26 weeks ended July 3, 1999 from $8.8 million for the prior 26 weeks ended July 27, 1998. The increase is primarily attributable to the Norwich and Knight acquisitions and increased accrued bonus expenses. One-time transition expenses for the 26 weeks ended July 3, 1999 include $0.6 million related to the shutdown of the Anderson and Arlington Heights facilities and $1.1 million related to acquisitions. One-time transition expenses for 26 weeks ended July 27, 1998 were $1.1 million related to acquisitions and $1.3 million related to the Anderson plant consolidation. INTEREST EXPENSE. Interest expense increased $0.6 million to $18.0 million for the 26 weeks ended July 3, 1999 compared to $17.4 million for the 26 weeks ended July 27, 1998 primarily due to additional borrowings to support the Norwich Moulders and Knight acquisitions. INCOME TAX. Our income tax expense was $0.5 million for the 26 weeks ended July 3, 1999. We continue to operate in a net operating loss carryforward position for Federal income tax purposes. 38 NET INCOME (LOSS). Net income for the 26 weeks ended July 3, 1999 of $2.1 million improved $3.8 million from a net loss of $1.7 million for the 26 weeks ended June 27, 1999 for the reasons discussed above. YEAR ENDED JANUARY 2, 1999 COMPARED TO YEAR ENDED DECEMBER 27, 1997 NET SALES. Net sales increased 19.8% to $271.8 million in 1998, up $44.9 million from $227.0 million in 1997, despite an approximate 2% decrease in net selling price due mainly to competitive market conditions. Container sales increased $34.5 million in 1998, primarily due to the continued market strength of base products and the acquisition of Venture. Net sales in the drink cup product line increased $2.3 million in 1998 as a result of a large promotion. Net sales for aerosol overcaps increased about $2.0 million due to the acquisition of Knight. Housewares net sales increased $4.0 million or 23% in 1998 due primarily to new products and strong market demands. The acquisition of Norwich also brought us into the U.K. market, primarily closures product sales, which provided an additional $7.3 million of net sales in 1998. Other product lines, including custom molded products and custom mold building, decreased $5.2 million due to large custom programs that occurred in 1997. GROSS MARGIN. Gross margin increased $25.9 million, or 55.5%, from $46.7 million (20.6% of net sales) in 1997 to $72.6 million (26.7% of net sales) in 1998. The increase in gross margin was primarily attributed to increased sales volume as described above, acquisition integration, productivity improvements and lower raw material costs. A major focus during 1998 was the consolidation of products and business of the subsidiaries that we acquired in 1997 to the most efficient tooling, providing customers with the best product and customer service. As part of the integration, we closed the Anderson, South Carolina facility, which was acquired in the acquisition of Venture, in 1998. The majority of the business was transferred to our Charlotte, North Carolina plant. Also, productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of our facilities. OPERATING EXPENSES. Operating expenses during 1998 were $44.0 million (16.2% of net sales), compared with $30.5 million (13.4% of net sales) for 1997. Sales related expenses, including the cost of expanded sales coverage and higher product development and marketing expenses, increased $3.5 million, almost all a result of our 1997 acquisitions. General and administrative expenses increased $7.8 million in 1998 primarily as a result of acquisitions made in 1997 and 1998, increased patent litigation expenses and increased employee profit sharing expense. Intangible amortization increased from $2.2 million in 1997 to $4.1 million for 1998, primarily as a result of the amortization of goodwill ascribed to acquired companies in 1997 and 1998. Other expense was $4.1 million for 1998 and 1997. Our 1997 acquisitions resulted in start-up related expenses of $3.2 million in 1997 and $1.3 million in 1998. The assets acquired with the acquisition of PackerWare included a facility in Reno, Nevada that was closed in 1997. Expenses related to the closing of the Reno facility were $0.5 million in 1997 and $0.2 million in 1998. Plant closing expenses related to the Winchester, Virginia facility resulted in expenses of $0.4 million for 1997. The closing of the Anderson, South Carolina facility resulted in 1998 expenses of $2.4 million. INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of deferred financing costs for 1998 was $34.6 million (12.7% of net sales) compared to $30.2 million (13.3% of net sales) in 1997, an increase of $4.3 million. This increase is attributed to interest on borrowings related to the 1997 and 1998 acquisitions offset partially by principal reductions. Cash interest paid in 1998 was $33.2 million as compared to $29.9 million for 1997. Interest income for 1998 was $1.0 million, down from $2.0 million in 1997, which is attributable to an additional year of interest payments on the 1996 Notes from the escrow account. INCOME TAXES. During fiscal 1998, we recorded a benefit of $0.2 million in federal and state income tax, primarily due to a carryback claim, compared to an expense of $0.1 million for fiscal 1997. We continue to operate in a net operating loss carryforward position for federal income tax purposes. NET LOSS. We recorded a net loss of $7.6 million in 1998 compared to a $14.4 million net loss in 1997 for the reasons stated above. 39 YEAR ENDED DECEMBER 27, 1997 COMPARED TO YEAR ENDED DECEMBER 28, 1996 NET SALES. Net sales increased 50.2% to $227.0 million in 1997, up $75.9 million from $151.1 million in 1996, which sales included an approximate 2% increase in net selling price due mainly to the impact of cyclical adjustments in the price of plastic resin. Container sales increased $30.1 million in 1997, primarily due to the continued market strength of base products and the acquisitions of Venture, Virginia Design and Container Industries. Net sales in the drink cup product line increased $23.8 million in 1997 as a result of the acquisition of PackerWare and a strong increase in existing drink cup business. Net sales of aerosol overcaps were relatively flat, decreasing about $2.6 million. The acquisition of PackerWare also brought us into the housewares product market, which provided an additional $17.5 million of net sales in 1997. Other product lines, including custom molded products and custom mold building, increased $7.1 million due to large custom programs that occurred in 1997. GROSS MARGIN. Gross margin increased $5.8 million or 14.1% from $40.9 million (27.1% of net sales) in 1996 to $46.7 million (20.6% of net sales) in 1997. The increase in gross margin is primarily attributable to increased sales volume as described above. The gross margin as a percent of net sales derived from our 1997 acquisitions was about 10.6% compared to 23.8% for non-acquisition related sales. Significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of our facilities. These productivity improvements were offset by increased resin prices in 1997 and the transition expenses of our 1997 acquisitions. OPERATING EXPENSES. Operating expenses during 1997 were $30.5 million (13.4% of net sales), compared with $23.7 million (15.7% of net sales) for 1996. Sales related expenses, including the cost of expanded sales coverage and higher product development and marketing expenses, increased $4.4 million, primarily as a result of the business acquisitions that we made in 1997 ($3.3 million). General and administrative expenses decreased $2.3 million in 1997 primarily as a result of the $2.8 million one-time compensation expense incurred in 1996 which related to the recapitalization of BPC Holding. Intangible amortization increased from $0.5 million in 1996 to $2.2 million for 1997, primarily as a result of the amortization of $1.6 million related to our 1997 acquisitions. Other expenses increased $2.6 million from $1.6 million for 1996 to $4.1 million in 1997. Our 1997 acquisitions resulted in a charge of $3.2 million in 1997 for start-up related expenses. The acquisition of PackerWare included a facility in Reno, Nevada, which was closed in 1997. Expenses related to the closing of the Reno facility were $0.5 million in 1997. Plant closing expenses related to the Winchester, Virginia facility resulted in expenses of $0.4 million for 1997. Included in 1996 was a charge of $0.7 million of start-up related expenses associated with the acquisition of Tri-Plas and $0.9 million related to the Winchester plant closing. INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of deferred financing costs for 1997, was $30.2 million (13.3% of net sales) compared to $20.1 million (13.3% of net sales) in 1996, an increase of $10.1 million. This increase is due to the full year impact of the recapitalization of BPC Holding, which occurred in June 1996. The recapitalization of BPC Holding included an offering of $105.0 million aggregate principal amount of the 1996 Notes, which bear interest at 12.5% annually. $35.6 million of the proceeds from the 1996 Notes were placed in escrow to pay the first three years of interest on the 1996 Notes. Interest is payable semi-annually on June 15 and December 15 of each year. Cash interest paid in 1997 was $29.9 million as compared to $19.7 million for 1996. Interest income for 1997 was $2.0 million, up from $1.3 million in 1996, also attributed to the full year impact of the recapitalization of BPC Holding. INCOME TAXES. During fiscal 1997, we incurred $0.1 million in federal and state income tax compared to $0.2 million for fiscal 1996. We continue to operate in a net operating loss carryforward position for federal income tax purposes. NET LOSS. We recorded a net loss of $14.4 million in 1997 compared to a $3.3 million net loss in 1996 for the reasons stated above. 40 INCOME TAX MATTERS BPC Holding has unused operating loss carryforwards of $26.0 million for federal income tax purposes which begin to expire in 2010. Alternative minimum tax credit carryforwards of about $2.8 million are available to BPC Holding indefinitely to reduce future years' federal income taxes. LIQUIDITY AND CAPITAL RESOURCES We have a credit facility with NationsBank, N.A. for a senior secured line of credit. Giving effect to the $20.0 million increase in our credit facility in connection with the Cardinal acquisition, the credit facility provides for aggregate borrowings up to a maximum of about $142.9 million including: o a $70.0 million revolving line of credit, subject to a borrowing base formula; o a 1.5 million revolving line of credit, subject to a borrowing base; o a $58.6 million term loan facility; o a 3.8 million term loan facility; and o a $5.6 million standby letter of credit facility to support our and our subsidiaries' obligations under our Nevada Industrial Revenue Bonds. The debt under our credit facility is guaranteed by our parent, BPC Holding, and our subsidiaries. Our credit facility requires us to comply with specified financial ratios and tests, including a minimum Tangible Capital Funds (as defined in the credit facility) test, maximum leverage ratio, interest coverage ratio, debt service coverage ratio and a fixed charge coverage ratio. The requirements of these tests may change on a quarterly basis. These covenants were waived as of July 3, 1999, as a result of the Cardinal acquisition. See "Description of Certain Other Debt -- The Credit Facility". The 1994 Indenture, the 1996 Indenture and the 1998 Indenture restrict our ability to incur additional debt and contain other provisions that could limit our liquidity. At July 3, 1999, on a pro forma basis giving effect to the acquisition of Cardinal and a $20.0 million concurrent increase in our credit facility, we had unused borrowing capacity under our credit facility's borrowing base of $35.8 million. Any additional debt above the borrowing base requires approval from the credit facility's lenders. Net cash provided by operating activities was $34.1 million in 1998 as compared to $14.2 million in 1997. The increase was primarily the result of a decreased consolidated net loss in 1998 and additional depreciation and amortization as the result of acquisitions in 1997 and 1998. Net cash provided by operating activities was $16.1 million for the 26 weeks ended July 3, 1999, an increase of $1.7 million from the 26 weeks ended June 27, 1998. The increase is primarily the result of improved operating performance with income before depreciation and amortization increasing $6.1 million from the 26 weeks ended June 27, 1998. Net working capital changes (defined as accounts receivable, inventories, prepaid expenses, other receivables, accounts payable and accrued expenses) decreased net cash $4.8 million from the 26 weeks ended June 27, 1998 due to our growth. Capital expenditures in 1998 were $22.6 million, an increase of $5.8 million from $16.8 million in 1997. Included in capital expenditures during 1998 was $6.2 million relating to the addition of a new warehouse, production systems and offices necessary to support production operating levels throughout Berry Plastics. Capital expenditures also included investment of $11.7 million for molds, $2.2 million for molding and printing machines, and $2.5 million for miscellaneous accessory equipment and systems. The capital expenditure budget for 1999 is expected to be $25.8 million, including about $8.1 million for building and systems which includes a major plant renovation, $10.5 million for molds, $4.2 million for molding and printing machines, and $3.0 million for miscellaneous accessory equipment. Capital expenditures for the 26 weeks ended July 3, 1999 included $5.5 million 41 for molds, $0.7 million for molding and printing machines, $4.4 million for buildings and systems, and $2.9 million for accessory equipment and systems. Net cash provided by financing activities was $17.6 million in 1998 as compared to $80.4 million in 1997. The $62.8 million decrease can be attributed primarily to a $52.4 million decrease in borrowings to finance acquisitions. Net cash provided by financing activities was $2.4 million for the 26 weeks ended July 3, 1999, representing a decrease of $4.2 million from the 26 weeks ended June 27, 1998. This decrease can be attributed to a decrease in borrowings from the revolving line of credit as a result of the improved operating performance noted above. Increased working capital needs occur whenever we experience strong incremental demand or a significant rise in the cost of raw material, particularly plastic resin. However, we anticipate that our cash interest, working capital and capital expenditure requirements for 1999 will be satisfied through a combination of funds generated from operating activities and cash on hand, together with funds available under our credit facility. Management bases such belief on historical experience and the substantial funds available under our credit facility. However, we cannot predict our future results of operations. The indentures governing the 1994 Notes, the 1998 Notes and the Notes restrict, and our credit facility prohibits, our ability to pay any dividend or make any distribution of funds to BPC Holding to satisfy interest and other obligations on the 1996 Notes. Based upon historical operating results, without a substantial increase in the net income of Berry Plastics, we anticipate that we will be unable to generate sufficient net income to permit a dividend to BPC Holding in an amount sufficient to meet BPC Holding's interest payment obligations under the 1996 Notes. Interest on the 1996 Notes is payable semi-annually on June 15 and December 15 of each year. However, from December 15, 1999 until June 15, 2001, BPC Holding may, at its option, pay interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. After June 15, 2001 or in the event that BPC Holding does not pay interest in additional notes, management anticipates that such interest obligations will only be met by refinancing the 1996 Notes or raising capital through equity offerings. We can not assure you that then-current market conditions would permit BPC Holding to consummate a refinancing or equity offering. At July 3, 1999, our cash balance was $3.0 million and, on a pro forma basis giving effect to the acquisition of Cardinal and a $20 million concurrent increase in our credit facility, we had unused borrowing capacity under our credit facility's borrowing base of about $35.8 million. GENERAL ECONOMIC CONDITIONS AND INFLATION We face various economic risks ranging from an economic downturn adversely impacting our primary markets to market fluctuations in plastic resin prices. In the short-term, rapid increases in the cost of resin may not be recovered through price increases to customers. Also, shortages of raw materials may occur from time to time. In the long-term, however, raw material availability and price changes generally do not have a material adverse effect on gross margin. Cost changes generally are passed through to customers over a period of time. In addition, we believe that our sensitivity to economic downturns in our primary markets is less significant due to our diverse customer base and our ability to provide a wide array of products to numerous end markets. We believe that we are not affected by inflation except to the extent that the economy in general is thereby affected. Should inflationary pressures drive costs higher, we believe that general industry competitive price increases would sustain operating results, although we can not assure you that this will be the case. IMPACT OF YEAR 2000 We have been modifying or replacing portions of our software since 1991 so that our computer systems will function properly with respect to dates in the Year 2000 and thereafter. Because we commenced this process early, the costs incurred to address this issue in any single year have not been significant. Our current business applications are Year 2000 compliant. Acquired businesses are converted to our applications for Year 2000 42 compliance and consistency in applications and reporting. Excluding Cardinal, the most recent acquired business, Knight, was converted to our applications on March 1, 1999. We plan to convert Cardinal to our applications by November 1999. However, we are currently in the process of replacing our current business software with another Year 2000 compliant package. This replacement is not due to any Year 2000 issues, but is needed to accommodate the changes that we have experienced in our business due to acquisitions in recent years. The anticipated cost of this conversion is about $2.0 million. The accounting phase of this conversion was completed for all plants in January 1999. The remaining phases are scheduled to be completed by the end of 1999. We believe that we have an effective program in place to resolve all internal Year 2000 issues. An inventory of computer based systems has been compiled and verified through testing and supplier verification. All identified non-compliant equipment and software will be corrected before December 1999. The current estimated cost for this resolution is $110,000. These systems include personal computers, postage machines, plant automation and telephone system components. The major Year 2000 risk that we face is the Year 2000 readiness of external suppliers of goods and services. We could have material disruption in our ability to produce and deliver product should there be major disruptions in the economy or failure of key suppliers. While it is impossible to account for the effectiveness of every supplier's Year 2000 efforts, the following steps are in the process of being completed: o We are identifying key suppliers, which include suppliers of raw material, banking, transportation, service, and utility providers and surveying these suppliers as to their Year 2000 status; o We are identifying which suppliers are not compliant or at risk; and o We are engaging in risk assessment and contingency planning for these key suppliers. These steps will not be completed until some time during the 3rd quarter of 1999 because some of our suppliers are not targeting Year 2000 compliance until the summer of 1999. The amount of potential liability and lost revenue due to Year 2000 issues cannot be reasonably estimated at this time. We will continue to work throughout the year to minimize any Year 2000 risks. 43 BUSINESS We are the nation's leading manufacturer and supplier of plastic injection-molded aerosol overcaps, drink cups and rigid thinwall open-top containers for a wide variety of end-use markets. We are also a leading manufacturer and supplier of plastic injection-molded semi-disposable housewares. In addition, with sales of over two billion aerosol overcaps in fiscal 1998, we believe that we are the largest supplier of plastic aerosol overcaps in the world. In our plastic packaging business, we focus primarily on three markets: aerosol overcaps, rigid thinwall open-top containers and drink cups. Our housewares business produces home products such as dinnerware, tumblers and garden items. We concentrate on manufacturing high-quality items sold to image-conscious marketers of consumer and industrial products. With over 1,000 proprietary molds, superior color matching capabilities, sophisticated multi- color printing techniques and nationwide plant locations, we consistently produce and deliver mass quantities of high-quality products on a cost-efficient basis. Our total net sales among our product categories is as follows: Fiscal ------------------------------------------------ 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- PLASTIC PACKAGING PRODUCTS: (DOLLARS IN MILLIONS) Aerosol overcaps $ 38.0 $ 43.6 $ 49.7 $ 47.1 $ 49.1 Rigid open-top containers ..... 61.6 71.1 80.8 111.5 145.9 Drink cups ..... 17.3 14.1 37.6 39.9 Other .......... 6.5 8.7 6.5 13.3 15.3 PLASTIC HOUSEWARES PRODUCTS ........ 17.5 21.6 -------- -------- -------- -------- -------- Total net sales ... $ 106.1 $ 140.7 $ 151.1 $ 227.0 $ 271.8 ======== ======== ======== ======== ======== We supply aerosol overcaps to a wide variety of customers and for a wide variety of products, including such well-known brand names as Faultless starch, Gillette personal care products, Pam cooking spray, Pledge furniture polish, Raid insect repellants, Rustoleum and Sherwin-Williams paints and Sure deodorant. Similarly, our containers are used for packaging a broad spectrum of consumer and commercial products, including Arch (Olin) pool chemicals, Elmer's home repair products, Hershey's cocoa, McDonald's children's meals, Milliken adhesives, Pillsbury cookie dough and promotional containers for a variety of customers, including the National Football League, Walt Disney and Warner- Brothers. Our drink cups are sold to fast food and family-dining restaurants, convenience stores, stadiums and retail stores. Our largest drink cup customers are Circle K, Coca-Cola, McDonald's, Pepsi-Cola and Steak 'n Shake. Our housewares products are primarily seasonal, semi-disposable housewares and lawn and garden items such as plates, bowls, pitchers, tumblers and flower pots. Our largest housewares customer, Wal-Mart, named us their housewares "Supplier of the Year" for 1998. COMPETITIVE STRENGTHS We believe that we are a strong competitor in our industry for the following reasons: o SUCCESSFUL INTEGRATION OF NUMEROUS STRATEGIC ACQUISITIONS. We have historically acquired businesses that we believe will improve our financial performance in the long-term and, in some cases, provide us with a new or complementary product line. We have successfully closed ten acquisitions since 1992. Our acquired businesses had aggregate pre-acquisition revenues of about $239 million. We believe that our acquisitions have strengthened our core businesses, as well as opened up new product lines and markets for us. Moreover, we believe that we have materially reduced the manufacturing and overhead costs of the companies that we acquired by introducing high technology manufacturing processes, closing excess facilities and taking advantage of economies of scale. 44 o HIGH-CAPACITY, STATE-OF-THE-ART PRODUCTION CAPABILITIES. We operate over 300 injection molding machines in 12 locations in the United States and one location in Europe. These machines, many of which are high-speed, specialized machines, range in clamp tonnage from 80 to 825 tons. Our wide range of state-of-the-art molding machines and national distribution system allow us to economically mass produce high-quality products. In addition, we believe that our post-molding capabilities are among the most modern and extensive in the industry. These capabilities include printing, labeling, assembly, packing and distribution. o FULL PRODUCT LINES AND STRONG MARKET POSITION. A substantial majority of our sales are in product categories in which we are the nation's largest supplier. We use over 1,000 active molds, providing our customers with a wide range of products from which to choose. For a majority of our customers we are the sole or largest supplier of plastic injection-molded products. We believe that our extensive product lines, market experience, product quality and focus on customer satisfaction allow us to maintain our strong position in our key markets. o LARGE, DIRECT SALES FORCE. Our sales force is comprised of over 40 dedicated professionals and is among the largest in-house sales forces in our industry. Our sales force is focused on working both with customers and with our internal production and product design personnel to develop customized packaging. We believe that the size of our sales force allows us to maintain close working relationships with our customers. o IN-HOUSE PRODUCT DESIGN AND GRAPHIC ARTS CAPABILITIES. We have an in-house staff of 16 product development engineers and 22 graphic artists. These professionals work closely with customers to develop new products and designs. We also believe that our customized designs often help our customers differentiate their products in the marketplace and improve their product's performance. We believe that these capabilities have given us a significant competitive advantage in certain high-margin niche container product markets where the ability to produce sophisticated and colorful graphics is crucial to a product's success. o DEDICATION TO SERVICE AND QUALITY. As a result of our dedication to service and quality, we have received several awards from our top ten customers including, in 1998, Wal-Mart's "Supplier of the Year" award in its housewares division and SC Johnson Wax's "Supplier Quality Achievement Award." In addition, four of our plants are ISO 9000 certified. Our remaining nine facilities are working to obtain their ISO 9000 certification. ISO 9000 certification is only given to companies that meet the requirements of a quality management system established by the International Standardization Organization. o LARGE, DIVERSE CUSTOMER BASE. We sell our plastic packaging and housewares products to over 7,000 customers who are engaged in a variety of businesses. We believe that this provides us with a stable client base that is not materially affected by particular end-use market fluctuations. We also believe that we are the single-source or largest supplier of plastic aerosol overcaps, containers and drink cups to a majority of our customers. Our top ten customers represented only about 18% of our fiscal 1998 net sales on a pro forma basis. Our largest customer represented only about 4% of our fiscal 1998 net sales on a pro forma basis. GROWTH STRATEGY Our goal is to maintain and enhance our market position and leverage our core strengths to increase profitability. Our strategy to achieve this goal includes the following elements: o PURSUE STRATEGIC ACQUISITIONS IN OUR CORE BUSINESSES. We have successfully closed ten acquisitions since 1992. We will continue to pursue strategic acquisitions that we believe will provide added value to our core businesses. 45 o DESIGN AND INTRODUCE INNOVATIVE NEW PRODUCTS TO PENETRATE NEW MARKETS. We intend to grow our product lines and increase market share by producing new products. For example, we recently developed a complete line of pool chemical containers specifically designed for Arch. We also introduced a 16 oz. insulated coffee mug and lid, with enhanced functionality and styling, in 1999 and a single-serve soft ice cream dispensing container that was recently accepted for use by Healthy Choice. o EMPHASIZE OUTSTANDING PRODUCT QUALITY AND CUSTOMER SERVICE. Through our dedication to product quality and service, we intend to grow our base business through growth in the marketplace and by gaining business from our competitors. Our field sales, production, and support staff meet with customers to understand their needs and improve our product offerings and services. Each of our customers has designated sales and customer service representatives responsible for their individual needs. Sophisticated technology is an ongoing part of our traditional quality assurance activities. We extensively test parts for size, color, strength and material quality using statistical process control techniques. PLASTIC PACKAGING PRODUCTS AEROSOL OVERCAPS We believe that we are the worldwide leader in the production of aerosol overcaps. About 20% of the U.S. market consists of marketers who produce overcaps for use on their own products. We believe that a portion of these in-house producers will outsource the manufacture of aerosol overcaps in order to reduce their inventory of manufacturing assets and to focus on their core businesses. We believe that these companies will look to outsource the manufacture of overcaps to high technology, low cost manufacturers, such as Berry Plastics. The aerosol overcaps that we produce are used in a wide variety of consumer goods including spray paints, household and personal care products, insecticides and numerous other commercial and consumer products. Most U.S. manufacturers and contract fillers of aerosol products purchase some portion of their needs from us. In fiscal 1998, no single aerosol overcap customer accounted for more than 3% of our total net sales. We believe that, over the years, Berry Plastics has developed several significant competitive advantages including the following: o a reputation for outstanding quality; o short lead-time requirements to fill customer orders; o long-standing relationships with major customers; o the ability to quickly and accurately reproduce over 3,500 colors; o proprietary packing technology that minimizes freight cost and warehouse space; o high-speed, low-cost molding and decorating capability; and o a broad product line of proprietary molds. We received a "Supplier Quality Achievement Award" in 1998 from SC Johnson Wax. We continue to develop new products in the plastic aerosol overcap market, including the "spray-thru" line of aerosol overcaps, such as that used for Pledge furniture polish. Major competitors in this market include Dubuque Plastics, Cobra and Transcontainer. In addition, a number of companies, including several of our customers (e.g., S.C. Johnson and Reckitt & Colman), currently produce plastic aerosol overcaps for their own use. RIGID OPEN-TOP CONTAINERS We produce six different types of containers, classified as follows: o thinwall; 46 o child-resistant; o pry-off; o dairy; o polypropylene; and o industrial. We believe that we are the leading U.S. manufacturer in thinwall, child- resistant, pry-off and frozen dessert containers. We consider industrial containers to be a market with little differentiation between products and an absence of higher margin niches. The following table describes each of our six container product lines: - --------------------------------------------------------------------------------
PRODUCT LINE DESCRIPTION SIZE OF CONTAINER USES OF PRODUCT - ------------ ----------- ----------------- --------------- Thinwall Thinwalled, multi-purpose containers with 6 oz. to 2 gallons Food, promotional products, toys or without handles and lids and a wide variety of other uses Child-resistant Containers that meet Consumer Product Safety 2 lbs. to 2 gallons Pool and other chemicals Commission standards for child safety Pry-off Containers having a tight lid-fit and requiring 4 oz. to 2 gallons Building products, adhesives, other an opening device industrial uses Dairy Thinwall containers in traditional dairy market 6 oz. to 1.25 gallons, Cultured dairy products including sizes and styles Multi-pack yogurt, cottage cheese, sour cream and dips, frozen desserts Polypropylene Usually clear containers in round, oblong or 6 oz. to 5 lbs. Food, deli, sauces, salads rectangular shapes Industrial Thick-walled, larger pails designed to 2.5 to 5 gallons Building products, chemicals, accommodate heavy loads paints, other industrial uses
- -------------------------------------------------------------------------------- The largest uses for our containers are for food products, building products, chemicals and dairy products. We have a diverse customer base for our container lines, and no single container customer exceeded 3% of our total net sales in fiscal 1998. We believe that we offer the broadest product line among U.S.-based injection-molded plastic container manufacturers. Our container capacities range from 4 ounces to 5 gallons and are offered in various styles with accompanying lids, bails and handles, as well as a wide array of decorating options. In addition to a complete product line, we offer sophisticated printing capabilities, an in-house graphic arts department, low cost manufacturing capability with 12 plants strategically located throughout the U.S. and a dedication to high-quality products and customer service. Our product engineers, located in most of our facilities, work with customers to design and commercialize new containers. We seek to develop niche container products and new applications for our products by taking advantage of our state-of-the-art decorating and graphic arts capabilities and dedication to service and quality. We believe that these capabilities have given us a significant competitive advantage in certain high-margin niche container product markets where the ability to produce sophisticated and colorful graphics is crucial to the product's success. Examples of these products are popcorn containers for new movie promotions and professional and college sporting and entertainment events. In order to identify new applications for existing products, we rely extensively on our national sales force. Once opportunities are identified, the sales force works with our product design engineers to satisfy customers' needs. In the non-industrial container market, our strongest competitors include Airlite, Sweetheart, Landis and Polytainers. We also produce industrial pails for a market that is dominated by large volume competitors such as 47 Letlea, Plastican, NAMPAC and Ropak. We do not participate heavily in this market due to its generally lower margins. We intend to selectively participate in the industrial container market when higher margin opportunities, equipment utilization or customer requirements make participation an attractive option. DRINK CUPS We believe that we are the leading provider of injection-molded plastic drink cups in the United States. As beverage producers, convenience stores and fast food restaurants increase their marketing efforts for larger sized drinks, we believe that the plastic drink cup market will expand because of plastic's desirability over paper for larger drink cups. We produce injection-molded plastic cups that range in size from 12 to 64 ounces. Our primary markets are fast food and family-dining restaurants, convenience stores, stadiums, and retail stores. Virtually all of our cups are decorated, often as promotional items, and we are known in the industry for our innovative, state-of-the-art graphics capability. We have historically supplied a full line of traditional straight-sided and drive-through style drink cups from 12 to 64 ounces with disposable and reusable lids primarily to fast food and convenience store chains. With the acquisition of PackerWare, we expanded our presence in this market while diversifying into the stadium and family-dining restaurant markets. The 64 ounce cup, which has been highly successful with convenience stores, is one of our fastest growing drink cups. Our major competitors in the drink cup market include Packaging Resources Incorporated, Pescor Plastics and WNA (formerly Cups Illustrated). CUSTOM MOLDED PRODUCTS AND CLOSURES PRODUCTS We also make custom molded products by using molds provided by our customers as the model. Typically, the low cost of entry in the custom molded products market creates an open marketplace in which many companies can compete. Rather than pursue the overall custom molded products market, we focus our custom molding efforts on those customers who value our mold and product design expertise, superior color matching abilities and sophisticated multi-color printing capabilities. The majority of our custom business requires specialized equipment and expertise. We entered the closures market as a result of our acquisition of Norwich in July 1998. We only sell closure products in the United Kingdom. The primary closure product that we sell is a foil sealed milk cap. Demand for this product has increased in recent years as the U.K.'s milk market is using more plastic containers. Through Norwich, we offer a broad product line that includes dispensing, tamper evident and custom molded closures. PLASTIC HOUSEWARES PRODUCTS Our participation in the multi-billion dollar plastic housewares market is focused on producing and selling seasonal (spring and summer) semi-disposable plastic housewares (e.g., plates, bowls, pitchers and tumblers) and plastic lawn and garden products (primarily outdoor flower pots). We sell virtually all of our products in this market through major national retail marketers and national chain stores including Wal-Mart and Target. PackerWare is a recognized brand name in these markets and our PackerWare branded products are often co-branded by our customers. Historically, our PackerWare subsidiary has provided high-quality products to consumers at a relatively modest price that is consistent with the pricing targets of our retail marketers. We believe that outstanding service and ability to deliver products with timely combination of color and design further enhance our position in this market. We received an award as the "Supplier of the Year" in 1998 by Wal-Mart in its housewares division. MARKETING AND SALES We reach our large and diversified base of over 7,000 customers primarily through our direct field sales force of over 40 professionals. These field sales representatives are focused on individual product lines, but are encouraged to sell all of our products to serve the needs of our customers. We believe that a direct field sales force is 48 able to focus on target markets and customers, with the added benefit of permitting us to control pricing decisions centrally. We also use the services of manufacturing representatives to assist our direct sales force. We believe that we produce a high level of customer satisfaction. Highly skilled customer service representatives are located in each of our facilities to support the national field sales force. In addition, telemarketing representatives, marketing managers and sales/marketing executives oversee marketing and sales efforts. Manufacturing and engineering personnel work closely with field sales personnel to satisfy customers' needs through the production of high quality, value-added products and on-time deliveries. Additional marketing and sales techniques include promoting the benefits that our Graphic Arts department with computer-assisted graphic design capabilities and in-house production of photopolymer printing plates can offer our customers. Our centralized color matching and materials blending department uses a computerized spectrophotometer to ensure that colors produced match those requested by customers. MANUFACTURING GENERAL We manufacture our products using a plastic injection molding process. In this process, plastic resin, in the form of small pellets, is fed into an injection molding machine. The injection molding machine melts the plastic resin and injects it into a multi-cavity steel mold, which forces the plastic resin to take the final shape of the product. After they solidify, which generally takes between five and 25 seconds, the plastic parts are ejected from the mold into automated handling systems from which they are packed in corrugated containers for further processing or shipment. After molding, the product may be either decorated (printing, silk-screening, labeling) or assembled (e.g., bail handles fitted to containers). We believe that our molding and decorating capabilities are among the best in the industry. Our overall manufacturing philosophy is to be a low-cost producer by using high-speed molding machines, modern multi-cavity hot runner, cold runner and insulated runner molds, extensive material handling automation and sophisticated printing technology. We package large volume products using state-of-the-art robotic packaging processes. This technology enables us to deliver a higher quality product (due to reduced breakage) and lowers warehousing and shipping costs (due to more efficient use of space). At each of our plants we have complete tooling maintenance capability to support our molding and decorating operations. We historically have made, and intend to continue to make, significant capital investments in plant and equipment because of our objectives to grow, to improve productivity, to maintain competitive advantages, and to maintain the large base of equipment and other assets necessary for our business. PRODUCT DEVELOPMENT Our full-time product engineers use three-dimensional computer-aided-design technology to design and modify new products and prepare mold drawings. Engineers use an in-house model shop that includes a thermoforming machine to produce prototypes and sample parts. They simulate the molding environment by running prototype molds in a small injection molding machine dedicated to the research and development of new products. Production molds are then designed and outsourced for production by various companies in the U.S. and Canada with whom we have extensive experience and established relationships. Our engineers oversee the mold-building process from start to finish. QUALITY ASSURANCE Each of our plants uses Total Quality Management philosophies. These philosophies include the use of statistical process control and extensive involvement of employees to increase productivity. This team approach to problem- solving increases employee participation and provides necessary training at all levels. Four of our plants have ISO 9000 certification, which certifies compliance by a company in meeting the requirements of a quality management system established by the International Standardization Organization. Our Evansville plant was 49 certified in 1994, our Henderson plant was certified in 1995, our Iowa Falls plant was certified in 1996 and our Lawrence plant was certified in 1998. We are pursuing ISO certification in all of our other facilities. Extensive testing of parts for size, color, strength and material quality using statistical process control techniques and sophisticated technology is also an ongoing part of our traditional quality assurance activities. SYSTEMS We use a fully integrated computer software system at our plants that is capable of producing complete financial and operational reports. This accounting and control system may be expanded to add new features and/or locations as we grow. In addition, we have a sophisticated quality assurance system based on ISO 9000 certification, a bar code based material management system and an integrated manufacturing system. SOURCES AND AVAILABILITY OF RAW MATERIALS Plastic resin is the most important raw material that we purchase. We purchased about $62 million of resin in fiscal 1998 (excluding specialty resins), of which 70% was high density polyethylene, 12% linear low density polyethylene and 18% polypropylene. Our purchasing strategy is to buy from only high-quality, dependable suppliers, such as Dow, Union Carbide, Chevron, Phillips, Equistar, and Mobil. Although we do not have any supply contracts with our key suppliers, we believe that we have maintained outstanding relationships with these key suppliers over the past several years and expect that such relationships will continue into the foreseeable future. Based on our experience, we believe that adequate quantities of plastic resins will be available, but we cannot assure you of that. See "Risk Factors--We do not have firm contracts with plastic resin supplies." EMPLOYEES We have about 2,800 employees. None of our employees are covered by collective bargaining agreements. On February 5, 1998, the employees in Monroeville, Ohio voted to decertify the union in the facility. This facility was acquired as a result of the acquisition of Venture and was our only plant with a collective bargaining agreement during 1998. PATENTS AND TRADEMARKS We have numerous patents and trademarks on our products. None of the patents or trademarks are considered by management to be material to our business. See "Legal Proceedings" below. ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION Our past and present operations and the past and present ownership and operations of real property by Berry Plastics are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes or otherwise relating to the protection of the environment. We believe that we are in substantial compliance with applicable environmental laws and regulations. However, we cannot predict whether we will incur liability in the future under environmental statutes and regulations with respect to non-compliance with environmental laws, contamination of sites formerly or currently owned or operated by us (including contamination caused by prior owners and operators of such sites) or the off-site disposal of hazardous substances. Based upon a May 1998 compliance inspection, the Ohio Environmental Protection Agency issued a Notice of Violation dated June 23, 1998 to Venture alleging that its Monroeville, Ohio facility failed to file certain reports required pursuant to the Federal Emergency Planning and Community Right-To-Know Act of 1986 (also known as "SARA Title III") for the reporting years 1994 and 1995. This matter has since been closed by the Ohio Environmental Protection Agency. No fines or penalties were assessed. 50 Like any manufacturer, we may receive notices of potential liability, pursuant to CERCLA or analogous state laws, for cleanup costs associated with offsite waste recycling or disposal facilities at which wastes associated with its operations have allegedly come to be located. Liability under CERCLA is strict, retroactive and joint and several. No such notices are currently pending. The Food and Drug Administration regulates the material content of direct- contact food containers and packages, including certain thinwall containers that we manufacture. We use approved resins and pigments in our direct contact food products and believe we are in material compliance with all such applicable FDA regulations. The plastics industry, including Berry Plastics, also is subject to existing and potential federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other similar measures. The principal resin used in our products, high-density polyethylene, is recyclable, and, accordingly, we believe that the legislation promulgated to date and such initiatives to date have not affected us negatively. It is possible that any future legislative or regulatory efforts or future initiatives may affect us adversely. Beginning January 1, 1995, legislation in Oregon, California and Wisconsin requires products packaged in rigid plastic containers to comply with standards intended to encourage recycling and to increase the use of recycled materials. Although the regulations vary by state, the principal requirement is typically the use of recycled plastic as an ingredient in containers sold for non-food uses. Additionally, Oregon and California allow lightweighting of the container or concentrating the product sold in the container as options for compliance. Oregon and California provide for an exemption from all these regulations if statewide recycling reaches or exceeds 25% of rigid plastic containers. In September 1996, California passed a new bill permanently exempting food and cosmetics containers from this requirement. However, non-food containers are still required to comply. In December 1996, the Department of Environmental Quality estimated that Oregon had met its recycling goal of 25% for 1997 (based on 1996 data), and accordingly, was in compliance for the 1997 calendar year. However, in January 1998, California formally approved a 23.2% recycling rate for the state during 1996, and since this falls below the required 25% rate for exemption of non-food containers, the state can now begin enforcing its recycled content mandate on any non-food plastic containers from 8 oz. to 5 gallons. In order to facilitate individual customer compliance with these regulations, we provide our customers with the option to purchase containers that are lower weight. 51 PROPERTIES The following table sets forth our principal facilities: LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED - ----------------- ----- -------------- ---------------- ---------------- Lawrence, KS...... 19.3 423,000 Manufacturing Owned Evansville, IN.... 13.4 420,000 Headquarters and Owned Manufacturing Ontario, CA....... 10.0 200,000 Manufacturing Leased (expires August 2003) Henderson, NV..... 12.0 168,000 Manufacturing Owned Charlotte, NC..... 32.0 148,000 Manufacturing Owned Streetsboro, OH... 12.0 140,000 Manufacturing Owned Monroeville, OH... 19.0 112,000 Manufacturing Owned Minneapolis, MN... 3.0 110,000 Manufacturing Leased (expires December 1999) Suffolk, VA....... 14.0 102,000 Manufacturing Owned Iowa Falls, IA.... 14.0 101,000 Manufacturing Owned Woodstock, IL..... 11.7 98,000 Manufacturing Owned Norwich, England.. 5.0 44,000 Manufacturing Owned York, PA.......... 10.0 40,000 Manufacturing Leased (expires December 2001) We believe that our property and equipment are well-maintained, in good operating condition and adequate for our present needs. LEGAL PROCEEDINGS We are party to various legal proceedings involving routine claims which are incidental to our business. Although our legal and financial liability with respect to such proceedings cannot be estimated with certainty, we believe that any ultimate liability would not be material to our financial condition. Berry Plastics and/or our subsidiary Berry Sterling are currently litigating two lawsuits that involve United States Patent No. Des. 362,368. This patent claims an ornamental design for a cup that fits an automobile cup holder. On September 21, 1995, Berry Sterling filed suit in United States District Court, Eastern District of Virginia, against Pescor Plastics, Inc. for infringement of this patent. Pescor Plastics filed counterclaims seeking a declaratory judgment of invalidity and non-infringement, and damages under the Lanham Act. On December 28, 1995, Berry Sterling filed suit against Packaging Resources Incorporated in United States District Court, Southern District of New York, for infringement of this patent and seeking, among other equitable relief, damages in an unspecified amount. Packaging Resources has filed counterclaims against Berry Sterling alleging violation of the Lanham Act, tortious interference with Packaging Resources' prospective business advantage, consumer fraud and requesting a declaratory judgment that its "Drive-N-Go" cup does not infringe this patent. Packaging Resources has not specified the amount of damages sought. On February 25, 1998, after trial, a jury rendered a verdict in Berry Sterling's action against Pescor Plastics. The jury found the patent to be invalid on the grounds of functionality and obviousness and awarded Pescor $150,000 on its counterclaim. The jury also found that Pescor willfully infringed the patent and awarded Berry Sterling damages of $1.2 million, but this award was not included in the judgment because of the finding of the invalidity of the patent. On March 11, 1998, Berry Sterling filed a motion with the Court to set aside the verdict of invalidity and the award on the counterclaim, which was subsequently denied by the Court. On April 29, 1998, Berry Sterling filed a Notice of Appeal of the Court's judgment and the denial of its motion to set 52 aside the jury's verdict. Oral argument for the appeal took place on January 5, 1999, and we are awaiting the Court's decision. The Court in the Packaging Resources case put the case on its suspense calendar pending the appeal in the Pescor Plastics case. 53 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information with respect to the executive officers, directors and certain key personnel of our parent, BPC Holding and its subsidiaries:
NAME AGE TITLE ENTITY ---- --- ----- ------ Roberto Buaron(1)(4)........ 52 Chairman and Director Berry Plastics and BPC Holding Martin R. Imbler(1)(4).... 51 President, Chief Executive Berry Plastics Officer and Director President and Director BPC Holding Ira G. Boots................ 45 Executive Vice President - Berry Plastics Operations and Director James M. Kratochvil......... 42 Executive Vice President, Chief Financial Officer, Berry Plastics Treasurer and Secretary Executive Vice President - Chief Financial Officer and BPC Holding Secretary R. Brent Beeler............. 46 Executive Vice President, Berry Plastics Sales and Marketing Randy Hobson................ 32 Vice President - Sales and Berry Plastics Marketing Ruth Richmond............... 36 Vice President - Planning Berry Plastics and Administration and Assistant Secretary David Weaver................ 36 Vice President and Plant Berry Plastics Manager - Lawrence Fredrick A. Heseman......... 46 Vice President and Plant Berry Plastics Manager -Evansville Bruce J. Sims............... 49 Vice President - Sales and Berry Plastics Marketing, Housewares George A. Willbrandt........ 54 Vice President - Sales and Berry Plastics Marketing Lawrence G. Graev(2)(3)..... 54 Director Berry Plastics and BPC Holding Joseph S. Levy(2)(3)........ 31 Vice President, Assistant Berry Plastics and Donald J. Hofmann, Secretary and Director BPC Holding Jr.(1)(2)(3)(4)............. 41 Director Berry Plastics and BPC Holding Mathew J. Lori.............. 35 Director Berry Plastics and BPC Holding David M. Clarke............. 48 Director Berry Plastics and BPC Holding
- --------------------------------- (1) Member of the Stock Option Committee of BPC Holding. (2) Member of the Audit Committee of BPC Holding. (3) Member of the Audit Committee of Berry Plastics. (4) Member of the Compensation Committee of Berry Plastics. ROBERTO BUARON has been Chairman and a Director of Berry Plastics since it was organized in December 1990. He has also served as Chairman and a Director of BPC Holding since 1990. He is the Chairman and Chief Executive Officer of First Atlantic Capital, Ltd., which he founded in 1989. From 1987 to 1989, he was an Executive Vice President with Overseas Partners, Inc., an investment management firm. From 1983 to 1986, he was First Vice President of Smith Barney, Inc., and a General Partner of First Century Partnership, its venture capital 54 affiliate. Prior to 1983, he was a Principal at McKinsey & Company. Mr. Buaron is also a director of CFP Holdings, Inc., a processed meat company. MARTIN R. IMBLER has been President, Chief Executive Officer and a Director of Berry Plastics since January 1991. He has also served as a Director of BPC Holding since January 1991, and as President of BPC Holding since May 1996. From June 1987 to December 1990, he was President and Chief Executive Officer of Risdon Corporation, a cosmetic packaging company. Mr. Imbler was employed by American Can Company from 1981 to 1987, as Vice President and General Manager of the East/South Region Food and General Line Packaging business from 1985 to 1987 and as Vice President-Marketing, from 1981 to 1985. IRA G. BOOTS has been Executive Vice President-Operations, and a Director of Berry Plastics since April 1992. Prior to that, Mr. Boots was Vice President of Operations, Engineering and Product Development of the Company from December 1990 to April 1992. Mr. Boots was employed by Berry Plastics, Inc. from 1984 to December 1990 as Vice President-Operations. JAMES M. KRATOCHVIL was promoted to Executive Vice President, Chief Financial Officer, Secretary and Treasurer of Berry Plastics in December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of Berry Plastics since 1991, and as Treasurer of Berry Plastics since May 1996. He was also promoted to Executive Vice President, Chief Financial Officer and Secretary of BPC Holding in December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of BPC Holding since 1991. Mr. Kratochvil was employed by Berry Plastics, Inc. from 1985 to 1991 as Controller. R. BRENT BEELER was promoted to Executive Vice President-Sales and Marketing in February 1996. He formerly served as Vice President, Sales and Marketing of Berry Plastics since December 1990. Mr. Beeler was employed by Berry Plastics, Inc. from October 1988 to December 1990 as Vice President, Sales and Marketing. RANDY HOBSON has been Vice President-Sales and Marketing of Berry Plastics since June 1998. Mr. Hobson was Marketing Manager-Containers for Berry Plastics from November 1997 to June 1998. Prior to that, he was a Regional Sales Manager from 1992 to November 1997. Mr. Hobson joined Berry Plastics, Inc. in 1988. RUTH RICHMOND has been Assistant Secretary of BPC Holding and Berry Plastics since April 1998. Ms. Richmond has been Vice President-Planning and Administration of Berry Plastics since January 1995. From January 1994 to December 1994, Ms. Richmond was Vice President and Plant Manager-Henderson. Ms. Richmond was Plant Manager-Henderson from February 1993 to January 1994 and Assistant General Manager-Henderson from February 1991 to February 1993. Ms. Richmond joined the accounting department of Berry Plastics, Inc. in 1986. DAVID WEAVER has been Vice President and Plant Manager-Lawrence of Berry Plastics since January 1997. From January 1993 to January 1997, he was Vice President and Plant Manager-Iowa Falls. From February 1992 to January 1993, Mr. Weaver was Plant Manager-Iowa Falls and, prior to that, he was Maintenance Engineering Supervisor from July 1990 to February 1992. Mr. Weaver was a Project Engineer from January 1989 to July 1990 for Berry Plastics, Inc. FREDRICK A. HESEMAN was promoted to Vice President and Plant Manager-Evansville of Berry Plastics in December 1997. From October 1996 to December 1997, Mr. Heseman was Plant Manager-Evansville, and prior to that, he was Engineering Manager from December 1990 to October 1996. Mr. Heseman was employed by Berry Plastics, Inc. from June 1987 to December 1990 as Engineering Manager. BRUCE J. SIMS has been Vice President-Sales and Marketing, Housewares of Berry Plastics since January 1997. Prior to the acquisition of PackerWare, Mr. Sims served as President of PackerWare from March 1996 to January 1997 and as Vice President from October 1994 to March 1996. From January 1990 to October 1994 he was Vice President of the Miner Container Corporation, a national injection molder. Mr. Sims was Executive Vice President of MKM Distribution Company from 1985 to 1990. 55 GEORGE A. WILLBRANDT was promoted to Vice President-Sales and Marketing of Berry Plastics in April 1997. He formerly served as Vice President, Sales and Marketing of Berry Sterling since 1995. Prior to that he was President and co-owner of Sterling Products, which he founded in 1983. LAWRENCE G. GRAEV has been a Director of Berry Plastics and BPC Holding since August 1995. Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP of New York, where he has been a partner since 1974. Mr. Graev is also a Director of First Atlantic. JOSEPH S. LEVY has been Vice President and Assistant Secretary of Berry Plastics and BPC Holding since April 1995. Mr. Levy has been a Director of BPC Holding and the Company since April 1998. Mr. Levy has been a Vice President of First Atlantic Capital, Ltd. since December 1994. From 1991 to December 1994, Mr. Levy was an Associate at First Atlantic. DONALD J. HOFMANN, JR. has been a Director of BPC Holding and Berry Plastics since June 1996. Mr. Hofmann has been a General Partner of Chase Capital Partners since 1992. Prior to that, he was head of MH Capital Partners Inc., the equity investment arm of Manufacturers Hanover. Mr. Hofmann is also a director of Advanced Accessory Systems, LLC, a manufacturer of towing and rack systems and related accessories for automobiles. MATHEW J. LORI has been a Director of BPC Holding and Berry Plastics since October 1996. Mr. Lori has been a Principal with Chase Capital Partners since January 1998, and prior to that, Mr. Lori had been an Associate since April 1996. From September 1993 to March 1996, he was an Associate in the Merchant Banking Group of The Chase Manhattan Bank, N.A. DAVID M. CLARKE has been a Director of BPC Holding and Berry Plastics since June 1996. Mr. Clarke is a Managing Director with Aetna, Inc., a private equity investment group and, prior to that, he had been a Vice President in the Investment Group of Aetna Life Insurance Company from 1988 to 1996. A stockholders agreement contains provisions regarding the election of directors. See "Certain Transactions--Stockholders Agreements." BOARD COMMITTEES The Board of Directors of BPC Holding has an Audit Committee and a Stock Option Committee, and the Board of Directors of Berry Plastics has an Audit Committee and a Compensation Committee. In each case, the Audit Committees oversee the activities of the independent auditors and internal controls. The Stock Option Committee administers the BPC Holding 1996 Stock Option Plan. The Compensation Committee makes recommendations to the Board of Directors of Berry Plastics concerning salaries and incentive compensation for our officers and employees. 56 EXECUTIVE COMPENSATION The following table sets forth a summary of the compensation paid by Berry Plastics to our Chief Executive Officer and our four other most highly compensated executive officers (collectively, the "Named Executive Officers") for services rendered in all capacities to Berry Plastics during fiscal 1998, 1997 and 1996. SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION SECURITIES FISCAL UNDERLYING OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) PENSATION(1) --------------------------- ---- ------ ----- ---------- --------- 1998 $327,397 $ 46,697 -- $1,650 Martin R. Imbler................................... 1997 307,396 87,623 -- 1,520 President and Chief Executive Officer 1996 292,078 128,993 8,472 595,848 1998 176,631 39,024 -- 1,650 Ira G. Boots........................................ 1997 151,691 72,868 -- 1,520 Executive Vice President - Operations 1996 145,735 94,205 5,214 239,335 James M. Kratochvil................................. 1998 142,483 30,413 -- 1,650 Executive Vice President, Chief Financial Officer, 1997 119,459 56,307 -- 1,520 Treasurer and Secretary 1996 112,614 72,796 3,259 120,427 1998 145,218 32,621 -- 1,650 R. Brent Beeler..................................... 1997 125,973 60,554 -- 1,520 Executive Vice President - Sales and Marketing 1996 121,108 72,796 3,259 120,427 1998 182,823 39,024 -- 1,650 George A. Willbrandt................................ 1997 214,788 -- -- 11,303 Vice President - Sales and Marketing 1996 182,077 100,000 -- 201,420
- -------------------------------- (1) Amounts shown reflect contributions by us under our 401(k) plan and payments made under a one-time deferred bonus award plan. See "Certain Transactions -- Management." " The following table provides information on the number of exercisable and unexercisable management stock options held by the Named Executive Officers at January 2, 1999. FISCAL YEAR-END OPTION VALUES(1)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT YEAR-END FISCAL YEAR-END NAME EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE(2) ---- ---------------------------- ---------------------------- Martin R. Imbler...... 5,083/3,389 $355,810/237,230 Ira G. Boots.......... 3,128/2,086 218,960/146,020 James M. Kratochvil... 1,955/1,304 136,850/91,280 R. Brent Beeler....... 1,955/1,304 136,850/91,280 George A. Willbrandt.. 780/520 54,600/36,400
- -------------------------------- 1. None of BPC Holding's capital stock is currently publicly traded. The values reflect management's estimate of the fair market value of the Class B Nonvoting Common Stock of BPC Holding at January 2, 1999. 2. All options granted to management of Berry Plastics are excersiable for shares of Class B Nonvoting Common Stock, par value $.01 per share, of BPC Holding. 57 DiRECTOR COMPENSATION Directors receive no cash consideration for serving on the Board of Directors of BPC Holding or Berry Plastics, but directors are reimbursed for out-of-pocket expenses incurred in connection with their duties as directors. EMPLOYMENT AGREEMENTS We have an employment agreement with Mr. Imbler that expires on June 30, 2001. Base compensation under the agreement for fiscal 1998 was $327,397. The agreement also provides for an annual performance bonus of $50,000 to $175,000 based upon Berry Plastics' attainment of certain financial targets. We may terminate Mr. Imbler's employment for "cause" or upon a "disability" (as such terms are defined in the agreement). If we terminate Mr. Imbler "without cause" (as defined in the agreement) Mr. Imbler is entitled to receive, among other things, the greater of one year's salary or 1/12 of one year's salary for each year (not to exceed 24 years in the aggregate) of employment with Berry Plastics. The agreement also contains customary noncompetition, nondisclosure and nonsolicitation provisions. We also have employment agreements with each of Messrs. Boots, Kratochvil, Beeler and Willbrandt each of which expires on June 30, 2001. The agreements provided for fiscal 1998 base compensation of $176,631 for Mr. Boots, $142,483 for Mr. Kratochvil, $145,218 for Mr. Beeler and $182,823 for Mr. Willbrandt. Salaries are subject in each case to annual adjustment at the discretion of the Compensation Committee of our Board of Directors. The agreements entitle each executive to participate in all other incentive compensation plans established for executive officers of Berry Plastics. We may terminate each agreement for "cause" or a "disability" (as such terms are defined in the agreements). If we terminate an executive's employment without "cause" (as defined in the agreements), the agreements require that we pay certain amounts to the terminated executive, including (1) the greater of (A) one year's salary or (B) 1/12 of one year's salary for each year (not to exceed 24 years in the aggregate) of employment with Berry Plastics (other than Mr. Willbrandt, who would receive one year's salary), and (2) certain benefits under applicable incentive compensation plans. Each agreement also includes customary noncompetition, nondisclosure and nonsolicitation provisions. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION We established the Compensation Committee comprised of Messrs. Buaron, Imbler and Hofmann, in October 1996. The annual salary and bonus paid to Messrs. Imbler, Boots, Kratochvil, Beeler and Willbrandt for fiscal 1998 were determined by the Compensation Committee in accordance with their respective employment agreements. All other compensation decisions with respect to officers of Berry Plastics are made by Mr. Imbler pursuant to policies established in consultation with the Compensation Committee. We are party to an Amended and Restated Management Agreement with First Atlantic Capital, Ltd. pursuant to which First Atlantic Capital provides us with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, we paid First Atlantic Capital fees and expenses of $835,000 for fiscal 1998, $771,200 for fiscal 1997, and $787,600 for fiscal 1996. In connection with the recapitalization of BPC Holding in 1996, the Management Agreement was amended to provide for a fee for services rendered in connection with certain transactions equal to the lesser of (1) 1% of the total transaction value and (2) $1,250,000 for any such transaction consummated plus out-of-pocket expenses in respect of such transaction, whether or not consummated. Also in connection with the recapitalization of BPC Holding in 1996, BPC Holding paid a fee of $1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic Capital for advisory services, including originating, structuring and negotiating the transaction. In January 1997, First Atlantic Capital received advisory fees of about $287,500 for originating, structuring and negotiating the acquisition of PackerWare and about $28,700 for providing similar services in connection with the acquisition of Container Industries. In May 1997, First Atlantic Capital received advisory fees of about $117,900 for originating, structuring and negotiating the acquisition of Virginia Design. In August 1997, First Atlantic Capital received advisory fees of about $531,600 for providing services in the acquisition of Venture. First Atlantic Capital received advisory fees of about $140,000 in July 1998 for originating, structuring and 58 negotiating the acquisition of Norwich. In October 1998, First Atlantic Capital received advisory fees of about $180,000 for providing services in the acquisition of Knight. Upon completion of the Cardinal acquisition, First Atlantic received advisory fees of about $695,000 for services provided with respect to the acquisition. See "Certain Transactions." Mr. Buaron, the Chairman and a director of BPC Holding and Berry Plastics, is the Chairman and Chief Executive Officer of First Atlantic Capital. Mr. Graev is a director of First Atlantic Capital. As an officer and the sole stockholder of First Atlantic Capital, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic Capital on its capital stock, including any bonuses paid as a result of, and any dividends paid out of, the $1,250,000 fee paid by BPC Holding to First Atlantic Capital in connection with the recapitalization of BPC Holding or any of the fees paid with respect to the acquisitions described above. First Atlantic Capital is engaged by Atlantic Equity Partners International II to provide certain financial and management consulting services for which it receives annual fees. First Atlantic Capital and Atlantic Equity Partners International II have completely distinct ownership and equity structures. See "Certain Transactions." Atlantic Equity Partners, L.P., a stockholder of BPC Holding prior to the consummation of the recapitalization of BPC Holding in 1996, received about $67.6 million from the sale of its common stock in BPC Holding and warrants to purchase common stock. First Atlantic is engaged by Atlantic Equity Partners to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and Atlantic Equity Partners have completely distinct ownership and equity structures. Atlantic Equity Associates, L.P., a Delaware limited partnership, is the sole general partner of Atlantic Equity Partners. Mr. Buaron is the sole shareholder of Buaron Capital Corporation. Buaron Capital is the managing and sole general partner of Atlantic Equity Associates. By virtue of their direct and indirect ownership interests in Atlantic Equity Partners, Mr. Levy is entitled to receive $178,000 and Buaron Capital is entitled to receive $4,672,000 from the proceeds from the sale of equity interests in BPC Holding. See "Certain Transactions." In connection with the recapitalization of BPC Holding in 1996, Mr. Imbler, a director of Berry Plastics and BPC Holding, received about $5.9 million, Douglas E. Bell, a former director of Berry Plastics, received about $2.5 million, Mr. Boots, a director of Berry Plastics, received about $2.4 million, and Messrs. Beeler and Kratochvil, officers of Berry Plastics, each received about $1.3 million from their sale of certain equity interests in BPC Holding. In connection with the offering in April 1994 of the 1994 Notes (the "1994 Transaction"), we paid a $50.0 million dividend on our common stock to BPC Holding, and BPC Holding distributed that amount to its holders of equity interests. In connection therewith, BPC Holding agreed to pay cash bonuses, upon the occurrence of certain events, to the members of management who held options under BPC Holding's 1991 Stock Option Plan in amounts equal to the amounts they would have been entitled to had the shares of common stock underlying their unvested options been outstanding at the time of the declaration of the $50.0 million dividend by BPC Holding. As a result of the recapitalization of BPC Holding, such bonuses were paid to Messrs. Imbler, Bell, and Boots. Mr. Imbler received a bonus in the amount of $594,000. Messrs. Bell and Boots each received bonuses of $238,000. See "Certain Transactions." In connection with the recapitalization of BPC Holding in 1996, Chase Securities Inc., an affiliate of Chase Venture Capital Associates and Messrs. Hofmann and Lori, received a fee of $500,000 for arranging the sale of $15.0 million of BPC Holding's Common Stock to Atlantic Equity Partners International II, Chase Venture Capital Associates and certain other equity investors (collectively, the "Common Stock Purchasers") and the sale of $15.0 million of BPC Holding's Preferred Stock to Chase Venture Capital Associates. Chase Manhattan Investment Holdings, Inc., an affiliate of Chase Securities and Messrs. Hofmann and Lori, received about $13.6 million from the sale of equity interests of BPC Holding in the 1996 Transaction. STOCK OPTION PLAN Employees, directors and certain independent consultants of Berry Plastics and its subsidiaries are entitled to participate in the BPC Holding 1996 Stock Option Plan. This Stock Option Plan provides for the grant of both "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and stock options that are non-qualified under the Code. The total number of shares of Class B Nonvoting Common Stock of BPC Holding for which options may be granted pursuant to the Stock Option Plan is 51,620. The Stock 59 Option Plan will terminate on October 3, 2003 or such earlier date on which the Board of Directors of BPC Holding, in its sole discretion, determines. The Stock Option Committee of the Board of Directors of BPC Holding administers all aspects of the Stock Option Plan. The Stock Option Committee selects which of Berry Plastics' directors, employees and independent consultants will receive options, the time when options are granted, whether the options are incentive stock options or non-qualified stock options, the manner and timing for vesting of such options, the terms of such options, the exercise date of any options and the number of shares subject to such options. Directors who are also employees are eligible to receive options under the Stock Option Plan. The exercise price of incentive stock options granted by BPC Holding under the Stock Option Plan may not be less than 100% of the fair market value of the Class B Nonvoting Common Stock at the time of grant and the term of any option may not exceed seven years. With respect to any employee who owns stock representing more than 10% of the voting power of the outstanding capital stock of BPC Holding, the exercise price of any incentive stock option may not be less than 110% of the fair market value of such shares at the time of grant and the term of such option may not exceed five years. The exercise price of a non-qualified stock option is determined by the Stock Option Committee on the date the option is granted. However, the exercise price of a non-qualified stock option may not be less than 100% of the fair market value of Class B Nonvoting Common Stock if the option is granted at any time after the initial public offering of such stock. Options granted under the Stock Option Plan are nontransferable except by will and the laws of descent and distribution. Options granted under the Stock Option Plan typically expire after seven years and vest over a five-year period based on timing as well as achieving financial performance targets. Under the Stock Option Plan, as of July 3, 1999, there were outstanding options to purchase an aggregate of 50,354 shares of Class B Nonvoting Common Stock to 67 employees of Berry Plastics, at an exercise price between $100 and $122 per share. Of that amount, options to purchase an aggregate of 21,504 shares have been issued to the Named Executive Officers in October 1996, at an exercise price of $100 per share, including 8,472 to Mr. Imbler, 5,214 to each of Messrs. Bell and Boots, 3,259 to each of Messrs. Beeler and Kratochvil, and 1,300 to Mr. Willbrandt. 60 PRINCIPAL STOCKHOLDERS All of our outstanding capital stock is owned by BPC Holding. The following table sets forth certain information regarding the ownership of the capital stock of BPC Holding with respect to the following: o each person known by BPC Holding to own beneficially more than 5% of the outstanding shares of any class of its voting capital stock; o each of BPC Holding's directors; o the Named Executive Officers; and o all directors and officers as a group. Except as otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned. Unless otherwise indicated, the address for each stockholder is c/o Berry Plastics Corporation, 101 Oakley Street, Evansville, Indiana 47710.
Shares of Shares of Percentage of Voting Nonvoting All Classes of Common Stock(1) Percentage of Common Stock(1) Common Stock Name and Address of Voting (Fully Beneficial Owner Class A Class B Common Stock Class A Class B Class C -Diluted) ------- ------- -------------- ------- ------- ------- ----------- Atlantic Equity Partners International II, L.P.(2) ........ -- 128,142 54.4% -- 3,385 11,470 22.3% Chase Venture Capital Associates, L.P.(3) .............. 52,000 5,623 23.9 148,000 17,837 -- 34.8 BPC Equity, LLC(5) .................. 31,200 -- 13.2 88,800 -- -- 18.7 Roberto Buaron(6) ................... -- 128,142 54.4 -- 3,385 11,470 22.3 Martin R. Imbler .................... -- 3,629 1.5 -- 15,390(7) 664 3.1 Joseph S. Levy(8) ................... -- 42 * -- 118 14 * Lawrence G. Graev(9) ................ -- -- -- -- -- -- -- Donald J. Hofmann, Jr..(10) ......... 52,000 5,623 23.9 148,000 17,837 -- 34.8 Mathew J. Lori(11) .................. 52,000 5,623 23.8 148,000 17,837 -- 34.8 David M. Clarke(12) ................. 31,200 -- 13.2 88,800 -- -- 18.7 Ira G. Boots ........................ -- 1,718 * -- 5,446(13) -- 1.1 James M. Kratochvil ................. -- 1,196 * -- 5,359(14) 391 1.1 R. Brent Beeler ..................... -- 1,196 * -- 5,359(15) 391 1.1 George A. Willbrandt ................ -- 520 * -- 2,260(16) 170 * All officers and directors as a group (16 persons) .................... 83,200 143,644 96.3 236,800 63,330 13,616 84.1 ------- ------- -------------- ------- ------- ------- -----------
- ---------------------------- * Less than one percent. (1) Included in the amounts of common stock presented in this chart are warrants to purchase shares of common stock of BPC Holding. The authorized capital stock of BPC Holding consists of 3,500,000 shares of capital stock, including 2,500,000 shares of common stock, $.01 par value, and 1,000,000 shares of Preferred Stock, $.01 par value. Of the 2,500,000 shares of common stock of BPC Holding, 500,000 shares are designated Class A Voting Common Stock, 500,000 shares are designated Class A Nonvoting Common Stock, 500,000 shares are designated Class B Voting Common Stock, 500,000 shares are designated Class B Nonvoting Common Stock, and 500,000 shares are designated Class C Nonvoting Common Stock. Of the 1,000,000 shares of preferred stock of BPC Holding, 800,000 shares are designated Series A Senior Cumulative Exchangeable Preferred Stock, and 200,000 shares are designated Series B Cumulative Preferred Stock. (2) Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman, Cayman Islands, British West Indies. Atlantic Equity Associates International II, L.P., a Delaware limited partnership, is the sole general partner of Atlantic Equity Partners International II and as such exercises voting and/or investment power over shares of capital stock owned by Atlantic Equity Partners International II, including the shares of common stock of BPC Holding held by Atlantic Equity Partners International 61 II. Mr. Buaron is the sole shareholder of Buaron Holdings Ltd. Buaron Holdings is the sole general partner of Atlantic Equity Associates International II. As the general partner of Atlantic Equity Associates International II, Buaron Holdings may be deemed to beneficially own the shares of common stock of BPC Holding held by Atlantic Equity Partners International II. Buaron Holdings disclaims any beneficial ownership of any shares of capital stock owned by Atlantic Equity Partners International II, including the shares of common stock of BPC Holding held by Atlantic Equity Partners International II. Through his affiliation with Buaron Holdings and Atlantic Equity Associates International II, Mr. Buaron controls the sole general partner of Atlantic Equity Partners International II and therefore has the authority to control voting and/or investment power over, and may be deemed to beneficially own, the shares of common stock of BPC Holding owned by Atlantic Equity Partners International II. Mr. Buaron disclaims any beneficial ownership of any of these shares. (3) Address is 380 Madison Avenue, 12th Floor, New York, New York 10017. (4) Represents warrants to purchase such shares of common stock held by Chase Venture Capital Associates that are currently exercisable. (5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance Company exercises voting and/or investment power over shares of capital stock owned by BPC Equity, LLC, including shares of common stock of BPC Holding held by BPC Equity. (6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. Represents shares of common stock of BPC Holding owned by Atlantic Equity Partners International II. Mr. Buaron is the sole shareholder of Buaron Holdings. Buaron Holdings is the sole general partner of Atlantic Equity Associates International II. Atlantic Equity Associates International II is the sole general partner of Atlantic Equity Partners International II and as such, exercises voting and/or investment power over shares of capital stock owned by Atlantic Equity Partners International II, including the shares of common stock of BPC Holding held by Atlantic Equity Partners International II. Mr. Buaron, as the sole shareholder and Chief Executive Officer of Buaron Holdings, controls the sole general partner of Atlantic Equity Partners International II and therefore has voting and/or investment power over, and may be deemed to beneficially own, the shares of common stock of BPC Holding held by Atlantic Equity Partners International II. Mr. Buaron disclaims any beneficial ownership of the such shares. (7) Includes 5,083 options granted to Mr. Imbler, which are presently exercisable. (8) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. (9) Address is c/o O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112. (10) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017. Represents shares owned by Chase Venture Capital Associates. Mr. Hofmann is a General Partner of Chase Capital Partners, which is the private equity investment arm of Chase Manhattan Corporation, which is an affiliate of Chase Venture Capital Associates. Mr. Hofmann disclaims any beneficial ownership of the shares of common stock of BPC Holding held by Chase Venture Capital Associates. (11) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017. Represents shares owned by Chase Venture Capital Associates. Mr. Lori is a Principal of Chase Capital Partners, which is the private equity investment arm of Chase Manhattan Corporation, which is an affiliate of Chase Venture Capital Associates. Mr. Lori disclaims any beneficial ownership of the shares of common stock of BPC Holding held by Chase Venture Capital Associates. (12) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Represents shares owned by BPC Equity. Mr. Clarke is a Managing Director of Aetna, Inc., an affiliate of Aetna Life Insurance Company, which is a member of BPC Equity. Mr. Clarke disclaims any beneficial ownership of the shares of common stock of BPC Holding held by BPC Equity. (13) Includes 3,128 options granted to Mr. Boots, which are currently exercisable. (14) Includes 1,955 options granted to Mr. Kratochvil, which are currently exercisable. (15) Includes 1,955 options granted to Mr. Beeler, which are currently exercisable. (16) Includes 780 options granted to Mr. Willbrandt, which are currently exercisable. 62 CERTAIN TRANSACTIONS FIRST ATLANTIC Pursuant to the Management Agreement between us and First Atlantic Capital, First Atlantic Capital provides us with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. We paid First Atlantic fees and expenses of about $835,000 for fiscal 1998, $771,200 for fiscal 1997 and $787,600 for fiscal 1996 for these services. The management agreement also provides for a fee for services rendered in connection with certain transactions equal to the lesser of 1% of the total transaction value and $1,250,000 for any such transaction consummated plus out-of-pocket expenses, whether or not consummated. In connection with the recapitalization of BPC Holding in 1996, BPC Holding paid a fee of about $1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic Capital for advisory services. These services included originating, structuring and negotiating the recapitalization of BPC Holding. First Atlantic Capital received advisory fees of about $287,500 for originating, structuring and negotiating the acquisition of PackerWare and about $28,700 for providing similar services in connection with the acquisition of Container Industries. In May 1997, First Atlantic Capital received advisory fees of about $117,900 for originating, structuring and negotiating the acquisition of Virginia Design. In August 1997, First Atlantic Capital received advisory fees of about $531,600 for providing services with respect to the acquisition of Venture. First Atlantic Capital received advisory fees of about $140,000 in July 1998 for originating, structuring and negotiating the acquisition of Norwich, and in October 1998 First Atlantic Capital received advisory fees of about $180,000 for providing services with respect to the acquisition of Knight. Upon completion of the Cardinal acquisition, First Atlantic received advisory fees of about $695,000 for services provided with respect to the acquisition. Mr. Buaron, the Chairman and a director of BPC Holding and Berry Plastics, is the Chairman and Chief Executive Officer of First Atlantic Capital. As an officer and the sole stockholder of First Atlantic Capital, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic Capital on its capital stock, including any bonuses paid as a result of, and any dividends paid out of, the $1,250,000 fee paid by BPC Holding to First Atlantic Capital in connection with the recapitalization of BPC Holding in 1996 or any of the fees paid with respect to the acquisitions described above. Mr. Graev is also a director of First Atlantic Capital, and Mr. Levy is an officer of First Atlantic Capital. First Atlantic Capital is engaged by Atlantic Equity Partners International II to provide certain financial and management consulting services for which it receives annual fees. First Atlantic Capital and Atlantic Equity Partners International II have completely distinct ownership and equity structures. Atlantic Equity Partners, L.P., a stockholder of BPC Holding prior to the consummation of the recapitalization of BPC Holding in 1996, received about $67.6 million from the sale of its common stock in BPC Holding and warrants to purchase common stock. First Atlantic is engaged by Atlantic Equity Partners to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and Atlantic Equity Partners have completely distinct ownership and equity structures. Atlantic Equity Associates, L.P., is the sole general partner of Atlantic Equity Partners. Mr. Buaron is the sole shareholder of Buaron Capital, and Buaron Capital is the managing and sole general partner of Atlantic Equity Associates. By virtue of their direct and indirect ownership interests in Atlantic Equity Partners, Mr. Levy is entitled to receive $178,000 and Buaron Capital is entitled to receive $4,672,000 from the proceeds from the sale of equity interests in BPC Holding. THE 1996 TRANSACTION On June 18, 1996, our parent, BPC Holding, consummated the transaction described below. BPC Mergerco, Inc. was organized by Atlantic Equity Partners International II, Chase Venture Capital Associates, L.P., and other institutional investors to acquire a majority of the outstanding capital stock of BPC Holding. Pursuant to a Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, certain of the Common Stock Purchasers purchased shares of common stock of BPC Mergerco. In addition, pursuant to a Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, Chase Venture Capital Associates and the Northwestern Mutual Life Insurance Company (the "Preferred Stock Purchasers") purchased shares of preferred stock of BPC Mergerco and warrants (the "1996 Warrants") to purchase shares of common stock of BPC Mergerco. Immediately after the 63 purchase of the common stock, the preferred stock and the 1996 Warrants of BPC Mergerco, BPC Mergerco merged with and into BPC Holding, with BPC Holding being the surviving corporation. Upon the consummation of this merger, (1) each share of Class A Common Stock, $.00005 par value, and Class B Common Stock, $.00005 par value, of BPC Holding and certain previously held warrants exercisable for such Class A and Class B Common Stock were converted into the right to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the nominal exercise price therefor, (2) all other classes of common stock of BPC Holding, a majority of which was held by members of management, were converted into shares of common stock of the surviving corporation (constituting about 19% of the post-merger common stock of the surviving corporation) and (3) the common stock, preferred stock and 1996 Warrants of Mergerco were converted into common stock, preferred stock and warrants of the surviving corporation, respectively. In addition, upon the consummation of the merger, the holders of the warrants (the "1994 Warrants") to purchase capital stock of BPC Holding that were issued in connection with the offering of the 1994 Notes became entitled to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the exercise price therefor. The aggregate consideration paid to the sellers of the equity interests in BPC Holding, including the holders of the 1994 Warrants, was about $119.6 million in cash. In order to finance the recapitalization of BPC Holding, including the payment of related fees and expenses: (1) BPC Holding issued the 1996 Notes for net proceeds of about $100.2 million (or $64.6 million after deducting the amount of such net proceeds used to purchase marketable securities available for payment of interest on the 1996 Notes); (2) the Common Stock Purchasers, the Preferred Stock Purchasers and certain members of management made equity and rollover investments in the aggregate amount of $70.0 million (which amount included rollover investments of about $7.1 million by certain members of management and $3.0 million by an existing institutional shareholder); and (3) BPC Holding received an aggregate of about $0.9 million in connection with the exercise of management stock options to purchase common stock of BPC Holding. In connection with the recapitalization of BPC Holding, Atlantic Equity Partners International II, Chase Venture Capital Associates, certain other institutional investors and certain members of management entered into a Stockholders Agreement pursuant to which certain stockholders, among other things, (1) were granted certain registration rights and (2) under certain circumstances, have the right to force a sale of BPC Holding. MANAGEMENT In connection with the recapitalization of BPC Holding in 1996, Mr. Imbler received about $5.9 million, Mr. Bell received about $2.5 million, Mr. Boots received about $2.4 million, and Messrs. Kratochvil and Beeler each received about $1.3 million from their sale of certain equity interests in BPC Holding. In connection with the 1994 Transaction, we paid a $50.0 million dividend on our common stock to BPC Holding, and BPC Holding distributed that amount to its holders of equity interests. In connection therewith, BPC Holding agreed to pay cash bonuses, upon the occurrence of certain events, to the members of management who held options under BPC Holding's 1991 Stock Option Plan in amounts equal to the amounts they would have been entitled to had the shares of common stock underlying their unvested options been outstanding at the time of the declaration of the $50.0 million dividend by BPC Holding. As a result of the recapitalization of BPC Holding in 1996, bonuses were paid to Mr. Imbler in the amount of about $594,000, to Mr. Bell in the amount of about $238,000, to Mr. Boots in the amount of about $238,000, to Mr. Kratochvil in the amount of about $119,000 and to Mr. Beeler in the amount of about $119,000. STOCKHOLDERS AGREEMENTS In connection with the recapitalization of BPC Holding, BPC Holding entered into a Stockholders Agreement dated as of June 18, 1996 (the "Stockholders Agreement") with the Common Stock Purchasers, certain Management Stockholders (as defined herein) and, for limited purposes thereunder, the Preferred Stock Purchasers. The Stockholders Agreement grants the Common Stock Purchasers rights and obligations, including the following: (1) until the occurrence of events specified in the New Stockholders Agreement, to designate the members of a seven person Board of Directors as follows: (A) one director will be Roberto Buaron or his designee; (B) Atlantic 64 Equity Partners International II will have the right to designate three directors (who are currently Messrs. Graev, Imbler and Levy); (C) Chase Venture Capital Associates will have the right to designate two directors (who are currently Messrs. Hofmann and Lori); and (D) the institutional holders (excluding Atlantic Equity Partners International II and Chase Venture Capital Associates) will have the right to designate one director (who is currently Mr. Clarke); (2) in the case of certain Common Stock Purchasers, to subscribe for a proportional share of future equity issuances by BPC Holding; (3) under certain circumstances and in the case of Atlantic Equity Partners International II or Chase Venture Capital Associates, to cause the initial public offering of equity securities of BPC Holding or a sale of BPC Holding subsequent to the fifth anniversary of the closing of the recapitalization of BPC Holding and (4) under 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 BPC Holding or a sale of BPC Holding subsequent to the sixth anniversary of the closing of the recapitalization of BPC Holding. Provisions under the Stockholders Agreement also (1) prohibits BPC Holding from taking certain actions without the consent of holders of a majority of voting stock held by Chase Venture Capital Associates and the institutional holders other than Atlantic Equity Partners International II (or, following the occurrence of certain events, the consent of Atlantic Equity Partners International II), including certain transactions between BPC Holding and any subsidiary, on the one hand, and First Atlantic Capital or any of its affiliates, on the other hand; (2) obligates BPC Holding to provide certain Common Stock Purchasers with financial and other information regarding BPC Holding and to provide access and inspection rights to all Common Stock Purchasers; and (3) restricts transfers of equity by the Common Stock Purchasers, subject to certain exceptions (including transfers of up to 10% of the equity (including warrants to purchase equity) held by each Common Stock Purchaser on the date of the Stockholders Agreement). Pursuant to the Stockholders Agreement, under certain circumstances the Preferred Stock Purchasers (and their transferees) have tag-along rights with respect to the 1996 Warrants and the common stock of BPC Holding issuable upon exercise of the 1996 Warrants. Under specified circumstances and subject to certain exceptions, the Preferred Stock Purchasers (and their transferees) are entitled to include a pro rata share of their preferred stock in a transaction (or series of related transactions) involving the transfer by Atlantic Equity Partners International II, Chase Venture Capital Associates and the specified institutional holders of more than 50% of the aggregate amount of securities held by them immediately following the closing of the 1996 Transaction. The Stockholders Agreement grants specified registration rights to the Common Stock Purchasers. Atlantic Equity Partners International II and Chase Venture Capital Associates each have the right, on three occasions, to demand registration, at BPC Holding's expense, of their shares of common stock of BPC Holding. Under certain circumstances, a majority in interest of the institutional holders (excluding Atlantic Equity Partners International II and Chase Venture Capital Associates) have the right, on one occasion, to demand registration, at BPC Holding's expense, of their shares of common stock of BPC Holding. The Stockholders Agreement provides that if BPC Holding proposes to register any of its securities, either for its own account or for the account of other stockholders, BPC Holding will be required to notify all Common Stock Purchasers and to include in such registration the shares of common stock of BPC Holding requested to be included by them. All shares of common stock of BPC Holding owned by the Common Stock Purchasers requested to be included in a registration will be subject to cutbacks under specified circumstances in connection with an underwritten public offering. The provisions of the Stockholders Agreement regarding voting rights, negative covenants, information/inspection rights, the right to force a sale of BPC Holding, preemptive rights and transfer restrictions generally will expire on the earlier to occur of: o the fifth anniversary of the closing of the recapitalization of BPC Holding in 1996, if an underwritten public offering of equity securities of BPC Holding resulting in gross proceeds of at least $20.0 million occurs prior to such fifth anniversary; o the occurrence of such underwritten public offering that occurs subsequent to such fifth anniversary of the closing of the recapitalization of BPC Holding in 1996; o the twentieth anniversary of the closing of the recapitalization of BPC Holding in 1996; and o a sale of BPC Holding. 65 In addition, the Stockholders Agreement provides that certain rights of a Common Stock Purchaser (to the extent such rights apply to such Common Stock Purchaser) to designate members of the Board of Directors of BPC Holding and/or to approve certain actions by BPC Holding will terminate under specific circumstances. BPC Holding is also party to the Amended and Restated Stockholders Agreement dated June 18, 1996 (the "Management Stockholders Agreement"), with Atlantic Equity Partners International II and all management shareholders including, among others, Messrs. Imbler, Boots, Kratochvil, Beeler, and Willbrandt (collectively, the "Management Stockholders"). The Management Stockholders Agreement contains provisions that: o limit transfers of equity by the Management Stockholders; o require the Management Stockholders to sell their shares as designated by BPC Holding or Atlantic Equity Partners II upon the consummation of certain transactions; o grant the Management Stockholders certain rights of co-sale in connection with sales by Atlantic Equity Partners International II; o grant BPC Holding rights to repurchase capital stock from the Management Stockholders upon the occurrence of certain events; and o require the Management Stockholders to offer shares to BPC Holding prior to any permitted transfer. CHASE SECURITIES INC. In connection with the recapitalization of BPC Holding in 1996, Chase Securities, an affiliate of Chase Venture Capital Associates and Messrs. Hofmann and Lori, who are members of the Board of Directors of BPC Holding and Berry Plastics, received a fee of $500,000 for arranging the sale of $15.0 million of BPC Holding's Common Stock to certain of the Common Stock Purchasers and the sale of $15.0 million of BPC Holding Preferred Stock to Chase Venture Capital Associates. Chase Manhattan Investment Holdings, Inc., an affiliate of Chase Securities and Messrs. Hofmann and Lori, received about $13.6 million from the sale of equity interests of BPC Holding in the recapitalization of BPC Holding. LEGAL SERVICES Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP, New York, New York. O'Sullivan Graev & Karabell, LLP provides legal services to us and to BPC Holding in connection with certain matters, principally relating to transactional, securities law, general corporate and litigation matters. TRANSACTIONS WITH AFFILIATES The indentures governing the 1994 Notes, the 1996 Notes, the 1998 Notes, the Notes, the Stockholders Agreement, and our credit facility restrict our and our affiliates' ability to enter into transactions with affiliates, including officers, directors and principal stockholders. 66 DESCRIPTION OF CERTAIN OTHER DEBT BPC HOLDING 1996 NOTES On June 18, 1996, BPC Holding, as part of a recapitalization, issued 12.50% Senior Secured Notes due 2006 for net proceeds, after expenses, of about $100.2 million (or $64.6 million after deducting the amount of such net proceeds used to purchase marketable securities available for payment of interest on the notes). These notes were exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006. Interest on the 1996 Notes is payable semi-annually on June 15 and December 15 of each year. In addition, from December 15, 1999 until June 15, 2001, BPC Holding may, at its option, pay interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. In connection with the 1996 Notes, $35.6 million was placed in escrow to pay three years' interest on the notes. The escrow account was depleted on June 15, 1999. The 1996 Notes rank senior in right of payment to all existing and future subordinated debt of BPC Holding and all other obligations of Berry Plastics, including BPC Holding's subordinated guarantee of the 1994 Notes, the 1998 Notes and the Notes and PARI PASSU in right of payment with all senior debt of BPC Holding. The 1996 Notes are structurally subordinated to all existing and future senior debt of Berry Plastics, including borrowings under the credit facility and our Nevada Industrial Revenue Bonds. BERRY PLASTICS 1994 NOTES AND 1998 NOTES On April 21, 1994, Berry Plastics completed an offering of 100,000 units consisting of $100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Senior Subordinated Notes due 2004 and 100,000 warrants to purchase 1.13237 shares of Class A Common Stock, $.00005 par value, of BPC Holding. The 1994 Notes mature on April 15, 2004 and interest is payable semi-annually on October 15 and April 15 of each year and commenced on October 15, 1994. The 1994 Notes are unconditionally guaranteed on a senior subordinated basis by the Guarantors. The net proceeds to Berry Plastics from the sale of the 1994 Notes, after expenses, were $93.0 million. On August 24, 1998, Berry Plastics issued $25 million aggregate principal amount of 12.25% Berry Plastics Corporation Series B Senior Subordinated Notes due 2004. The 1998 Notes mature on April 15, 2004 and interest is payable semi-annually on October 15 and April 15 of each year and commenced on October 15, 1998. The 1998 Notes are unconditionally guaranteed on a senior subordinated basis by the Guarantors. The net proceeds to Berry Plastics from the sale of the 1998 Notes, after expenses, were $25.2 million. Berry Plastics is not required to make mandatory redemption or sinking fund payments with respect to the 1994 Notes or 1998 Notes. The 1994 Notes and 1998 Notes may be redeemed at the option of Berry Plastics, in whole or in part, at redemption prices ranging from 106.125% beginning on April 15, 1999 and par after April 15, 2002. Upon a change in control, as defined in the indentures governing the 1994 Notes and 1998 Notes, each holder of 1994 Notes and 1998 Notes will have the right to require Berry Plastics to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued interest. The 1994 Notes and 1998 Notes rank PARI PASSU with the Notes and PARI PASSU with or senior in right of payment to all existing and future subordinated debt of Berry Plastics. The 1994 Notes and 1998 Notes rank junior in right of payment to all existing and future senior debt of Berry Plastics, including borrowings under our credit facility and our Nevada Industrial Revenue Bonds. The indentures governing the 1994 Notes and 1998 Notes contain certain covenants which, among other things, limit Berry Plastics and its subsidiaries' ability to incur debt, merge or consolidate, sell, lease or transfer assets, make dividend payments and engage in transactions with affiliates. 67 The terms of the 1998 Notes are identical in all material respects to the terms of the 1994 Notes, except that the 1994 Notes have a priority upon the payment of proceeds pursuant to an Asset Sale. In addition, since the 1998 Notes are issued pursuant to a separate indenture from the 1994 Notes, holders of the 1998 Notes vote as a separate class from holders of the 1994 Notes. THE CREDIT FACILITY Our credit facility with NationsBank, N.A. provides for aggregate borrowing up to a maximum of about $142.9 million including: o a $70.0 million revolving line of credit, subject to a borrowing base formula. At July 3, 1999, on a pro forma basis giving effect to the acquisition of Cardinal and a $20.0 million concurrent increase in our credit facility, we had unused borrowing capacity under our credit facility's revolving line of credit of about $35.8 million; o a (pound)1.5 million revolving line of credit, subject to a borrowing base; o a $58.6 million term loan facility; o a (pound)3.8 million term loan facility; and o a $5.6 million standby letter of credit facility to support our and our subsidiaries' obligations under our Nevada Industrial Revenue Bonds. The debt under our credit facility is guaranteed by BPC Holding and substantially all of our subsidiaries. The credit facility matures on January 21, 2002 unless previously terminated by us or by the lenders upon an Event of Default as defined in the Credit Agreement. The term loan facilities require periodic principal payments, varying in amount through the maturity of the facility. Such periodic payments will aggregate about $19.0 million for fiscal 1999 and about $19.9 million for fiscal 2000. Interest on borrowings under the credit facility is based on either: o the lender's base rate (which is the higher of the lender's prime rate and the federal funds rate plus 0.50%) plus an applicable margin of 0.50%; or o LIBOR (adjusted for reserves) plus an applicable margin of 2.0%, at our option. Following receipt of the quarterly financial statements, the agent under our credit facility has the option to change the applicable interest rate margin on loans (other than under the UK Revolver and UK Term Loan) once per quarter to a specified margin determined by the ratio of funded debt to EBITDA of Berry Plastics and our subsidiaries. Notwithstanding the foregoing, interest on borrowings under the UK Revolver and the UK Term Loan is based on LIBOR (adjusted for reserves) plus 2.50%. The credit facility contains various covenants which include, among other things: o maintenance of certain financial ratios and compliance with certain financial tests and limitations; o limitations on the issuance of additional debt; and o limitations on capital expenditures. 68 NEVADA INDUSTRIAL REVENUE BONDS We are party to a Financing Agreement with the City of Henderson, Nevada Public Improvement Trust, pursuant to which we have agreed to pay amounts sufficient to pay principal, interest and any premium on the Nevada Industrial Revenue Bonds. The Nevada Industrial Revenue Bonds bear interest at a variable rate (3.0% at January 2, 1999 and 4.6% at December 27, 1997), require annual principal payments of $0.5 million on each April 1 until maturity, are collateralized by irrevocable letters of credit issued by NationsBank under our credit facility and mature in April 2007. 69 DESCRIPTION OF NOTES You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this description, the word "Company" refers only to Berry Plastics Corporation and not to any of its subsidiaries and the word "Holding" refers to BPC Holding Corporation and not to any of its subsidiaries. The Company will issue the Notes under an Indenture (the "Indenture") among itself, the Guarantors and United States Trust Company of New York, as trustee (the "Trustee"), in a private transaction that is not subject to the registration requirements of the Securities Act. See "Notice to Investors." The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following description is a summary of certain provisions of the Indenture and the Registration Rights Agreement. It does not restate those agreements in their entirety. We urge you to read the Indenture and the Registration Rights Agreement because they, and not this description, define your rights as holders of the Notes. Copies of the Indenture and the Registration Rights Agreement will be made available to prospective investors as set forth below under "--Additional Information." Certain defined terms used in this description but not defined below under "--Certain Definitions" have the meanings assigned to them in the Indenture. As of the date of the Indenture, all of our subsidiaries will be "Restricted Subsidiaries." However, under the circumstances described below under the subheading "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture. Unrestricted Subsidiaries will not guarantee these Notes. BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES THE NOTES The Notes: o are general unsecured obligations of the Company; o are junior in right of payment to all existing and future Senior Indebtedness of the Company, including borrowings under the Credit Facility and the Nevada Bonds; o are PARI PASSU in right of payment with the 1994 Notes and the 1998 Notes and PARI PASSU with or senior in right of payment to all existing and future subordinated Indebtedness of the Company; and o are unconditionally guaranteed by the Guarantors. THE GUARANTEES The Notes are guaranteed by all of the Guarantors. Each Guarantee of the Notes: o is a general unsecured obligation of the Guarantor; o is junior in right of payment to all existing and future Senior Indebtedness of the Guarantor, including the Guarantor's Guarantee of borrowings under the Credit Facility and the Nevada Bonds; and 70 o is PARI PASSU in right of payment with the Guarantor's Guarantee of the 1994 Notes and the 1998 Notes and PARI PASSU with or senior in right of payment with any existing and future subordinated Indebtedness of the Guarantor. PRINCIPAL, MATURITY AND INTEREST Notes with a maximum aggregate principal amount of $75.0 million will be issued in this offering. The Company may issue additional notes (the "Additional Notes") from time to time after this offering. Any offering of Additional Notes is subject to the covenant described below under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." The Notes and any Additional Notes subsequently issued under the Indenture would be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue Notes in denominations of $1,000 and integral multiples of $1,000. The Notes will mature on July 15, 2007. Interest on the Notes will accrue at the rate of 11% per annum and will be payable semi-annually in arrears on January 15 and July 15, commencing on January 15, 2000. The Company will make each interest payment to the Holders of record on the immediately preceding January 1 and July 1. Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. METHODS OF RECEIVING PAYMENTS ON THE NOTES The Company will pay all principal, interest and premium and Liquidated Damages, if any, on the Notes at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest and Liquidated Damages, if any, payments by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. PAYING AGENT AND REGISTRAR FOR THE NOTES The Trustee will initially act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders, and the Company or any of its Subsidiaries may act as Paying Agent or Registrar. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. OPTIONAL REDEMPTION At any time prior to July 15, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 111% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company or a capital contribution to the Company's common equity made with the net cash proceeds of an Initial Public Offering; provided that: 71 (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days of the date of the closing of such public offering or the making of such capital contribution. Except pursuant to the preceding paragraph, the Notes will not be redeemable at the Company's option prior to July 15, 2003. After July 15, 2003, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below: YEAR PERCENTAGE 2003........................................................... 105.500% 2004........................................................... 103.667% 2005........................................................... 101.833% 2006 and thereafter............................................ 100.000% MANDATORY REDEMPTION The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase. Within 10 days following any Change of Control, the Company will mail a notice to each Holder stating: (1) that the Change of Control Offer is being made pursuant to the covenant entitled "Change of Control" and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date the notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; 72 (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such conflict. On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so accepted the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to making the Change of Control Payment, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Designated Senior Indebtedness or obtain the requisite consents, if any, under all agreements governing outstanding Designated Senior Indebtedness to permit the repurchase of Notes required by this covenant. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. One of the events that constitutes a Change of Control is a sale, lease or transfer of all or substantially all of Holding's or the Company's assets. The Indenture will be governed by New York law, and there is no established quantitative definition under New York law of "substantially all" of the assets of a corporation. Accordingly, if Holding or the Company were to engage in a transaction in which it disposed of less than all of their respective assets, a question of interpretation could arise as to whether such disposition was "substantially all" of their respective assets and whether the Company was required to make a Change of Control Offer. In such cases, the Company might not be required to make a Change of Control Offer and would be permitted, subject to the restrictions contained in the Indenture, including the covenant described below under the caption "--Certain Covenants--Restricted Payments," to find alternative uses for the proceeds of that sale. Pursuant to the terms of the Indenture, however, the Company could be required to make an Asset Sale Offer in those circumstances. Neither the Board of Directors of Holding nor the Trustee may waive the operation of the Change of Control covenant. The Credit Facility provides that certain change of control events will constitute an event of default thereunder. Upon the occurrence of an event of default under the Credit Facility, all amounts outstanding thereunder 73 may become due and payable. All indebtedness of the Company under the Credit Facility is Senior Indebtedness. Accordingly, in the event of an event of default under the Credit Facility, including with respect to an event similar to a Change of Control, the subordination provisions contained in the Indenture will prohibit the Company (if the holders of Senior Indebtedness issue a notice to the Company to such effect) from making any payment on the Notes until such event of default is cured or upon the expiration of 179 days (unless the holders of Senior Indebtedness accelerate the maturity of the Senior Indebtedness). See "--Subordination." Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of Notes to require that the Company repurchase the Notes in the event of a highly leveraged transaction or certain transactions with Holding's management or affiliates, including a reorganization, restructuring, merger or similar transaction (including, in certain circumstances, an acquisition of Holding by its management or affiliates) involving Holding that may adversely affect Holders of Notes. A transaction involving Holding's management or affiliates, or a transaction involving a recapitalization of Holding, may result in a Change of Control if it is the type of transaction specified by such definition. The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a takeover of Holding, and, thus, the removal of incumbent management. The Change of Control purchase feature, however, is not the result of management's knowledge of any specific effort to accumulate Holding's stock or to obtain control of Holding by means of a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of anti-takeover provisions. Instead, the Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchasers. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that Holding would decide to do so in the future. Subject to the limitations discussed below, Holding could, in the future, enter into certain transactions including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect Holding's capital structure or credit ratings. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. ASSET SALES The Company will not, and will not permit any of its Restricted Subsidiaries to, conduct an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of; (2) such fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee no later than immediately prior to the consummation of such proposed Asset Sale with respect to any Asset Sale involving aggregate payments in excess of $2.0 million; and (3) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets; and 74 (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received). Within 180 days after any Asset Sale, the Company may apply the Net Proceeds from such Asset Sale to either: (1) permanently reduce Senior Indebtedness; or (2) make an investment in another business, make a capital expenditure or acquire other long-term tangible assets, in each case, in the same or a similar line of business as the Company or any Restricted Subsidiary was engaged in on the date of the Indenture. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Bank Indebtedness or otherwise invest such Net Proceeds in Cash Equivalents. Any Net Proceeds from the Asset Sale that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." If the aggregate amount of Excess Proceeds exceeds $5.0 million, upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other PARI PASSU Indebtedness, that is in an integral multiple of $1,000, that may be purchased out of the Excess Proceeds, if any, remaining upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If the aggregate amount of Notes and such other PARI PASSU Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes and such other PARI PASSU Indebtedness surrendered by Holders into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other PARI PASSU Indebtedness to be purchased in the manner described under the caption "--Selection and Notice" below. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of such conflict. The Credit Facility restricts the Company from purchasing any Notes prior to the termination thereof and provides that certain change of control events with respect to Holding and asset sales would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Indebtedness to which the Company becomes a party may contain similar or more restrictive provisions. In the event a Change of Control or Asset Sale occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the Credit Facility. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. SELECTION AND NOTICE If less than all of the Notes are to be purchased in an Asset Sale Offer or redeemed at any time, the Trustee will select Notes for purchase or redemption as follows: 75 (1) if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. No Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the purchase or redemption date to each Holder of Notes to be purchased or redeemed at its registered address. Notices of purchase or redemption may not be conditional. If any Note is to be purchased or redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be purchased or redeemed. A new Note in principal amount equal to the unpurchased or unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for purchase or redemption become due on the date fixed for purchase or redemption. On and after the purchase or redemption date, interest ceases to accrue on Notes or portions of them called for redemption. NOTE GUARANTEES The Guarantors will jointly and severally guarantee the Company's obligations under the Notes. Each Note Guarantee will be subordinated to the prior payment in full of all Senior Indebtedness of that Guarantor. The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors--Under specific circumstances, the Notes and Guarantees may be voided." A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless subject to the provisions of the following paragraph and certain other provisions of the Indenture: (1) immediately after giving effect to that transaction, no Default or Event of Default exists; and (2) in the case of any Guarantor other than Holding, the Person acquiring the property in such sale or disposition or the Person formed by or surviving any such consolidation or merger will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock." The Note Guarantee of a Guarantor will be released: (1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (other than Holding), by way of merger or consolidation or otherwise, to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, if the Guarantor applies the Net Proceeds of that sale or other disposition in accordance with the "Asset Sale" provisions of the Indenture; (2) in connection with the sale or other disposition of all of the Capital Stock of any Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, if the Company applies the Net Proceeds of that sale or other disposition in accordance with the "Asset Sale" provisions of the Indenture; or 76 (3) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the provisions described below under "--Certain Covenants--Designation of Restricted Subsidiaries and Unrestricted Subsidiaries." See "--Repurchase at the Option of Holders--Asset Sales." SUBORDINATION The payment of principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be subordinated in right of payment to the prior payment in full of all Senior Indebtedness of the Company, including Senior Indebtedness of the Company incurred after the date of the Indenture. The holders of Senior Indebtedness of the Company will be entitled to receive payment in full of all Obligations due in respect of Senior Indebtedness (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness of the Company, whether or not such interest was an allowed claim) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"), in the event of any distribution to creditors of the Company: (1) in a liquidation or dissolution of the Company; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshaling of the Company's assets and liabilities. The Company also may not make any payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under "--Legal Defeasance and Covenant Defeasance") if: (1) a default in the payment, when due, whether upon acceleration or otherwise, of the principal, premium, if any, or interest on any Senior Indebtedness of the Company occurs and is continuing; or (2) any other default occurs and is continuing on any series of Designated Senior Indebtedness and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or from, or on behalf of, the holders of any Designated Senior Indebtedness. Payments on the Notes may and shall be resumed: (1) in the case of a payment default, upon the date on which such default is cured or waived; and (2) in the case of a nonpayment default, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any such Designated Senior Indebtedness has been accelerated. No new period of payment blockage may be commenced within 365 days after the receipt by the Trustee of any prior Payment Blockage Notice. If the Trustee or any Holder of the Notes receives a payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under "--Legal Defeasance and Covenant Defeasance") when: (1) the payment is prohibited by these subordination provisions; and 77 (2) the Trustee or the Holder has actual knowledge that the payment is prohibited; the Trustee or the Holder, as the case may be, shall hold the payment in trust for the benefit of the holders of Senior Indebtedness. Upon the proper written request of the holders of Senior Indebtedness, the Trustee or the Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Indebtedness or their proper representative. The Company must promptly notify each representative of holders of Senior Indebtedness of the Company if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of the Company, Holders of Notes may recover less, ratably, than creditors of the Company who are holders of Senior Indebtedness or of other indebtedness which is not subordinated to the Notes. See "Risk Factors." Holders of Senior Indebtedness are third party beneficiaries of the subordination provisions of the Indenture and no amendment thereof shall be effected without the prior written consent of the holders of a majority of the outstanding principal amount of Senior Indebtedness. CERTAIN COVENANTS RESTRICTED PAYMENTS The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than dividends or distributions payable in Equity Interests of the Person making such dividend or distribution, other than Disqualified Stock; or dividends or distributions payable to the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor); (3) purchase, redeem or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees, except a payment of interest or principal at the Stated Maturity (other than intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries that is a Guarantor); (4) directly or indirectly make any loan or advance to, or make any other payment to, Holding; or (5) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (5) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock;" and 78 (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (2), (3), (5), (6) and (7) of the next succeeding paragraph), is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income and Consolidated Step-Up Depreciation and Amortization of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income plus Consolidated Step-Up Depreciation and Amortization for such period is a deficit, less 100% of such deficit); PLUS (b) 100% of the aggregate net cash proceeds received by the Company since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); PLUS (c) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment. The preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3) (b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor in a Permitted Refinancing; (4) a Restricted Payment to Holding pursuant to the Tax Sharing Agreement as the same may be amended from time to time in a manner that is not materially adverse to the Company; (5) a Restricted Payment to Holding to pay its operating and administrative expenses including, without limitation, directors fees, legal and audit expenses, Commission compliance expenses and corporate franchise and other taxes, in an aggregate amount not to exceed $500,000 in any fiscal year; (6) a Restricted Payment to Holding to pay management fees in an aggregate amount not to exceed $750,000 in any fiscal year of the Company; (7) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; 79 (8) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Holding from any current or former employee of Holding, the Company or any Subsidiary of the Company; PROVIDED, HOWEVER, that (a) the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any fiscal year, net of cash proceeds received from the sale of Equity Interests to employees and (b) no Default or Event of Default shall have occurred and be continuing immediately after such transaction; (9) Investments by the Company in joint ventures or similar projects in a business similar to that conducted by the Company and its Restricted Subsidiaries on the date of the Indenture in an aggregate amount not to exceed $5.0 million; (10)a Restricted Payment to Holding to pay cash interest payments on Holding's 12 1'2% Senior Secured Notes due 2006 and on any Refinancing Indebtedness incurred to refund, refinance or replace Holding's 12 1'2% Senior Secured Notes due 2006 in a Permitted Refinancing; and (11)other Restricted Payments in an aggregate amount not to exceed $5.0 million since the date of the Indenture. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or its Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee if the fair market value exceeds $1.0 million. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $5.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant entitled "Restricted Payments" were computed, which calculations may be based upon the Company's latest available financial statements. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt), and the Company will not issue any, and will not permit any of its Subsidiaries to issue any, shares of Disqualified Stock; PROVIDED, HOWEVER, that the Company and its Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.25 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom and including the pro forma earnings of any business acquired by the Company or any of its Subsidiaries with the proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company and its Restricted Subsidiaries of term Indebtedness, revolving credit Indebtedness and letters of credit under the Credit Facility in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed the greater of: (a) $150.0 million in principal amount (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder), less the aggregate amount of all Net Proceeds of Asset Sales that have been applied by the Company or any of its Restricted Subsidiaries since the date of the Indenture to repay any term Indebtedness under a 80 Credit Facility pursuant to the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales;" and (b) the Borrowing Base; (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of the Indenture and the New Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; (4) the incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4) in a Permitted Refinancing, not to exceed $10.0 million at any time outstanding; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Refinancing Indebtedness; PROVIDED, HOWEVER, that such Refinancing Indebtedness is a Permitted Refinancing; (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries that is a Guarantor; PROVIDED, HOWEVER, that: (a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary that is a Guarantor thereof; shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company of Indebtedness between the Company and Holding; PROVIDED that the advances evidenced by such Indebtedness are permitted under the covenant described above under the caption "--Restricted Payments;" (8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding; and (9) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (10)the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt; PROVIDED, HOWEVER, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (10). 81 (11)the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; PROVIDED, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued; and (12)the incurrence by the Company or its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount, including all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (12) in a Permitted Refinancing, not to exceed the sum of $25.0 million at any time outstanding. The Company will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this "Incurrence of Indebtedness and Disqualified Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (12) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. LIENS The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reasons of: (1) Existing Indebtedness as in effect on the date of the Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the date of the Indenture; 82 (2) the 1994 Indenture, the 1994 Notes and the guarantees thereof, the 1998 Indenture and the 1998 Notes and the guarantees thereof; (3) the Indenture, the Notes and the Note Guarantees; (4) applicable law; (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that the Consolidated Cash Flow of such Person, to the extent of such restriction, is not taken into account in determining whether such acquisition was permitted by the terms of the Indenture; (6) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (7) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (3) of the preceding paragraph; and (8) Refinancing Indebtedness that is a Permitted Refinancing, PROVIDED that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. MERGER, CONSOLIDATION OR SALE OF ASSETS The Company may not: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) the Company is the surviving corporation; or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company pursuant to agreements reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Registration Rights Agreement; (3) immediately after such transaction no Default or Event of Default exists; and (4) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock." 83 TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any of its Restricted Subsidiaries to sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with a Person who was not an Affiliate; and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction involving aggregate payments in excess of $2.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction is approved by a majority of the Board of Directors; and (b) with respect to any Affiliate Transaction involving aggregate payments in excess of $5.0 million, an opinion as to the fairness to the Holders from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) transactions between or among Holding, the Company and/or its Restricted Subsidiaries; (3) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company; (4) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments;" and (5) the payment of annual fees and expenses to First Atlantic (PROVIDED that such payment is permitted by the provisions of the Indenture described above under the caption "--Restricted Payments"). NO SENIOR SUBORDINATED INDEBTEDNESS The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness of the Company and senior in any respect in right of payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to its Senior Indebtedness and senior in any respect in right of payment to its Note Guarantee. ADDITIONAL NOTE GUARANTEES If the Company or any of its Subsidiaries transfers or causes to be transferred, in one or a series of related transactions, other than a transaction or series of related transactions constituting a Restricted Payment permitted by the provisions of the covenant described above under the caption "--Restricted Payments," any assets, businesses, divisions, real property or equipment having a book value in excess of $1.0 million to any Subsidiary that is not a Guarantor or if the Company or any of its Subsidiaries shall acquire another Domestic Restricted Subsidiary having (a) total assets with a book value in excess of $1.0 million or (b) Consolidated Cash Flow in excess of $1.0 million, 84 then such transferee or acquired Subsidiary (if other than a Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with the terms of the Indenture) shall execute a Note Guarantee and deliver an opinion of counsel as to the enforceability of such Note Guarantee, in accordance with the terms of the Indenture. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "--Restricted Payments" or Permitted Investments, as applicable. That designation will only be permitted if such Restricted Payment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. REPORTS Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Trustee and to all Holders of Notes, within the time periods specified in the Commission's rules and regulations all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and any other information required by Section 13 or 15(d) of the Exchange Act with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and file such information with the Trustee and make such information available to investors who request it in writing. Notwithstanding the foregoing, to the extent permitted under the rules and regulations of the Commission, the Company may instead supply such information with respect to Holding. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. EVENTS OF DEFAULT AND REMEDIES Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest and Liquidated Damages, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (2) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (3) failure by the Company to comply with the provisions described under the captions "--Repurchase at the Option of Holders--Change of Control," "--Repurchase at the Option of Holders--Asset Sales," 85 "--Certain Covenants--Restricted Payments" and "--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock;" (4) failure by the Company or the Guarantors for 60 days after notice to comply with any of the other agreements in the Indenture or the Notes; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default: (a) is caused by a failure to pay principal of, premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $2.0 million or more; (6) failure by the Company, Holding or any of their respective Subsidiaries to pay final judgments aggregating in excess of $2.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (7) except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of any Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee; and (8) certain events of bankruptcy or insolvency with respect to the Company, Holding or any of their respective Subsidiaries. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, Holding or any of their respective Subsidiaries, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any Indebtedness is outstanding pursuant to the Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable upon the earlier of (1) the day which is five business days after notice of acceleration is given to the Company and the lender under the Credit Facility or (2) the date of acceleration of the Indebtedness under the Credit Facility. Under certain circumstances, the Holders of at least a majority in aggregate principal amount of the outstanding Notes may rescind any acceleration with respect to the Notes and its consequences. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages) if it determines that withholding notice is in their interest. The Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, any Note held by a non-consenting Holder. 86 In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to July 15, 2003, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to July 15, 2003, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, the Company is required to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Notes Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. The waiver may not be effective to waive liabilities under the federal securities laws. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Guarantors discharged with respect to their Note Guarantees ("Legal Defeasance") except for: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, and premium, if any, interest and Liquidated Damages, if any, on such Notes when such payments are due; (2) the Company's and the Guarantors' obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's and the Guarantors' obligations in connection therewith; and (4) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including nonpayment, bankruptcy, receivership, rehabilitation and insolvency events) described under "--Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and premium, if any, interest and Liquidated Damages, if any, on 87 the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, of such principal or installment of principal of, or premium, if any, interest or Liquidated Damages, if any on the outstanding Notes; (2) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to the terms of the Indenture concurrently with such incurrence); or (b) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the day on which all applicable preference periods have run; (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the day on which all applicable preferences have run and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the day on which all applicable preferences have run, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or the Guarantors with the intent of defeating, hindering, delaying or defrauding creditors of the Company or the Guarantors; and (8) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or Exchange Offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or Exchange Offer for Notes). 88 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder of Notes): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter or waive the provisions with respect to the redemption of the Notes; (3) reduce the rate of or change the time for payment of interest on any Note; (4) waive a Default or Event of Default in the payment of principal of, or premium, if any, interest or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or premium, if any, interest or Liquidated Damages, if any, on the Notes; (7) waive a redemption payment with respect to any Note; (8) make any change to the subordination provisions of the Indenture that adversely affects Holders; (9) release any Guarantor from any of its obligations under its Note Guarantee or the Indenture, except in accordance with the terms of the Indenture or change any Note Guarantee in any manner that would adversely affect Holders; or (10) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; (4) to make any change that would provide any additional rights or benefits to the Holders of the Notes (including providing for additional Note Guarantees pursuant to the provisions described above under the caption "--Certain Covenants--Additional Guarantees") or that does not adversely affect the legal rights under the Indenture of any such Holder; (5) to provide for the issuance of Additional Notes in accordance with the provisions of the Indenture; or (6) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 89 CONCERNING THE TRUSTEE If the Trustee becomes a creditor of the Company, the Guarantors or any Affiliate of the Company or the Guarantors, the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to Berry Plastics Corporation, 101 Oakley Street, Evansville, Indiana 47710, Attention: Corporate Secretary. BOOK-ENTRY, DELIVERY AND FORM The New Notes will initially be represented by one or more permanent global notes in definitive, fully registered book-entry form, without interest coupons (the "Global Notes") that will be deposited with, or on behalf of, Depository Trust Company ("DTC") and registered in the name of DTC or its nominee, on behalf of the acquirers of New Notes represented thereby for credit to the respective accounts of the acquirers, or to such other accounts as they may direct, at DTC, or Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), or Cedel Bank, societe anonyme ("Cedel"). See "The Exchange Offer--Book Entry Transfer". Except as set forth below, the Global Notes may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances described below. All interests in the Global Notes, including those held through Euroclear or Cedel, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Cedel may also be subject to the procedures and requirements of such systems. DEPOSITORY PROCEDURES The following description of the operations and procedures of DTC, Euroclear and Cedel are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters. DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other 90 entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised the Company that, pursuant to procedures established by it: (1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and (2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). Investors in the Rule 144A Global Notes who are Participants in DTC's system may hold their interests therein directly through DTC. Investors in the Rule 144A Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Cedel) which are Participants in such system. Investors in the Regulation S Global Notes must initially hold their interests therein through Euroclear or Cedel, if they are participants in such systems, or indirectly through organizations that are participants in such systems. After the expiration of the Restricted Period (but not earlier), investors may also hold interests in the Regulation S Global Notes through Participants in the DTC system other than Euroclear and Cedel. Euroclear and Cedel will hold interests in the Regulation S Global Notes on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear, and Citibank, N.A., as operator of Cedel. All interests in a Global Note, including those held through Euroclear or Cedel, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Cedel may also be subject to the procedures and requirements of such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal of, and interest and premium and Liquidated Damages, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes; or (2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. 91 DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Subject to the transfer restrictions set forth under "Notice to Investors," transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Cedel will be effected in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the Notes described herein, cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Cedel participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may be, by its respective depositary; however, such cross- market transactions will require delivery of instructions to Euroclear or Cedel, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Cedel, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Cedel participants may not deliver instructions directly to the depositories for Euroclear or Cedel. DTC has advised the Company that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants. Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to facilitate transfers of interests in the Rule 144A Global Notes and the Regulation S Global Notes among participants in DTC, Euroclear and Cedel, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither the Company nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Cedel or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive Notes in registered certificated form ("Certificated Notes") if: (1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company fails to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act; (2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or (3) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. 92 In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to in "Notice to Investors," unless that legend is not required by applicable law. REGISTRATION RIGHTS; LIQUIDATED DAMAGES The following description is a summary of the material provisions of the Registration Rights Agreement. It does not restate that agreement in its entirety. We urge you to read the proposed form of Registration Rights Agreement in its entirety because it, and not this description, defines your registration rights as Holders of these Notes. See "--Additional Information." The Company, the Guarantors and the Initial Purchasers entered into the Registration Rights Agreement on July 6, 1999. Pursuant to the Registration Rights Agreement, the Company and the Guarantors agreed to file with the Commission the Exchange Offer Registration Statement on the appropriate form under the Securities Act with respect to the New Notes. Upon the effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors will offer to the holders of Transfer Restricted Securities pursuant to the Exchange Offer who are able to make certain representations the opportunity to exchange their Transfer Restricted Securities for New Notes. If: (1) the Company and the Guarantors are not (a) required to file the Exchange Offer Registration Statement; or (b) permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy; or (2) any holder of Transfer Restricted Securities notifies the Company prior to the 20th day following consummation of the Exchange Offer that: (a) it is prohibited by law or Commission policy from participating in the Exchange Offer; or (b) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales; or (c) that it is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, the Company and the Guarantors will file with the Commission a Shelf Registration Statement to cover resales of the Notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company and the Guarantors will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each Note (together with any Note Guarantees) until: (1) the date on which such Note has been exchanged by a Person other than a broker-dealer for a New Note in the Exchange Offer; 93 (2) following the exchange by a broker-dealer in the Exchange Offer of a Note for an New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement; (3) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; or (4) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. The Registration Rights Agreement will provide: (1) the Company and the Guarantors will file an Exchange Offer Registration Statement with the Commission on or prior to 45 days after the date of the Indenture; (2) the Company and the Guarantors will use their best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 210 days after the date of the Indenture; (3) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company and the Guarantors will (a) commence the Exchange Offer; and (b) use their best efforts to issue on or prior to 30 business days, or longer, if required by the Federal securities laws, after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, New Notes in exchange for all Notes tendered prior thereto in the Exchange Offer; and (4) if obligated to file the Shelf Registration Statement, the Company and the Guarantors will use their best efforts to file the Shelf Registration Statement with the Commission on or prior to 45 days after such filing obligation arises and to cause the Shelf Registration to be declared effective by the Commission on or prior to 90 days after such obligation arises. If: (1) the Company and the Guarantors fail to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing; or (2) any of such registration statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"); or (3) the Company and the Guarantors fail to consummate the Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement; or (4) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (1) through (4) above, a "Registration Default"), then the Company and the Guarantors will pay Liquidated Damages to each Holder of Notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Notes held by such Holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to 94 a maximum amount of Liquidated Damages for all Registration Defaults of $.50 per week per $1,000 principal amount of Notes. All accrued Liquidated Damages will be paid by the Company and the Guarantors on each Damages Payment Date to the Global Note Holder by wire transfer of immediately available funds or by Federal funds check and to Holders of Certificated Notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Holders of Notes will be required to make certain representations to the Company and the Guarantors (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver certain information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. By acquiring Transfer Restricted Securities, a Holder will be deemed to have agreed to indemnify the Company and the Guarantors against certain losses arising out of information furnished by such Holder in writing for inclusion in any Shelf Registration Statement. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person; and (2) Indebtedness encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. Neither Chase Venture Capital Associates, L.P., nor its Affiliates will be deemed an Affiliate of Holding, the Company or any of its Subsidiaries for purposes of this definition by reason of its direct or indirect beneficial ownership of 30% or less of the voting Common Stock of Holding or by reason of any employee thereof being appointed to the Board of Directors of Holding. "ASSET SALE" means: (1) the sale, lease, conveyance or other disposition of any property or assets of the Company or any Restricted Subsidiary, including by way of a sale-and-leaseback, other than sales of inventory in the ordinary course of business; PROVIDED that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries will be governed by the provisions of the Indenture described above under the caption "--Repurchase at the Option of Holders--Change of Control" and/or the provisions described above under the caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; or 95 (2) the issuance or sale of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (1) or (2) above, whether in a single transaction or a series of related transactions. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value equal to or less than $1.0 million or for Net Proceeds equal to or less than $1.0 million; (2) a transfer of assets between or among the Company and its Wholly Owned Restricted Subsidiaries, (3) any Restricted Payment, dividend or purchase or retirement of Equity Interests that is permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments;" (4) the issuance or sale of Equity Interests of any Restricted Subsidiary of the Company; PROVIDED that such Equity Interests are issued or sold in consideration for the acquisition of assets by such Restricted Subsidiary or in connection with a merger or consolidation of another Person into such Restricted Subsidiary; (5) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; and (6) the sale or other disposition of cash or Cash Equivalents. "BOARD OF DIRECTORS" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function. "BORROWING BASE" means, as of any date, an amount equal to: (1) 85% of the face amount of all accounts receivable owned by the Company and its Subsidiaries as of such date that were not more than 90 days past due; PLUS (2) 65% of the book value (calculated on a first in first out basis) of all inventory owned by the Company and its Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be so required to be capitalized on a balance sheet prepared in accordance with GAAP. "CAPITAL STOCK" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of such partnership. "CASH EQUIVALENTS" means: 96 (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case, with any lender party to the Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; and (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition. "CHANGE OF CONTROL" means the occurrence of any of the following: (1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of Holding's or the Company's assets to any "person" or "group" (as those terms are used in Section 13(d)(3) of the Exchange Act) other than the Principal and his Related Parties; (2) the adoption of a plan relating to the liquidation or dissolution of Holding or the Company; (3) the acquisition by any "person" or "group" (as defined above), other than by the Principal and his Related Parties, of a direct or indirect interest in more than 35% of the voting power of the voting stock of Holding by way of purchase, merger or consolidation or otherwise if: (a) such person or group (as defined above), other than the Principal and his Related Parties, owns, directly or indirectly, more of the voting power of the voting stock of Holding than the Principal and his Related Parties; and (b) such acquisition occurs prior to an Initial Public Offering; (4) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than by the Principal and his Related Parties) of a direct or indirect interest in more than 50% of the voting power of the voting stock of Holding by way of purchase, merger or consolidation or otherwise if such acquisition occurs subsequent to an Initial Public Offering; or (5) the first day on which a majority of the members of the Board of Directors of Holding are not Continuing Directors. "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period PLUS: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing Consolidated Net Income; PLUS (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent such provision for taxes was included in computing Consolidated Net Income; PLUS 97 (3) Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period to the extent such expense was deducted in computing Consolidated Net Income; PLUS (4) Consolidated Depreciation and Amortization Expense of such Person and its Restricted Subsidiaries for such period to the extent such expense was deducted in computing Consolidated Net Income; PLUS (5) other non-cash charges (including, without limitation, repricing of stock options, to the extent deducted in computing Consolidated Net Income; but excluding any non-cash charge that requires an accrual or reserve for cash expenditures in future periods or which involved a cash expenditure in a prior period), in each case, on a consolidated basis and determined in accordance with GAAP. "CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect to any Person for any period, the total amount of depreciation and amortization expense (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person for such period on a consolidated basis as determined in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any period, the sum of: (1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount, non-cash interest payments, the interest component of capital leases, and net payments (if any) pursuant to Hedging Obligations); (2) commissions, discounts and other fees and charges paid or accrued with respect to letters of credit and bankers' acceptance financing; and (3) interest for such period whether or not paid by such Person or its Restricted Subsidiaries under a Guarantee of Indebtedness of any other Person. "CONSOLIDATED NET INCOME" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that: (1) the Net Income of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the specified Person or a Guarantor; (2) the Net Income of any Person that is a Restricted Subsidiary (other than a Wholly Owned Restricted Subsidiary) shall be included only to the extent of the amount of dividends or distributions paid to the specified Person or a Guarantor; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; and (5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded whether or not distributed to the specified Person or one of its Subsidiaries. "CONSOLIDATED STEP UP DEPRECIATION AND AMORTIZATION" means, with respect to any Person for any period, the total amount of depreciation related to the write up of assets and amortization of such Person for such period on a consolidated basis as determined in accordance with GAAP to the extent such depreciation was deducted in computing Consolidated Net Income. 98 "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of Holding who: (1) was a member of such Board of Directors on the date of the Indenture; or (2) was nominated for election or elected to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CREDIT FACILITY" means the Second Amended and Restated Financing and Security Agreement dated as of July 2, 1998 as amended through the date hereof, by and among the Company, NIM Holdings, Norwich Injection Moulders, the financial institutions party thereto and NationsBank, N.A., as collateral and administrative agent, providing for up to $142.9 million of borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "DESIGNATED SENIOR INDEBTEDNESS" means: (1) the Senior Bank Indebtedness; and (2) any other Senior Indebtedness permitted to be incurred under the Indenture the principal amount of which is $15.0 million or more and that has been designated in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "--Certain Covenants--Restricted Payments." "DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that was formed under the laws of the United States or any state thereof or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Facility) in existence on the date of the Indenture, until such amounts are repaid. "FIRST ATLANTIC" means First Atlantic Capital, Ltd. "FIXED CHARGES" means, with respect to any specified Person for any period, the sum, without duplication, of: 99 (1) the Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income; PLUS (2) the product of (a) all cash dividend payments and noncash dividend payments in the form of securities (other than Disqualified Stock) on any series of preferred stock of such Person and its Restricted Subsidiaries, times (b) except to the extent such dividend payments are deemed tax deductible, a fraction, the numerator of which is one and the denominator of which is one minus the then current combined Federal, state and local statutory tax rate of such Person and its Restricted Subsidiaries, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than revolving credit borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of calculating the Fixed Charge Coverage Ratio, acquisitions, dispositions and discontinued operations (as determined in accordance with GAAP) that have been made by the specified Person or any of its Restricted Subsidiaries, including all mergers and consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they (and the reduction of any associated fixed charge obligations resulting therefrom) had occurred on the first day of the four-quarter reference period. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. "GUARANTEE" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, through letters of credit and reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "GUARANTORS" means each of: (1) each Domestic Restricted Subsidiary of the Company; (2) NIM Holdings Limited and Norwich Injection Moulders Limited; and (3) any other Restricted Subsidiary that executes a Note Guarantee in accordance with the provisions of the Indenture; and their respective successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and 100 (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "INDEBTEDNESS" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) representing Capital Lease Obligations; (4) in respect of the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (5) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes the Guarantee by the specified Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INITIAL PUBLIC OFFERING" means a public offering of the common stock of Holding that first results in the common stock of Holding becoming listed for trading on a Stock Exchange. "INVESTMENTS" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers, directors, consultants and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. 101 "NET INCOME" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions); and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that are the subject of such Asset Sale and any reserve for indemnification adjustment in respect of the sale price of such asset or assets. "1998 INDENTURE" means the Indenture dated August 24, 1998 among the Company, the Guarantors named therein and the Trustee, governing the 1998 Notes. "1994 INDENTURE" means the Indenture dated April 21, 1994 among the Company, the Guarantors named therein and the Trustee, governing the 1994 Notes. "1998 NOTES" means the $25.0 million in principal amount of the Company's 12 1'4% Senior Subordinated Notes due 2004. "1994 NOTES" means the $100.0 million in principal amount of the Company's 12 1'4% senior Subordinated Notes due 2004. "NON-RECOURSE DEBT" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) is the lender; (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "PERMITTED INVESTMENTS" means: (1) any Investments in the Company or in a Wholly Owned Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; 102 (3) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales;" (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; and (6) Hedging Obligations. "PERMITTED JUNIOR SECURITIES" means: (1) Equity Interests in the Company or any Guarantor; or (2) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Indebtedness under the Indenture. "PERMITTED LIENS" means: (1) Liens of the Company and any Guarantor securing Senior Indebtedness that was permitted by the terms of the Indenture to be incurred; (2) Liens in favor of the Company or the Guarantors; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "--Certain Covenants--Incurrence of Indebtedness and Disqualified Stock" covering only the assets acquired with such Indebtedness; (7) Liens existing on the date of the Indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, 103 PROVIDED that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (9) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; and (10)Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "PERMITTED REFINANCING" means Refinancing Indebtedness if: (1) the principal amount of Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums, accrued interest and reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, the Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or any agency or political subdivision thereof or any other entity. "PRINCIPAL" means Roberto Buaron. "REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness referred to in the first paragraph of or in clauses (2), (3), (4) and (12) of the second paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock." "RELATED PARTY" means with respect to the Principal: (1) any spouse, sibling or descendant of the Principal, whether or not such relationship arises from birth, adoption or marriage or despite such relationship being dissolved by divorce; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a controlling interest of which consist of the Principal and/or such other Persons referred to in the immediately preceding clause (1). "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. 104 "SENIOR BANK INDEBTEDNESS" means the Indebtedness outstanding under the Credit Facility as such agreement may be restated, further amended, supplemented or otherwise modified or replaced from time to time hereafter, together with any refunding or replacement of any such Indebtedness. "SENIOR INDEBTEDNESS" means: (1) the Senior Bank Indebtedness; (2) any other Indebtedness permitted to be incurred by the Company or a Guarantor, as the case may be, under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is PARI PASSU with or subordinated in right of payment to the Notes or a Note Guarantee, as the case may be; and (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2). Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include: (1) any liability for Federal, state, local or other taxes owed or owing by the Company or a Guarantor, as the case may be; (2) any Indebtedness of the Company or a Guarantor, as the case may be, to Holding or to any of Holding's other Subsidiaries or other Affiliates; (3) any trade payables; or (4) the portion of any Indebtedness that is incurred in violation of the Indenture. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "STOCK EXCHANGE" means the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market. "SUBSIDIARY" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person or any combination thereof. "TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, as in effect on the date of the Indenture, between the Company and Holding. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; 105 (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Disqualified Stock," the Company shall be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the due date of such payment; by (2) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. 106 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS SCOPE OF DISCUSSION This general discussion of certain United States federal income and estate tax consequences applies to you if you acquire the Notes at original issue for cash and hold the Notes as a "capital asset," generally, for investment, under Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary, however, does not consider state, local or foreign tax laws. In addition, it does not include all of the rules which may affect the United States tax treatment of your investment in the Notes. For example, special rules not discussed here may apply to you if you are: o a broker-dealer, a dealer in securities or a financial institution; o an S corporation; o an insurance company; o a tax-exempt organization; o subject to the alternative minimum tax provisions of the Code; o holding the Notes as part of a hedge, straddle or other risk reduction or constructive sale transaction; o a nonresident alien or foreign corporation subject to net-basis United States federal income tax on income or gain derived from a Note because such income or gain is effectively connected with the conduct of a United States trade or business; or o an expatriate. This discussion only represents our best attempt to describe certain federal income tax consequences that may apply to you based on current United States federal tax law. This discussion may in the end inaccurately describe the federal income tax consequences which are applicable to you because the law may change, possibly retroactively, and because the Internal Revenue Service (the "IRS") or any court may disagree with this discussion. THIS SUMMARY MAY NOT COVER YOUR PARTICULAR CIRCUMSTANCES BECAUSE IT DOES NOT CONSIDER FOREIGN, STATE OR LOCAL TAX RULES, DISREGARDS CERTAIN FEDERAL TAX RULES, AND DOES NOT DESCRIBE FUTURE CHANGES IN FEDERAL TAX RULES. PLEASE CONSULT YOUR TAX ADVISOR RATHER THAN RELYING ON THIS GENERAL DESCRIPTION. UNITED STATES HOLDERS If you are a "United States Holder," as defined below, this section applies to you. Otherwise, the next section, "Non-United States Holders," applies to you. DEFINITION OF UNITED STATES HOLDER. You are a "United States Holder" if you hold the Notes and you are: o a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the "substantial presence" test under Section 7701(b) of the Code; o a corporation or partnership created or organized in the United States or under the laws of the United States or of any political subdivision of the United States (except that under the regulations to be published, certain partnerships created or organized under the foreign laws may be classified as a domestic partnership if such classification is more appropriate); 107 o an estate, the income of which is subject to United States federal income tax regardless of its source; or o a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial decisions of the trust, or if the trust was in existence on August 20, 1996 and has elected to continue to be treated as a United States person. TAXATION OF STATED INTEREST. You must generally include the interest on the Notes in ordinary income: o when it accrues, if you use the accrual method of accounting for United States federal income tax purposes; or o when you receive it, if you use the cash method of accounting for United States federal income tax purposes. SALE OR OTHER TAXABLE DISPOSITION OF THE NOTES. You must recognize taxable gain or loss on the sale, exchange, redemption, retirement or other taxable disposition of a Note. The amount of your gain or loss equals the difference between the amount you receive for the Note (in cash or other property, valued at fair market value), minus the amount attributable to accrued interest on the Note, minus your adjusted tax basis in the Note. Your initial tax basis in a Note equals the price you paid for the Note. Your gain or loss will generally be a long-term capital gain or loss if you have held the Note for more than one year. Otherwise, it will be a short-term capital gain or loss. Payments attributable to accrued interest which you have not yet included in income will be taxed as ordinary interest income. LIQUIDATED DAMAGES/EXCHANGE WITH REGISTERED NOTES. We intend to take the position that the likelihood of our failing to exchange the Notes with the registered Notes pursuant to the Registration Rights Agreement is remote. Accordingly, you must include the payment of Liquidated Damages as ordinary income only when they are accrued or paid, in accordance with your own method of accounting. The exchange of Notes with the registered Notes pursuant to the Registration Rights Agreement will not be a taxable event. Your basis in the Notes will carry over to the registered Notes received and the holding period of the registered Notes will include the holding period of the Notes surrendered. BACKUP WITHHOLDING. You may be subject to a 31% backup withholding tax when you receive interest payments on the Note or proceeds upon the sale or other disposition of a Note. Certain holders (including, among others, corporations and certain tax-exempt organizations) are generally not subject to backup withholding. In addition, the 31% backup withholding tax will not apply to you if you provide your taxpayer identification number ("TIN") in the prescribed manner unless: o the IRS notifies us or our agent that the TIN you provided is incorrect; o you fail to report interest and dividend payments that you receive on your tax return and the IRS notifies us or our agent that withholding is required; or o you fail to certify under penalties of perjury that you are not subject to backup withholding. If the 31% backup withholding tax does apply to you, you may use the amounts withheld as a refund or credit against your United States federal income tax liability as long as you provide certain information to the IRS. NON-UNITED STATES HOLDERS DEFINITION OF NON-UNITED STATES HOLDER. A "Non-United States Holder" is any person other than a United States Holder. Please note that if you are subject to United States federal income tax on a net basis on income or gain with respect to a Note because such income or gain is effectively connected with the conduct of a United States trade or business, this disclosure does not cover the United States federal tax rules that apply to you. 108 INTEREST. PORTFOLIO INTEREST EXEMPTION. You will generally not have to pay United States federal income tax on interest paid on the Notes because of the "portfolio interest exemption" if either: o you represent that you are not a United States person for United States federal income tax purposes and you provide your name and address to us or our paying agent on a properly executed IRS Form W-8 (or a suitable substitute form) signed under penalties of perjury; or o a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its business holds the Note on your behalf, certifies to us or our agent under penalties of perjury that it has received IRS Form W-8 (or a suitable substitute) from you or from another qualifying financial institution intermediary, and provides a copy to us or our agent. You will not, however, qualify for the portfolio interest exemption described above if: o you own, actually or constructively, 10% or more of the total combined voting power of all classes of our capital stock; o you are a controlled foreign corporation with respect to which we are a "related person" within the meaning of Section 864(d)(4) of the Code; or o you are a bank receiving interest described in Section 881(c)(3)(A) of the Code. WITHHOLDING TAX IF THE INTEREST IS NOT PORTFOLIO INTEREST. If you do not claim, or do not qualify for, the benefit of the portfolio interest exemption, you may be subject to a 30% withholding tax on interest payments made on the Notes. However, you may be able to claim the benefit of a reduced withholding tax rate under an applicable income tax treaty. The required information for claiming treaty benefits is generally submitted, under current regulations, on Form 1001. Successor forms will require additional information, as discussed below under the heading "Non-United States Holders--New Withholding Regulations." REPORTING. We may report annually to the IRS and to you the amount of interest paid to, and the tax withheld, if any, with respect to you. SALE OR OTHER DISPOSITION OF THE NOTES. You will generally not be subject to United States federal income tax or withholding tax on gain recognized on a sale, exchange, redemption, retirement, or other disposition of a Note. You may, however, be subject to tax on such gain if you are an individual who was present in the United States for 183 days or more in the taxable year of the disposition, in which case you may have to pay a United States federal income tax of 30% (or a reduced treaty rate) on such gain. UNITED STATES FEDERAL ESTATE TAXES. If you qualify for the portfolio interest exemption under the rules described above when you die, the Notes will not be included in your estate for United States federal estate tax purposes. BACKUP WITHHOLDING AND INFORMATION REPORTING. PAYMENTS FROM UNITED STATES OFFICE. If you receive payments of interest or principal directly from us or through the United States office of a custodian, nominee, agent or broker, there is a possibility that you will be subject to both backup withholding at a rate of 31% and information reporting. With respect to interest payments made on the Note, however, backup withholding and information reporting will not apply if you certify, generally on a Form W-8 or substitute form, that you are not a United States person in the manner described above under the heading "Non-United States Holders--Interest." 109 Moreover, with respect to proceeds received on the sale, exchange, redemption, or other disposition of a Note, backup withholding or information reporting generally will not apply if you properly provide, generally on Form W-8 or a substitute form, a statement that you are an "exempt foreign person" for purposes of the broker reporting rules, and other required information. If you are not subject to United States federal income or withholding tax on the sale or other disposition of a Note, as described above under the heading "Non-United States Holders--Sale or Other Disposition of Notes," you will generally qualify as an "exempt foreign person" for purposes of the broker reporting rules. PAYMENTS FROM FOREIGN OFFICE. If payments of principal and interest are made to you outside the United States by or through the foreign office of your foreign custodian, nominee or other agent, or if you receive the proceeds of the sale of a Note through a foreign office of a "broker," as defined in the pertinent United States Treasury Regulations, you will generally not be subject to backup withholding or information reporting. You will, however, be subject to backup withholding and information reporting if the foreign custodian, nominee, agent or broker has actual knowledge or reason to know that the payee is a United States person. You will also be subject to information reporting, but not backup withholding, if the payment is made by a foreign office of a custodian, nominee, agent or broker that is a United States person or a controlled foreign corporation for United States federal income tax purposes, or that derives 50% or more of its gross income from the conduct of a United States trade or business for a specified three year period, unless the broker has in its records documentary evidence that you are a Non-United States Holder and certain other conditions are met. REFUNDS. Any amounts withheld under the backup withholding rules may be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the required information is furnished to the IRS. NEW WITHHOLDING REGULATIONS. New regulations relating to withholding tax on income paid to foreign persons (the "New Withholding Regulations") will generally be effective for payments made after December 31, 2000, subject to certain transition rules. The New Withholding Regulations modify and, in general, unify the way in which you establish your status as a Non-United States "beneficial owner" eligible for withholding exemptions including the portfolio interest exemption, a reduced treaty rate or an exemption from backup withholding. For example, the New Withholding Regulations will require new forms, which you will generally have to provide earlier than you would have had to provide replacements for expiring existing forms. The New Withholding Regulations clarify withholding agents' reliance standards. They also require additional certifications for claiming treaty benefits. The New Withholding Regulations also provide somewhat different procedures for foreign intermediaries and flow-through entities (such as foreign partnerships) to claim the benefit of applicable exemptions on behalf of Non-United States beneficial owners for which or for whom they receive payments. When you purchase the Notes, you will be required to submit certification that complies with the temporary Treasury Regulations in order to obtain an available exemption from or reduction in withholding tax. The New Withholding Regulations provide that certifications satisfying the requirements of the New Withholding Regulations will be deemed to satisfy the requirements of the Treasury Regulations now in effect. If you are a Non-United States Holder claiming benefit under an income tax treaty (and not relying on the portfolio interest exemption), you should be aware that you may be required to obtain a taxpayer identification number and to certify your eligibility under the applicable treaty's limitations on benefits article in order to comply with the New Withholding Regulations' certification requirements. The New Withholding Regulations are complex and this Summary does not completely describe them. Please consult your tax advisor to determine how the New Withholding Regulations will affect your particular circumstances. 110 PLAN OF DISTRIBUTION Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of Berry Plastics within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such exchange notes are acquired in the ordinary course of such holder's business, such holder has no arrangement with any person to participate in the distribution of such exchange notes and neither such holder nor any such other person is engaging in or intends to engage in a distribution of such exchange notes. Accordingly, any holder who is an affiliate of Berry Plastics or any holder using the exchange offer to participate in a distribution of the exchange notes will not be able to rely on such interpretations by the staff to the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction. Notwithstanding the foregoing, each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities (other than outstanding notes acquired directly from Berry Plastics). Berry Plastics and the guarantors have agreed that, for a period of one year from the date of this prospectus, they will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until November , 1999 (90 days from the date of this prospectus), all dealers effecting transactions in the exchange notes may be required to deliver a prospectus. Berry Plastics will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the outstanding notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker-dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus as required, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year from the date of this prospectus, Berry Plastics will send a reasonable number of additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. Berry Plastics will pay all the expenses incident to the exchange offer (including the expenses of one counsel for the holders) other than commissions or concessions of any broker-dealers. Berry Plastics and the guarantors have agreed to indemnify the Initial Purchasers and any broker-dealers participating in the exchange offer against certain liabilities, including liabilities under the Securities Act. This prospectus has been prepared for use in connection with the exchange offer and may be used by the Initial Purchasers in connection with offers and sales related to market-making transactions in the Notes. The Initial Purchasers may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of sale. Berry Plastics will not receive any of the proceeds of such sales. The Initial Purchasers has no obligation to make a market in the notes and may discontinue its market-making activities at any time without notice, at its sole discretion. We have agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, and to contribute to payments which the Initial Purchasers might be required to make in respect thereof. 111 LEGAL MATTERS Certain legal matters in connection with this offering and the exchange notes will be passed upon for us by O'Sullivan Graev & Karabell, LLP, New York, New York. Lawrence G. Graev, one of our directors, is the Chairman of O'Sullivan Graev & Karabell, LLP. See "Certain Transactions--Legal Services." EXPERTS The consolidated financial statements of BPC Holding Corporation as of December 27, 1997 and January 2, 1999, and for each of the three years in the period ended January 2, 1999 and of Knight Engineering and Plastics Division of Courtaulds Packaging Inc. as of and for the year ended March 31, 1998 included elsewhere in this Registration Statement and Prospectus have been audited by Ernst & Young LLP, independent auditors, as stated in their reports appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. The consolidated financial statements of CPI Holding, Inc. as of November 30, 1998 and 1997, and for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 to November 30, 1996 included in this Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Norwich Injection Moulders Limited for the years ended October 31, 1997, 1996 and 1995 included in this Registration Statement have been audited by Lovewell Blake, independent auditors, as stated in their report appearing herein. 112 INDEX TO FINANCIAL STATEMENTS PAGE BPC HOLDING AUDITED FINANCIAL STATEMENTS Report of Independent Auditors.............................................F-3 Consolidated Balance Sheets at January 2, 1999 and December 27, 1997.......F-4 Consolidated Statements of Operations for the three years in the period ended January 2, 1999...................................................F-6 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the three years in the period ended January 2, 1999.................F-7 Consolidated Statements of Cash Flows for the three years in the period ended January 2, 1999...................................................F-8 Notes to Consolidated Financial Statements ................................F-9 BPC HOLDING UNAUDITED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at July 3, 1999 and January 2, 1999...................................................................F-22 Condensed Consolidated Statements of Operations for the Thirteen and Twenty-Six Weeks ended July 3, 1999 and June 27, 1998..................F-24 Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended July 3, 1999 and June 27, 1998.............................F-25 Notes to Condensed Consolidated Financial Statements......................F-26 CPI HOLDING, INC. AUDITED FINANCIAL STATEMENTS Report of Independent Auditors............................................F-30 Consolidated Balance Sheets at November 30, 1998 and 1997.................F-31 Consolidated Statements of Income for the three years in the period ended November 30, 1998................................................F-33 Consolidated Statements of Mandatorily Redeemable Preferred Stock and Shareholders' Equity for the three years in the period ended November 30, 1998......................................................F-34 Consolidated Statements of Cash Flows for the three years in the period ended November 30, 1998................................................F-37 Notes to Consolidated Financial Statements ...............................F-38 CPI HOLDING, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at May 31, 1999.....................F-46 Condensed Consolidated Statements of Operations for the 26 weeks ended May 31, 1999 and 1998..................................................F-48 Condensed Consolidated Statements of Cash Flows for the 26 weeks ended May 31, 1999 and 1998..................................................F-49 Notes to Condensed Consolidated Financial Statements......................F-50 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC. AUDITED FINANCIAL STATEMENTS Report of Independent Auditors............................................F-52 Balance Sheet at March 31, 1998...........................................F-53 Statement of Operations for the year ended March 31, 1998.................F-54 Statement of Cash Flows for the year ended March 31, 1998.................F-55 Notes to Financial Statements ............................................F-56 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS Condensed Balance Sheet at September 30, 1998.............................F-58 Condensed Statement of Operations for the six months ended September 30, 1998 and 1997.........................................................F-59 Condensed Statement of Cash Flows for the six months ended September 30, 1998 and 1997.........................................................F-60 Notes to Condensed Financial Statements...................................F-61 NORWICH INJECTION MOULDERS LIMITED AUDITED FINANCIAL STATEMENTS Report of Independent Auditors............................................F-62 Profit and Loss Account for the three years in the period ended October 31, 1997...............................................................F-65 Balance Sheet at October 31, 1997, 1996, and 1995.........................F-66 Cash Flow Statement for the three years in the period ended October 31, 1997...................................................................F-67 F-1 Notes to the Accounts.....................................................F-68 NORWICH INJECTION MOULDERS LIMITED UNAUDITED INTERIM FINANCIAL STATEMENTS Profit and Loss Account for the 6 months ended April 30, 1998 and 1997....F-81 Balance Sheet at April 30, 1998...........................................F-82 Cash Flow Statement for the 6 months ended April 30, 1998 and 1997........F-83 Notes to the Accounts.....................................................F-84 F-2 REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors BPC Holding Corporation We have audited the accompanying consolidated balance sheets of BPC Holding Corporation and subsidiaries as of January 2, 1999 and December 27, 1997, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for each of the three years in the period ended January 2, 1999. These financial statements are the responsibility of Holding's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BPC Holding Corporation and subsidiaries at January 2, 1999 and December 27, 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 2, 1999, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Ernst & Young LLP Indianapolis, Indiana February 19, 1999 F-3 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
JANUARY 2, DECEMBER 27, 1999 1997 -------- ------------ ASSETS Current assets: Cash and cash equivalents ........................ $ 2,318 $ 2,688 Accounts receivable (less allowance for doubtful accounts of $1,651 at January 2, 1999 and $1,038 at December 27, 1997) .......................... 29,951 28,385 Inventories: Finished goods ................................. 23,146 22,029 Raw materials and supplies ..................... 8,556 7,429 -------- ------------ 31,702 29,458 Prepaid expenses and other receivables ........... 1,665 1,834 Income taxes recoverable ......................... 577 1,167 -------- ------------ Total current assets ................................ 66,213 63,532 Assets held in trust ................................ 6,679 19,738 Property and equipment: Land ............................................. 7,769 5,811 Buildings and improvements ....................... 38,960 33,891 Machinery, equipment and tooling ................. 141,054 122,991 Automobiles and trucks ........................... 1,386 1,241 Construction in progress ......................... 11,780 10,357 -------- ------------ 200,949 174,291 Less accumulated depreciation .................... 80,944 66,073 -------- ------------ 120,005 108,218 Intangible assets: Deferred financing and origination fees, net ..... 10,327 10,849 Covenants not to compete, net .................... 4,071 3,940 Excess of cost over net assets acquired, net ..... 44,536 30,303 Deferred acquisition costs ....................... 20 13 -------- ------------ 58,954 45,105 Deferred income taxes ............................... 2,758 2,049 Other ............................................... 708 802 -------- ------------ Total assets ........................................ $255,317 $ 239,444 ======== ============
F-4 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (CONTINUED) (IN THOUSANDS OF DOLLARS)
JANUARY 2, DECEMBER 27, 1999 1997 ---------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable .................................................. $ 18,059 $ 16,732 Accrued expenses and other liabilities ............................ 10,863 7,162 Accrued interest .................................................. 4,166 3,612 Employee compensation and payroll taxes ........................... 8,953 7,489 Income taxes ...................................................... 22 55 Current portion of long-term debt ................................. 19,388 7,619 ---------- ------------ Total current liabilities ........................................... 61,451 42,669 Long-term debt, less current portion ................................ 303,910 298,716 Accrued dividends on preferred stock ................................ 7,225 3,674 Deferred income taxes ............................................... 497 -- Other liabilities ................................................... 2,591 3,360 ---------- ------------ 375,674 348,419 STOCKHOLDERS' EQUITY (DEFICIT): Series A Preferred Stock; 800,000 shares authorized; 600,000 shares issued and outstanding (net of discount of $2,770 at January 2, 1999 and $3,062 at December 27, 1997) ............... 11,801 11,509 Series B Preferred Stock; 200,000 shares authorized, issued and outstanding ............................. 5,000 5,000 Class A Common Stock; $.01 par value: Voting; 500,000 shares authorized; 91,000 shares issued and outstanding .................................. 1 1 Nonvoting; 500,000 shares authorized; 259,000 shares issued and outstanding .................................. 3 3 Class B Common Stock; $.01 par value: Voting; 500,000 shares authorized; 145,058 shares issued and 144,546 shares outstanding ................... 1 1 Nonvoting; 500,000 shares authorized; 58,612 shares issued and 56,937 shares outstanding .................... 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 17,000 shares issued and 16,833 shares outstanding .................................. -- -- Treasury stock: 512 shares Class B Voting Common Stock; 1,675 shares Class B Nonvoting Common Stock; and 167 shares Class C Nonvoting Common Stock .......................................................... (280) (22) Additional paid-in capital ....................................... 45,611 49,374 Warrants ......................................................... 3,511 3,511 Retained earnings (deficit) ...................................... (185,923) (178,353) Accumulated other comprehensive income (loss) .................... (83) -- ---------- ------------ Total stockholders' equity (deficit) ................................ (120,357) (108,975) ---------- ------------ Total liabilities and stockholders' equity (deficit) ................ $ 255,317 $ 239,444 ========== ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
YEAR ENDED -------------------------------------------- JANUARY 2, DECEMBER 27, DECEMBER 28, 1999 1997 1996 ---------- ------------ ------------ Net sales ............................ $ 271,830 $ 226,953 $ 151,058 Cost of goods sold ................... 199,227 180,249 110,110 ---------- ------------ ------------ Gross margin ......................... 72,603 46,704 40,948 Operating expenses: Selling ............................ 14,780 11,320 6,950 General and administrative ......... 19,308 11,505 13,769 Research and development ........... 1,690 1,310 858 Amortization of intangibles ........ 4,139 2,226 524 Other expenses ..................... 4,084 4,144 1,578 ---------- ------------ ------------ Operating income ..................... 28,602 16,199 17,269 Other expenses: Loss on disposal of property and equipment ...................... 1,865 226 302 ---------- ------------ ------------ Income before interest and taxes ..... 26,737 15,973 16,967 Interest: Expense ............................ (35,555) (32,237) (21,364) Income ............................. 999 1,991 1,289 ---------- ------------ ------------ Loss before income taxes ............. (7,819) (14,273) (3,108) Income taxes (benefit) ............... (249) 138 239 ---------- ------------ ------------ Net loss ............................. (7,570) (14,411) (3,347) Preferred stock dividends ............ (3,551) (2,558) (1,116) Amortization of preferred stock discount ............................. (292) (74) -- ---------- ------------ ------------ Net loss attributable to common shareholders ......................... $ (11,413) $ (17,043) $ (4,463) ========== ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS OF DOLLARS)
COMMON STOCK PREFERRED STOCK ADDITIONAL ------------------------- ----------------- TREASURY PAID-IN RETAINED CLASS A CLASS B CLASS C CLASS A CLASS B STOCK CAPITAL WARRANTS EARNINGS ------- ------- ------- ------- ------- -------- ----------- -------- --------- Balance at December 31, 1995(1) .... $ -- $ -- $ -- $ -- $ -- $ (58) $ 960 $ 4,034 $ (37,420) Net loss ........................... -- -- -- -- -- -- -- -- (3,347) Market value adjustment - warrants . -- -- -- -- -- -- (1,145) 9,399 (8,254) Exercise of stock options .......... -- -- -- -- -- -- 1,130 -- -- Distribution on sale of equity interests .......................... -- -- -- -- -- 58 (1,424) (13,433) (114,921) Proceeds from newly issued equity .. 4 2 -- 14,571 -- -- 52,797 -- -- Payment of deferred compensation ... -- -- -- -- -- -- 479 -- -- Issuance of private warrants ....... -- -- -- (3,511) -- -- -- 3,511 -- Accrued dividends on preferred stock -- -- -- -- -- -- (1,116) -- -- Amortization of preferred stock discount ........................... -- -- -- 156 -- -- -- -- -- Purchase treasury stock from management ......................... -- -- -- -- -- (22) -- -- -- Balance at December 28, 1996 ....... 4 2 -- 11,216 -- (22) 51,681 3,511 (163,942) Net loss ........................... -- -- -- -- -- -- -- -- (14,411) Sale of stock to management ........ -- -- -- -- -- -- 325 -- -- Issuance of preferred stock ........ -- -- -- -- 5,000 -- -- -- -- Accrued dividends on preferred stock -- -- -- -- -- -- (2,558) -- -- Amortization of preferred stock discount ........................... -- -- -- 293 -- -- (74) -- -- ------- ------- ------- ------- ------- -------- ----------- -------- --------- Balance at December 27, 1997 ....... 4 2 -- 11,509 5,000 (22) 49,374 3,511 (178,353) ------- ------- ------- ------- ------- -------- ----------- -------- --------- Net loss ........................... -- -- -- -- -- -- -- -- (7,570) Sale of stock to management ........ -- -- -- -- -- -- 80 -- -- Purchase treasury stock from management ......................... -- -- -- -- -- (258) -- -- -- Translation loss ................... -- -- -- -- -- -- -- -- -- Accrued dividends on preferred stock -- -- -- -- -- -- (3,551) -- -- Amortization of preferred stock discount ........................... -- -- -- 292 -- -- (292) -- -- ------- ------- ------- ------- ------- -------- ----------- -------- --------- Balance at January 2, 1999 ......... $ 4 $ 2 $ -- $11,801 $ 5,000 $ (280) $ 45,611 $ 3,511 $(185,923) ------- ------- ------- ------- ------- -------- ----------- -------- ---------
Accumulated Other Comprehensive Comprehensive Income (Loss) Total Income (Loss) -------------- --------- -------------- Balance at December 31, 1995(1) .... $ -- $ (32,484) $ -- Net loss ........................... -- (3,347) (3,347) Market value adjustment - warrants . -- -- -- Exercise of stock options .......... -- 1,130 -- Distribution on sale of equity interests .......................... -- (129,720) -- Proceeds from newly issued equity .. -- 67,374 -- Payment of deferred compensation ... -- 479 -- Issuance of private warrants ....... -- -- -- Accrued dividends on preferred stock -- (1,116) -- Amortization of preferred stock discount ........................... -- 156 -- Purchase treasury stock from management ......................... -- (22) -- Balance at December 28, 1996 ....... -- (97,550) (3,347) Net loss ........................... -- (14,411) (14,411) Sale of stock to management ........ -- 325 -- Issuance of preferred stock ........ -- 5,000 -- Accrued dividends on preferred stock -- (2,558) -- Amortization of preferred stock discount ........................... -- 219 -- Balance at December 27, 1997 ....... -- (108,975) (14,411) Net loss ........................... -- (7,570) (7,570) Sale of stock to management ........ -- 80 -- Purchase treasury stock from management ......................... -- (258) -- Translation loss ................... (83) (83) (83) Accrued dividends on preferred stock -- (3,551) -- Amortization of preferred stock discount ........................... -- -- -- Balance at January 2, 1999 ......... $ (83) $(120,357) $ (7,653) -------------- --------- --------------
(1)Old Class A and Class B Common Stock was redeemed in connection with the 1996 Transaction (see Note 9). SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-7 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEAR ENDED --------------------------------------- JANUARY 2, DECEMBER 27, DECEMBER 28, 1999 1997 1996 --------- --------- --------- OPERATING ACTIVITIES Net loss .................................... $ (7,570) $ (14,411) $ (3,347) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation ........................... 20,690 16,800 10,807 Non-cash interest expense .............. 1,765 2,005 1,212 Amortization ........................... 4,140 2,226 524 Interest funded by assets held in trust 13,059 11,255 5,412 Non-cash compensation .................. 600 -- 358 Write-off of deferred acquisition costs -- 515 -- Loss on sale of property and equipment . 1,865 226 302 Deferred income taxes .................. (709) -- 53 Changes in operating assets and liabilities: Accounts receivable, net ............ 4,413 (2,290) (1,716) Inventories ......................... (252) 2,767 (1,710) Prepaid expenses and other receivables ......................... 1,016 (137) 520 Other assets ........................ (43) (225) (5) Accounts payable and accrued expenses ............................ (4,810) (4,516) 1,899 Income taxes payable ................ (33) (61) 117 --------- --------- --------- Net cash provided by operating activities ... 34,131 14,154 14,426 INVESTING ACTIVITIES Additions to property and equipment ......... (22,595) (16,774) (13,581) Proceeds from disposal of property and equipment ................................... 4,471 1,078 94 Acquisitions of businesses .................. (33,996) (86,406) (1,152) --------- --------- --------- Net cash used for investing activities ...... (52,120) (102,102) (14,639) FINANCING ACTIVITIES Proceeds from long-term borrowings .......... 44,044 85,703 105,000 Payments on long-term borrowings ............ (24,906) (2,821) (717) Purchase of treasury stock from management .. (258) -- -- Exercise of management stock options ........ -- -- 1,130 Proceeds from issuance of common stock ...... 80 325 52,797 Proceeds from issuance of preferred stock and warrants ................................ -- -- 14,571 Rollover investments and share repurchases .. -- -- (125,219) Assets held in trust ........................ -- -- (35,600) Net payments to public warrant holders ...... -- -- (4,502) Debt issuance costs ......................... (1,341) (2,763) (5,090) --------- --------- --------- Net cash provided by financing activities ... 17,619 80,444 2,370 --------- --------- --------- Net increase (decrease) in cash and cash equivalents ................................. (370) (7,504) 2,157 Cash and cash equivalents at beginning of year ........................................ 2,688 10,192 8,035 --------- --------- --------- Cash and cash equivalents at end of year .... $ 2,318 $ 2,688 $ 10,192
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-8 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) NOTE 1. ORGANIZATION BPC Holding Corporation ("Holding"), through its subsidiaries Berry Plastics Corporation ("Berry" or the "Company"), Berry Iowa Corporation ("Berry Iowa"), Berry Sterling Corporation ("Berry Sterling"), Berry Tri-Plas Corporation ("Berry Tri-Plas"), Berry Plastics Design Corporation ("Berry Design"), PackerWare Corporation ("PackerWare"), Venture Packaging, Inc. ("Venture Packaging") and its subsidiaries Venture Packaging Midwest, Inc. and Venture Packaging Southeast, Inc., NIM Holdings Limited and its subsidiary Norwich Injection Moulders Limited, and Knight Plastics, Inc., manufactures and markets plastic packaging products through its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa Falls, Iowa; Charlotte, North Carolina; York, Pennsylvania; Suffolk, Virginia; Woodstock, Illinois; North Walsham, England; Monroeville, Ohio; and Lawrence, Kansas. In conjunction with the PackerWare acquisition in January 1997 (see Note 3), the Company also acquired a manufacturing facility in Reno, Nevada. This facility was closed in 1997, and its operations were consolidated into the Henderson, Nevada facility. In March 1998, Berry announced the consolidation of its Anderson, South Carolina facility with other Company locations with the majority of the business moving to the Charlotte, North Carolina and Monroeville, Ohio facilities. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "1998", "1997," and "1996" relate to the fiscal years ended January 2, 1999, December 27, 1997, and December 28, 1996, respectively. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND BUSINESS The consolidated financial statements include the accounts of Holding and its subsidiaries all of which are wholly-owned. Intercompany accounts and transactions have been eliminated in consolidation. Holding, through its wholly- owned subsidiaries, operates in two primary industry segments. The Company is a manufacturer and marketer of plastic packaging, with sales concentrated in three product groups within this market: plastic aerosol overcaps, rigid open-top containers, and plastic drink cups. In addition, the Company is a manufacturer in the retail housewares/lawn and garden market. The Company's customers are located principally throughout the United States, without significant concentration in any one region or any one customer. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Purchases of various densities of plastic resin used in the manufacture of the Company's products aggregated approximately $62 million in 1998 (excluding specialty resins). Dow Chemical Corporation is the principal supplier (approximately 54%) of the Company's total resin material requirements. The Company also uses other suppliers such as Union Carbide, Chevron, Phillips and Equistar to meet its resin requirements. The Company does not anticipate any material difficulty in obtaining an uninterrupted supply of raw materials at competitive prices in the near future. However, should a significant shortage of the supply of resin occur, changes in both the price and availability of the principal raw material used in the manufacture of the Company's products could occur and result in financial disruption to the Company. The Company is subject to existing and potential federal, state, local and foreign legislation designed to reduce solid waste in landfills. While the principal resins used by the Company are recyclable and, therefore, reduce the Company's exposure to legislation promulgated to date, there can be no assurance that future legislation or regulatory initiatives would not have a material adverse effect on the Company. Legislation, if promulgated, requiring plastics to be degradable in landfills or to have minimum levels of recycled content would have a F-9 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) significant impact on the Company's business as would legislationproviding for disposal fees or limiting the use of plastic products. CASH AND CASH EQUIVALENTS All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost (first in, first out method) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the assets ranging from three to 25 years. INTANGIBLE ASSETS Origination fees relating to the 1994 Notes, 1996 Notes, 1998 Notes and deferred financing fees are being amortized using the straight-line method over the lives of the respective debt agreements. Covenants not to compete are being amortized over the respective lives of the agreements. The costs in excess of net assets acquired represent the excess purchase price over the fair value of the net assets acquired in the original acquisition of Berry Plastics and subsequent acquisitions. These costs are being amortized over a range of 15 to 20 years. Holding periodically evaluates the value of intangible assets to determine if an impairment has occurred. This evaluation is based on various analyses including reviewing anticipated cash flows. REVENUE RECOGNITION Revenue from sales of products is recognized at the time product is shipped to the customer. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATIONS Certain amounts on the 1997 and 1996 financial statements have been reclassified to conform with the 1998 presentation. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS On December 28, 1997, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130) which establishes new rules for the reporting and display of comprehensive income and its components (net income and "other comprehensive income"). Adoption of the Statement had no impact on the Company's financial position. F-10 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) In fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (FAS 131) which changes the basis on which public business enterprises report information about operating segments. The Company has two reportable segments: packaging products and housewares products. The Company's packaging business consists of three primary market groups: plastic aerosol overcaps, containers, and plastic drink cups. The Company's housewares business consists of semi-disposable plastic housewares and plastic lawn and garden products, sold primarily through major national retail marketers and national chain stores. The Company evaluates performance and allocates resources based on operating income before depreciation and amortization of intangibles adjusted to exclude (i) market value adjustment related to stock options, (ii) other non-recurring or "one-time" expenses, (iii) management fees and reimbursed expenses paid to First Atlantic and (iv) certain legal expenses associated with unusual litigation ("Adjusted EBITDA"). The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company's reportable segments are business units that offer different products to different markets.
YEAR ENDED --------------------------------------- JANUARY 2, DECEMBER 27, DECEMBER 28, 1999 1997 1996 --------- --------- --------- Net sales: Packaging products .................. $ 250,270 $ 209,433 $ 151,058 Housewares products ................. 21,560 17,520 -- Adjusted EBITDA: Packaging products .................. 56,102 38,016 34,068 Housewares products ................. 3,662 2,253 -- Total assets: Packaging products .................. 218,537 202,198 145,798 Housewares products ................. 36,780 37,246 -- Reconciliation of Adjusted EBITDA to loss before income taxes: Adjusted EBITDA for reportable segments ............................ $ 59,764 $ 40,269 $ 34,068 Net interest expense ................ (34,556) (30,246) (20,075) Depreciation ........................ (20,690) (16,800) (10,807) Amortization ........................ (4,140) (2,226) (524) Loss on disposal of property and equipment ....................... (1,865) (226) (302) One-time expenses ................... (4,860) (4,216) (4,361) Stock option market value adjustment .......................... (600) -- (358) Management fees ..................... (872) (828) (749) --------- --------- --------- Loss before income taxes ............ $ (7,819) $ (14,273) $ (3,108) ========= ========= =========
NOTE 3. ACQUISITIONS On January 17, 1997, the Company acquired certain assets and assumed certain liabilities of Container Industries, Inc. ("Container Industries") of Pacoima, California for $2.9 million. The purchase was funded out of operating funds. The operations of Container Industries are included in the Company's operations since the acquisition date using the purchase method of accounting. On January 21, 1997, the Company acquired the outstanding stock of PackerWare Corporation, a Kansas corporation, for aggregate consideration of approximately $28.1 million and merged PackerWare with a newly-formed, wholly- owned subsidiary of the Company (with PackerWare being the surviving corporation). The purchase was primarily financed through the Credit Facility (see Note 5). The operations of PackerWare are included in the Company's operations since the acquisition date using the purchase method of accounting. F-11 On May 13, 1997, Berry Design, a newly-formed wholly-owned subsidiary of the Company, acquired substantially all of the assets and assumed certain liabilities of Virginia Design Packaging Corp. ("Virginia Design") for approximately $11.1 million. The purchase was financed through the Credit Facility (see Note 5). The operations of Berry Design are included in the Company's operations since the acquisition date using the purchase method of accounting. On August 29, 1997, the Company acquired the outstanding common stock of Venture Packaging for aggregate consideration of $43.7 million and merged Venture Packaging with a newly formed subsidiary of the Company (with Venture Packaging being the surviving corporation). The purchase was primarily financed through the Credit Facility (see Note 5). Additionally, preferred stock and warrants were issued to certain selling shareholders of Venture Packaging (see Note 9). The operations of Venture Packaging are included in the Company's operations since the acquisition date using the purchase method of accounting. On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of Berry, acquired all of the capital stock of Norwich Moulders of Norwich, England for aggregate consideration of approximately $14.0 million. The purchase was primarily financed through the Credit Facility (see Note 9). The operations of Norwich Moulders are included in Berry's operations since the acquisition date using the purchase method of accounting. On October 16, 1998, Knight Plastics, Inc. ("Knight"), a newly formed wholly-owned subsidiary of Berry, acquired substantially all of the assets of the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for aggregate consideration of approximately $18.0 million. The purchase was financed through the Credit Facility's revolving line of credit. The pro forma results listed below are unaudited and reflect purchase accounting adjustments assuming the Container Industries, PackerWare, Virginia Design, and Venture acquisitions occurred on December 31, 1995; and the Norwich Moulders and Knight acquisitions occurred on December 29, 1996. YEAR ENDED ------------------------------------------ JANUARY 2, DECEMBER 27, DECEMBER 28, 1999 1997 1996 ---------- ------------ ------------ Net sales ................... $ 296,485 $ 298,679 $ 257,098 Loss before income taxes .... (8,924) (19,808) (9,932) Net loss .................... (8,791) (20,178) (10,171) The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above dates, nor are they necessarily indicative of future operating results. Further, the information gathered on the acquired companies is based upon unaudited internal financial information and reflects only pro forma adjustments for additional interest expense and amortization of the excess of the cost over the underlying net assets acquired, net of the applicable income tax effects. NOTE 4.INTANGIBLE ASSETS Intangible assets consist of the following: January 2, December 27, 1999 1997 --------- --------- Deferred financing and origination fees ...... $ 15,817 $ 14,578 Covenants not to compete ..................... 6,233 4,598 Excess of cost over net assets acquired ...... 49,197 32,464 Deferred acquisition costs ................... 20 13 Accumulated amortization ..................... (12,313) (6,548) -------- -------- $ 58,954 $ 45,105 ======== ======== F-12 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) Excess of cost over net assets acquired increased due to the acquisitions of Norwich Moulders and Knight to the extent the purchase price exceeded the fair value of the net assets acquired. NOTE 5. LONG-TERM DEBT Long-term debt consists of the following:
January 2, 1999 December 27, 1997 --------------- ----------------- Holding 12.50% Senior Secured Notes ................ $ 105,000 $ 105,000 Berry 12.25% Senior Subordinated Notes ............. 125,000 100,000 Term loans ......................................... 71,243 58,300 Revolving line of credit ........................... 16,162 25,654 Nevada Industrial Revenue Bonds .................... 4,500 5,000 Iowa Industrial Revenue Bonds ...................... -- 5,400 South Carolina Industrial Development Bonds ........ -- 6,985 Capital lease obligation payable through December 1999 ...................................... 561 547 Debt premium (discount), net ....................... 832 (551) --------------- ----------------- 323,298 306,335 Less current portion of long-term debt ............. 19,388 7,619 --------------- ----------------- $ 303,910 $ 298,716 =============== =================
HOLDING 12.50% SENIOR SECURED NOTES On June 18, 1996, Holding, as part of a recapitalization (see Note 9), issued 12.50% Senior Secured Notes due 2006 (the "1996 Offering") for net proceeds, after expenses, of approximately $100.2 million (or $64.6 million after deducting the amount of such net proceeds used to purchase marketable securities available for payment of interest on the notes). These notes were exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006 (the "1996 Notes"). Interest is payable semi-annually on June 15 and December 15 of each year. In addition, from December 15, 1999 until June 15, 2001, Holding may, at its option, pay interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. In connection with the 1996 Notes, $35.6 million was placed in escrow, which has been invested in U.S. government securities, to pay three years' interest on the notes. Pending disbursement, the trustee will have a first priority lien on the escrow account for the benefit of the holders of the 1996 Notes. Funds may be disbursed from the escrow account only to pay interest on the 1996 Notes and, upon certain repurchases or redemptions of the notes, to pay principal of and premium, if any, thereon. The balance in the escrow account as of January 2, 1999 is $6.7 million. The 1996 Notes rank senior in right of payment to all existing and future subordinated debt of Holding, including Holding's subordinated guarantee of the 1994 Notes and 1998 Notes (as defined hereinafter) and PARI PASSU in right of payment with all senior debt of Holding. The 1996 Notes are effectively subordinated to all existing and future senior debt of Berry, including borrowings under the Credit Facility and the Nevada Industrial Revenue Bond. F-13 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) BERRY 12.25% SENIOR SUBORDINATED NOTES On April 21, 1994, Berry completed an offering of 100,000 units consisting of $100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Senior Subordinated Notes, due 2004 (the "1994 Notes") and 100,000 warrants to purchase 1.13237 shares of Class A Common Stock, $.00005 par value (collectively the "1994 Transaction"), of Holding. The net proceeds to Berry from the sale of the 1994 Notes, after expenses, were $93.0 million. On August 24, 1998, Berry completed an additional offering of $25.0 million aggregate principal amount of 12.25% Series B Senior Subordinated Notes due 2004 (the "1998 Notes"). The net proceeds to Berry from the sale of the 1998 Notes, after expenses, were $25.2 million. The 1994 Notes and 1998 Notes mature on April 15, 2004 and interest is payable semi-annually on October 15 and April 15 of each year and commenced on October 15, 1994 and October 15, 1998 for the 1994 Notes and 1998 Notes respectively. Holding and all of Berry's subsidiaries fully, jointly, and severally, and unconditionally guarantee on a senior subordinated basis the 1994 Notes and 1998 Notes. There are no nonguarantor subsidiaries. Berry is not required to make mandatory redemption or sinking fund payments with respect to the 1994 Notes and 1998 Notes. Subsequent to April 15, 1999, the 1994 Notes and 1998 Notes may be redeemed at the option of Berry, in whole or in part, at redemption prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a change in control, as defined in the indenture entered into in connection with the 1994 Transaction (the "1994 Indenture") and the 1998 Transaction ("1998 Indenture"), each holder of notes will have the right to require Berry to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued interest. The 1994 Notes and 1998 Notes rank PARI PASSU with or senior in right of payment to all existing and future subordinated debt of Berry. The notes rank junior in right of payment to all existing and future senior debt of Berry, including borrowings under the Credit Facility and the Nevada Industrial Revenue Bonds. The 1994 Indenture and 1998 Indenture contains certain covenants which, among other things, limit Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell, lease or transfer assets, make dividend payments and engage in transactions with affiliates. CREDIT FACILITY Concurrent with the Venture Packaging Acquisition, the Company amended its then existing financing and security agreement (the "Security Agreement") with NationsBank, N.A. for a senior secured line of credit to increase the commitments thereunder to an aggregate principal amount of $127.2 million (the "Credit Facility"). Concurrently with the Norwich Acquisition, the Credit Facility was amended and increased to $132.6 million (plus an additional revolving credit facility of ?1.5 million (the "UK Revolver") and a term loan facility of ?4.5 million (the "UK Term Loan"), each for NIM Holdings and Norwich). The debt under the Credit Facility is guaranteed by Holding and substantially all of its subsidiaries. The obligations of the Company and the subsidiaries under the Credit Facility and the guarantees thereof are secured primarily by all of the assets of such persons. The Credit Facility replaced the facility previously provided by Fleet Capital Corporation. The Credit Facility provides the Company with (i) a $50.0 million revolving line of credit, subject to a borrowing base formula, (ii) the UK Revolver, subject to a borrowing base, (iii) a $63.7 million term loan facility, (iv) the UK Term Loan and (v) a $5.6 million standby letter of credit facility to support the Company's and its subsidiaries' obligations under the Nevada Bonds. The Credit Facility also provides for a $5.4 million term loan facility, the proceeds of which were used to retire in July 1998 the Company's and its subsidiaries' obligations under the Iowa Bonds, on which Berry Iowa had agreed, pursuant to a Loan and Trust Agreement with The City of Iowa Falls, Iowa, to pay amounts sufficient to pay principal, interest and any premium with respect to the Iowa Bonds. Also, the Credit Facility provided a term loan facility to support the Company's and its subsidiaries' obligations under the South Carolina Industrial Development Bonds. In August 1998, in conjunction with the closing and sale of the Anderson, South Carolina Facility, the Bonds were paid by the Company. The difference between the repayment of the development bonds and other related liabilities and the net proceeds from the sale of the facility of approximately $3.0 million has been financed with borrowings under the term loan facility. The Company borrowed F-14 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) all amounts available under the term loan facility and the UK Term Loan to finance the PackerWare Acquisition, the Virginia Design Acquisition, the Venture Packaging Acquisition and the Norwich Acquisition. At January 2, 1999, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of approximately $26.3 million. The Credit Facility matures on January 21, 2002 unless previously terminated by the Company or by the lenders upon an Event of Default as defined in the Security Agreement. The term loan facility requires periodic payments, varying in amount, through the maturity of the facility. Interest on borrowings under the Credit Facility is based on either (i) the lender's base rate (which is the higher of the lender's prime rate and the federal funds rate plus 0.50%) plus an applicable margin of 0.50% or (ii) LIBOR (adjusted for reserves) plus an applicable margin of 2.0%, at the Company's option (7.0% at January 2, 1999 and 8.0% at December 27, 1997). Following receipt of the quarterly financial statements, the agent under the Credit Facility has the option to change the applicable interest rate margin on loans (other than under the UK Revolver and UK Term Loan) once per quarter to a specified margin determined by the ratio of funded debt to EBITDA of the Company and its subsidiaries. Notwithstanding the foregoing, interest on borrowings under the UK Revolver and the UK Term Loan is based on LIBOR (adjusted for reserves) plus 2.50%. The Credit Facility contains various covenants which include, among other things: (i) maintenance of certain financial ratios and compliance with certain financial tests and limitations, (ii) limitations on the issuance of additional debt and (iii) limitations on capital expenditures. NEVADA INDUSTRIAL REVENUE BONDS The Nevada Industrial Revenue Bonds bear interest at a variable rate (3.0% at January 2, 1999 and 4.6% at December 27, 1997), require annual principal payments of $0.5 million on April 1, are collateralized by irrevocable letters of credit issued by NationsBank under the Credit Facility and mature in April 2007. OTHER Future maturities of long-term debt are as follows: 1999, $19,388; 2000, $20,386; 2001, $16,105; 2002, $34,763; 2003, $500, and $231,324 thereafter. Interest paid was $33,236, $29,927 and $19,744 for 1998, 1997 and 1996, respectively. Interest capitalized was $777, $341 and $225 for 1998, 1997 and 1996, respectively. NOTE 6. LEASE AND OTHER COMMITMENTS Certain property and equipment are leased using capital and operating leases. Capitalized lease property consisted of manufacturing equipment with a cost of $2,970 and $1,661 and related accumulated amortization of $1,468 and $831 at January 2, 1999, and December 27, 1997, respectively. Capital lease amortization is included in depreciation expense. Total rental expense for operating leases was approximately $5,414, $3,332, and $2,344 for 1998, 1997, and 1996, respectively. Future minimum lease payments for capital leases and noncancellable operating leases with initial terms in excess of one year are as follows: At January 2, 1999 ----------------------------------- Capital Leases Operating Leases ---------------- ---------------- 1999 ............................... $ 606 $ 3,834 2000 ............................... -- 3,724 2001 ............................... -- 3,422 2002 ............................... -- 2,805 2003 ............................... -- 2,207 Thereafter ......................... -- 1,921 ---------------- ---------------- 606 $ 17,913 Less: amount representing interest 45 -- ================ ================ Present value of net minimum lease payments ........................... $ 561 -- ---------------- ---------------- F-15 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) NOTE 7. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax liabilities and assets at January 2, 1999 and December 27, 1997 are as follows: January 2, December 27, 1999 1997 ------------ ------------ Deferred tax liabilities: Tax over book depreciation ................... $ 11,080 $ 11,073 Deferred tax assets: Allowance for doubtful accounts .............. 633 590 Inventory .................................... 900 1,391 Compensation and benefit accruals ............ 1,592 1,198 Insurance reserves ........................... 436 338 Net operating loss carryforwards ............. 10,012 8,372 Alternative minimum tax (AMT) credit carryforwards ................................ 2,758 2,049 ------------ ------------ Total deferred tax assets ................. 16,331 13,938 ------------ ------------ 5,251 2,865 ------------ ------------ Valuation allowance ............................ (2,493) (816) ------------ ------------ Net deferred tax asset ......................... $ 2,758 $ 2,049 ============ ============ Income tax expense consists of the following: January 2, December 27, December 28, 1999 1997 1996 ------------ ------------ ------------ Current Federal ..................... $ (493) $ -- $ -- Foreign ..................... 152 -- -- State ....................... 92 138 186 Deferred Federal ..................... -- -- 69 State ....................... -- -- (16) ------------ ------------ ------------ Income tax expense (benefit).... $ (249) $ 138 $ 239 ============ ============ ============ Holding has unused operating loss carryforwards of approximately $26.0 million for federal income tax purposes which begin to expire in 2010. AMT credit carryforwards are available to Holding indefinitely to reduce future years' federal income taxes. A tax sharing agreement is in place that allows Holding to make losses available to Berry. Income taxes paid during 1998, 1997 and 1996 approximated $526, $47, and $528 respectively. F-16 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) A reconciliation of income tax expense, computed at the federal statutory rate, to income tax expense, as provided for in the financial statements, is as follows:
Year Ended -------------------------------------------- January 2, December 27, December 28, 1999 1997 1996 ------------ ------------ ------------ Income tax expense (benefit) computed at statutory rate ..... $ (2,658) $ (4,853) $ (1,057) State income tax expense, net of federal benefit ................ 90 138 112 Amortization of goodwill .......... 339 285 -- Expenses not deductible for income tax purposes ................... 432 219 51 Change in valuation allowance ..... 1,677 4,298 1,103 Other ............................. (129) 51 30 ------------ ------------ ------------ Income tax expense (benefit) ...... $ (249) $ 138 $ 239 ============ ============ ============
NOTE 8. EMPLOYEE RETIREMENT PLANS Berry sponsors a defined contribution 401(k) retirement plan covering substantially all employees. Contributions are based upon a fixed dollar amount for employees who participate and percentages of employee contributions at specified thresholds. Contribution expense for this plan was approximately $933, $629, and $531 for 1998, 1997 and 1996, respectively. NOTE 9. STOCKHOLDERS' EQUITY COMMON STOCK On June 18, 1996, Holding consummated the transaction described below (the "1996 Transaction"). BPC Mergerco, Inc. ("Mergerco"), a wholly owned subsidiary of Holding, was organized by Atlantic Equity Partners International II, L.P. ("International"), Chase Venture Capital Associates, L.P. ("CVCA"), and certain other institutional investors to effect the acquisition of a majority of the outstanding capital stock of Holding. Pursuant to the terms of a Common Stock Purchase Agreement dated as of June 12, 1996 each of International, CVCA and certain other equity investors (collectively the "Common Stock Purchasers") subscribed for shares of common stock of Mergerco. In addition, pursuant to the terms of a Preferred Stock Purchase Agreement dated as of June 12, 1996 (the "Preferred Stock Purchase Agreement"), CVCA and an additional institutional investor (the "Preferred Stock Purchasers") purchased shares of preferred stock of Mergerco (the "Preferred Stock") and warrants (the "1996 Warrants") to purchase shares of common stock of Mergerco. Immediately after the purchase of the common stock, the preferred stock and the 1996 Warrants of Mergerco, Mergerco merged (the "Merger") with and into Holding, with Holding being the surviving corporation. Upon the consummation of the Merger: each share of the Class A Common Stock, $.00005 par value, and Class B Common Stock, $.00005 par value, of Holding and certain privately-held warrants exercisable for such Class A and Class B Common Stock were converted into the right to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the nominal exercise price therefor, and all other classes of common stock of Holding, a majority of which was held by certain members of management, were converted into shares of common stock of the surviving corporation. In addition, upon the consummation of the Merger, the holders of the warrants (the "1994 Warrants") to purchase capital stock of Holding that were issued in connection with the 1994 Transaction became entitled to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the exercise price therefor. The Company's common stock shareholders who held common stock immediately preceding the 1996 Transaction retained 78% of the common stock. Additionally, a $2,762 bonus was paid to management employees who held unvested stock options at the time of the 1994 Transaction which is included in 1996 general and administrative expenses. The authorized capital stock of Holding consists of 3,500,000 shares of capital stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding Common Stock"). Of the 2,500,000 shares of Holding F-17 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) Common Stock, 500,000 shares are designated Class A voting Common Stock (the "Class A Voting Stock"), 500,000 shares are designated Class A Nonvoting Common Stock (the "Class A Nonvoting Stock"), 500,000 shares are designated Class B Nonvoting Common Stock (the "Class B Nonvoting Stock"), and 500,000 shares are designated Class C Nonvoting Common Stock (the "Class C Nonvoting Stock"). PREFERRED STOCK AND WARRANTS In connection with the 1996 Transaction, for aggregate consideration of $15.0 million, Mergerco issued units (the "Units") comprised of Series A Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share (the "Preferred Stock"), and detachable warrants to purchase shares of Class B Common Stock (voting and non-voting) constituting 6% of the issued and outstanding Common Stock of all classes, determined on a fully-diluted basis (the "Warrants"). Dividends accrue at a rate of 14% per annum, payable quarterly in arrears (each date of payment, a "Dividend Payment Date") and will accumulate until declared and paid. Dividends declared and accruing prior to the first Dividend Payment Date occurring after the sixth anniversary of the issue date (the "Cash Dividend Date") may, at the option of Holding, be paid in cash in full or in part or accrue quarterly on a compound basis. Thereafter, all dividends are payable in cash in arrears. The dividend rate is subject to increase to a rate of (i) 16% per annum if (and for so long as) Holding fails to declare and pay dividends in cash for any quarterly period following the Cash Dividend Date and (ii) 15% per annum if (and for so long as) Holding fails to comply with its obligations relating to the rights and preferences of the Preferred Stock. If Holding fails to pay in full, in cash, (a) all accrued and unpaid dividends on or prior to the twelfth anniversary of the issue date or (b) all accrued dividends on any Dividend Payment Date following the twelfth anniversary of the issue date, the holders of Preferred Stock will be permitted to elect a majority of the Board of Directors of Holding. The Preferred Stock ranks prior to all other classes of stock of Holding upon liquidation and is entitled to receive, out of assets available for distribution, cash in the aggregate amount of $15.0 million, plus all accrued and unpaid dividends thereon. Subject to the terms of the 1996 Indenture, on any Dividend Payment Date, Holding has the option of exchanging the Preferred Stock, in whole but not in part, for Senior Subordinated Exchange Notes, at the rate of $25 in principal amount of notes for each $25 of liquidation preference of Preferred Stock held; provided, however, that no shares of Preferred Stock may be exchanged for so long as any shares of Preferred Stock are held by CVCA or its affiliates. Upon such exchange, Holding will be required to pay in cash all accrued and unpaid dividends. Pursuant to the Preferred Stock Purchase Agreement, the holders of Preferred Stock and Warrants have unlimited incidental registration rights (subject to cutbacks under certain circumstances). The exercise price of the Warrants is $.01 per Warrant and the Warrants are exercisable immediately upon issuance. All unexercised warrants will expire on the tenth anniversary of the issue date. The number of shares issuable upon exercise of a Warrant are subject to anti-dilution adjustments upon the occurrence of certain events. In conjunction with the Venture Packaging acquisition, Holding authorized and issued 200,000 shares of Series B Cumulative Preferred Stock to certain selling shareholders of Venture Packaging. The Preferred Stock has a stated value of $25 per share, and dividends accrue at a rate of 14.75% per annum and will accumulate until declared and paid. The Preferred Stock ranks junior to the Series A Preferred Stock and prior to all other capital stock of Holding. In addition, Warrants to purchase 9,924 shares of Class B Non-Voting Common Stock at $108 per share were issued to the same selling shareholders of Venture Packaging. STOCK OPTION PLAN Pursuant to the provisions of the BPC Holding Corporation 1996 Stock Option Plan (the "Option Plan") as amended, whereby 51,620 shares have been reserved for future issuance, Holding has granted options to certain officers and key employees to acquire shares of Class B Nonvoting Common Stock. These options are subject to various agreements, which among other things, set forth the class of stock, option price and performance thresholds to determine exercisability and vesting requirements. The Option Plan expires October 3, 2003 or such earlier date F-18 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) on which the Board of Directors of Holding, in its sole discretion, determines. Option prices range from $100 to $122 per share. Options granted under the Option Plan typically expire after seven years and vest over a five-year period with half of each person's award based on continued employment and half based on the Company achieving financial performance targets. FASB Statement 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("Statement 123"), prescribes accounting and reporting standards for all stock- based compensation plans. Statement 123 provides that companies may elect to continue using existing accounting requirements for stock-based awards or may adopt a new fair value method to determine their intrinsic value. Holding has elected to continue following Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") to account for its employee stock options. Under APB 25, because the exercise price of Holding's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized at the grant date. Information related to the Option Plan is as follows:
January 2, 1999 December 27, 1997 --------------------------- ---------------------------- Weighted Weighted Number Average Number Average of Exercise of Exercise Shares Price Shares Price -------------- ---------- -------------- ---------- Options outstanding, beginning of year ........ 47,708 $ 101 43,393 $ 100 Options granted ............. 11,005 122 5,425 106 Options exercised ........... -- -- -- -- Options canceled ............ 7,984 100 (1,110) 100 -------------- ---------- -------------- ---------- Options outstanding, end of year ..................... 50,729 105 47,708 101 ============== ========== ============== ========== Option price range at end of year ..................... $100 - $122 $100 - $108 Options exercisable at end of year ..................... 25,191 13,561 Options available for grant at year end .............. 891 3,912 Weighted average fair value of options granted during year ..................... $ 122 $ 106
The following table summarizes information about the options outstanding at January 2, 1999: Weighted Number Average Weighted Range of Outstanding Remaining Average Number Exercise at January 2, Contractual Exercise Exercisable at Prices 1999 Life Price January 2, 1999 - --------- ------------- ----------- --------- ---------------- $100 - $122 50,729 3 years $105 25,191 Disclosure of pro forma financial information is required by Statement 123 as if the Company had accounted for its employee stock options using the fair value method as defined by the Statement. The fair value for options granted by the Company have been estimated at the date of grant using a Black Scholes option pricing model with the following weighted average assumptions: Year Ended -------------------------------------------- January 2, December 27, December 28, 1999 1997 1996 ------------ ------------ ------------ Risk-free interest rate ........ 6.4% 6.4% 6.5% Dividend yield ................. 0.0% 0.0% 0.0% Volatility factor .............. .20 .07 .01 Expected option life ........... 4.0 years 4.0 years 5.0 years F-19 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) For purposes of the pro forma disclosures, the estimated fair value of the stock options are amortized to expense over the related vesting period. Because compensation expense is recognized over the vesting period, the initial impact on pro forma net loss may not be representative of compensation expense in future years, when the effect of amortization of multiple awards would be reflected in the Consolidated Statement of Operations. The Company's pro forma net losses giving effect to the estimated compensation expense related to stock options are as follows: Year Ended -------------------------------------------- January 2, December 27, December 28, 1999 1997 1996 ------------ ------------ ------------ Net loss................... $ (7,198) $ (14,594) $ (3,389) STOCKHOLDERS AGREEMENTS Holding entered into a new stockholders agreement (the "New Stockholders Agreement") dated as of June 18, 1996 with the Common Stock Purchasers, certain management stockholders and, for limited purposes thereunder, the Preferred Stock Purchasers. The New Stockholders Agreement grants certain rights including, but not limited to, designation of members of Holding's Board of Directors, the initiation of an initial public offering of equity securities of the Company or a sale of Holding. The agreement also restricts certain transfers of Holding's equity. Holding entered into an amended and restated agreement with its management stockholders and International on June 18, 1996. The agreement contains provisions (i) limiting transfers of equity by the management stockholders; (ii) requiring the management stockholders to sell their shares as designated by Holding or International upon the consummation of certain transactions; (iii) granting the management stockholders certain rights of co-sale in connection with sales by International; (iv) granting rights to repurchase capital stock from the management stockholders upon the occurrence of certain events; and (v) requiring the management stockholders to offer shares to Holding prior to any permitted transfer. NOTE 10. RELATED PARTY TRANSACTIONS The Company is party to a management agreement (the "Management Agreement") with First Atlantic Capital, Ltd. ("First Atlantic"). In connection with the 1996 Transaction, Holding paid a fee of $1,250 plus reimbursement for out-of-pocket expenses to First Atlantic for advisory services, including originating, structuring and negotiating the 1996 Transaction. First Atlantic also received advisory fees of $966 for originating, structuring and negotiating the 1997 acquisitions and advisory fees of approximately $140 and $180 in July 1998 and October 1998, respectively, for originating, structuring and negotiating the Norwich Acquisition and the Knight Acquisition, respectively. In consideration of financial advisory and management consulting services, the Company paid First Atlantic fees and expenses of $835, $771 and $788 for fiscal 1998, 1997, and 1996, respectively. NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION The Company's financial instruments generally consist of cash and cash equivalents and the Company's long-term debt. The carrying amounts of the Company's financial instruments approximate fair value at January 2, 1999, except for the 1994 Notes and the 1996 Notes for which the fair value exceed the carrying value by approximately $4.5 million and $4.2 million, respectively. F-20 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) NOTE 12. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS) The following summarizes consolidated financial information of Holding's wholly- owned subsidiary, Berry Plastics Corporation and subsidiaries: January 2, December 27, 1999 1997 --------- ------------ CONSOLIDATED BALANCE SHEETS Current assets .................................... $ 65,590 $ 62,824 Property and equipment - net of accumulated depreciation ...................................... 120,005 108,218 Other noncurrent assets ........................... 58,716 44,480 Current liabilities ............................... 60,210 42,158 Noncurrent liabilities ............................ 210,093 205,172 Equity (deficit) .................................. (25,992) (31,808)
Year Ended ----------------------------------------- January 2, December 27, December 28, 1999 1997 1996 ---------- ------------ ------------ CONSOLIDATED STATEMENTS OF OPERATIONS Net sales ................................ $ 271,830 $ 226,954 $ 151,058 Cost of goods sold ....................... 199,226 180,249 110,110 Income (loss) before income taxes ........ 5,650 (2,493) 6,490 Net income (loss) ........................ 5,899 (2,631) 5,989
The following summarizes parent company only financial information of Berry: January 2, December 27, 1999 1997 ---------- ------------ BALANCE SHEET Current assets ................................... $ 28,579 $ 31,492 Property and equipment - net of accumulated depreciation ..................................... 48,220 45,091 Investment in/due from subsidiaries .............. 120,230 87,613 Other noncurrent assets .......................... 15,629 14,111 Current liabilities .............................. 41,325 53,506 Noncurrent liabilities ........................... 197,325 156,609 Equity (deficit) ................................. (25,992) (31,808) Year Ended ----------------------------------------- January 2, December 27, December 28, 1999 1997 1996 ---------- ------------ ------------ STATEMENTS OF OPERATIONS Net sales .......................... $ 140,856 $ 140,976 $ 108,253 Cost of goods sold ................. 91,763 101,769 75,861 Income (loss) before income taxes... 5,650 (2,493) 6,490 Net income (loss) .................. 5,899 (2,631) 5,989 F-21 BPC HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS) July 3, January 2, 1999 1999 -------- ---------- (Unaudited) ASSETS Current assets: Cash and cash equivalents ........................... $ 2,993 $ 2,318 Accounts receivable (less allowance for doubtful accounts of $1,507 at July 3, 1999 and $1,651 at January 2, 1999) ... 40,842 29,951 Inventories: Finished goods .................................... 23,967 23,146 Raw materials and supplies ........................ 8,347 8,556 -------- ---------- 32,314 31,702 Prepaid expenses and other receivables .............. 2,575 1,665 Income taxes recoverable ............................ 83 577 -------- ---------- Total current assets ................................... 78,807 66,213 Assets held in trust ................................... 252 6,679 Property and equipment: Land ................................................ 7,762 7,769 Buildings and improvements .......................... 39,047 38,960 Machinery, equipment and tooling .................... 140,801 141,054 Automobiles and trucks .............................. 1,405 1,386 Construction in progress ............................ 21,766 11,780 -------- ---------- 210,781 200,949 Less accumulated depreciation ....................... 90,510 80,944 -------- ---------- 120,271 120,005 Intangible assets: Deferred financing and origination fees, net ........ 9,765 10,327 Covenants not to compete, net ....................... 4,068 4,404 Excess of cost over net assets acquired, net ........ 41,971 44,536 Deferred acquisition costs .......................... 146 20 -------- ---------- 55,950 59,287 Deferred income taxes .................................. 2,758 2,758 Other .................................................. 371 375 -------- ---------- Total assets ........................................... $258,409 $ 255,317 ======== ========== F-22 CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
July 3, January 2, 1999 1999 --------- ---------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ...................................... $ 20,664 $ 18,059 Accrued expenses and other liabilities ................ 8,590 9,944 Accrued interest ...................................... 3,795 4,166 Employee compensation and payroll taxes ............... 12,156 8,953 Income taxes .......................................... 1,534 941 Current portion of long-term debt ..................... 20,297 19,388 --------- ---------- Total current liabilities ................................ 67,036 61,451 Long-term debt, less current portion ..................... 300,187 303,910 Accrued dividends on preferred stock ..................... 9,188 7,225 Deferred income taxes .................................... 472 497 Other liabilities ........................................ 2,193 2,591 --------- ---------- 379,076 375,674 Stockholders' equity (deficit): Series A Preferred Stock; 800,000 shares authorized; 600,000 shares issued and outstanding (net of discount of $2,624 at July 3, 1999 and $2,770 at January 2, 1999) .................................. 11,947 11,801 Series B Preferred Stock; 200,000 shares authorized, issued and outstanding ............................ 5,000 5,000 Class A Common Stock; $.01 par value: Voting; 500,000 shares authorized; 91,000 shares issued and outstanding ......................... 1 1 Nonvoting; 500,000 shares authorized; 259,000 shares issued and outstanding .................. 3 3 Class B Common Stock; $.01 par value: Voting; 500,000 shares authorized; 145,058 shares issued and 144,546 shares outstanding .......... 1 1 Nonvoting; 500,000 shares authorized; 58,612 shares issued and 56,842 shares outstanding ........... 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 17,000 shares issued and 16,833 shares outstanding ........... -- -- Treasury stock: 512 shares Class B Voting Common Stock; 1,770 shares Class B Nonvoting Common Stock; and 167 shares Class C Nonvoting Common Stock ............................................. (296) (280) Additional paid-in capital ........................... 43,502 45,611 Warrants ............................................. 3,511 3,511 Retained earnings (deficit) .......................... (183,801) (185,923) Accumulated other comprehensive loss ................. (536) (83) --------- ---------- Total stockholders' equity (deficit) ..................... (120,667) (120,357) --------- ---------- Total liabilities and stockholders' equity (deficit) ..... $ 258,409 $ 255,317 ========= ==========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-23 BPC HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
Thirteen Weeks Ended Twenty-six Weeks Ended ---------------------- ---------------------- July 3, June 27, July 3, June 27, 1999 1998 1999 1998 --------- --------- --------- --------- (Unaudited) Net sales ........................................... $ 82,392 $ 69,586 $ 159,852 $ 136,317 Cost of goods sold .................................. 58,259 50,768 112,782 100,016 --------- --------- --------- --------- Gross margin ........................................ 24,133 18,818 47,070 36,301 Operating expenses: Selling ......................................... 4,323 3,487 8,553 7,112 General and administrative ...................... 5,845 4,400 11,883 8,799 Research and development ........................ 633 347 1,175 743 Amortization of intangibles ..................... 1,275 828 2,550 1,708 Other ........................................... 711 1,230 1,667 2,363 --------- --------- --------- --------- Operating income .................................... 11,346 8,526 21,242 15,576 Other income and expense: Loss on disposal of property and equipment ...... 169 297 778 430 --------- --------- --------- --------- Income before interest and income taxes ............. 11,177 8,229 20,464 15,146 Interest: Expense ......................................... (8,736) (8,776) (18,022) (17,441) Income .......................................... 62 337 162 575 --------- --------- --------- --------- Income (loss) before income taxes ................... 2,503 (210) 2,604 (1,720) Income tax expense .................................. 289 13 482 26 --------- --------- --------- --------- Net income (loss) ................................... 2,214 (223) 2,122 (1,746) Preferred stock dividends ........................... (998) (869) (1,962) (1,783) Amortization of preferred stock discount ............ (73) (73) (146) (146) --------- --------- --------- --------- Net income (loss) attributable to Common Stockholders $ 1,143 $ (1,165) $ 14 $ (3,675) ========= ========= ========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-24 BPC HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) Twenty-Six Weeks Ended -------------------- July 3, June 27, 1999 1998 -------- -------- (Unaudited) OPERATING ACTIVITIES Net income (loss) ..................................... $ 2,122 $ (1,746) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation .................................... 11,560 10,075 Non-cash interest expense ....................... 872 884 Amortization .................................... 2,550 1,708 Interest funded by assets held in trust ......... 6,427 6,393 Loss on sale of property and equipment .......... 778 430 Changes in operating assets and liabilities: Accounts receivable, net ..................... (11,058) (5,565) Inventories .................................. (636) 1,950 Prepaid expenses and other receivables ....... (910) 534 Other assets ................................. (126) (169) Payables and accrued expenses ................ 4,557 (114) -------- -------- Net cash provided by operating activities ............. 16,136 14,380 INVESTING ACTIVITIES Additions to property and equipment ................... (13,461) (7,854) Proceeds from disposal of property and equipment ...... 408 95 -------- -------- Net cash used for investing activities ................ (13,053) (7,759) FINANCING ACTIVITIES Proceeds from long-term borrowings .................... 7,672 -- Payments on long-term borrowings ...................... (10,058) (6,524) Payment of refinancing fees ........................... -- (46) Purchase of stock from management ..................... (16) (59) -------- -------- Net cash used for financing activities ................ (2,402) (6,629) Effect of exchange rate changes on cash ............... (6) -- -------- -------- Net increase (decrease) in cash and cash equivalents .. 675 (8) Cash and cash equivalents at beginning of period ...... 2,318 2,688 -------- -------- Cash and cash equivalents at end of period ............ $ 2,993 $ 2,680 ======== ======== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-25 BPC HOLDING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of BPC Holding Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. The accompanying financial statements include the results of BPC Holding Corporation ("Holding") and its wholly-owned subsidiary, Berry Plastics Corporation ("Berry"), and its wholly-owned subsidiaries: Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Venture Packaging Southeast, Inc., NIM Holdings Limited ("NIM Holdings"), Norwich Injection Moulders Limited ("Norwich Moulders"), and Knight Plastics, Inc. For further information, refer to the consolidated financial statements and footnotes thereto included in Holding's and Berry's Form 10-K's filed with the Securities and Exchange Commission for the year ended January 2, 1999. Certain amounts on the 1998 financial statements have been reclassified to conform with the 1999 presentation. 2. ACQUISITIONS On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of Berry, acquired all of the capital stock of Norwich Moulders of Norwich, England for aggregate consideration of approximately $14.0 million. The purchase was primarily financed through Berry's credit facility (see Note 3). The operations of Norwich Moulders are included in Berry's operations since the acquisition date using the purchase method of accounting. On October 16, 1998, Knight Plastics, Inc. ("Knight"), a newly formed wholly-owned subsidiary of Berry, acquired substantially all of the assets of the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for aggregate consideration of approximately $18.0 million. The purchase was financed through Berry's revolving line of credit. The pro forma results listed below are unaudited and reflect purchase accounting adjustments assuming the Norwich Moulders and Knight acquisitions occurred on December 28, 1997. Thirteen Weeks Ended Twenty-six Weeks Ended June 27, 1998 June 27, 1998 -------------------- ---------------------- Net sales ................... $ 78,976 $ 155,012 Loss before income taxes .... (646) (2,956) Net loss .................... (717) (3,098) The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above date, nor are they necessarily indicative of future operating results. Further, the information gathered on the acquired companies is based upon unaudited internal financial information and reflects only pro forma adjustments for additional interest expense and amortization of the excess of the cost over the underlying net assets acquired, net of the applicable income tax effects. F-26 3. LONG-TERM DEBT Long-term debt consists of the following: July 3, January 2, 1999 1999 -------- ---------- Holding 12.50% Senior Secured Notes .............. $105,000 $105,000 Berry 12.25% Senior Subordinated Notes ........... 125,000 125,000 Term loans ....................................... 61,151 71,243 Revolving line of credit ......................... 23,835 16,162 Nevada Industrial Revenue Bonds .................. 4,000 4,500 Capital leases ................................... 740 561 Debt premium, net ................................ 758 832 -------- ---------- 320,484 323,298 Less current portion of long-term debt ........... 20,297 19,388 -------- ---------- $300,187 $ 303,910 ======== ========== The current portion of long-term debt consists of $19.6 million of quarterly installments on the term loans, a $0.5 million repayment of the industrial bonds and the monthly principal payments related to capital lease obligations. The debt under our credit facility is guaranteed by BPC Holding and substantially all of our subsidiaries. As of July 3, 1999, the credit facility provided an aggregate commitment of about $119.7 million including (i) $50.0 million revolving line of credit (which was increased by $20.0 million concurrently with the Cardinal acquisition - See Note 7), subject to a borrowing base formula; (ii) (pound)1.5 million revolving line of credit, subject to a borrowing base ("UK Revolver"); (iii) $56.0 million term loan facility; (iv) (pound)3.6 million term loan facility ("UK Term Loan"); and (v) $5.6 million standby letter of credit facility to support our and our subsidiaries' obligations under our Nevada Industrial Revenue Bonds. At July 3, 1999, we had unused borrowing capacity under our credit facility's revolving line of credit of about $28.9 million. The credit facility matures on January 21, 2002 unless previously terminated by us or by the lenders upon an Event of Default as defined in the Security Agreement. The term loan facilities require periodic principal payments, varying in amount through the maturity of the facility. Such periodic payments will aggregate about $19.0 million for fiscal 1999 and about $19.9 million for fiscal 2000. Interest on borrowings under the credit facility is based on either the lender's base rate (which is the higher of the lender's prime rate and the federal funds rate plus 0.50%) plus an applicable margin of 0.50%; or LIBOR (adjusted for reserves) plus an applicable margin of 2.0%, at our option. Following receipt of the quarterly financial statements, the agent under our credit facility has the option to change the applicable interest rate margin on loans (other than under the UK Revolver and UK Term Loan) once per quarter to a specified margin determined by the ratio of funded debt to EBITDA of Berry Plastics and our subsidiaries. Notwithstanding the foregoing, interest on borrowings under the UK Revolver and the UK Term Loan is based on LIBOR (adjusted for reserves) plus 2.50%. The credit facility contains various covenants which include, among other things (i) maintenance of certain financial ratios and compliance with certain financial tests and limitations, (ii) limitations on the issuance of additional debt, and (iii) limitations on capital expenditures. 4. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION The following summarizes financial information of Holding's wholly-owned subsidiary, Berry Plastics Corporation, and its subsidiaries. F-27 July 3, January 2, 1999 1999 --------- ---------- CONSOLIDATED BALANCE SHEETS Current assets ...................................... $ 78,436 $ 65,590 Property and equipment - net of accumulated depreciation ........................................ 120,271 120,005 Other noncurrent assets ............................. 55,624 58,716 Current liabilities ................................. 65,839 60,210 Noncurrent liabilities .............................. 205,948 210,093 Equity (deficit) .................................... (17,456) (25,992)
Thirteen Weeks Ended Twenty-six Weeks Ended --------------------- ---------------------- July 3, June 27, July 3, June 27, 1999 1998 1999 1998 --------- --------- ---------- --------- CONSOLIDATED STATEMENT OF OPERATIONS Net sales .......................... $ 82,392 $ 69,586 $ 159,851 $ 136,317 Cost of goods sold ................. 58,259 50,768 112,782 100,016 Income before income taxes ......... 5,946 2,888 9,465 4,571 Net income ......................... 5,655 2,875 8,989 4,546
The following summarizes parent company only financial information of Berry: July 3, January 2, 1999 1999 --------- --------- CONSOLIDATED BALANCE SHEETS Current assets ................................... $ 40,328 $ 28,579 Property and equipment - net of accumulated depreciation ..................................... 48,937 48,220 Investment in/due from subsidiaries .............. 122,100 120,230 Other noncurrent assets .......................... 14,947 15,629 Current liabilities .............................. 44,970 41,325 Noncurrent liabilities ........................... 198,798 197,325 Equity (deficit) ................................. (17,456) (25,992)
Thirteen Weeks Ended Twenty-six Weeks Ended ----------------------- ----------------------- July 3, June 27, July 3, June 27, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- CONSOLIDATED STATEMENT OF OPERATIONS Net sales .............................. $ 40,675 $ 37,263 $ 76,207 $ 72,408 Cost of goods sold ..................... 26,187 24,375 48,642 47,554 Income before income taxes ............. 5,946 2,888 9,465 4,571 Net income ............................. 5,655 2,875 8,989 4,546
5. SEGMENT REPORTING The Company has two reportable segments: plastic packaging products and plastic housewares products. The Company's plastic packaging business consists of three primary market groups: aerosol overcaps, containers, and plastic drink cups. The Company's plastic housewares business consists of semi-disposable plastic housewares and plastic lawn and garden products, sold primarily through major national retail marketers and national chain stores. The Company evaluates performance and allocates resources based on operating income before depreciation and amortization of intangibles adjusted to exclude (i) market value adjustment related to stock options, (ii) other non-recurring or F-28 "one-time" expenses, (iii) management fees and reimbursed expenses paid to First Atlantic Capital, Ltd. and (iv) certain legal expenses associated with unusual litigation ("Adjusted EBITDA"). The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company's reportable segments are business units that offer different products to different markets.
Thirteen Weeks Ended Twenty-six Weeks Ended ------------------------- ------------------------ July 3, June 27, July 3, June 27, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net sales: Plastic packaging products .................. $ 75,279 $ 62,259 $ 140,443 $ 120,897 Plastic housewares products ................. 7,113 7,327 19,409 15,420 Adjusted EBITDA: Plastic packaging products .................. 18,349 14,572 33,912 27,172 Plastic housewares products ................. 982 1,317 3,741 2,896 Reconciliation of Adjusted EBITDA to income (loss) before income taxes: Adjusted EBITDA for reportable segments ..... $ 19,331 $ 15,889 $ 37,653 $ 30,068 Net interest expense ........................ (8,674) (8,439) (17,860) (16,866) Depreciation ................................ (5,687) (5,187) (11,560) (10,075) Amortization ................................ (1,275) (828) (2,549) (1,708) Loss on disposal of property and equipment .. (169) (297) (778) (430) One-time expenses ........................... (711) (1,120) (1,667) (2,264) Stock option market value adjustment ........ (94) (10) (198) (10) Management fees ............................. (218) (218) (437) (435) ---------- ---------- ---------- ---------- Income (loss) before income taxes ........... $ 2,503 $ (210) $ 2,604 $ (1,720) ========== ========== ========== ==========
6. COMPREHENSIVE INCOME Comprehensive income (loss) was $1.7 million and $(0.2) million for the thirteen weeks ended July 3, 1999 and June 27, 1998, respectively, and $1.6 million and $(1.7) million for the twenty-six weeks ended July 3, 1999 and June 27, 1998, respectively. 7. SUBSEQUENT EVENTS On July 6, 1999, Berry acquired all of the outstanding capital stock of CPI Holding Corporation, the parent company of Cardinal Packaging, Inc., for aggregate consideration of approximately $72.0 million, including acquisition related costs. The purchase was financed through the issuance by Berry of $75.0 million of 11% Senior Subordinated Notes. F-29 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders CPI Holding, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of CPI Holding, Inc. and Subsidiary as of November 30, 1998 and 1997, and the related consolidated statements of income, mandatorily redeemable preferred stock and shareholders' equity, and cash flows for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 (Date of Acquisition) to November 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CPI Holding, Inc. and Subsidiary as of November 30, 1998 and 1997, and the results of their operations and their cash flows for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 (Date of Acquisition) to November 30, 1996 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Cleveland, Ohio June 11, 1999 F-30 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 1998 AND 1997
ASSETS (NOTE 4) 1998 1997 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents .................................. $ 101,748 $ 18,624 Accounts receivable, less allowances of $163,000 and $72,000 5,397,359 5,260,109 Inventories ................................................ 7,553,127 7,878,158 Prepaid expenses ........................................... 579,064 455,492 Prepaid income taxes ....................................... 428,019 50,600 Deferred income taxes (Note 7) ............................. 305,000 215,000 ----------- ----------- Total current assets ..................................... 14,364,317 13,877,983 ----------- ----------- PROPERTY AND EQUIPMENT: Land ....................................................... 295,000 295,000 Building and improvements .................................. 3,597,818 3,526,034 Machinery and equipment .................................... 24,587,601 22,222,100 Molds ...................................................... 12,486,433 10,720,280 ----------- ----------- Total .................................................... 40,963,852 36,763,414 Less accumulated depreciation and amortization ............. 9,271,295 5,670,397 ----------- ----------- Property and equipment, net ................................ 31,692,557 31,093,017 ----------- ----------- GOODWILL, less accumulated amortization of $1,078,511 in 1998 and $734,756 in 1997 ............................. 14,147,546 14,491,301 ----------- ----------- OTHER ASSETS (Note 3) ......................................... 1,004,109 1,267,964 ----------- ----------- TOTAL ......................................................... $61,208,529 $60,730,265 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. F-31 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (CONTINUED) NOVEMBER 30, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 ------------ ------------ CURRENT LIABILITIES: Current portion of long-term debt (Note 4) ................................ $ 4,060,780 $ 3,519,064 Current portion of long service executive nonqualified pension (Note 5) ... 420,310 380,000 Accounts payable .......................................................... 2,595,014 2,922,093 Accrued liabilities ....................................................... 547,524 881,507 ------------ ------------ Total current liabilities ............................................... 7,623,628 7,702,664 LONG-TERM DEBT, less current portion (Note 4) ................................ 28,388,825 28,132,857 LONG SERVICE EXECUTIVE NONQUALIFIED PENSION, less current portion (Note 5) .................................................. 544,424 968,000 DEFERRED INCOME TAXES (Note 7) ............................................... 5,182,000 4,611,000 ------------ ------------ Total liabilities ....................................................... 41,738,877 41,414,521 ------------ ------------ MANDATORILY REDEEMABLE PREFERRED STOCK (Note 9) .............................. 18,761,668 17,171,325 ------------ ------------ SHAREHOLDERS' EQUITY (Notes 4 and 10): Common stock: Class A (voting), $.01 par value, authorized 500,000 shares, 89,281.5 in 1998 and 90,114.8 in 1997 issued and outstanding ................... 893 901 Class B (non-voting), $.01 par value, authorized 300,000 shares, 124,760 issued and outstanding ................................................ 1,247 1,247 Class C (non-voting), $.01 par value, authorized 200,000 shares, 90,791.6 issued and outstanding ................................................ 908 908 Additional paid-in capital .............................................. 883,848 2,392,768 ESOP receivable (Note 8) ................................................ (113,912) (186,405) Stock subscription receivable ........................................... (65,000) (65,000) ------------ ------------ Total shareholders' equity ............................................. 707,984 2,144,419 ------------ ------------ TOTAL ........................................................................ $ 61,208,529 $ 60,730,265 ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. F-32 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED NOVEMBER 30,1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
1998 1997 1996 ------------ ------------ ------------ (10 MONTHS) NET SALES ............................... $ 53,970,517 $ 54,387,787 $ 45,416,838 COST OF SALES ........................... 43,066,403 42,421,263 34,275,302 ------------ ------------ ------------ GROSS PROFIT ............................ 10,904,114 11,966,524 11,141,536 ------------ ------------ ------------ OPERATING EXPENSES: Selling .............................. 3,087,033 3,113,293 2,790,338 General and administrative (Note 11) . 3,176,276 2,949,312 2,164,232 ESOP contribution (Note 8) ........... 26,720 30,999 209,780 ------------ ------------ ------------ Total operating expenses .......... 6,290,029 6,093,604 5,164,350 ------------ ------------ ------------ INCOME FROM OPERATIONS .................. 4,614,085 5,872,920 5,977,186 OTHER INCOME (EXPENSE): Interest expense ..................... (3,383,736) (3,531,327) (3,188,345) Miscellaneous, net ................... 5,602 (8,225) 1,500 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES .............. 1,235,951 2,333,368 2,790,341 INCOME TAXES (Note 7) ................... 438,700 797,000 1,056,000 ------------ ------------ ------------ NET INCOME .............................. $ 797,251 $ 1,536,368 $ 1,734,341 ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. F-33 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1998
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE --------------------------------- PREFERRED STOCK COMMON STOCK ADDITIONAL ----------------------- ------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL -------- ------------ -------- -------- ----------- BALANCE - DECEMBER 1, 1997 .......... 141,134 $ 17,171,325 305,666 $ 3,056 $ 2,392,768 REDEMPTION OF STOCK: Common stock ...................... (833) (8) (22,145 Preferred stock ................... (167) (20,347) NET INCOME .......................... TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ................ REPAYMENT OF ESOP RECEIVABLE ........................ DIVIDENDS: Paid ($8.75 per Class A Preferred Shares outstanding) ... (700,000) Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ...... 2,310,690 (1,486,775 -------- ------------ -------- -------- ----------- BALANCE, NOVEMBER 30, 1998 .......... 140,967 $ 18,761,668 304,833 $ 3,048 $ 883,848 ======== ============ ======== ======== =========== SHAREHOLDERS' EQUITY ------------------------------------------------------ STOCK TOTAL RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' EARNINGS RECEIVABLE RECEIVABLE EQUITY --------- ---------- ------------ ------------- BALANCE - DECEMBER 1, 1997 .......... $ (186,405) $ (65,000) $ 2,144,419 REDEMPTION OF STOCK: Common stock ...................... (22,153) Preferred stock ................... NET INCOME .......................... $ 797,251 797,251 TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ................ 26,664 26,664 REPAYMENT OF ESOP RECEIVABLE ........................ 72,493 72,493 DIVIDENDS: Paid ($8.75 per Class A Preferred Shares outstanding) ... Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ...... (823,915) (2,310,690) --------- ---------- ------------ ------------- BALANCE, NOVEMBER 30, 1998 .......... -- $ (113,912) $ (65,000) $ 707,984 ========= ========== ============ =============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. (Continued) F-34 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1997
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE ----------------------------- PREFERRED STOCK COMMON STOCK ADDITIONAL ---------------------- --------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL -------- ----------- ------- ------ ----------- BALANCE - DECEMBER 1, 1996 .................... 140,867 $15,872,343 304,333 $3,043 $ 2,988,955 ISSUANCE OF STOCK: Common stock ........................... 1,333 13 13,318 Preferred stock ........................ 267 26,668 NET INCOME .................................... TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ...................... REPAYMENT OF ESOP RECEIVABLE .............................. DIVIDENDS: Paid ($11.97 per Class A Preferred Shares outstanding) ......................... (943,559) Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ............ 2,215,873 (609,505) -------- ----------- ------- ------ ----------- BALANCE, NOVEMBER 30, 1997 .................... 141,134 $17,171,325 305,666 $3,056 $ 2,392,768 ======== =========== ======= ====== =========== SHAREHOLDERS' EQUITY ------------------------------------------------------- STOCK TOTAL RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' EARNINGS RECEIVABLE RECEIVABLE EQUITY ----------- ---------- ------------ ------------- BALANCE - DECEMBER 1, 1996 .................... $ (360,000) $ (65,000) $ 2,566,998 ISSUANCE OF STOCK: Common stock ........................... 13,331 Preferred stock ........................ -- NET INCOME .................................... $ 1,536,368 $ 1,536,368 TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ...................... 70,000 70,000 REPAYMENT OF ESOP RECEIVABLE .............................. $ 173,595 173,595 DIVIDENDS: Paid ($11.97 per Class A Preferred Shares outstanding) ......................... Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ............ (1,606,368) (2,215,873) ----------- ---------- ------------ ------------- BALANCE, NOVEMBER 30, 1997 .................... -- $ (186,405) $ (65,000) $ 2,144,419 =========== ========== ============ =============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. (Continued) F-35 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1996
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE ---------------------------- - PREFERRED STOCK COMMON STOCK ADDITIONAL -------------------- --------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL ------- ----------- ------- ------ ----------- ISSUANCE OF STOCK: Class A Preferred ............................... 80,000 $ 8,000,000 Class B Preferred ............................... 60,000 6,000,000 Class A Common .................................. 88,782 $ 888 $ 886,928 Class B Common .................................. 124,760 1,248 1,246,352 Class C Common .................................. 86,458 864 863,720 ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE DEBT PAYMENTS ............... ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS: Class C Common .................................. 4,333 43 43,289 Class B Preferred ............................... 867 86,668 NET INCOME ........................................ REDUCTION OF ESOP RECEIVABLE ...................... DIVIDENDS: Increase in accumulated but not declared dividends on redeemable preferred stock ......... 1,785,675 (51,334) ------- ----------- ------- ------ ----------- BALANCE, NOVEMBER 30, 1996 ........................ 140,867 $15,872,343 304,833 $3,043 $ 2,988,955 ======= =========== ======= ====== =========== SHAREHOLDERS' EQUITY ------------------------------------------------------- STOCK TOTAL RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' EARNINGS RECEIVABLE RECEIVABLE EQUITY ----------- ---------- ------------ ------------- ISSUANCE OF STOCK: Class A Preferred ............................... -- Class B Preferred ............................... -- Class A Common .................................. $ 887,816 Class B Common .................................. 1,247,600 Class C Common .................................. 864,584 ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE DEBT PAYMENTS ............... $ (540,000) (540,000) ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS: Class C Common .................................. $ (21,666) 21,666 Class B Preferred ............................... (43,334) (43,334) NET INCOME ........................................ $ 1,734,341 1,734,341 REDUCTION OF ESOP RECEIVABLE ...................... 180,000 180,000 DIVIDENDS: Increase in accumulated but not declared dividends on redeemable preferred stock ......... (1,734,341) (1,785,675) ----------- ---------- ------------ ------------- BALANCE, NOVEMBER 30, 1996 ........................ -- $ (360,000) $ (65,000) $ 2,566,998 =========== ========== ============ =============
(Concluded) F-36 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
1998 1997 1996 ------------ ----------- ------------ (10 MONTHS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ....................................................................... $ 797,251 $ 1,536,368 $ 1,734,341 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................................. 4,167,042 3,849,775 2,954,524 (Gain) loss on disposals of property and equipment ............................ (5,602) 8,225 (1,500) Deferred income taxes ......................................................... 481,000 20,000 303,000 Tax benefit of dividends paid to ESOP ......................................... 26,664 70,000 -- Change in operating assets and liabilities: Accounts receivable ....................................................... (137,250) 113,169 346,751 Inventories ............................................................... 325,031 344,427 (1,908,856) Prepaid expenses, prepaid income taxes, and deposits ...................... (444,735) 145,576 (388,988) Accounts payable .......................................................... (327,079) (1,187,703) (501,026) Accrued liabilities ....................................................... (333,983) (241,057) 497,245 Income taxes payable ...................................................... -- (203,900) 283,300 ------------ ----------- ------------ Net cash provided by operating activities ........................................ 4,548,339 4,454,880 3,318,791 ------------ ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of stock of Cardinal Packaging, Inc. along with land and buildings from a related partnership, including acquisition costs and net of cash received of $28,946......................................................................... (39,363,708) Purchase of property and equipment ............................................... (4,207,586) (3,160,719) (2,882,380) Proceeds from disposal of property and equipment ................................. 7,500 2,500 1,500 Investment in patents ............................................................ (9,540) -- -- ------------ ----------- ------------ Net cash used in investing activities ............................................ (4,209,626) (3,158,219) (42,244,588) ------------ ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Preferred dividends paid ......................................................... (700,000) (943,559) -- Repayment of ESOP receivable ..................................................... 72,493 173,595 -- Proceeds from issuance of (payments for redemption of): Common Stock .................................................................. (22,153) 13,331 3,021,666 Mandatorily redeemable preferred stock ........................................... (20,347) 26,668 6,043,334 Proceeds from long-term debt ..................................................... 4,190,822 2,508,745 30,993,349 Payments on long-term debt, and long service executive nonqualified pension ...... (3,776,404) (3,112,774) (1,076,595) ------------ ----------- ------------ Net cash (used in) provided by financing activities .............................. (255,589) (1,333,994) 38,981,754 ------------ ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................... 83,124 (37,333) 55,957 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................................... 18,624 55,957 -- ------------ ----------- ------------ CASH AND CASH EQUIVALENTS, END OF YEAR ................................................. $ 101,748 $ 18,624 $ 55,957 ============ =========== ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Income taxes ..................................................................... $ 335,119 $ 925,942 $ 415,525 Interest ......................................................................... $ 3,776,313 $ 3,384,339 $ 2,240,510 ============ =========== ============ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: The Company received stock subscriptions of $65,000 in 1996. In conjunction with the acquisition in 1996, the Company recorded liabilities to the former shareholders totaling $1,960,000 and issued preferred stock valued at $8,000,000 in exchange for previously issued common shares of Cardinal.
The accompanying notes to consolidated financial statements are an integral part of these financial statements. F-37 CPI HOLDING, INC. AND SUBSIDIARY - ------------------------------------------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996 1. NATURE OF OPERATIONS AND ORGANIZATION CPI Holding, Inc. ("CPI" or the "Company") was organized under the laws of the State of Delaware for the purpose of acquiring an injection molding manufacturer. On January 26, 1996, CPI acquired 100 percent of the common stock of Cardinal Packaging, Inc. ("Cardinal"). The Company, through its wholly-owned subsidiary, Cardinal, is a manufacturer of rigid thin-walled polyethylene and polypropylene containers and sells its products to customers located throughout the United States and Canada. The majority of the Company's products are used in the frozen dessert and refrigerated product industries in the form of premium round containers. In addition, the Company provides containers for selected industrial customers and seasonal retailers. The Company maintains ongoing credit evaluations of its customers and generally does not require collateral. The Company provides reserves for potential credit losses and such losses historically have not exceeded management's estimates. The Company is headquartered in Streetsboro, Ohio. Additional manufacturing facilities are located in Minneapolis, Minnesota and Ontario, California. CPI acquired, along with land and buildings previously owned by a related partnership, 70 percent of the common stock of Cardinal for $39,392,654, including acquisition costs. The remaining 30 percent of the common stock of Cardinal was acquired from the Cardinal Packaging, Inc. Employee Stock Ownership Plan ("ESOP") in exchange for 80,000 shares of CPI Class A redeemable preferred stock valued at $8,000,000. In addition, and in conjunction with the acquisition, the Company entered into an agreement to pay the sellers $2,460,000 (which includes imputed interest of $500,000) in monthly payments through January 2001 (see Note 5). The total purchase price, including acquisition costs, has been allocated to the assets acquired and liabilities assumed based on their estimated fair values, except for the portion related to the ESOP's ownership which is accounted for at historical costs, using the purchase method of accounting. In addition, goodwill was reduced by $745,000 because of the deferred tax asset recorded for the future tax benefits of the long service executive nonqualified pension payments (See Note 7). Accordingly, the amounts recorded for this acquisition were as follows: Current Assets, including $28,946 of cash ..................... $12,435,461 Property ...................................................... 30,557,656 Other assets .................................................. 1,743,858 ----------- Total assets acquired ..................................... 44,736,975 Liabilities assumed ........................................... 11,355,378 ----------- Net assets acquired ........................................... 33,381,597 Goodwill ...................................................... 15,226,057 ----------- Total purchase price, including acquisition costs ............. $48,607,654 =========== As a result of the acquisition in 1996, the inventory on January 26, 1996 was increased by $296,712 based on the fair market value of the acquired inventory at the date of acquisition. Cost of sales for the period January 26, 1996 (date of acquisition) to November 30, 1996 includes $296,712 related to this adjustment. F-38 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FINANCIAL STATEMENT PRESENTATION--The consolidated financial statements include the accounts of CPI and its wholly-owned subsidiary. All significant intercompany balances and transactions are eliminated in consolidation. USE OF ESTIMATES--The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the financial statement date and the reported amounts of revenues and expenses for the reporting period. Actual amounts could differ from those estimates. REVENUE RECOGNITION--Sales and cost of sales are recognized upon shipment of product. CASH AND CASH EQUIVALENTS--The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. INVENTORIES--Inventories are valued at the lower of cost, using the first-in, first-out basis, or market. Inventories consist of the following at November 30: 1998 1997 ---------- ---------- Raw materials ..................... $2,433,849 $1,700,765 Finished Good ..................... 5,119,278 6,177,393 ---------- ---------- Total ............................. $7,553,127 $7,878,158 ========== ========== PROPERTY AND EQUIPMENT--Property and equipment is stated at cost. Additions, renewals and betterments are capitalized; maintenance and repairs, which do not extend the useful life of the asset, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from ten to 40 years for buildings, related building improvements and leasehold improvements, 12 to 15 years for manufacturing machinery and equipment, seven years for molds, five years for office furniture and fixtures, and three years for vehicles. Equipment under capitalized leases is amortized over the terms of the leases, which do not exceed the estimated useful life of the leased equipment. GOODWILL AND INTANGIBLE ASSETS--The Company's intangible assets consist of goodwill, deferred financing costs, and patent costs. Amortization is recorded over the estimated economic lives. Goodwill is amortized over 40 years. Deferred financing costs are amortized over the terms of the related loans with the amortization included in interest expense. Patent costs are amortized over 17 years, beginning when the patent approval is obtained. The Company evaluates the unamortized cost of these intangible assets to determine if the carrying amount exceeds the recoverable amount and to record an impairment loss, if necessary. This determination is based on an evaluation of such factors as the occurrence of a significant event, a significant change in the environment in which the business operates or, primarily for goodwill, the expected undiscounted future net cash flows. INCOME TAXES--Deferred income taxes are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of various assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. NEW ACCOUNTING PRONOUNCEMENTS--In 1998, Cardinal adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 130 established standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. SFAS No. 131 requires that a public business enterprise report financial and F-39 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) descriptive information about its reportable operating segments such as a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. SFAS No. 132 standardized the disclosure requirements for pensions and other postretirement benefits. The adoption of these statements did not have a material impact on the Company's financial statements. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 is effective for fiscal quarters of fiscal years beginning after June 15, 1999. The Company has not completed its evaluation of this statement but does not anticipate a material impact on the financial statements from the adoption of this accounting standard. RECLASSIFICATIONS--Certain reclassifications were made to the 1996 and 1997 financial statements to conform to the presentation used in the 1998 financial statements. 3. OTHER ASSETS Other assets consist of the following at November 30: 1998 1997 ---------- ---------- Deferred financing costs, less accumulated amortization of $607,139 in 1998 and $392,855 in 1997 .......................... $ 892,861 $1,107,145 Deposits ..................................... 65,106 115,062 Patents, less accumulated amortization of $18,566 in 1998 and $15,711 in 1997 ....... 46,142 39,457 Miscellaneous ................................ 6,300 ---------- ---------- Total .................................. $1,004,109 $1,267,964 ========== ========== 4. LONG-TERM DEBT Long-term debt consists of the following as of November 30:
1998 1997 ----------- ----------- Note payable to financial institution with quarterly principal payments at scheduled amounts, plus interest at a variable rate (7.8125 percent as of November 30,1998), due March 1, 2001 ........................................ $10,500,000 $13,500,000 Note payable to financial institution with quarterly principal payments at scheduled amounts beginning in 2001, plus interest at a variable rate (8.3125 percent as of November 30,1998), due March 1, 2001 ..................... 10,000,000 10,000,000 Revolving credit facility payable to financial institution with interest at a variable rate (7.8125 percent as of November 30,1998), due March 1, 2003 ..................... 7,002,522 5,615,116 Capital expansion note payable to financial institution with quarterly interest payments at a variable rate (8.3125 percent as of November 30, 1998), fifteen equal quarterly principal payments, plus interest, beginning September 1, 1999, due March 2003 ........................ 4,681,646 1,886,980
F-40 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1998 1997 ----------- ----------- ESOP loan to bank with semi-annual principal payments of $90,000, plus monthly interest (6.5875 percent as of November 30, 1998) at 85 percent of the bank's prime rate, through January 2000; collateralized by the common stock of the Company ........................................... 113,912 186,405 Note payable to financing company with monthly principal and interest payments of $3,690, through October 1999; interest at 6.755 percent a year, collateralized by specific equipment ....................................... 39,252 79,399 Other notes payable to banks paid off in 1998 ........... -- 3,481 Capital lease obligations for equipment, payable to various banks and leasing companies in aggregate monthly principal and interest payments of $20,583 through July 2000; interest at 6.75 percent to 10.85 percent a year; collateralized by equipment with an aggregate net book value of $810,344 and $1,454,135 as of November 30, 1998 and November 30, 1997, respectively ...................... 112,273 380,540 ----------- ----------- Total .................................................... 32,449,605 31,651,921 Less current portion ..................................... 4,060,780 3,519,064 ----------- ----------- Amount due after one year ................................ $28,388,825 $28,132,857 =========== ===========
The notes payable, revolving credit facility, and capital expansion note are collateralized by substantially all of the assets of the Company. The credit agreement includes financial covenants with respect to capital expenditure limits; rent payments under operating leases; earnings before depreciation, amortization, interest and income taxes; and fixed charge and interest coverage ratios. As of November 30, 1998, the Company has violated certain of these covenants related to minimum EBITDA, as defined, fixed charges coverage ratio, interest coverage ratio, and maximum capital expenditures, for which the lender has waived the covenant violations. At November 30, 1998, required annual principal payments on long-term debt are: YEAR ENDING NOVEMBER 30, 1999........................................ $ 4,060,780 2000........................................ 5,765,206 2001........................................ 6,248,439 2002........................................ 6,248,439 2003........................................ 10,126,741 ----------- Total....................................... $32,449,605 =========== F-41 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Future minimum lease payments under capital leases, included above, as of November 30, 1998 are as follows: YEAR ENDING NOVEMBER 30, 1999........................................ $109,337 2000........................................ 7,080 -------- Total minimum lease payments................ 116,417 Less amount representing interest........... 4,144 -------- Present value of capital lease obligations included with long-term debt at November 30, 1998................................. $112,273 ======== 5. LONG SERVICE EXECUTIVE NONQUALIFIED PENSION AND CONSULTING AGREEMENTS Under the terms of the purchase agreement for the common stock of Cardinal, the Company agreed to make payments to the previous shareholders of $41,000 a month through January 2001 for long service executive nonqualified pension payments. These future payments have been recorded as a liability at their net present value. In addition, the Company paid $20,000 a year to the previous shareholders under a consulting agreement from February 1996 through January 1998. Consulting expense was $3,333 for 1998, $20,000 for 1997, and $16,660 for the period January 26, 1996 to November 30, 1996. At November 30, 1998, future payments under the long service executive nonqualified pension agreement are as follows: YEAR ENDING NOVEMBER 30, 1999........................................ $492,000 2000........................................ 492,000 2001........................................ 82,000 --------- Total Payments.............................. 1,066,000 Less amount representing interest (at 9.25 percent).................................. 101,266 --------- Present value of long service executive nonqualified pension........................ 964,734 Current portion............................. 420,310 --------- Noncurrent portion.......................... $544,424 ========= 6. OPERATING LEASES The Company leases specific equipment, vehicles, and its Minneapolis, Minnesota and Ontario, California office and plant facilities under operating leases from unrelated parties. These leases expire at various dates through November 2003. Total rent expense, including month-to-month rentals, was $1,588,000 for 1998, $1,538,000 for 1997. Future minimum lease payments under noncancellable operating leases as of November 30, 1998 are: YEAR ENDING NOVEMBER 30, 1999........................................ $1,479,200 2000........................................ 1,218,900 2001........................................ 999,300 2002........................................ 945,300 2003........................................ 855,600 ---------- Total....................................... $5,498,300 ========== F-42 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. INCOME TAXES The provision (benefit) for income taxes consists of: 1998 1997 1996 --------- --------- ---------- (10 MONTHS) Federal: Current ............ $(122,300) $ 649,000 $ 618,000 Deferred ........... 267,000 31,000 245,000 State and local: Current ............ 80,000 128,000 135,000 Deferred ........... 214,000 (11,000) 58,000 --------- --------- ---------- Total ................. $ 438,700 $ 797,000 $1,056,000 ========= ========= ========== The consolidated tax provision differs from the tax provision computed at the statutory United States tax rate of approximately 34 percent for the following reasons: 1998 1997 1996 --------- --------- ----------- Tax provision at statutory federal rate .. $ 420,000 $ 785,000 $ 949,000 Amortization of goodwill ................. 117,000 136,000 114,000 Dividends paid to Employee Stock Ownership Plan on allocated shares .............. (163,000) (189,000) -- State and local income taxes ............. 294,000 117,000 193,000 Other .................................... (229,300) (52,000) (200,000) --------- --------- ----------- Total .............................. $ 438,700 $ 797,000 $ 1,056,000 ========= ========= =========== The tax benefit of the deductible portion of the Class A preferred dividends paid on the unallocated shares held by the ESOP that were utilized by the ESOP to make debt payments was charged directly to retained earnings. The approximate tax effect of each type of temporary difference that gave rise to the Company's deferred tax assets and liabilities as of November 30, is as follows:
1998 1997 ----------- ----------- Current deferred income tax assets (liabilities): Inventories ..................................... $ 73,000 $ 53,000 (Prepaid) accrued state income taxes ............ 6,000 (13,000) Accrued liabilities ............................. 4,000 3,000 Long service executive nonqualified pension - current ......................................... 160,000 145,000 Allowance for doubtful accounts ................. 62,000 27,000 ----------- ----------- 305,000 215,000 ----------- ----------- Noncurrent deferred income tax assets (liabilities): Basis of property ............................... (5,878,000) (5,509,000) Long service executive nonqualified pension - noncurrent ...................................... 206,000 367,000 Net operating loss carryforward ................. 102,000 Alternative minimum tax credit carryforwards .... 388,000 531,000 ----------- ----------- (5,182,000) (4,611,000) ----------- ----------- Net deferred income tax liability .................. $(4,877,000) $(4,396,000) =========== ===========
F-43 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. EMPLOYEE STOCK OWNERSHIP PLAN In 1988, Cardinal established an employee stock ownership plan. On December 14, 1989, the ESOP used $1,800,000 of proceeds from a bank loan to purchase 30 percent of Cardinal's common stock. In conjunction with the acquisition of Cardinal by CPI in which the ESOP exchanged its 30 percent investment in Cardinal for a 22 percent investment in CPI, the Company assumed the remaining bank obligation of $720,000 at January 26, 1996. As of November 30, 1998, $113,912 remains outstanding on this loan. As a result of the Company assuming the bank obligation, the Company also recorded a loan receivable from the ESOP, which is reported as a reduction of shareholders' equity. The Company is obligated to make contributions to the ESOP that are used by the ESOP to pay the loan principal and interest to the bank. Shares of stock acquired by the ESOP are allocated to each eligible employee in amounts based on the employee's compensation. Company contributions charged to expense were $26,720 in 1998, $30,999 in 1997 and $209,780 for the period January 26, 1996 to November 30, 1996. The Company paid Class A preferred dividends of $700,000 in 1998 and $943,559 in 1997 to the ESOP. The ESOP used a portion of the dividends to make the required principal payments. 9. MANDATORILY REDEEMABLE PREFERRED STOCK MANDATORILY REDEEMABLE PREFERRED STOCK--The Company is authorized to issue 100,000 nonvoting shares of Class A redeemable preferred stock and 100,000 non-voting shares of Class B redeemable preferred stock, each with a par value of $.01 per share. There are 80,000 shares of Class A redeemable preferred stock outstanding as of November 30, 1998 and 1997. There are 60,966.69 shares of Class B redeemable preferred stock outstanding as of November 30, 1998 and 61,133.36 shares outstanding as of November 30, 1997, including 866.68 shares issued under Executive Stock Agreements described in Note 10. Accumulating dividends accrue daily at 8.75 percent of the liquidation value ($100 per share) plus any accumulated dividends on the Class A redeemable preferred stock. Accumulating dividends accrue at 10 percent of the liquidation value ($100 per share) plus any accumulated dividends on the Class B redeemable preferred stock. Unpaid accumulating dividends are deemed to be accumulated dividends for purposes of calculating the accumulating and nonaccumulating dividends. Nonaccumulating dividends accrue daily at 10 percent of the liquidation value plus any accumulated dividends on the Class A redeemable preferred stock only. Unpaid nonaccumulating dividends are not deemed to be accumulated dividends for purposes of calculating the accumulating and nonaccumulating dividends. Accumulating dividends were $1,483,077 for the year ended November 30, 1998 and $1,385,329 for the year ended November 30, 1997. The nonaccumulating dividends were $827,613 for the year ended November 30, 1998 and $830,544 for the year ended November 30, 1997. These amounts have been recorded as an increase in the redeemable preferred stock and as a reduction of retained earnings and of additional paid-in capital in the accompanying consolidated statements of mandatorily redeemable preferred stock and shareholders' equity. As of November 30, 1998, the unpaid accumulating dividends were $2,331,161 and the unpaid nonaccumulating dividends were $2,331,864. On June 30, 2003, the Company shall redeem all outstanding shares of the Class A and Class B redeemable preferred stock for the aggregate liquidation value plus all unpaid dividends. The aggregate liquidation value and unpaid dividends of the Class A and Class B redeemable preferred stock is $18,761,668 as of November 30, 1998 and $17,171,325 as of November 30, 1997. The Class A redeemable preferred stock is convertible at the shareholders' option into Class A common stock at any time based on the liquidation value of the shares to be converted at the then current conversion price. 10. COMMON STOCK The authorized shares of stock and the number of shares outstanding as of November 30, 1998 and 1997 are as follows: COMMON STOCK--The Company has three classes of common stock of which Class A is voting and Class B and C are non-voting. Holders of Class B common stock are entitled to convert such shares into the same number of shares of Class A or Class C common stock at any time. F-44 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Holders of Class C common stock are entitled to convert such shares into the same number of shares of Class A common stock upon the occurrence of a Conversion Event as defined in the Company's Certificate of Amendment to Certificate of Incorporation. Class C common stock includes 4,333.2 shares issued under Executive Stock Agreements described below, as of November 30, 1998 and 1997. EXECUTIVE STOCK AGREEMENTS--The Company has entered into agreements with certain members of its management under which shares of Class B redeemable preferred stock and Class C common stock have been issued. The Company has notes receivable aggregating $65,000 from manager shareholders for the purchase of one-half of their shares at November 30, 1998 and 1997. These notes bear interest at 8.25 percent a year and are reported as stock subscriptions receivable as a reduction of shareholders' equity. One-half of the shares of common stock and one-half of the shares of redeemable preferred stock vest immediately and the remaining shares vest upon the payment in full of the receivables plus any accrued interest. In the event a shareholder manager ceases to be employed by the Company, the Company and certain shareholders have the right to repurchase all or a portion of these shares from the individual at the fair value of the vested shares and the lower of the fair value of shares or the original cost of the unvested shares held as of the date of termination. 11. RELATED PARTY TRANSACTIONS The following amounts were paid to shareholders of the Company: 1998 1997 1996 -------- -------- ---------- Management fees ................. $200,000 $200,000 $ 200,000 Transaction costs ............... -- -- 1,285,000 -------- -------- ---------- Total ...................... $200,000 $200,000 $1,485,000 ======== ======== ========== The management fees are included in general and administrative expense in the accompanying statements of income. The transaction costs were capitalized as of the acquisition date. * * * * * * F-45 CPI HOLDING, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars) MAY 31, 1999 ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents ....................................... $ 31 Accounts receivable (less allowance for doubtful accounts of $156) ........................................................... 6,910 Inventories: Finished goods ............................................... 5,705 Raw materials and supplies ................................... 2,338 ------- 8,043 Prepaid expenses and other receivables .......................... 323 Deferred income taxes ........................................... 305 ------- Total current assets ................................................. 15,612 Property and equipment: Land ............................................................ 295 Buildings and improvements ...................................... 3,499 Machinery, equipment and tooling ................................ 37,407 Automobiles and trucks .......................................... 54 Construction in progress ........................................ 1,914 ------- 43,169 Less accumulated depreciation ................................... 11,213 ------- 31,956 Intangible assets: Deferred financing and origination fees, net .................... 786 Excess of cost over net assets acquired, net .................... 13,957 ------- 14,743 Other ................................................................ 112 ------- Total assets ......................................................... $62,423 ======= F-46 CPI HOLDING, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (In Thousands of Dollars) MAY 31, 1999 (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable .............................................. $ 4,205 Accrued expenses and other liabilities ........................ 157 Current portion of long-term debt ............................. 4,987 Total current liabilities .......................................... 9,349 Long-term debt, less current portion ............................... 28,078 Deferred income taxes .............................................. 5,182 42,609 Mandatorily Redeemable Preferred Stock ............................ 19,348 Stockholders' equity: Class A Common Stock (voting); $.01 par value: 500,000 shares authorized; 89,281.5 shares issued and outstanding ................................................ 1 Class B Common Stock (non-voting); $.01 par value: 300,000 shares authorized; 124,760 shares issued and outstanding ................................................ 1 Class C Common Stock (non-voting); $.01 par value: 200,000 shares authorized; 90,791.6 shares issued and outstanding .. 1 Additional paid-in capital .................................... 349 Retained earnings ............................................. 293 Less: ESOP receivable ........................................ (114) Stock subscription receivable ............................ (65) Total stockholders' equity ......................................... 466 Total liabilities and stockholders' equity ......................... $ 62,423 ======== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-47 CPI HOLDING, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands of Dollars) TWENTY-SIX WEEKS ENDED ---------------------- MAY 31, MAY 31, 1999 1998 ------- ------- (UNAUDITED) Net sales ........................................ $28,465 $26,418 Cost of goods sold ............................... 23,407 21,247 Gross margin ..................................... 5,058 5,171 ------- ------- Operating expenses: Selling ...................................... 1,447 1,550 General and administrative ................... 1,310 1,296 Amortization of intangibles .................. 301 311 Other ........................................ 61 43 Operating income ................................. 1,939 1,971 ------- ------- Interest expense ............................. 1,400 1,639 Income before income taxes ....................... 539 332 ------- ------- Income tax expense ............................... 202 114 Net income ....................................... $ 337 $ 218 ======= ======= SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-48 CPI HOLDING, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED MAY 31, MAY 31, 1999 1998 (UNAUDITED) - ------------------------------------------------------------- OPERATING ACTIVITIES Net income................................................. $ 337 $ 218 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation.......................................... 1,942 1,746 Amortization.......................................... 298 307 Deferred income taxes................................. --- 28 Changes in operating assets and liabilities: Accounts receivable, net.......................... (1,513) (1,399) Inventories....................................... (490) 723 Prepaid expenses and other receivables............ 684 (210) Other assets...................................... (1) 38 Payables and accrued expenses..................... 1,219 101 Net cash provided by operating activities.................. 2,476 1,552 - ------------------------------------------------------------- INVESTING ACTIVITIES Additions to property and equipment........................ (2,205) (2,594) Net cash used for investing activities..................... (2,205) (2,594) - ------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term borrowings......................... 1,460 3,299 Payments on long-term borrowings........................... (1,809) (1,876) Proceeds (payments) from Preferred equity.................. 7 (348) Net cash provided by (used for) financing activities....... (342) 1,075 Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents....... (71) 33 Cash and cash equivalents at beginning of period........... 102 19 Cash and cash equivalents at end of period................. $ 31 $ 52 - --------------------------------------------------------------------------------------- ============================================================================== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-49 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands of dollars, except as otherwise noted) (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of CPI Holding, Incorporated and its subsidiary, Cardinal Packaging, Incorporated (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. The accompanying financial statements include the results of CPI Holding, Incorporated ("Holding") and its wholly-owned subsidiary, Cardinal Packaging, Incorporated ("Cardinal"). 2. LONG-TERM DEBT Long-term debt consists of the following: MAY 31, 1999 ---------- Note payable to financial institution with quarterly principal payments at scheduled amounts, plus interest at a variable rate, due March 1, 2000....................................................... $9,000 Note payable to financial institution with quarterly principal payments at scheduled amounts beginning in 2001, plus interest at a variable rate, due March 1, 2003.................................... 10,000 Revolving credit facility payable to financial institution with interest at a variable rate, due March 1, 2003...................... 8,117 Capital expansion note payable to financial institution with quarterly interest payments at a variable rate, fifteen equal quarterly principal payments, plus interest, beginning September 1, 1999, due March 2003................................................ 5,000 ESOP loan to bank with semi-annual principal payments of $90, plus monthly interest at 85 percent of the bank's prime rate, through January 2000; collateralized by the common stock of the Company..... 114 Note payable to financing company with monthly principal and interest payments of $4, through October 1999; interest at 6.755 percent a year, collateralized by specific equipment.......................... 18 Capital lease obligations for equipment, payable to various banks and leasing companies in aggregate monthly principal and interest payments of $20 through July 2000; interest at 6.75 percent to 10.85 percent a year; collateralized by specific equipment................ 57 Long service executive nonqualified pension agreements payable to the previous shareholders. The pension agreements are payable at $41 per month through January 2001 and are recorded at their net present value with a discount rate of 9.25 percent.......................... 759 33,065 Less current portion of long-term debt.............................. 4,987 $28,078 ----------------------------------------------------------------------- ============================================================================== F-50 CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. LONG-TERM DEBT (CONTINUED) The current portion of long-term debt consists of $4.5 million of principal payments outlined in the table above, and $0.4 million of payments related to the Long service executive nonqualified pension agreement. The notes payable, revolving credit facility, and capital expansion note are collateralized by substantially all of the assets of the Company. The credit agreement includes financial covenants with respect to capital expenditure limits; rent payments under operating leases; earnings before depreciation, amortization, interest and income taxes; and fixed charge and interest coverage ratios. 3. CARDINAL PACKAGING, INCORPORATED SUMMARY FINANCIAL INFORMATION The following summarizes parent company only financial information of Holding: MAY 31, 1999 --------- CONSOLIDATED BALANCE SHEETS Current assets......................................................... $ 7 Investment in subsidiary............................................... 19,807 Other noncurrent assets................................................ --- Current liabilities.................................................... --- Noncurrent liabilities................................................. --- Equity (deficit)....................................................... 19,814 26 WEEKS ENDED ---------------------- MAY 31, MAY 31, 1999 1998 ---------------------- CONSOLIDATED STATEMENTS OF OPERATIONS Net sales.............................................. $ --- $ --- Cost of goods sold..................................... --- --- Income before income taxes ............................ 539 332 Net income ............................................ 337 218 4. SEGMENT REPORTING The Company has one reportable segment of plastic packaging products. F-51 REPORT OF INDEPENDENT AUDITORS Knight Engineering & Plastics Division of Courtaulds Packaging Inc. We have audited the accompanying balance sheet of Knight Engineering & Plastics Division of Courtaulds Packaging Inc. (the Division) as of March 31, 1998 and the related statement of operations, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Division at March 31, 1998, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Indianapolis, Indiana May 19, 1999 F-52 KNIGHT ENGINEERING & PLASTICS DIVISION OF COURTAULDS PACKAGING INC. BALANCE SHEET MARCH 31, 1998 ASSETS Current assets $ Cash............................................................. 719,004 Accounts receivable, less allowance for doubtful accounts of $52,061.......................................................... 3,625,898 Inventories: Finished goods................................................ 586,035 Raw materials and supplies.................................... 1,192,082 1,778,117 Prepaid expenses................................................. 195,799 Total current assets................................................ 6,318,818 Property and equipment Land and improvements............................................ 877,410 Buildings and improvements....................................... 5,754,664 Machinery, equipment and tooling................................. 21,102,328 Construction in progress......................................... 2,085,286 29,819,688 - ---------------------------------------------------------------------- Less accumulated depreciation.................................... 16,348,730 - ---------------------------------------------------------------------- 13,470,958 - ---------------------------------------------------------------------- Goodwill, net of accumulated amortization of $854,972............... 2,402,064 - ---------------------------------------------------------------------- $ 22,191,840 - ---------------------------------------------------------------------- LIABILITIES AND DIVISION EQUITY ====================================================================== Current liabilities ====================================================================== $ Note payable, parent............................................. 3,477,089 ====================================================================== Accounts payable................................................. 2,336,323 ====================================================================== Accrued expenses and other liabilities........................... 2,493,482 ====================================================================== Total current liabilities........................................... 8,306,894 ====================================================================== Division equity..................................................... 13,884,946 ====================================================================== $ 22,191,840 - ---------------------------------------------------------------------- ============================================================================== SEE ACCOMPANYING NOTES. F-53 KNIGHT ENGINEERING & PLASTICS DIVISION OF COURTAULDS PACKAGING INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998 $ Net sales......................................................... 23,836,485 Cost of goods sold................................................ 21,058,181 Gross margin...................................................... 2,778,304 Operating expenses: Selling, general and administrative............................. 3,219,902 Amortization of intangibles..................................... 162,852 Operating income (loss)........................................... (604,450) Other income (expense): Gain on disposal of property and equipment...................... 41,400 Interest income................................................. 3,590 Interest (expense), parent...................................... (261,325) $ Division (loss)................................................... (820,785) - -------------------------------------------------------------------- ============================================================================== SEE ACCOMPANYING NOTES. F-54 KNIGHT ENGINEERING & PLASTICS DIVISION OF COURTAULDS PACKAGING INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1998 OPERATING ACTIVITIES $ Division loss....................................................... (820,785) Adjustments to reconcile division loss to net cash provided by operating activities: Depreciation..................................................... 1,702,511 Amortization..................................................... 162,852 Gain on sale of property and equipment........................... (41,400) Changes in operating assets and liabilities: Accounts receivable, net...................................... (168,875) Inventories................................................... 67,937 Prepaid expenses.............................................. 253,840 Accounts payable and accrued expenses......................... 1,009,378 Net cash provided by operating activities 2,165,458 INVESTING ACTIVITIES Purchases of machinery and equipment................................ (1,530,295) Division equity contribution from parent............................ 261,000 Proceeds from disposal of property and equipment.................... 41,400 Net cash used in investing activities............................... (1,227,895) FINANCING ACTIVITIES Net payments on note payable, parent................................ (456,893) Net cash used in financing activities............................... (456,893) Net increase in cash................................................ 480,670 Cash at beginning of year........................................... 238,334 $ Cash at end of year................................................. 719,004 - ---------------------------------------------------------------------- ============================================================================== SEE ACCOMPANYING NOTES. F-55 KNIGHT ENGINEERING & PLASTICS DIVISION OF COURTAULDS PACKAGING INC. NOTES TO FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying financial statements include the accounts of Knight Engineering and Plastics Division of Courtaulds Packaging Inc., a West Virginia Corporation (the Division). Courtaulds Packaging, Inc. (Parent) is owned by Courtaulds PLC, a public limited company organized under the laws of England and Wales. The Division was not a legal entity and operated as a component of a larger business. The Division's financial statements includes only assets, liabilities and results of operations which comprise the specific division. The balance sheet and statement of operations, which have been prepared from the historical accounting records of the Division, include all revenues and costs directly attributable to the Division's business, including costs of facilities, employees and related support functions. The Division has not been charged for the cost of certain functions and services performed by the Parent or other related entities on behalf of the Division. Similarly, the Division has not been allocated any income tax expense or benefit during the year ended March 31, 1998. Management believes that the impact of costs performed by Parent and other related entities on behalf of the Division would not be significant to the accompanying financial statements. The Division manufactures and markets plastic packaging products, primarily proprietary and custom molded plastic overcaps and closures. During the year ended March 31, 1998, the Division operated manufacturing facilities located in Woods tock and Arlington Heights, Illinois. The Division's customers are located principally throughout the United States. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES Inventories are valued at the lower of cost (first in, first out method) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the assets ranging from three to fifty years. GOODWILL The cost in excess of net assets acquired represent the excess purchase price over the fair value of the net assets acquired in the original acquisition of the Division. These costs are being amortized over 20 years. The Division periodically evaluates the value of intangible assets to determine if an impairment has occurred. This evaluation is based on various analyses including reviewing anticipated cash flows. REVENUE RECOGNITION Revenue from sales of products is recognized at the time product is shipped to the customer. RETIREMENT PLANS During the year ended March 31, 1998, the Division had two defined contribution benefit plans, a retirement and a employee thrift plan. The Plans covered substantially all the Division's employees. The retirement plan provides for an annual employer contribution of 4% of gross wages. The employee thrift plan provides for a 75% to a 100% annual match on employee deferrals of up to 6%. The plans expenses were approximately $291,000 for the year ended March 31, 1998. F-56 KNIGHT ENGINEERING & PLASTICS DIVISION OF COURTAULDS PACKAGING INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) INCOME TAXES The taxable income of the Division was included in the tax returns of Courtaulds Packaging Inc. As such, separate income tax returns were not prepared or filed for the Division. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 3. NOTE PAYABLE, PARENT At March 31, 1998, the Division had a note payable to Courtaulds Packaging Inc. The note was used to fund the Division's working capital requirements with no stated maturity. Interest was charged to the Division at a rate of approximately 7%. 4. SALES INFORMATION For the year ended March 31, 1998, 38% of the Division's revenues were derived from three customers. The accounts receivables related to these customers at March 31, 1998 was approximately $560,000. 5. LEASES The Division leases certain warehouse buildings under a month to month lease arrangements. Rent expense for the year ended March 31, 1998 was approximately $145,000. 6. RELATED PARTY TRANSACTIONS The Division has engaged in business transactions with a related party, Thatcher Tubes, Inc., throughout the year. Thatcher Tubes is a fully consolidated subsidiary of Courtaulds Packaging Inc. During the year ended March 31, 1998, the Division had sales of approximately $1,845,000 to Thatcher. In addition, the related accounts receivable balance at March 31, 1998 was approximately $354,000. 7. SUBSEQUENT EVENTS On October 16, 1998, a newly formed, wholly-owned subsidiary of Berry Plastics Corporation acquired substantially all of the assets of the Division for aggregate consideration of approximately $18 million. F-57 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC. CONDENSED BALANCE SHEET (In Thousands of Dollars) SEPTEMBER 30, 1998 --------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.............................. $ 790 ..Accounts receivable (less allowance for doubtful accounts of $50).................................... 2,785 Inventories: Finished goods..................................... 522 Raw materials and supplies.......................... 1,256 1,778 Prepaid expenses and other receivables................. 199 Total current assets..................................... 5,552 Property and equipment: Land................................................... 877 Buildings and improvements............................. 6,059 Machinery, equipment and tooling....................... 22,456 Construction in progress............................... 2,620 32,012 Less accumulated depreciation.......................... 18,678 - ----------------------------------------------------------- --------------- 13,334 Goodwill (net of accumulated amortization of $936) ...... 2,321 $ 21,207 LIABILITIES AND DIVISION EQUITY Current liabilities: Notes payable, parent.................................. $ 3,186 Accounts payable....................................... 2,443 Accrued expenses and other liabilities................. 2,024 Total current liabilities................................ 7,653 Division equity.......................................... 13,554 - ----------------------------------------------------------- $ 21,207 - ----------------------------------------------------------- ============================================================================== SEE ACCOMPANYING NOTES. F-58 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC. CONDENSED STATEMENT OF OPERATIONS (In Thousands of Dollars) SIX-MONTHS ENDED ---------------------------- SEPTEMBER 30, SEPTEMBER 30, 1998 1997 ---------------------------- (Unaudited) Net sales........................... $11,893 $11,721 Cost of goods sold.................. 10,596 11,097 Gross margin........................ 1,297 624 Operating expenses: Selling, general and administrative.................. 1,377 1,244 Amortization of intangibles..... 81 81 Operating income, (loss) ........... (161) (701) Other income and expense: Gain on sale of property and equipment....................... - 9 Interest expense, parent........ (169) (226) Interest income................. - 2 ---------------------------- -------------------------------------- Division loss....................... $(330) $(916) ============================ SEE ACCOMPANYING NOTES. F-59 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC. CONDENSED STATEMENT OF CASH FLOWS (In Thousands of Dollars) SIX-MONTHS ENDED ------------------------------- SEPTEMBER SEPTEMBER 30, 30, 1998 1997 --------------- ------------- ------------------------------- (UNAUDITED) OPERATING ACTIVITIES Division loss................................... $ (330) $ (916) Adjustments to reconcile net loss to net cash provided by operating ..........................activities: Depreciation............................... 918 1,030 Amortization............................... 81 81 Gain on sale of property and equipment..... --- (9) Changes in operating assets and liabilities: Accounts receivable, net................. 841 257 Inventories.............................. --- 115 Prepaid expenses and other receivables... (4) 153 Payables and accrued expenses............ (363) (313) Net cash provided by operating activities....... 1,143 398 - --------------------------------------------------- INVESTING ACTIVITIES Additions to property and equipment............. (781) (59) Proceeds from disposal of property and equipment --- 9 Division equity contribution from parent........ --- 133 Net cash provided by (used in) investing activities...................................... (781) 83 - --------------------------------------------------- FINANCING ACTIVITIES Net payments on note payable, parent............ (291) (286) Net cash used in financing activities........... (291) (286) - --------------------------------------------------- - --------------------------------------------------- Net increase in cash and cash equivalents....... 71 195 - --------------------------------------------------- Cash and cash equivalents at beginning of period 719 238 - --------------------------------------------------- Cash and cash equivalents at end of period...... $790 $433 - --------------------------------------------------- ==============================================================================
SEE ACCOMPANYING NOTES. F-60 KNIGHT ENGINEERING AND PLASTICS DIVISION OF COURTAULDS PACKAGING INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) (Unaudited) 1.....BASIS OF PRESENTATION The accompanying financial statements include the accounts of Knight Engineering and Plastics Division of Courtaulds Packaging Inc., a West Virginia Corporation (the Division). Courtaulds Packaging, Inc. (Parent) is owned by Courtauld PLC, a public limited company organized under the laws of England and Wales. The Division was not a legal entity and operated as a component of a larger business. The Division's financial statement includes only assets, liabilities and results of operations which comprise the specific division. The balance sheet and statement of operations, which have been prepared from the historical accounting records of the Division, include all revenues and costs directly attributable to the Division's business, including costs of facilities, employees and related support functions. The Division has not been charged for the cost of certain functions and services performed by the Parent or other related entities on behalf of the Division. Similarly, the Division has not been allocated any income tax expense or benefit. Management believes that the impact of costs performed by Parent and other related entities on behalf of the Division would not be significant to the accompanying financial statements. 2. NOTE PAYABLE, PARENT At September 30, 1998, the Division had a note payable to Courtaulds Packaging Inc. The note was used to fund the Division's working capital requirements with no stated maturity. Interest was charged to the Division at a rate of approximately 7%. 3. SUBSEQUENT EVENT On October 16, 1998, a newly formed, wholly-owned subsidiary of Berry Plastics Corporation acquired substantially all of the assets of the Division for aggregrate consideration of approximately $18 million. F-61 NORWICH INJECTION MOULDERS LIMITED DIRECTORS J E Barlow (Chairman) A R Sandell (Managing) T D Johnson SECRETARY REGISTERED OFFICE Mrs. J Barlow Stanford Tuck Road North Walsham Norfolk AUDITORS Lovewell Blake Chartered Accountants 102 Prince of Wales Road Norwich REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31ST OCTOBER 1997 The directors present herewith the audited accounts for the year ended 31st October 1997. DIRECTORS' RESPONSIBILITIES Company law requires the directors to prepare accounts that give a true and fair view of the state of affairs of the company and of the profit or loss for its financial year. In doing so the directors are required to: o select suitable accounting policies and apply them consistently; o make judgements and estimates that are reasonable and prudent; o state whether applicable accounting standards have been followed, o subject to any material departures disclosed and explained in the accounts; o prepare the accounts on the going concern basis unless it is inappropriate o to presume that the company will continue in business. The directors are responsible for maintaining proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the accounts comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. REVIEW OF ACTIVITIES The company's main activities are unchanged since last year and are principally those of the production of plastic goods by injection moulding. In the opinion of the directors the company will be able to maintain its present level of turnover for the foreseeable future. The profit for the year has been added to the balance on the profit and loss account. F-62 NORWICH INJECTION MOULDERS LIMITED REPORT OF THE DIRECTORS (CONTINUED) DIRECTORS The directors named above held office throughout the year. In accordance with the articles of association T D Johnson will retire at the annual general meeting and, being eligible, offers himself for re-election. The interests of the directors of the company at 31st October 1997 in the shares of the company, according to the register required to be kept by Section 325 of the Companies Act 1985 were as follows: 31ST OCTOBER 31ST OCTOBER 1997 ORDINARY 1996 ORDINARY 31ST OCTOBER 1995 SHARES SHARES ORDINARY SHARES FULLY PAID FULLY PAID FULLY PAID PARTLY PAID -------------- -------------- ----------- ----------- J E Barlow........... 60 60 11 49 A R Sandell.......... 29 29 -- 29 T D Johnson.......... 11 11 -- 11 MARKET VALUE OF INTEREST IN LAND In the opinion of the directors, the current open market value on an existing use basis of the freehold land and buildings exceeds the net book value as shown in the balance sheet at the 31st October 1997 by (pound)80,711. CLOSE COMPANY PROVISIONS The company is a close company within the provisions of the Income and Corporation Taxes Act 1988. AUDITORS A resolution to re-appoint Lovewell Blake will be proposed at the annual general meeting. By order of the board J BARLOW Secretary North Walsham 22nd December 1997 F-63 REPORT OF INDEPENDENT AUDITORS TO THE DIRECTORS OF NORWICH INJECTION MOULDERS LIMITED To the Directors of Norwich Injection Moulders Limited We have audited the balance sheets of Norwich Injection Moulders Limited as at 31st October 1997, 31st October 1996 and 31st October 1995, and the related profit and loss accounts and cash flow statements for each of the three years in the period ended 31st October 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with United Kingdom auditing standards which do not differ in any significant respect from United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Norwich Injection Moulders Limited at 31st October 1997, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended 31st October 1997 in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 24 of Notes to the Accounts). /S/ LOVEWELL BLAKE Chartered Accountants Norwich, England 22nd December 1997 in respect of accounts to 31st October 1997 31st January 1997 in respect of accounts to 31st October 1996 11th March 1996 in respect of accounts to 31st October 1995 except for Note 24 Differences between United Kingdom and United States Generally Accepted Accounting Principles as to which the date is 18th May 1999 F-64 NORWICH INJECTION MOULDERS LIMITED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31ST YEAR ENDED 31ST YEAR ENDED 31ST NOTES OCTOBER 1997 OCTOBER 1996 OCTOBER 1995 ----------- ----------------- ----------------- --------------- (POUND) (POUND) (POUND) Turnover ....................................... 2 8,117,742 7,308,368 5,046,307 Change in stock of finished goods .............. 5,908 26,405 15,783 ----------- ---------- ----------- 8,123,650 7,334,773 5,062,090 Other operating income ......................... 3 21,738 6,823 3,749 ----------- ---------- ----------- 8,145,388 7,341,596 5,065,839 Raw materials and consumables .................. 3,772,741 3,521,241 2,270,368 Other external charges ......................... 677,847 616,428 468,515 Staff costs .................................... 4 1,510,732 1,421,872 1,073,648 Depreciation ................................... 6 441,666 338,363 293,657 Other operating charges ........................ 537,182 482,605 432,372 Interest payable and similar charges ........... 7 103,769 120,943 128,526 ----------- ---------- ----------- 7,043,937 6,501,452 4,666,086 ----------- ---------- ----------- Profit on ordinary activities before taxation ..................................... 8 1,101,451 840,144 399,753 Tax on profit on ordinary activities ........... 9 261,160 4,618 98,035 ----------- ---------- ----------- Profit on ordinary activities after taxation ..................................... * 840,291 835,526 301,718 Balance 1st November 1996 ...................... 2,209,809 1,374,283 1,072,565 ----------- ---------- ----------- Balance 31st October 1997 ...................... 3,050,100 2,209,809 1,374,283 =========== ========== ===========
There are no movements in shareholders funds other than the increase to the retained profits for the years ended 31st October 1997, 31st October 1996 and 31st October 1995. There were no recognized gains or losses other than the profit of (pound)840,291 in the year ended 31st October 1997, (pound)835,526 in the year ended 31st October 1996 and (pound)301,718 in the year ended 31st October 1995. *A summary of the significant adjustments to the profit on ordinary activities after taxation (net income) that would be required if US Generally Accepted Accounting Principles were to be applied instead of those generally accepted in the United Kingdom is set out in Note 24 of Notes to the Accounts. F-65 NORWICH INJECTION MOULDERS LIMITED BALANCE SHEET
Notes 31st October 1997 31st October 1996 31st October 1995 --------- ------------------ ----------------- ----------------- (pound) (pound) (pound) FIXED ASSETS Tangible assets ..................................... 10 3,839,712 3,507,176 2,978,664 CURRENT ASSETS Stock and work in progress .......................... 11 342,324 313,971 231,064 Debtors ............................................. 12 1,622,209 1,582,819 1,234,573 Bank balances ....................................... 510,081 560,087 -- Cash in hand ........................................ 464 338 669 ---------- ---------- ---------- 2,475,078 2,457,215 1,466,306 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR ........ 13 2,384,216 2,696,054 1,783,404 NET CURRENT ASSETS/(LIABILITIES) ................................ 90,862 (238,839) (317,098) TOTAL ASSETS LESS CURRENT LIABILITIES ................................. 3,930,574 3,268,337 2,661,566 ---------- ---------- ---------- CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR ............................................ 14 880,374 1,058,428 1,098,041 PROVISIONS FOR LIABILITIES AND CHARGES DEFERRED TAXATION ................................... 15 -- -- 189,227 ---------- ---------- ---------- 3,050,200 2,209,909 1,374,298 ========== ========== ========== CAPITAL AND RESERVES Called up share capital ............................. 16 100 100 15 Profit and loss account ............................. 3,050,100 2,209,809 1,374,283 ---------- ---------- ---------- 3,050,200 2,209,909 1,374,298 ========== ========== ==========
JE BARLOW - Director ...... AR SANDELL - Director The statutory accounts for the year to 31st October 1997 were approved by the board of directors on 22nd December 1997. The statutory accounts for the year to 31st October 1997 were approved by the board of directors on 31st January 1997. The statutory accounts for the year to 31st October 1997 were approved by the board of directors on 27th February 1996. o A summary of the significant adjustments to capital and reserves (shareholders funds) that would be required if US Generally Accepted Accounting Principles were to be applied instead of those generally accepted in the United Kingdom is set out in Note 24 of Notes to the Accounts. F-66 NORWICH INJECTION MOULDERS LIMITED CASH FLOW STATEMENT
YEAR ENDED YEAR ENDED YEAR ENDED 31ST 31ST 31ST OCTOBER OCTOBER OCTOBER NOTES 1997 1996 1995 ----- ---------- ---------- ---------- (POUND) (POUND) (POUND) CASH FLOW FROM OPERATING ACTIVITIES ....... 20 1,520,397 1,443,181 781,305 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE ................................ 21 (84,576) (122,884) (126,426) TAXATION .................................. (193,817) (70,214) (50,052) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT ................................ 21 (980,793) (635,844) (924,113) CASH INFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING ................... 261,211 614,239 (319,286) FINANCING - DECREASE IN DEBT .............. 21 (251,086) (9,654) 379,110 - CALLS ON SHARE CAPITAL .......... 21 -- 85 -- INCREASE IN CASH IN THE YEAR .............. 22 10,125 604,760 59,824 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT INCREASE IN CASH IN THE YEAR .............. 10,125 604,760 59,824 CASH OUTFLOW/(INFLOW) FROM DECREASE/INCREASE IN DEBT AND LEASE FINANCING ................................. 21 251,086 9,564 (379,110) MOVEMENT IN NET DEBT IN THE PERIOD ........ 261,211 614,324 (319,286) NET DEBT AT 1ST NOVEMBER .................. (921,849) (1,536,173) (1,216,887) NET DEBT AT 31ST OCTOBER .................. 22 (660,638) (921,849) (1,536,173) ---- ---------- ---------- ----------
The significant differences between the cashflow statement presented above and that required under US Generally Accepted Accounting Principles are set out in Note 24 of Notes to the Accounts. F-67 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS 1. PRINCIPAL ACCOUNTING POLICIES (A) BASIS OF ACCOUNTING The accounts are prepared under the historical cost basis of accounting and in accordance with applicable UK accounting standards. (B) DEPRECIATION Depreciation is provided on fixed assets at rates sufficient to write off, on a straight line basis, the cost of the assets over their expected useful lives. It is the company's policy to maintain its freehold property to such a standard that its residual disposal value will at least equal its book value and accordingly no provision for depreciation has been made. The principal annual rates used for this purpose which are consistent with those of last year are: Freehold land and buildings Not depreciated Leasehold property expenditure Over period of the lease Plant and machinery 10% - 50% Motor vehicles 20% - 25% Loose tools Written off on a usage basis (C) STOCK AND WORK IN PROGRESS Stock and work in progress are stated at the lower of cost and net realisable value. In general cost is determined on a first in first out basis and includes transport and handling costs. In the case of work in progress cost includes all direct expenditure and production overheads based on the normal level of activity. Net realisable value is the price at which stock can be sold in the normal course of business after allowing for the costs of realisation and, where appropriate, the cost of conversion from their existing state to a finished condition. Provision is made where necessary for obsolete, slow moving and defective stock. (D) FINANCE LEASE AND HIRE PURCHASE CONTRACTS Assets held under finance leases, other than hire purchase contracts, are capitalized at their fair value and are depreciated over either the lease term, or the useful working life of the asset, whichever is the shorter. Fair value is usually the cost at which the company could have purchased the asset. Future rental payments due during the primary lease period are shown as creditors. The difference between the total primary lease payments and the fair value of the asset is treated as a finance charge and is charged to the profit and loss account on a straight line basis over the primary lease period. Secondary lease rentals are charged to profit and loss account in the period in which they are paid. Assets held under hire purchase contracts are capitalized at their fair value and are depreciated over their useful working life on the same basis as set out in note 1(b). F-68 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (E) OPERATING LEASES Operating lease rentals are charged to profit and loss account in the period in which they are incurred. (F) DEFERRED TAXATION Provision is made for deferred taxation where, in the opinion of the directors, it is likely to be payable in the foreseeable future. (G) PENSION SCHEME The company operates defined contribution schemes. The assets of the schemes are held separately from those of the company in independently administered funds. The charge in the profit and loss accounts represents the contributions payable by the company to the funds for the year. (H) FOREIGN CURRENCIES Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling on the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Significant differences arising due to exchange fluctuations have been reflected in the profit and loss account. 2. TURNOVER The contribution to turnover and profit before taxation arises from the production of plastic goods by injection moulding. 1997 1996 1995 --------- --------- --------- (POUND) (POUND) (POUND) Geographical analysis of turnover United Kingdom......... 7,890,743 7,160,110 4,887,260 Rest of Europe......... 226,999 148,258 159,047 --------- --------- --------- 8,117,742 7,308,368 5,046,307 ========= ========= ========= 3. OTHER OPERATING INCOME 1997 1996 1995 --------- --------- --------- (POUND) (POUND) (POUND) Training grants........ 500 2,589 3,700 Interest received (gross) 21,238 4,234 49 --------- --------- --------- 21,738 6,823 3,749 ========= ========= ========= F-69 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 4. EMPLOYEE INFORMATION The average number of persons employed by the company during the year including directors is analyzed below: 1997 1996 1995 -------- -------- -------- Manufacturing and packing .................... 57 52 42 Selling and administration ................... 18 17 16 Former employees ............................. 2 2 2 -------- -------- -------- 77 71 60 ======== ======== ======== 1997 1996 1995 --------- --------- --------- (POUND) (POUND) (POUND) Staff costs Wages and salaries paid to the company's employees ............... 1,313,859 1,264,343 926,530 Pensions to former employees ...... 14,905 14,905 14,905 Social security costs ............. 139,201 107,619 98,325 Pension contributions ............. 42,767 35,005 33,888 --------- --------- --------- 1,510,732 1,421,872 1,073,648 ========= ========= ========= 5. DIRECTORS' EMOLUMENTS 1997 1996 1995 --------- --------- --------- (POUND) (POUND) (POUND) Management remuneration ......... 271,217 363,153 206,546 Pension contributions ........... 15,818 16,043 15,449 Taxable benefits ................ 27,301 28,608 29,403 --------- --------- --------- 314,336 407,804 251,398 ========= ========= ========= The directors' emoluments disclosed above (excluding pension contributions) include amounts paid to: (POUND) (POUND) (POUND) --------- --------- --------- The Highest Paid Director.............. 106,903 137,910 86,398 Retirement benefits in respect of the three directors are accruing under a defined contribution scheme. The contributions paid in respect of the highest paid director were (pound)5,488 ((pound)5,583 in the year ended 31st October 1996 and (pound)5,365 in the year ended 31st October 1995). F-70 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 6. DEPRECIATION The charge for the year is made up as under: 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) The charge for the year is made up as under: Depreciation of tangible fixed assets Owned assets ............................... 342,082 193,832 143,785 Assets held under finance lease and hire purchase contracts ................ 116,103 169,931 151,738 ------- ------- ------- 458,185 363,763 295,523 (16,519) (25,400) (1,866) ------- ------- ------- Profit on sale of tangible fixed assets ..................................... 441,666 338,363 293,657 ------- ------- ------- 7. INTEREST PAYABLE AND SIMILAR CHARGES 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) Bank loan and overdraft ............ 63,718 69,425 80,945 Finance leases and hire purchase contracts expiring within five years ................. 40,051 51,518 47,581 ------- ------- ------- 103,769 120,943 128,526 ------- ------- ------- 8. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION The profit on ordinary activities before taxation is stated after charging the following amounts: 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) Hire of equipment .................. 55,698 71,616 72,385 Rent of land and buildings ......... 22,080 22,127 28,203 Auditors remuneration .............. 3,000 3,000 2,750 ------- ------- ------- F-71 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 9. TAX ON PROFIT ON ORDINARY ACTIVITIES 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) Corporation tax for the year at 30% (1996 30%, 1995 25%) Taxation payable ...................... 261,163 193,845 70,043 Overprovision in previous year ........ (3) -- -- Decrease in provision for deferred tax ......................... -- (189,227) 27,992 ------- ------- ------- 261,160 4,618 98,035 F-72 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 10. TANGIBLE FIXED ASSETS
EXPENDITURE ON SHORT MOTOR FREEHOLD LEASEHOLD PLANT AND TOTAL PROPERTY PROPERTY MACHINERY VEHICLES ------------ ------------ ------------ ------------ ------------ (POUND) (POUND) (POUND) (POUND) (POUND) COST 1st November 1994 ......... 3,211,137 921,157 298 2,167,594 122,088 Additions ................. 843,420 269,790 -- 546,130 27,500 Disposals ................. (109,265) -- -- (85,375) (23,890) ------------ ------------ ------------ ------------ ------------ 31st October 1995 ......... 3,945,292 1,190,947 298 2,628,349 125,698 Additions ................. 967,725 1,719 -- 933,038 32,968 Disposals ................. (168,686) -- -- (137,011) (31,675) ------------ ------------ ------------ ------------ ------------ 31st October 1995 ......... 4,744,331 1,192,666 298 3,424,376 126,991 Additions ................. 900,630 26,623 -- 779,975 94,032 Disposals ................. (365,688) -- -- (276,915) (88,773) ------------ ------------ ------------ ------------ ------------ 31st October 1995 ......... 5,279,273 1,219,289 298 3,927,436 132,250 ============ ============ ============ ============ ============ DEPRECIATION 1st November 1994 ......... 729,236 -- 225 696,176 32,835 Disposals ................. (58,131) -- -- (46,677) (11,454) Charge for the year ....... 295,523 -- 12 265,347 30,146 ------------ ------------ ------------ ------------ ------------ 31st October 1995 ......... 966,628 -- 237 914,846 51,545 Disposals ................. (93,236) -- -- (70,136) (23,100) Charge for the year ....... 363,763 -- 12 334,547 29,204 ------------ ------------ ------------ ------------ ------------ 31st October 1996 ......... 1,237,155 -- 249 1,179,257 57,649 Disposals ................. (255,779) -- -- (193,173) (62,606) Charge for the year ....... 458,185 -- 12 431,284 26,889 ------------ ------------ ------------ ------------ ------------ 31st October 1997 ......... 1,439,561 -- 261 1,417,368 21,932 ============ ============ ============ ============ ============ NET BOOK AMOUNT 31st October 1997 ......... 3,839,712 1,219,289 37 2,510,068 110,318 ============ ============ ============ ============ ============ 31st October 1996 ......... 3,507,176 1,192,666 49 2,245,119 69,342 ============ ============ ============ ============ ============ 31st October 1995 ......... 2,978,664 1,190,947 61 1,713,503 74,153 ============ ============ ============ ============ ============ 31st October 1994 ......... 2,481,901 921,157 73 1,471,418 89,253 ============ ============ ============ ============ ============
Details of fixed assets held under finance leases and hire purchase contracts, which are included in the relevant headings in the table above, are as follows: 1997 1996 1995 (pound) (pound) (pound) ------- --------- ------- Net book value at 31st October 1997............................ 808,682 1,080,707 954,467 F-73 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 11.STOCK AND WORK IN PROGRESS The amounts attributable to the different categories are as follows: 1997 1996 1995 (POUND) (POUND) (POUND) -------- ------- ------- Raw materials................... 200,506 200,719 129,345 Packing materials............... 9,698 11,492 15,035 Finished goods.................. 87,466 81,558 61,156 Work in progress................ 44,654 20,202 25,528 -------- ------- ------- 342,324 313,971 231,064 ======== ======= ======= 12.DEBTORS 1997 1996 1995 (POUND) (POUND) (POUND) --------- --------- --------- Trade debtors................... 1,595,311 1,562,039 1,219,983 Loans........................... -- -- 160 Prepayments..................... 26,898 20,780 14,430 --------- --------- --------- 1,622,209 1,582,819 1,234,573 --------- --------- --------- 13.CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR 1997 1996 1995 --------- --------- --------- (POUND) (POUND) (POUND) Bank overdraft (see note (a) below).......................... -- 60,005 105,009 Bank loan (see note (b) below).. 36,664 36,664 36,664 --------- --------- --------- Bank loan and overdraft......... 36,664 96,669 141,673 Trade creditors................. 1,578,688 1,743,509 1,044,690 Corporation tax payable 1st August 1998 (1996 - 1st August 1997, 1995 - 1st August 1996)........... 261,163 193,820 70,189 Taxation and social security payments........................ 163,762 130,944 142,640 Hire purchase obligations (see note (c) below)................. 254,145 327,177 297,128 Accruals........................ 89,794 203,935 87,084 --------- --------- --------- 2,384,216 2,696,054 1,783,404 --------- --------- --------- (a) Secured by a fixed and floating charge over the other assets of the company. (b) Secured by a mortgage on the freehold premises. (c) Secured on the assets concerned. F-74 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 14.CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1997 1996 1995 (POUND) (POUND) (POUND) ------- --------- --------- Bank loan bearing interest at various rates repayable by quarter installments (see note (a) below).................... 705,742 742,406 779,070 (see note (b) below).................... 174,632 316,022 318,971 ------- --------- --------- 880,374 1,058,428 1,098,041 ------- --------- --------- (a) Secured by a mortgage on the freehold premises (b) Secured on the assets concerned. The bank loan above analyzed by due dates of repayment Repayable between one and two years......... 36,664 36,664 36,664 Repayable between two and five years........ 109,992 109,992 109,992 Repayable after more than five years by installments................................ 559,086 595,750 632,414 705,742 742,406 779,070 15.DEFERRED TAXATION 1997 1996 1995 PROVIDED UNPROVIDED PROVIDED UNPROVIDED PROVIDED UNPROVIDED -------- ---------- -------- ---------- -------- ---------- (POUND) (POUND) (POUND) (POUND) (POUND) (POUND) Accelerated capital Allowances.. -- 373,364 -- 316,866 189,227 -- -------- ---------- -------- ---------- -------- ---------- 16. SHARE CAPITAL 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) AUTHORIZED Ordinary shares of(pound)1 each.................... 100 100 100 CALLED UP SHARE CAPITAL Shares issued at(pound)1 each (1997:100, 1996:100, 1995:11)....................................... 100 100 11 Shares issued at 5p each (1997:nil, 1996:nil, 1995:89)....................................... -- -- 4 100 100 15 17.LEASING COMMITMENTS The company leases land and building in Norwich. At 31st October 1997 the lease has an unexpired term of two years, at a rental of (pound)22,080. F-75 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 18.CAPITAL EXPENDITURE 1997 1996 1995 ------- ------- ------- (POUND) (POUND) (POUND) Authorized and contracted for..................... 43,652 -- 175,108 ======= ======= ======= 19.CONTROLLING INTEREST Mr. J E Barlow owns 60% of the issued share capital of the company and, as such, controls the company. 20.NOTES TO CASHFLOW STATEMENT Reconciliation of operating profit to net cash inflow from operating activities. 1997 1996 1995 (pound) (pound) (pound) --------- -------- -------- Operating profit......................... 1,101,451 840,144 399,753 Depreciation............................. 441,666 338,363 293,657 Interest payable and similar charges..... 103,769 120,943 128,526 Interest received........................ (21,238) (4,234) -- Increase in stocks....................... (28,353) (82,907) (59,607) Increase in debtors...................... (39,390) (348,246) (290,978) (Decrease)/Increase in creditors......... (37,508) 579,118 309,954 --------- -------- -------- Net cash inflow from operating activities 1,520,397 1,443,181 781,305 --------- -------- -------- 21.ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 1997 1996 1995 ------- -------- --------- (POUND) (POUND) (POUND) Interest received........................ 21,238 4,234 -- Interest paid............................ (63,598) (73,625) (81,245) Interest element of finance lease rental payments................................. (42,216) (53,493) (45,181) ------- -------- --------- NET CASH (OUTFLOW) FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE.. (84,576) (122,884) (126,426) ======= ======== ========= CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 1997 1996 1995 ------- -------- --------- (POUND) (POUND) (POUND) Purchase of tangible fixed assets........ (1,107,221) (736,694) (977,113) Proceeds from the sale of fixed assets... 126,428 100,850 53,000 NET CASH (OUTFLOW) FOR CAPITAL EXPENDITURE AND FINANCIAL) INVESTMENT............ (980,793) (635,844) (924,113) F-76 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 21.ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT (CONTINUED) FINANCING 1997 1996 1995 -------- ------- ------- (pound) (pound) (pound) Loans advanced to company............. - - 250,000 Loans repaid by company............... (36,664) (36,664) (29,466) Hire purchase advances to company..... 137,700 386,953 453,296 Hire purchase and finance lease repayments............................ (352,122) (359,853) (294,720) Calls on share capital................ - 85 - -------- ------- ------- NET CASH (OUTFLOW)/INFLOW FROM FINANCING............................. (251,086) (9,479) (379,110) 22. ANALYSIS OF CHANGES IN NET DEBT AT AT 1ST 31ST NOVEMBER CASH OTHER OCTOBER 1994 FLOWS CHANGES 1995 -------- ------- ------- ------- (POUND) (POUND) (POUND) (POUND) Cash in hand, at bank..... 131 538 - 669 Overdraft................. (164,295) 59,286 - (105,009) -------- ------- ------- ------- (164,164) 59,824 - (104,340) Hire purchase and finance leases.................... (457,523) (158,576) - (616,099) Debt due within one year.. (25,600) 29,466 (40,530) (36,664) Debt due after one year... (569,600) (250,000) 40,530 (779,070) --------- --------- --------- ------- (1,216,887) (319,286) - (1,536,173) =========== ========== = ========= AT AT 1ST 31ST NOVEMBER CASH OTHER OCTOBER 1994 FLOWS CHANGES 1996 -------- ------- ------- ------- (POUND) (POUND) (POUND) (POUND) Cash in hand, at bank..... 669 559,756 - 560,425 Overdraft................. (105,009) 45,004 - (60,005) ------- ------- ------- ------- (104,340) 604,760 - 500,420 Hire purchase and finance leases ................... (616,099) (27,100) - (643,199) Debt due within one year.. (36,664) 36,664 (36,664) (36,664) Debt due after one year... (779,070) - 36,664 (742,406) --------- - --------- ------- (1,536,173) 614,324 - (921,849) NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 22.ANALYSIS OF CHANGES IN NET DEBT (CONTINUED) AT AT 1ST 31ST NOVEMBER CASH OTHER OCTOBER 1994 FLOWS CHANGES 1997 -------- ------- ------- ------- (POUND) (POUND) (POUND) (POUND) Cash in hand, at bank..... 560,425 (49,880) - 510,545 Overdraft................. (60,005) 60,005 - - -------- --------- --------- -------- 500,420 10,125 - 510,545 Hire purchase and finance leases ................... (643,199) 214,422 - (428,777) Debt due within one year.. (36,664) 36,664 (36,664) (36,664) Debt due after one year... (742,406) - 36,664 (705,742) --------- -------- --------- --------- (921,849) 261,211 (660,638) ========== ======== ========= ========= 23.COMPANIES ACT 1985 These financial statements do not comprise the Company's statutory accounts within the meaning of section 240 of the Companies Act 1985 of Great Britain. Statutory accounts for the years ended 31st October 1997, 1996 and 1995, on which the auditors' reports were unqualified, have been delivered to the Registrar of Companies for England and Wales. 24.DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The company's accounts are prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") which differ from United States generally accepted accounting principles ("US GAAP"). The significant differences applicable to the company are summarized below. DEPRECIATION OF FREEHOLD PROPERTY Under UK GAAP, the company does not depreciate its freehold property. Under US GAAP, depreciation would be provided. FINANCE LEASES AND HIRE PURCHASE CONTRACTS Under UK GAAP, the finance charge relating to finance (capital) leases and hire purchase contracts is charged to the profit and loss account on a straight line basis. Under US GAAP, such finance charges would be charged to income over the period of the lease so as to provide a constant rate of interest on the remaining balance of the capital obligation. It is considered that the difference between the two methods in this case does not have a material effect on either the balance sheets as at 31st October 1995, 31st October 1996 and 31st October 1997 or the reported results for the years then ended. F-78 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) 24.DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED) DEFERRED TAXATION Under UK GAAP, provision for deferred taxation is only made where in the opinion of the directors it is likely to be payable in the foreseeable future. Under US GAAP, deferred taxation is computed for all temporary differences between the tax and book bases of assets and liabilities. Deferred tax assets are recognized to the extent their realisation is more likely than not. The following is a summary of the significant adjustments to income and shareholders' funds which would be required if US GAAP were to be applied instead of UK GAAP. INCOME YEAR YEAR YEAR ENDED ENDED ENDED 31ST 31ST 31ST OCTOBER OCTOBER OCTOBER 1997 1996 1995 ---------- ---------- ----- (pound) (pound) (pound) Profit on ordinary activities after taxation as reported in the profit and loss account ........................... 840,291 835,526 301,718 ---------- ---------- ----- Adjustments Depreciation....................... (22,160) (21,627) (21,593) Deferred taxation - methodology.... (73,260) (250,215) (9,789) - on above adjustments. 6,648 6,488 6,478 ---------- ---------- ----- Net income as adjusted to accord with US GAAP Net income................. 751,519 570,172 276,814 ========= ======== ======= SHAREHOLDERS' FUNDS YEAR YEAR YEAR ENDED ENDED ENDED 31ST 31ST 31ST OCTOBER OCTOBER OCTOBER 1997 1996 1995 ---------- ------- ------ (POUND) (POUND) (POUND) Capital and reserves as reported ..... 3,050,200 2,209,909 1,374,298 Adjustments Fixed assets Tangible assets-freehold property depreciation.......................... (97,427) (75,267) (53,640) Deferred taxation - methodology. (361,320) (288,060) (37,845) - on above adjustments 29,228 22,580 16,092 ---------- ------- ------ Shareholders' funds as adjusted to accord with US GAAP....................... 2,620,681 1,869,162 1,298,905 ========== ========= ========= STATEMENT OF CASH FLOWS The statement of cash flows prepared under UK GAAP presents substantially the same information as that required under US GAAP but it differs with regard to the classification of items within it and as regards the definition of cash under UK GAAP and cash and cash equivalents under US GAAP. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment and financing. US GAAP require only three categories of cash flow activity to be reported, operating, investing and financing. Cash flows from F-79 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) taxation and returns on investments and servicing shown under UK GAAP would be included within operating activities under US GAAP. Capital expenditure and financial investment would be included within investing activities under US GAAP. Under UK GAAP, cash is defined as cash in hand and deposits repayable on demand less bank overdrafts repayable on demand. Under US GAAP, cash and cash equivalents would not include bank overdrafts but would include cash deposits repayable within three months at their inception. The categories of cash flows under US GAAP can be summarized as follows: YEAR YEAR YEAR ENDED ENDED ENDED 31ST 31ST 31ST OCTOBER OCTOBER OCTOBER 1997 1996 1995 (pound) (pound) (pound) ---------------------------------------- Cash inflow from operating activities. 1,242,004 1,250,083 604,827 ---------------------------------------- Cash outflow on investing activities.. (980,793) (635,844) (924,113) ---------------------------------------- Cash outflow from financing activities (251,086) (9,479) 379,110 ---------------------------------------- (Decrease)/Increase in cash and cash equivalents........................... (49,880) 559,756 538 ---------------------------------------- Cash and cash equivalents ---------------------------------------- At 1st November.................... 560,425 669 131 ---------------------------------------- At 31st October.................... 510,545 560,425 669 F:\Active\BerryPlastics_S-4__8-4-99\orig\155467(f-pages)c.doc F-84 NORWICH INJECTION MOULDERS LIMITED PROFIT AND LOSS ACCOUNT 6 MONTHS 6 MONTHS ENDED ENDED 30 APRIL 30 APRIL 1998 1997 (pound) (pound) ---------------------------------------- Turnover.............................. 4,294,764 3,954,620 ---------------------------------------- Change in stock of finished goods..... (8,941) (5,726) ---------------------------------------- 3,948,894 ---------------------------------------- Other operating income................ 11,663 10,707 ---------------------------------------- 4,297,486 3,959,601 ---------------------------------------- ---------------------------------------- Raw materials and consumables......... 1,813,051 1,735,182 ---------------------------------------- Other external charges................ 272,590 316,745 ---------------------------------------- Staff costs........................... 812,776 731,892 ---------------------------------------- Depreciation.......................... 251,990 201,514 ---------------------------------------- Other operating charges............... 405,219 434,945 ---------------------------------------- Interest payable and similar charges.. 47,096 53,500 ---------------------------------------- ---------------------------------------- ---------------------------------------- Profit on ordinary activities before taxation.............................. 694,754 485,823 ---------------------------------------- Tax on profit on ordinary activities.. 225,798 115,140 ---------------------------------------- Profit on ordinary activities after taxation.............................. 468,956 370,683 ---------------------------------------- Balance 1st November.................. 3,050,100 2,209,809 ---------------------------------------- Balance 30th April 3,519,056 2,580,492 ---------------------------------------- ============================================================================== There are no movements in shareholders funds other than the increase to the retained profits for the six month periods ended 30th April 1998 and 30th April 1997. There were no recognized gains or losses other than the profit of (pound)468,956 in the six months ended 30th April 1998, and (pound)370,683 in the six months ended 30th April 1997. * A summary of the significant adjustments to the profit on ordinary activities after taxation (net income) that would be required if US Generally Accepted Accounting Principles were to be applied instead of those generally accepted in the United Kingdom is set out in the Notes to the Accounts. F-81 NORWICH INJECTION MOULDERS LIMITED BALANCE SHEET ----------- 30 APRIL 1998 (poUnd) FIXED ASSETS Tangible Assets....................... 3,907,483 CURRENT ASSETS Stock and work in progress............ 307,332 Debtors............................... 1,651,367 Cash at bank and in hand.............. 886,682 -------------------------------------- CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR....................... 2,240,635 NET CURRENT ASSETS/(LIABILITIES)...... 604,746 NET ASSETS LESS CURRENT LIABILITIES... 4,512,229 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR.................... 993,073 PROVISIONS FOR LIABILITIES AND CHARGES DEFERRED TAXATION..................... - 3,519,156 CAPITAL AND RESERVES*................. Called up share capital............... 100 Profit and loss account............... 3,519,056 3,519,156 ---------------------------------------- ============================================================================== * A summary of the significant adjustments to capital and reserves (shareholders funds) that would be required if US Generally Accepted Accounting Principles were to be applied instead of those generally accepted in the United Kingdom is set out in the Notes to the Accounts. F-82 NORWICH INJECTION MOULDERS LIMITED CASH FLOW STATEMENT 6 MONTHS ENDED 6 MONTHS ------------ ENDED 30TH 30TH APRIL APRIL 1998 1997 (pound) (pound) CASH FLOW FROM OPERATING ACTIVITIES... 887,585 585,484 RETURNS ON INVESTMENTS AND SERVING OF FINANCE............................... (35,433) (42,793) TAXATION - - CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT............................ (319,771) (422,933) Cash inflow before use of liquid resources and financing............... 532,381 119,758 FINANCING - Decrease in debt.......... (156,244) (159,666) INCREASE/(DECREASE) IN CASH IN THE PERIOD................................ 376,137 (39,908) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT INCREASE/(DECREASE) IN CASH IN THE PERIOD................................ 376,137 (39,908) Cash outflow/(inflow) from decrease/increase in debt and lease financing............................. 156,244 159,666 MOVEMENT IN THE NET DEBT IN THE PERIOD 532,381 119,758 NET DEBT AT 1ST NOVEMBER.............. (660,638) (921,849) NET DEBT AT 30TH APRIL (128,257) (802,091) ---------------------------------------- The significant differences between the cashflow statement presented above and that required under the US Generally Accepted Accounting Principles are set out in Note 4 of the Notes to the Accounts. F-83 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS 1. PRINCIPAL ACCOUNTING POLICIES The accounts are prepared under the historical cost basis of accounting and in accordance with applicable UK accounting standards. 2. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR 1998 1997 (pound) (pound) ---------------------------------------- ---------------------------------------- Bank loan (see note (a) below)........ 36,664 36,664 ---------------------------------------- Bank loan and overdraft............... ---------------------------------------- ---------------------------------------- Trade creditor........................ 1,544,442 1,747,629 ---------------------------------------- Corporation tax payable 1st August.... 261,163 193,820 ---------------------------------------- Taxation and social security payments. 187,366 172,042 ---------------------------------------- Hire purchase obligations (see (b) below)................................ 211,000 211,000 ---------------------------------------- 2,240,635 2,361,155 ---------------------------------------- (a) Secured by a mortgage on a freehold premises. ============================================================================== (b) Secured on the assets concerned. 3. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1998 1997 (pound) (pound) ---------------------------------------- ---------------------------------------- Bank loan bearing interest at various rates repayable by quarterly installments (see note (a) below)..... 687,410 724,074 ---------------------------------------- Hire purchase obligations............. 79,865 290,865 ---------------------------------------- Corporation Tax....................... 225,798 115,140 ---------------------------------------- ---------------------------------------- (a) Secured by a mortgage on the freehold premises. ============================================================================== (b) Secured on the assets concerned. 1998 1997 (pound) (pound) ---------------------------------------- The bank loan above analyzed by due dates of repayment ---------------------------------------- Repayable between one and two years... 36,664 36,664 ---------------------------------------- Repayable between two and five years.. 109,992 109,992 ---------------------------------------- Repayable after more than five years by installments....................... 540,754 577,418 ---------------------------------------- ---------------------------------------- ============================================================================== 4. DIFFERENCE BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The company's accounts are prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") which differ from United States generally accepted accounting principles ("US GAAP"). The significant differences applicable to the company are summarized below. F-84 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) DEPRECIATION OF FREEHOLD PROPERTY Under UK GAAP, the company does not depreciate its freehold property. Under US GAAP, depreciation would be provided. FINANCE LEASES AND HIRE PURCHASE CONTRACTS Under UK GAAP, the finance charge relating to finance (capital) leases and hire purchase contracts is charged to the profit and loss account on a straight line basis. Under US GAAP, such finance charges would be charged to income over the period of the lease so as to provide a constant rate of interest on the remaining balance of the capital obligation. It is considered that the difference between the two methods in this case does not have a material effect on either the balance sheets as at 30th April 1997 and 30th April 1998 or the reported results for the six month periods then ended. DEFERRED TAXATION Under UK GAAP, provision for deferred taxation is only made where in the opinion of the directors it is likely to be payable in the foreseeable future. Under US GAAP, deferred taxation is computed for all temporary differences between the tax and book bases of assets and liabilities. Deferred tax assets are recognized to the extent their realization is more likely than not. The following is a summary of the significant adjustments to income and shareholders' funds which would be required if US GAAP were to be applied instead of UK GAAP. INCOME 6 MONTHS ENDED 6 MONTHS ------------ ENDED 30TH 30TH APRIL APRIL 1998 1997 (pound) (pound) Profit on ordinary activities after taxation as reported on the profit and loss account...................... 468,956 370,683 Adjustments Depreciation (11,080) (10,814) Deferred taxation - methodology....... (37,420) (36,630) - an above adjustments..................... 3,324 3,244 Net income as adjusted to accord with US GAAP Net income.................... 423,780 326,483 SHAREHOLDERS' FUNDS 6 MONTHS ENDED 6 MONTHS ------------ ENDED 30TH 30TH APRIL APRIL 1998 1997 (pound) (pound) Capital and reserves as reported...... 3,519,156 2,580,592 Adjustments Fixed Assets Tangible Assets - freehold property depreciation.......................... (108,507) (86,347) Deferred taxation - methodology........................... (397,950) (324,690) - on above adjustments................ 32,550 25,904 Shareholders' funds as adjusted to accord with US GAAP................... 3,045,249 2,195,459 ---------------------------------------- F-85 NORWICH INJECTION MOULDERS LIMITED NOTES TO THE ACCOUNTS (CONTINUED) STATEMENT OF CASH FLOWS The statement of cash flows prepared under UK GAAP presents substantially the same information as that required under US GAAP but it differs with regard to the classification of items within it and as regards the definition of cash under UK GAAP and cash and cash equivalents under US GAAP. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment and financing. US GAAP require only three categories of cash flow activity to be reported, operating, investing and financing. Cash flows from taxation and returns on investments and servicing shown under UK GAAP would be included within operating activities under US GAAP. Capital expenditure and financial investment would be included within investing activities under US GAAP. Under UK GAAP, cash is defined as cash in hand and deposits repayable on demand less bank overdrafts repayable on demand. Under US GAAP, cash and cash equivalents would not include bank overdrafts but would include cash deposits repayable within three months at their inception. The categories of cash flows under US GAAP can be summarized as follows: 6 MONTHS ENDED 6 MONTHS ------------ ENDED 30TH 30TH APRIL APRIL 1998 1997 (pound) (pound) Cash inflow from operating activities. 676,633 501,630 Cash outflow on investing activities.. (319,771) (422,933) Cash outflow from financing activities (156,244) (159,666) (Decrease)/Increase in cash and cash equivalents........................... 376,137 (39,908) Cash and cash equivalents At 1st November.............. 510,545 500,420 At 30th April................ 886,682 460,512 F-86 - ------------------------------------------------------------ BERRY PLASTICS CORPORATION $75,000,000 11% SENIOR SUBORDINATED NOTES DUE 2007 - ------------------------------------------------------------ -------------------------------- PROSPECTUS -------------------------------- - -------------------------------------------------------------------------------- We have not authorized any dealer, salesperson or other person to give you written information other than this offering memorandum or to make representations as to matters not stated in this offering memorandum. You must not rely on unauthorized information. This offering memorandum is not an offer to sell these securities or our solicitation of your offer to buy these securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this offering memorandum nor any sales made hereunder after the date of this offering memorandum shall create an implication that the information contained herein or our affairs have not changed since the date hereof. - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Certificate or Articles of Incorporation of the Company and each of the Guarantors (except Norwich), in each case as amended, provide that the Company and the Guarantors shall indemnify their respective directors to the fullest extent permitted under the DGCL and the laws of England and Wales (collectively, the "Corporation Law"), as applicable. The Corporation Law provides for indemnification by the Company and each of the Guarantors of their respective directors and officers. In addition, the By-laws of each of the Company and each Guarantor require the respective company to indemnify its current or former directors and officers to the fullest extent permitted by the applicable Corporation Law. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) EXHIBITS 2.1 Asset Purchase Agreement dated February 12, 1992, among the Company, Berry Iowa, Berry Carolina, Inc., Genpak Corporation, a New York corporation, and Innopac International Inc., a public Canadian corporation (filed as Exhibit 10.1 to the Registration Statement on Form S-1 filed on February 24, 1994 (Registration No. 33-75706) (the "Form S-1") and incorporated herein by reference) 2.2 Asset Purchase Agreement dated December 24, 1994, between the Company and Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form S-1 and incorporated herein by reference) 2.3 Asset Purchase Agreement dated March 1, 1995, among Berry Sterling, Sterling Products, Inc. and the stockholders of Sterling Products, Inc. (filed as Exhibit 2.3 to the Annual Report on Form 10-K filed on March 31, 1995 (the "1994 Form 10-K") and incorporated herein by reference) 2.4 Asset Purchase Agreement dated December 21, 1995, among Berry Tri-Plas, Tri-Plas, Inc. and Frank C. DeVore (filed as Exhibit 2.4 to the Annual Report on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated herein by reference) 2.5 Asset Purchase Agreement dated January 23, 1996, between the Company and Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K and incorporated herein by reference) 2.6 Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, by and among Holding, BPC Mergerco, Inc. ("Mergerco") and the other parties thereto (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 3, 1996 (the "Form 8-K") and incorporated herein by reference) II-1 2.7 Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, by and among Holding, Mergerco, Chase Venture Capital Associates, L.P. ("CVCA") and The Northwestern Mutual Life Insurance Company ("Northwestern") (filed as Exhibit 2.2 to the Form 8-K and incorporated herein by reference) 2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and between Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K and incorporated herein by reference) 2.9 Certificate of Merger of Mergerco with and into Holding, dated as of June 18, 1996 (filed as Exhibit 2.9 to the Registration Statement on Form S-4 filed on July 17, 1996 (Registration No. 333-08313) (the "1996 Form S-4") and incorporated herein by reference) 2.10 Agreement and Plan of Reorganization dated as of January 14, 1997 (the "PackerWare Reorganization Agreement"), among the Company, PackerWare Acquisition Corporation, PackerWare Corporation and the shareholders of PackerWare (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on February 4, 1997 (the "1997 8-K") and incorporated herein by reference) 2.11 Amendment to the PackerWare Reorganization Agreement dated as of January 20, 1997 (filed as Exhibit 2.2 to the 1997 8-K and incorporated herein by reference) 2.12 Asset Purchase Agreement dated as of January 17, 1997, among the Company, Container Industries and the shareholders of Container Industries (filed as Exhibit 2.12 to the Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (the "1996 Form 10-K") and incorporated herein by reference) 2.13 Agreement and Plan of Reorganization dated as of January 14, 1997, as amended on January 20, 1997, among the Company, PackerWare Acquisition Corporation, PackerWare Corporation and the Shareholders of PackerWare Corporation (filed as Exhibits 2.1 and 2.2 to the Current Report on Form 8-K filed February 3, 1997 and incorporated herein by reference) 2.14 Asset Purchase Agreement dated May 13, 1997, among the Company, Berry Design, Virginia Design Packaging Corp. and the shareholders of Virginia Design Packaging Corp. (filed as Exhibit 2.14 to the Annual Report on Form 10-K for the fiscal year ended December 27, 1997 (the "1997 Form 10-K") and incorporated herein by reference) 2.15 Agreement for the Sale and Purchase of the Entire Issued Share Capital of Norwich Injection Moulders Limited dated July 2, 1998, among the Company, NIM Holdings Limited and the persons listed on Schedule 1 thereto II-2 2.16 Stock Purchase Agreement dated June 18, 1999 among the Company, CPI Holding, Cardinal and the Shareholders of CPI Holding (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 21, 1999 and incorporated herein by reference). 3.1 Amended and Restated Certificate of Incorporation of Holding (filed as Exhibit 3.1 to the 1996 Form S-4 and incorporated herein by reference) 3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and incorporated herein by reference) 3.3 Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Form S-1 and incorporated herein by reference) 3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and incorporated herein by reference) 3.5 Certificate of Incorporation of Berry Iowa (filed as Exhibit 3.5 to the Form S-1 and incorporated herein by reference) 3.6 By-laws of Berry Iowa (filed as Exhibit 3.6 to the Form S-1 and incorporated herein by reference) 3.7 Certificate of Incorporation of Berry Tri-Plas (filed as Exhibit 3.7 to the Form S-1 and incorporated herein by reference) 3.8 By-laws of Berry Tri-Plas (filed as Exhibit 3.8 to the Form S-1 and incorporated herein by reference) 3.9 Certificate of Amendment to the Certificate of Incorporation of Berry Tri-Plas (filed as Exhibit 3.9 to the 1996 Form 10-K and incorporated herein by reference) 3.10 Certificate of Designation, Preferences, and Rights of Series B Cumulative Preferred Stock of Holding (filed as Exhibit 3.10 to the 1997 Form 10-K and incorporated herein by reference) 3.11 Certificate of Incorporation of Berry Sterling 3.12 By-laws of Berry Sterling 3.13 Certificate of Incorporation of AeroCon 3.14 By-laws of AeroCon 3.15 Articles of Incorporation of PackerWare 3.16 By-laws of PackerWare II-3 3.17 Certificate of Incorporation of Berry Design 3.18 By-laws of Berry Design 3.19 Certificate of Incorporation of Venture Holdings 3.20 By-laws of Venture Holdings 3.21 Articles of Incorporation of Venture Midwest 3.22 Code of Regulations of Venture Midwest 3.23 Articles of Incorporation for a Statutory Close Corporation of Venture Southeast 3.24 By-laws of Venture Southeast 3.25 Memorandum of Association of NIM Holdings 3.26 Articles of Association of NIM Holdings 3.27 Memorandum of Association of Norwich 3.28 Articles of Association of Norwich 3.29 Certificate of Incorporation of Knight Plastics 3.30 By-laws of Knight Plastics * 4.1 Indenture dated April 21, 1994 between the Company and United States Trust Company of New York, as Trustee (including the form of Note and Guarantees as Exhibits A and B thereto respectively) 4.2 Warrant Agreement between Holding and United States Trust Company of New York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and incorporated herein by reference) 4.3 Indenture dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Trustee (the "Trustee"), relating to Holding's Series A and Series B 12.5% Senior Secured Notes Due 2006 4.4 Pledge, Escrow and Disbursement Agreement dated as of June 18, 1996, by and among Holding, the Trustee and First Trust of New York, National Association, as Escrow Agent (filed as Exhibit 4.4 to the 1996 Form S-4 and incorporated herein by reference) II-4 4.5 Holding Pledge and Security Agreement dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Collateral Agent (filed as Exhibit 4.5 to the 1996 Form S-4 and incorporated herein by reference) 4.6 Registration Rights Agreement dated as of June 18, 1996, by and among Holding and DLJ (filed as Exhibit 4.6 to the 1996 Form S-4 and incorporated herein by reference) 4.7 BPC Holding Corporation 1996 Stock Option Plan (filed as Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by reference) 4.8 Form of Nontransferable Performance-Based Incentive Stock Option Agreement (filed as Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by reference) 4.9 Indenture dated as of August 24, 1998 among the Company, the Guarantors and United States Trust Company of New York, as trustee 4.10 Registration Rights Agreement dated as of August 24, 1998 by and among the Company, the Guarantors and DLJ *5 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of such firm) regarding the legality of the securities being offered 8 Opinion of O'Sullivan Graev & Karabell, LLP regarding the material United States Federal income tax consequences to the holders of the securities being offered 10.1 Second Amended and Restated Financing and Security Agreement dated as of July 2, 1998, as amended, by and among the Company, NIM Holdings, Norwich, Fleet Capital Corporation, General Electric Capital Corporation, Heller Financial, Inc. and NationsBank, N.A. 10.2 Employment Agreement dated December 24, 1990, as amended, between the Company and Martin R. Imbler ("Imbler") (filed as Exhibit 10.9 to the Form S-1 and incorporated herein by reference) 10.3 Amendment to Imbler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated herein by reference) 10.4 Amendment to Imbler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.4 to the 1996 Form S-4 and incorporated herein by reference) 10.5 Employment Agreement dated December 24, 1990, as amended, between the Company and R. Brent Beeler ("Beeler") (filed as Exhibit 10.10 to the Form S-1 and incorporated herein by reference) 10.6 Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated herein by reference) II-5 10.7 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.7 to the 1996 Form S-4 and incorporated herein by reference) 10.8 Employment Agreement dated December 24, 1990, as amended, between the Company and James M. Kratochvil ("Kratochvil") (filed as Exhibit 10.12 to the Form S-1 and incorporated herein by reference) 10.9 Amendment to Kratochvil Employment Agreement dated November 30, 1995 (filed as Exhibit 10.12 to the 1995 Form 10-K and incorporated herein by reference) 10.10 Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated herein by reference) 10.11 Employment Agreement dated as of January 1, 1993, between the Company and Ira G. Boots ("Boots") (filed as Exhibit 10.13 to the Form S-1 and incorporated herein by reference) 10.12 Amendment to Boots Employment Agreement dated November 30, 1995 (filed as Exhibit 10.14 to the 1995 Form 10-K and incorporated herein by reference) 10.13 Amendment to Boots Employment Agreement dated June 30, 1996 (filed as Exhibit 10.16 to the 1996 Form S-4 and incorporated herein by reference) 10.14 Financing Agreement dated as of April 1, 1991, between the City of Henderson, Nevada Public Improvement Trust and the Company (including exhibits) (filed as Exhibit 10.17 to the Form S-1 and incorporated herein by reference) 10.15 Letter of Credit of NationsBank, N.A. dated April 16, 1997 10.16 Purchase Agreement dated as of June 12, 1996, between Holding and DLJ relating to the 12.5% Senior Secured Notes due 2006 (filed as Exhibit 10.22 to the 1996 Form S-4 and incorporated herein by reference) 10.17 Stockholders Agreement dated as of June 18, 1996, among Holding, Atlantic Equity Partners International II, L.P., CVCA and the other parties thereto (filed as Exhibit 10.23 to the 1996 Form S-4 and incorporated herein by reference) 10.18 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996, issued to CVCA (Warrant No. 1) (filed as Exhibit 10.24 to the 1996 Form S-4 and incorporated herein by reference) 10.19 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996, issued to CVCA (Warrant No. 2) (filed as Exhibit 10.25 to the 1996 Form S-4 and incorporated herein by reference) II-6 10.20 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996, issued to The Northwestern Mutual Life Insurance Company (Warrant No. 3) (filed as Exhibit 10.26 to the 1996 Form S-4 and incorporated herein by reference) 10.21 Warrant to purchase Class B Common Stock of Holding dated June 18, 1996, issued to The Northwestern Mutual Life Insurance Company (Warrant No. 4) (filed as Exhibit 10.27 to the 1996 Form S-4 and incorporated herein by reference) 10.22 Amended and Restated Stockholders Agreement dated June 18, 1996, among Holding and certain stockholders of Holding (filed as Exhibit 10.28 to the 1996 Form S-4 and incorporated herein by reference) 10.23 Second Amended and Restated Management Agreement dated June 18, 1996, between First Atlantic Capital, Ltd. and the Company (filed as Exhibit 10.29 to the 1996 Form S-4 and incorporated herein by reference) 10.24 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Willard J. Rathbun (filed as Exhibit 10.30 to the 1997 Form 10-K and incorporated herein by reference) 10.25 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Craig Rathbun (filed as Exhibit 10.31 to the 1997 Form 10-K and incorporated herein by reference) 10.26 Purchase Agreement dated August 19, 1998 among the Company, the Guarantors and DLJ (filed as Exhibit 10.26 to the Registration Statement on Form S-4 filed September 29, 1998) *10.27 Indenture dated as of July 6, 1999 among the Company, the Guarantors and United States Trust Company of New York , as trustee *10.28 Registration Rights Agreement dated as of July 6, 1999 by and among the Company, the Guarantors, DLJ and Chase Securities, Inc. 21 List of Subsidiaries 23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of its opinion filed as Exhibit 5 hereto) *23.2 Consent of Ernst & Young LLP, independent auditors *23.3 Consent of Deloitte & Touche LLP, independent auditors *23.4 Consent of Lovewell Blake, independent auditors *24 Powers of Attorney II-7 25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United States Trust Company of New York, as Trustee (separately bound) 27 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Form of Letter to Clients * Filed herewith. (b) FINANCIAL STATEMENT SCHEDULES Report of Independent Auditors S-1 Schedule I -- Condensed Financial Information of Registrant S-2 Schedule II -- Valuation and Qualifying Accounts S-6 Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the financial statements or notes thereto. ITEM 22. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the Corporation Law, the Certificate of Incorporation and By-laws, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or II-8 in the aggregate, represent a fundamental change in the information set forth in the registration statement; (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of that time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY PLASTICS CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY PLASTICS CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 /S/ David M. Clarke - --------------------------- David M. Clarke Director August 20, 1999 /S/ Lawrence G. Graev - --------------------------- Lawrence G. Graev Director August 20, 1999 /S/ Donald J. Hofmann - --------------------------- Donald J. Hofmann Director August 20, 1999 /S/ Mathew J. Lori - --------------------------- Mathew J. Lori Director August 20, 1999 II-10 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BPC HOLDING CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President POWER OF ATTORNEY We, the undersigned directors and officers of BPC HOLDING CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 /S/ Martin R. Imbler President and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ David M. Clarke - --------------------------- David M. Clarke Director August 20, 1999 /S/ Lawrence G. Graev - --------------------------- Lawrence G. Graev Director August 20, 1999 /S/ Donald J. Hofmann - --------------------------- Donald J. Hofmann Director August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 /S/ Mathew J. Lori - --------------------------- Mathew J. Lori Director August 20, 1999 II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY IOWA CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY IOWA CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY TRI-PLAS CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY TRI-PLAS CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY STERLING CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY STERLING CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. AEROCON, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of AEROCON, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE President, Chief Executive Officer and Chairman of the /S/ Martin R. Imbler Board of Directors - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. PACKERWARE CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of PACKERWARE CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. PACKERWARE CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of PACKERWARE CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY PLASTICS DESIGN CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY PLASTICS DESIGN CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. VENTURE PACKAGING, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of VENTURE PACKAGING, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. VENTURE PACKAGING MIDWEST, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of VENTURE PACKAGING MIDWEST, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. VENTURE PACKAGING SOUTHEAST, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of VENTURE PACKAGING SOUTHEAST, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-22 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. VENTURE PACKAGING SOUTHEAST, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of VENTURE PACKAGING SOUTHEAST, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. NIM HOLDINGS LIMITED By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of NIM HOLDINGS LIMITED, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Martin R. Imbler Chairman of the Board of - --------------------------- Directors (Principal Martin R. Imbler Executive Officer) August 20, 1999 /S/ James M. Kratochvil - --------------------------- Director (Principal Financial James M. Kratochvil and Accounting Officer) August 20, 1999 /S/ Trevor D. Johnson - --------------------------- Trevor D. Johnson Sales and Marketing Director August 20, 1999 /S/ Alan R. Sandell - --------------------------- Alan R. Sandell Managing Director August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 II-24 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. NORWICH INJECTION MOULDERS LIMITED By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of NORWICH INJECTION MOULDERS LIMITED, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Martin R. Imbler Chairman of the Board of - --------------------------- Directors (Principal Martin R. Imbler Executive Officer) August 20, 1999 /S/ James M. Kratochvil - --------------------------- Director (Principal Financial James M. Kratochvil and Accounting Officer) August 20, 1999 /S/ Trevor D. Johnson - --------------------------- Trevor D. Johnson Sales and Marketing Director August 20, 1999 /S/ Alan R. Sandell - --------------------------- Alan R. Sandell Managing Director August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 II-25 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. KNIGHT PLASTICS, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of KNIGHT PLASTICS, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Martin R. Imbler Chairman of the Board of - --------------------------- Directors (Principal Martin R. Imbler Executive Officer) August 20, 1999 /S/ James M. Kratochvil Director - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Trevor D. Johnson - --------------------------- Alan R. Sandell Managing Director August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 II-26 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. BERRY PLASTICS ACQUISITION CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of BERRY PLASTICS ACQUISITION CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Martin R. Imbler Chairman of the Board of - --------------------------- Directors (Principal Martin R. Imbler Executive Officer) August 20, 1999 /S/ James M. Kratochvil - --------------------------- Director (Principal Financial James M. Kratochvil and Accounting Officer) August 20, 1999 /S/ Trevor D. Johnson - --------------------------- Joseph S. Levy Sales and Marketing Director August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 II-27 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. CPI HOLDING CORPORATION By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of CPI HOLDING CORPORATION, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-28 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. CARDINAL PACKAGING, INC. By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of CARDINAL PACKAGING, INC., do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Roberto Buaron - --------------------------- Chairman of the Board of Roberto Buaron Directors August 20, 1999 President, Chief Executive /S/ Martin R. Imbler Officer and Director - --------------------------- (Principal Executive Martin R. Imbler Officer) August 20, 1999 Executive Vice President, Chief Financial Officer, /S/ James M. Kratochvil Treasurer and Secretary - --------------------------- (Principal Financial and James M. Kratochvil Accounting Officer) August 20, 1999 /S/ Joseph S. Levy - --------------------------- Joseph S. Levy Director August 20, 1999 II-29 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August, 1999. NORWICH ACQUISITION LIMITED By:___/S/ MARTIN R. IMBLER_____________ Martin R. Imbler President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned directors and officers of NORWICH ACQUISITION LIMITED, do hereby constitute and appoint JAMES M. KRATOCHVIL and MARTIN R. IMBLER, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /S/ Martin R. Imbler Chairman of the Board of - --------------------------- Directors (Principal Martin R. Imbler Executive Officer) August 20, 1999 /S/ James M. Kratochvil - --------------------------- Director (Principal Financial James M. Kratochvil and Accounting Officer) August 20, 1999 /S/ Trevor D. Johnson - --------------------------- Trevor D. Johnson Sales and Marketing Director August 20, 1999 /S/ Alan R. Sandell - --------------------------- Alan R. Sandell Managing Director August 20, 1999 /S/ Ira G. Boots - --------------------------- Ira G. Boots Director August 20, 1999 II-30 REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES We have audited the consolidated financial statements of BPC Holding Corporation as of January 2, 1999, and for each of the three years in the period ended January 2, 1999, and have issued our report thereon dated February 19, 1999 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedules listed in Item 21(b) of this Registration Statement. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Indianapolis, Indiana February 19, 1999 S-1 BPC HOLDING CORPORATION (PARENT COMPANY) SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANt CONDENSED BALANCE SHEETS JANUARY DECEMBER 2, 1999 27, 1997 (IN THOUSANDS) - ----------------------------------------------- ASSETS $ Cash 622 708 Other assets (principally investment in subsidiary) (25,992) (31,808) Assets held in trust 6,679 18,933 Intangible assets 3,704 4,281 Due from Berry Plastics Corporation 8,095 8,095 Other -- -- $ Total assets $(6,892) 209 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ Current liabilities $1,240 510 Accrued dividends 7,225 3,674 Long-term debt 105,000 105,000 Total liabilities 113,465 109,184 Preferred stock 16,801 16,509 Class A common stock 4 4 Class B common stock 2 2 Class C common stock -- -- Treasury stock 280 (22) Additional paid-in capital 45,611 49,374 Warrants 3,511 3,511 Retained earnings (deficit) (185,923) (178,353) Total stockholders' equity (deficit) (120,357) (108,975) Total liabilities and stockholders' equity $ (deficit) $(6,892) 209 - ----------------------------------------------- S-2 BPC HOLDING CORPORATION CONDENSED STATEMENTS OF OPERATIONS YEAR ENDED --------------------------------------- JANUARY 2, DECEMBER DECEMBER 1999 27, 1997 28, 1996 ------------ ----------- ------------ (IN THOUSANDS) $ $ Net sales -- -- $ -- Cost of goods sold -- -- -- Gross profit -- -- -- Operating expenses 749 220 3,304 Interest expense, net 12,720 11,560 6,294 --------- Loss before income taxes and equity in net income (loss) of subsidiary (13,469) (11,780) (9,598) Equity in net income (loss) of subsidiary 5,899 (2,631) 5,989 Loss before income taxes (7,570) (14,411) (3,609) Income taxes -- -- (262) Net loss (7,570) (14,411) (3,347) Preferred stock dividends (3,551) (2,558) (1,116) Amortization of preferred stock discount (292) (74) -- - ----------------------------------------- Net loss attributable to common $ $ shareholders (11,413) (17,043) $ (4,463) - ----------------------------------------- S-3 BPC HOLDING CORPORATION CONDENSED STATEMENTS OF CASH FLOWS Year ended -------------------------------------- ------------------------------------- January 2, December December 1999 27, 1997 28, 1996 (IN THOUSANDS) - ------------------------------------- $ $ Net income (loss) $(7,570) (14,411) (3,347) Adjustments to reconcile net loss provided by operating activities: Net loss (income) of subsidiary (5,899) 2,631 (5,989) Amortization and non cash interest 500 726 441 Interest funded by assets held in trust 12,221 11,256 5,412 Non-cash compensation -- -- 358 Changes in operating assets and liabilities 840 (208) 427 Net cash provided by (used for) operating - ------------------------------------ activities 92 (6) (2,698) Net cash provided by investing activities -- -- -- Net cash provided by financing activities: Exercise of management stock options -- -- 1,130 Proceeds from senior secured notes -- -- 105,000 Proceeds from issuance of common --------- ---------- --------- and preferred stock and warrants 80 325 67,369 Rollover investments and share repurchases -- -- (125,219) Assets held in trust -- -- (35,600) Net payments to warrant holders -- -- (4,502) Debt issuance costs -- -- (5,069) Other (258) -- (22) Net cash from financing activities (178) 325 3,087 - ------------------------------------- - ------------------------------------- Net increase in cash and cash equivalents (86) 319 389 Cash and cash equivalents at beginning of year 708 389 -- - ------------------------------------- Cash and equivalents at end of year $622 $ 708 $ 389 S-4 Notes to Condensed Financial Statements (1) BASIS OF PRESENTATION. In the parent company-only financial statements, Holding's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since date of acquisition. The parent company-only financial statements should be read in conjunction with Holding's consolidated financial statements, which are included beginning on page F-1. (2) GUARANTEE. Berry had approximately $218.1 million and $201.3 million of long-term debt outstanding at January 2, 1999 and December 27, 1997, respectively. Under the terms of the debt agreements, Holding has guaranteed the payment of all principal and interest. S-5 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTs (IN THOUSANDS) CHARGED BALANCE CHARGED TO AT TO OTHER BALANCE BEGINNIN COSTS ACCOUNTS DEDUCTIONS AT OF AND - - END OF DESCRIPTION PERIOD GEXPENSES DESCRIBE DESCRIBE YEAR ------------------------- -------- --------- ---------- ----------- --------- Year ended January 2, 1999: Allowance for doubtful $ 280 accounts $ 1,038 $ 875 (2) $ 542 (1) $ 1,651 ======== ========= ========== =========== ========= Year ended December 27, 1997: Allowance for doubtful accounts $ 618 $ 325 $358(2) $ 263 (1) $ 1,038 ======== ========= ========== =========== ========= Year ended December 28, 1996: Allowance for doubtful accounts $ 737 $ 322 $-- $ 441 (1) $ 618 ======== ========= ========== =========== ========= (1) Uncollectible accounts written off, net of recoveries. (2) Primarily relates to purchase of accounts receivable and related allowance through acquisitions. S-6 EX-4.1 2 EXHIBIT 4.1 EXECUTION COPY ================================================================================ BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY IOWA CORPORATION BERRY-CPI PLASTICS CORP. 12 1/4% SENIOR SUBORDINATED NOTES DUE 2004 ______________________ INDENTURE Dated as of April 21, 1994 ______________________ ______________________ UNITED STATES TRUST COMPANY OF NEW YORK ______________________ Trustee ================================================================================ CROSS-REFERENCE TABLE* TRUST INDENTURE ACT SECTION INDENTURE SECTION 310 (a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312(a) 2.05 (b) 12.03 (c) 12.03 313(a) 7.06 (b)(1) 7.06 (b)(2) 7.06;7.07 (c) 7.06;12.02 (d) 7.06 314(a) 4.03; 12.02 (b) N.A. (c)(1) 12.04 (c)(2) 12.Q4 (c)(3) N.A. (d) N.A. (e) 12.05 (f) N.A. 315(a) 7.01 (b) 7.05;12.02 (c) 7.01 (d) 7.01 (e) 6.11 316(a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) 6.07;9.02 (b) 6.07 (c) 2.13 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318(a) 12.01 (b) N.A. (c) 12.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions 1 Section 1.02. Other Definitions 10 Section 1.03. Incorporation by Reference of Trust Indenture Act 10 Section 1.04. Rules of Construction 11 ARTICLE 2 THE NOTES Section 2.01. Form and Dating 11 Section 2.02. Execution and Authentication 12 Section 2.03. Registrar and Paying Agent 12 Section 2.04. Paying Agent to Hold Money in Trust 13 Section 2.05. Lists of Holders of the Notes 13 Section 2.06. Transfer and Exchange 13 Section 2.07. Replacement Notes 15 Section 2.08. Outstanding Notes 15 Section 2.09. Treasury Notes 16 Section 2.10. Temporary Notes 16 Section 2.11. Cancellation 16 Section 2.12. Defaulted Interest 16 Section 2.13. Record Date 17 Section 2.14. CUSIP Number 17 ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee 17 Section 3.02. Selection of Notes to Be Redeemed 18 Section 3.03. Notice of Redemption 18 Section 3.04. Effect of Notice of Redemption 19 Section 3.05. Deposit of Redemption Price 19 Section 3.06. Notes Redeemed in Part 19 Section 3.07. Optional Redemption 19 Section 3.08. Mandatory Redemption 20 Section 3.09. Offer to Purchase by Application of Excess Proceeds 20 ARTICLE 4 COVENANTS Section 4.01. Payment of Notes 22 Section 4.02. Maintenance of Office or Agency 22 Section 4.03. Reports 23 Section 4.04. Compliance Certificate 23 Section 4.05. Taxes 24 Section 4.06. Stay, Extension and Usury Laws 24 Section 4.07. Restricted Payments 24 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries 25 i Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock 26 Section 4.10. Asset Sales 27 Section 4.11. Transactions with Affiliates 28 Section 4.12. Liens 28 Section 4.13. Additional Guarantees 29 Section 4.14. Corporate Existence 29 Section 4.15. Offer to Repurchase Upon Change of Control 29 Section 4.16. No Senior Subordinated Indebtedness 30 ARTICLE 5 SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets 30 Section 5.02. Successor Corporation Substituted 31 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default 31 Section 6.02. Acceleration 33 Section 6.03. Other Remedies 34 Section 6.04. Waiver of Past Defaults 34 Section 6.05. Control by Majority 35 Section 6.06. Limitation on Suits 35 Section 6.07. Rights of Holders of Notes to Receive Payment 35 Section 6.08. Collection Suit by Trustee Section 6.09. Trustee May File Proofs of Claim 36 Section 6.10. Priorities 36 Section 6.11. Undertaking for Costs 37 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee 37 Section 7.02. Rights of Trustee 38 Section 7.03. Individual Rights of Trustee 38 Section 7.04. Trustee's Disclaimer 39 Section 7.05. Notice of Defaults 39 Section 7.06. Reports by Trustee to Holders of the Notes 39 Section 7.07. Compensation and Indemnity 39 Section 7.08. Replacement of Trustee 40 Section 7.09. Successor Trustee by Merger, etc 41 Section 7.10. Eligibility; Disqualification 41 Section 7.11. Preferential Collection of Claims Against Company 41 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 42 Section 8.02. Legal Defeasance and Discharge 42 Section 8.03. Covenant Defeasance 42 Section 8.04. Conditions to Legal or Covenant Defeasance 43 ii Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions 44 Section 8.06. Repayment to Company 44 Section 8.07. Reinstatement 45 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes 45 Section 9.02. With Consent of Holders of Notes 46 Section 9.03. Compliance with Trust Indenture Act 47 Section 9.04. Revocation and Effect of Consents 47 Section 9.05. Notation on or Exchange of Notes 47 Section 9.06. Trustee to Sign Amendments, etc 48 ARTICLE 10 NOTE GUARANTEES Section 10.01. Note Guarantee 48 Section 10.02. Subordination 49 Section 10.03. Liquidation; Dissolution; Bankruptcy 50 Section 10.04. Default on Designated Senior Indebtedness of the Guarantor 50 Section 10.05. Acceleration of Notes 51 Section 10.06. When Distribution Must Be Paid Over 51 Section 10.07. Notice by a Guarantor 52 Section 10.08. Subrogation 52 Section 10.09. Relative Rights 52 Section 10.10. Subordination May Not Be Impaired By Any Guarantor 52 Section 10.11. Distribution or Notice to Representative 52 Section 10.12. Rights of Trustee and Paying Agent 53 Section 10.13. Authorization to Effect Subordination 53 Section 10.14. Limitation of Guarantor's Liability 53 Section l0.15. Execution and Delivery of Note Guarantee 54 Section 10.16. Guarantors May Consolidate, etc., on Certain Terms 54 Section 10.17. Releases Following Sale of Assets 54 ARTICLE 11 SUBORDINATION Section 11.01. Subordination 55 Section 11.02. Liquidation; Dissolution; Bankruptcy 55 Section 11.03. Default on Senior Indebtedness 55 Section 11.04. Acceleration of Notes 56 Section 11.05. When Distribution Must Be Paid Over 56 Section 11.06. Notice by Company 57 Section 11.07. Subrogation 57 Section 11.08. Relative Rights 57 Section 11.09. Subordination May Not Be Impaired By Company 58 Section 11.10. Distribution or Notice to Representative 58 Section 11.11. Rights of Trustee and Paying Agent 58 Section 11.12. Authorization to Effect Subordination 58 iii ARTICLE 12 MISCELLANEOUS Section 12.01. Trust Indenture Act Controls 59 Section 12.02. Notices 59 Section 12.03. Communication by Holders of Notes with Other Holders of Notes 60 Section 12.04. Certificate and Opinion as to Conditions Precedent 60 Section 12.05. Statements Required in Certificate or Opinion 60 Section 12.06. Rules by Trustee and Agents 61 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders 61 Section 12.08. Governing Law 61 Section 12.09. No Adverse Interpretation of Other Agreements 61 Section 12.10. Successors 61 Section 12.11. Severability 61 Section 12.12. Counterpart Originals 61 Section 12.13. Table of Contents, Headings, etc 62 EXHIBITS EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO THE NOTE GUARANTEES iv INDENTURE dated as of April 21, 1994 among Berry Plastics Corporation, a Delaware corporation (the "Company"), BPC Holding Corporation, a Delaware corporation ("Holding"), Berry Iowa Corporation, a Delaware corporation ("Berry~ Iowa "), and Berry-CPI Plastics Corp., a Delaware corporation ("Berry-CPI Plastics"; Berry-CPI Plastics, together with Holding and Berry Iowa, the "Guarantors"), and United States Trust Company of New York, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 12 1A % Senior Subordinated Notes due 2004 (the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "ACQUIRED DEBT" means, with respect to any specified Person: (i) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary' of such specified Person and (ii) Indebtedness encumbering any asset acquired by such specified Person. "AFFILIATE," of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meattings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. Neither Chase Bank, CITEI, nor their respective Affiliates shall be deemed an Affiliate of the Company or any of its Subsidiaries for purposes of this definition by reason of its direct or indirect beneficial ownership of 15 % or less of the Common Stock of Holding or by reason of any employee thereof being appointed to the Board of Directors of Holding. "AGENT" means any Registrar, Paying Agent or co-registrar. "ASSET PURCHASE AGREEMENT" means the agreement pursuant to which Berry-CPI Plastics will acquire substantially all of the assets and assume certain indebtedness of CPI Plastics, Inc., CP Illinois, Inc. and CP Ohio, Inc. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any property or assets of the Company or any Subsidiary (including by way of a sale-and-leaseback) other than sales of inventory in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company shall be governed by Sections 4.15 and 5.01 hereof), 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 ~) for net proceeds in excess of $250,000. For purposes of this definition, the term "Asset Sale" shall not include (I) the transfer of assets by the Company to a Wholly Owned Subsidiary of the Company or by a Wholly Owned Subsidiary of the Company to the Company or to another Wholly Owned Subsidiary of the Company, (ii) any Restricted Payment, dividend or purchase or retirement of Equity Interests permitted under Section 4.07 hereof or (iii) the issuance or sale of Equity Interests of any Subsidiary of the Company, PROVIDED that such Equity Interests are issued or sold in consideration for the acquisition of assets by such Subsidiary or in connection with a merger or consolidation of another Person into such Subsidiary. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "BORROWING BASE" means, as of any date, an amount equal to the sum of (a) 85% of the face amount of all accounts receivable owned by the Company and its Subsidiaries as of such date that are not more than 90 days past due, and ~) 65% of the book value (calculated on a FIFO basis) of all inventory owned by the Company and its Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION', means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be so required to be capitalized on a balance sheet prepared in accordance with GAAP. "CAPITAL STOCK" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case with any lender party to the New 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 Holding's or the Company's assets to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) 2 (other than the Principals and their Related Parties), (ii) the adoption of a plan relating to the liquidation or dissolution of Holding or the Company, (iii) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than by the 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 1 3(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 or (v) the first day on which a majority of the members of the Board of Directors of Holding are not Continuing Directors. "CHASE BANK" means The Chase Manhattan Bank, N.A. "CITHI" means The CIT Group/Equity Investments, Inc. "CLASS A COMMON STOCK" means the Class A Common Stock, $.OO()05 par value per share, of Holding. "COMMON STOCK OF HOLDING" means the Class A Common Stock and the Class B Common Stock, $.0()005 par value per share, of Holding. "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 ~) 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 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. 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 3 accrued, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount, non-cash interest payments, the interest component of capital leases, and net payments (if any) pursuant to Hedging Obligations), (b) commissions, discounts and other fees and charges paid or accrued with respect to letters of credit and bankers' acceptance financing, and (c) interest actually paid by such Person or its Subsidiaries under a Guarantee of Indebtedness of any other Person. "CONSOLIDATED NET IN COME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED, that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Person that is a Subsidiary (other than a wholly Owned Subsidiary) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of Preferred Stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such Preferred Stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assetS of a going concern business made within 16 months after the acquisition of such business) subsequent to 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. "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. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give written notice to the Company. "CPI ACQUISITION" means, the acquisition of substantially all of the assets and the assumption of certain indebtedness of CPI Plastics, Inc., CP Illinois, Inc. and CP Ohio, Inc. by Berry-CPI Plastics pursuant to the Asset Purchase Agreement. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "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. 4 "DESIGNATED SENIOR INDEBTEDNESS" means (i) the Senior Bank Indebtedness and (ii) any other Senior Indebtedness (a) permitted to be incurred under this Indenture the principal amount of which is $15 million or more and ~) designated in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to July 15, 2004. "DISTRIBUTION" means, for purposes of Articles 10 and 11, a distribution consisting of cash, securities or other property, by set-off or otherwise. "EQUITY INTERESTS" mean~ 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). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries (other than under the New Revolving Credit Facility) in existence on the Issuance Date, until such amounts are repaid. "FIXED CHARGES" means, with respect to any Person for any period, the sum of (a) Consolidated Interest Expense of such Person for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income and (1)) the product of (i) all cash dividend payments (and non-cash dividend payments in the form of securities (other than Disqualified Stock) of an issuer) on any series of Preferred Stock of such Person, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of making the computation referred to above, acquisitions, dispositions and discontinued operations (as determined in accordance with GAAP) that have been made by the Company or any of its Subsidiaries, including all mergers and consolidations, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be calculated on a pro forma basis assuming that all such acquisitions, dispositions, discontinued operations, mergers and consolidations (and the reduction of any associated fixed charge obligations resulting therefrom) had occurred on the first day of the four-quarter reference period. 5 "GAAP" means general]y accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issuance Date. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTORS" means each of (i) Holding, Berry Iowa and Berry-CPI Plastics and (ii) any other Person that executes a Note Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDER" means a Person in whose name a Note is registered. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of any Indebtedness of such Person or any other Person. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "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. "ISSUANCE DATE" means the closing date for the sale and original issuance of the Notes. 6 "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York OR at a place of payment ARE authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however, any gain (1,ut 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 ~ut not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that are the subject of such Asset Sale and any reserve for indenmification or adjustment in respect of the sale price of such asset or assets. "NEW REVOLVING CREDIT FACILITY" means the New Revolving Credit Facility, dated as of the closing date of the Offering, by and among the Company and Barclays Business Credit, Inc., providing for up to $28 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. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the public offering of the Units by the Company and Holding. "OFFICER" means, with respect to any unnatural Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. 7 "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to Holding, any Subsidiary of Holding or the Trustee. "PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a Wholly Owned Subsidiary of the Company and that is engaged in the same or a similar line of business as the Company and its Subsidiaries were engaged in on the Issuance Date and (b) any Investments in Cash Equivalents. "PERMITTED REFINANCING" means Refinancing Indebtedness if (a) the principal amount of Refinancing Indebtedness does not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums, accrued interest and reasonable expenses incurred in connection therewith); ~) 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; (c) the Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK" means any Equity Interest with preferential right in the payment of dividends or liquidation or any Disqualified Stock. "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 clauses (a) and (b) of the second paragraph of Section 4.09 hereof. "RELATED PARTY" means with respect to the 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, 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). "REPRESENTATIVE" means, for purposes of Articles 10 and 11, the indenture trustee or other trustee, agent or representative for any Senior Indebtedness or, with respect to any Guarantor, for any Senior Indebtedness of such Guarantor. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED INVESTMENT" means any Investment other than a Permitted Investment. 8 "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR BANK INDEBTEDNESS" means the Indebtedness outstanding under the New 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 (i) the Senior Bank Indebtedness and (ii) any other Indebtedness permitted to be incurred by the Company or a Guarantor, as the case may be, under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is PARI PASSU with or subordinated in right of payment to the Notes or a Note Guarantee, as the case may be. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (w) any liability for federal, state, local or other taxes owed or owing by the Company or a Guarantor, as the case may be, (x) any Indebtedness of the Company or a Guarantor, as the case may be, to Holding or to any of Holding's other Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. "STOCK EXCHANGE" means the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, dated as of the closing date of the Offering, between the Company and Holding. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNITS" means the Notes of the Company and the Warrants of Holding. "WARRANT" means any Warrant (as defined in the Warrant Agreement) from time to time outstanding pursuant to the Warrant Agreement. "WARRANT AGENT" means United States Trust Company of New York, until a successor Warrant Agent shall have become such pursuant to the applicable provisions of the Warrant Agreement and, thereafter, such successor. "WARRANT AGREEMENT" means the Warrant Agreement dated as of April 21, 1994 between Holding and the Warrant Agent. 9 "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the due date of such payment, by (b) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more wholly Owned Subsidiaries of such Person and one or more wholly Owned Subsidiaries of such Person. "1994 BPC HOLDING CORPORATION EXTRAORDINARY BONUS AWARD PLAN" means the 1994 Extraordinary Bonus Award Plan to be adopted by the Board of Directors of BPC Holding Corporation prior to the consummation of the Offering. SECTION 1.02. OTHER DEFINITIONS. DEFINED IN TERM SECTION "Affiliate Transaction" .............................. 4.11 "Asset Sale Offer" ................................... 3.09 "Benefitted Party" ................................... 10.01 "Change of Control Offer" ............................ 4.15 "Change of Control Payment" .......................... 4.15 "Change of Control Payment Date" ..................... 4.15 "Covenant Defeasance" ................................ 8.03 "Event of Default" ................................... 6.01 "Excess Proceeds" .................................... 4.10 "Guarantor Payment Blockage Notice ................... 10.04 "incur" .............................................. 4.09 "Legal Defeasance" ................................... 8.02 "Note Guarantee" ..................................... 10.01 "Offer Amount" ....................................... 3.09 "Offer Period" ....................................... 3.09 "Paying Agent" ....................................... 2.03 "Payment Blockage Notice" ............................ 11.03 "Payment Default" .................................... 6.01 "Purchase Date" ...................................... 3.09 "Registrar" .......................................... 2.03 "Restricted Payments" ................................ 4.07 "Termination Date" ................................... 2.06 SECTION 1.03. INCORPORATION DY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: 10 "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a 14older of a Note; INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the Notes means the Company, the Guarantors and any successor obligor upon the Notes or any Note Guarantee, as the case may be. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) or is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DAT1NG. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this indenture. The notation on each Note relating to the Note Guarantee shall be substantially in the form set forth on Exhibit B, which is part of this Indenture. The Notes may have notations, legends or endorsements approved as to form by the Company and required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject or usage. Each Note shall be dated the date of its authentication. The Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. 11 SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduce~ on the Notes and may be in facsimile form. An Officer of each Guarantor shall sign the Note Guarantee for such Guarantor by manual or facsimile signature. If an Officer of the Company or a Guarantor whose signature is on a Note or a Note Guarantee, as the case may be, no longer holds that office at the time the Note is authenticated, the Note or the Note Guarantee, as the case may be, shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature of the Trustee shall be conclusive evidence that the Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Notes shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a written order of the Company signed by two Officers of the Company, authenticate Notes with the Note Guarantees endorsed thereon for original issue up to an aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time shall not exceed the amount set forth herein except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or any Guarantor or an Affiliate of the Company or any Guarantor. Any authenticating agent may resign at any time by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of the authenticating agent by giving written notice of termination to the authenticating agent and the Company. Upon receiving notice of such resignation or upon such termination by the Trustee, the Trustee may appoint a successor authenticating agent acceptable to the Company, in which case it shall so notify the Holders. Upon its appointment hereunder, any successor authenticating agent shall become vested with all the rights, powers and duties of its predecessor hereunder. The Company shall agree, by separate instrument, to pay each authenticating agent from time to time reasonable compensation for its services. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company and the Guarantors shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange (including any co-registrar, the "REGISTRAR") and (ii) an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder of a Note. The Company shall notify the Trustee and the Trustee shall notify the Holders of the Notes of the name and address of any Agent not a party to this Indenture. The Company or any 12 Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders of the Notes or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes, and shall notify the Trustee of any Default by the Company or any Guarantor in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Guarantor) shall have no further liability for the money delivered to the Trustee. If the Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders of the Notes all money held by it as Paying Agent. Upon the occurrence of either event specified in Section 6.01(h) or (i), the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. LISTS OF HOLDERS OF THE NOTES. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of the Notes and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company arid/or any Guarantor shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders of the Notes, including the aggregate principal amount of the Notes held by each thereof, and the Company and each Guarantor shall otherwise comply with TIA ss. 312(a) SECTION 2.06. TRANSFER AND EXCHANGE. (a) When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met; PROVIDED, HOWEVER, that any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or by his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate and deliver Notes at the Registrar's request, subject to such rules as the Trustee may reasonably require. Neither the Company nor the Registrar shall be required to (i) issue, register the transfer of or exchange Notes during a period beginning at the opening of business on a Business Day 15 days before 13 the day of any selection of Notes for redemption under Section 3.02 hereof or (ii) register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. No service charge shall be made to any Holder of a Note for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2. ~0, 3.06 or 9.05 hereof, which shall be paid by the Company). Prior to due presentment to the Trustee for registration of the transfer of any Note, the Trustee, any AGENT, the Company and the Guarantors may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and neither the Trustee, any Agent, the Company nor the Guarantors shall be affected by notice to the contrary. (b) The following restrictions and related provisions on transfer shall apply with respect to the Notes: (i) Until the Separation Date, no Note may be sold, assigned or otherwise transferred to any Person unless simultaneously with such transfer, the Trustee receives confirmation from the Warrant Agent for the Warrants that the Holder thereof has requested a transfer to the same transferee of one Warrant (subject to an adjustment under Section 14 of the Warrant Agreement) for each $1,000 aggregate principal amount of Notes so transferred. In connection with the foregoing, upon original issuance (if prior to the Separation Date) and, thereafter until the provisions of Section ofSection2.06~)(ii) hereof have been satisfied, the certificates evidencing the Notes will bear the following legend: "UNTIL THE EARLIEST TO OCCUR OF (I) OCTOBER 15, 1994, (II) SUCH EARLIER DATE AS MAY BE DETERMINED BY DONALDSON, LUFKIN & JENRETTE SECURITIES CORPO~ON ("DU") WITH THE CONSENT OF BPC HOLDING CORPORATION ("HOLDING"), WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD, (III) IN THE EVENT OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE (THE "INDEN'IURE") GOVERNING THE 121A% SEMOR SUBORDINATED NOTES DUE 2004 (THE '1NOTES") OF BERRY PLASTICS CORPORATION ("BERRY")), THE DATE BERRY MAILS N~CE THEREOF TO HOLDERS OF NOTES AND (iv) IN THE EVENT OF AN ASSET SALE OFFER (AS DEFINED IN THE INDENTURE), THE DATE BERRY MAILS NOTICE THEREOF TO HOLDERS OF NOTES, THE NOTES EVIDENCED HEREBY MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS, SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME TRANSFEREE FOR EACH ONE WARRANT (SUBJECT TO AN ADJUSTMENT UNDER SE~ON 14 OF THE WARAANT AGREEMENT, DATED AS OF APRIL 21,1994, BETWEEN HOLDING AND UNITED STATES TRUST COMPANY OF NEW YORK, AS WARRANT AGENT) TO PURCHASE 1.13237 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.00005 PER SHARE, OF HOLDING $1,000 PRINCIPAL AMOUNT OF NOTES SO TRANSFERRED." 14 For purposes of this Section 2.06, "Separation Date" shall mean the earliest to occur of (1) October 15, 1994, (2) such earlier date as may be determined by DLJ with the consent of Holding, which consent may not be unreasonably withheld, (3) in the event a Change of Control, the date the Company mails notice thereof to Holders of the Notes and (4) in the event of an Asset Sale Offer, the date the Company mails notice thereof to Holders of the Notes. The Company shall notify the Trustee of the occurrence of the Separation Date on or prior to the date thereof. (ii) On or following the Separation Date, a Holder may surrender the certificate evidencing such Notes to the Trustee for the exchange of such certificate for one or more certificates that do not bear the legend set forth in Section 2.06~)(i) above, representing in the aggregate a principal amount of Notes equal to the principal amount of Notes represented by the certificate so surrendered. (iii) If the Separation Date occurs prior to October 15, 1994, the Company shall notify the Trustee and the Registrar thereof and shall, or shall cause the Trustee to give, written notice thereof to each Holder by first-class mail, postage prepaid. SECTION 2.07 REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate and deliver a replacement Note (accompanied by a notation of the Note Guarantees duly endorsed by the Guarantors) if the Trustee's requirements for replacements of Notes are met. If required by the Trustee, the Company or the Guarantors, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee, the Company and the Guarantors to protect the Company, the Guarantors, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. Each of the Company, the Guarantors and the Trustee may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and the Guarantors and shall be entitled to all of the benefits of this Indenture equally and proportionally with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Subject to Section 2.09 hereof, a Note does not cease to be outstanding because the Company, a Subsidiary of the Company or an Affiliate of the Company holds the Note. 15 SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor, any of their respective Subsidiaries or any Affiliate of the Company or any Guarantor shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Responsible Officer knows to be so owned shall be so considered. Notwithstanding the foregoing, Notes that are to be acquired by the Company, any Guarantor, any Subsidiary of the Company or any Guarantor or an Affiliate of the Company or a fly Guarantor pursuant to an exchange offer, tender offer or other agreement shall not be deemed to b e owned by the Company, a Guarantor, a Subsidiary of the Company or a Guarantor or an Affiliate 0 f the Company or a Guarantor until legal title to such Notes passes to the Company, Guarantor, Subsidiary of the Company or a Guarantor or Affiliate of the Company or a Guarantor, as the case may be. SECTION 2. 10. TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors). Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company and the Trustee consider appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company signed by two Officers of the Company, shall authenticate definitive Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act), unless the Company directs cancelled Notes to be returned to it. The Company may not issue new Notes to replace Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All cancelled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by two Officers of the Company, the Company shall direct that cancelled Notes be returned to it. SECTION 2.12. DEFAULTED INTEREST. If the Company or any Guarantor defaults in a payment of interest on the Notes, the Company or such Guarantor (to the extent of their obligations under the Note Guarantees) shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders of the Notes on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the payment date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be fixed each such special record date and payment date, and shall, promptly thereafter, notify the Trustee 16 of any such date. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such defaulted interest as in this Subsection provided. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such defaulted interest as in this Subsection provided. At least 15 days before the special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holders of the Notes a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. RECORD DATE. The record date for purposes of determining the identity of Holders of the Notes entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA ss. 316(c). SECTION 2.14. CUSIP NUMBER. The Company in issuing the Notes may use a "CUSIP" number and, if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in the CUSIP number. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. If the Company is required to make an offer to purchase Notes pursuant to the provisions of Sections 4.10 or 4.15, it shall furnish to the Trustee, at least 30 days before the scheduled purchase date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the offer to purchase shall occur, (ii) the offer's terms, (iii) the purchase price, (iv) the principal amount of the Notes to be purchased, and (v) further setting forth a statement to the effect that (a) the Company or one of its Subsidiaries has made an Asset Sale and there are Excess Proceeds aggregating more than $5.0 million and the amount of such Excess Proceeds, or ~) a Change of Control has occurred, as applicable. 17 SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than a]] of the Notes are to be purchased in an Asset Sale Offer or redeemed at any time, the Trustee shall select the Notes to be purchased- or redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on A PRO RATA basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. In the event that less than all of the Notes properly tendered in an Asset Sale Offer are to be purchased, the particular Notes to be purchased shall be selected promptly upon the expiration of such Asset Sale Offer. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial purchase or redemption, the principal amount thereof to be purchased or redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be purchased or redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be purchased or redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. In the event the Company is required to make an Asset Sale Offer pursuant to Sections 3.09 and 4.10 hereof and the amount of Excess Proceeds to be applied to such purchase would result in the purchase of a principal amount of Notes which is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company the portion of such Excess Proceeds that is not necessary to purchase the immediately lesser principal amount of Notes that is so divisible. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a purchase or redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, anew Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; 18 (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder and deliver at the expense of the Company a new Note (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07 OPTIONAL REDEMPTION. (a) Bxcept as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to April 15, 1999. Thereafter, the Company shall 19 have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below: YEAR PERCENTAGE 1999 106.125% 2000 104.083% 2001 102.042% 2002 and thereafter 100.000% (b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to April 15, 1997, the Company may redeem up to 25% of the initial principal amount of the 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 the Company as a capital contribution or are used to purchase common equity securities of the Company, at a redemption price equal to 111.25% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date; provided that at least 75% of the principal amount of Notes originally issued remain outstanding immediately after the occurrence of such redemption and that such redemption occurs within 60 days following the closing of any such public offering. (c) my redemption pursuant to this section 3.07 shall be made pursuant to the provisions of sections 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the notes SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. 20 Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled 'Option of Holder to Elect Purchase'~ on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased pursuant to the terms of Section 3.02 hereof (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) equal in principal amount to the unpurchased portion of the Notes surrendered. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall 21 authenticate and mail or deliver such new Note (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Guarantor, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the Rate equal to 1 % per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or the Guarantors in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. 22 SECTION 4.03. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall (i) furnish to the Trustee and to all Holders all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms l0-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) file a copy of all such information and any other information required by Section 13 or 15(d) of the Exchange Act with the SEC for public availability (unless the SEC will not accept such a filing) and file such information with the Trustee and make such information available to investors, securities analysts and broker-dealers who request it in writing. Notwithstanding the foregoing, to the extent permitted under the rules and regulations of the SEC, the Company may instead supply such information with respect to Holding. The Company shall at all times comply with TIA ss. 314(a). SECTION 4.04. COMPLIANCE CERTIFICATE. (a) Each of the Company and the Guarantors shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries and the Guarantors during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company, its Subsidiaries or such Guarantors has kept, observed, performed and fulfilled their respective obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company, its Subsidiaries or such Guarantors, as the case may be, has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or such Guarantor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company, its Subsidiaries or such Guarantor, as the case may be, is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) Each of the Company and the Guarantors shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company or such Guarantor, as the case may be, is taking or proposes to take with respect thereto. 23 SECTION 4.05. TAXES. The Company shall pay, and shall cause each of it's Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Subsidiaries' Equity Interests (other than: dividends or distributions payable in Equity Interests of the Person making such dividend or distribution, other than Disqualified Stock; or dividends or distributions payable to the Company or any Wholly Owned Subsidiary of the Company that is a Guarantor); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company that is a Guarantor); (iii) purchase, redeem or otherwise acquire or retire for value any Indebtedness (other than the Notes)' that is PARI PASSU with or subordinated to the Notes or any Note Guarantee; (iv) directly or indirectly make any loan or advance to, or make any payment to, Holding; or (v) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and (c) such Restricted Payment, (A) in the case of any Restricted Payment other than as defined by clause (i) above, together with the aggregate of all other Restricted Payments made by the Company and its Subsidiaries after the Issuance Date (including Restricted Payments permitted by the next succeeding paragraph (other than such Restricted Payments permitted by clauses (iv), (v) and (vi) of the next succeeding paragraph)), or (B) in the case of any Restricted Payment defined in clause (i) above, together with the aggregate of all other Restricted Payments made by the Company and its Subsidiaries after the Issuance Date (including Restricted Payments permitted by 24 the next succeeding paragraph (other than Restricted Payments permitted by clauses (iv) and (v) of the next succeeding paragraph)), is less than the sum of (x) 50% of the sum of the Consolidated Net Income and Consolidated Step-Up Depreciation and Amortization of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter that begins after the Issuance Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income plus Consolidated Step-Up Depreciation and Amortization for such period is a deficit, 100% of such deficit), plus (y) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the Issuance Date of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock). The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); (iii) the defeasance, redemption or repurchase of PAN PASSU or subordinated Indebtedness in a Permitted Refinancing; (iv) a Restricted Payment to Holding pursuant to the Tax Sharing Agreement as the same may be amended from lime to time in a manner that is not materially adverse to the Company; (v) a Restricted Payment to Holding to pay its operating and administrative expenses including, without limitation, directors fees, legal and audit expenses, SEC compliance expenses and corporate franchise and other taxes, not to exceed in any fiscal year $500,000; (vi) a Restricted Payment to Holding to pay management fees not to exceed $750,000 in any fiscal year of the Company; (vii) a Restricted Payment to Holding for the purpose of paying a dividend on the Common Stock of Holding from the proceeds of the Offering in an amount not to exceed $50 million; (viii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Holding pursuant to any management equity subscription agreement or stock option agreement in effect as of 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 million and (1)) no Default or Event of Default shall have occurred and be continuing immediately after such transaction and (ix) Investments by the Company in joint ventures or similar projects in a business similar to that conducted by the Company and its Subsidiaries on the Issuance Date in an aggregate amount not to exceed $1 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section were computed, which calculations may be based upon the Company's latest available financial statements. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a)(i) pay dividends or make any other distributions to the Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Subsidiaries, ~) make loans or advances to the Company or any of its Subsidiaries or (c) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing 25 under or by reasons of (i) Existing Indebtedness as in effect on the Issuance Date, (ii) the New Revolving Credit Facility as in effect on the Issuance Date, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the New Revolving Credit Facility as in effect on the Issuance Date, (iii) this Indenture and the Notes, (iv) applicable law, (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that the Consolidated Cash Flow of such Person, to the extent of such restriction, is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture, (vi) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (vii) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above on the property so acquired, or (viii) permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt) and the Company shall not issue any, and shall not permit any of its Subsidiaries to issue any, shares of Disqualified Stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1 if such Indebtedness is incurred or such Disqualified Stock is issued on or before April 15, 1996 or at least 2.25 to 1 if such Indebtedness is incurred or such Disqualified Stock is issued after April 15, 1996, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom and including the earnings of any business acquired by the Company 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, HOWEVER, that until April 15, 1996, the Company may incur Indebtedness that is PARI PASSU in right of payment with the Notes pursuant to the foregoing Fixed Charge Coverage Ratio test only if the net proceeds thereof are used for capital expenditures (including Capital Lease Obligations), acquisitions of businesses and Permitted Investments. In addition, each of the following Indebtedness shall be subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Notes are subordinated to Senior Indebtedness: (A) all Indebtedness that does not provide for all interest payments to be made in cash; (B) all Indebtedness of the Company to any of its Subsidiaries; (C) any Indebtedness of the Company and its Subsidiaries if at the time of incurrence thereof, Indebtedness of the Company and the Guarantors that is PARI PASSU in right of payment to the Notes and the Note Guarantees (including, on a pro forma basis, the Indebtedness to be incurred) exceeds $100 million; and (D) all obligations under the 1994 BPC Holding Corporation Extraordinary Bonus Award Plan. 26 The foregoing limitations shall not apply to (a) revolving credit Indebtedness and letters of credit pursuant to the New Revolving Credit Facility in an aggregate principal amount not to exceed at any one time outstanding the greater of (i) $28 million in principal amount (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder), less the aggregate amount of all repayments after the Issuance Date that permanently reduce the commitment under the New Revolving Credit Facility, and (ii) the Borrowing Base; (b) the Existing Indebtedness; (c) the Notes or any Note Guarantee; (d) the incurrence by the Company of Refinancing Indebtedness; PROVIDED, HOWEVER, that such Refinancing Indebtedness is a Permitted Refinancing; (e) Indebtedness between or among the Company and any of its Wholly Owned Subsidiaries that are Guarantors; (f) Indebtedness from the Company to Holding PROVIDED that the advances evidenced by such Indebtedness are permitted under Section 4.07 hereof; (g) Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; and (h) the incurrence by the Company or its Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount at any time outstanding not to exceed the sum of $1 million at any one time. Notwithstanding anything to the contrary, the Company and its Subsidiaries shall not be permitted to incur any additional Senior Indebtedness unless it is secured. SECTION 4.10. ASSET SALES. The Company shall not, and shall not permit any of its Subsidiaries to, conduct an Asset Sale, unless (x) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee no later than immediately prior to the consummation of such proposed Asset Sale with respect to any Asset Sale involving aggregate payments in excess of $1 million) of the assets sold or otherwise disposed of and (y) at least 75% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; PROVIDED, HOWEVER, that the amount of (A) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets and (B) any notes or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this Section 4.10. Notwithstanding the foregoing, no sale, lease, conveyance or other disposition of the property or assets in the Jerseyville, Illinois or Alliance, Ohio facilities acquired in connection with the CPI Acquisition shall be subject to clauses (x) and (y) of this paragraph. Within 180 days after any Asset Sale, the Company may apply the Net Proceeds from such Asset Sale to either (a) permanently reduce Senior Indebtedness, or (b) make an investment in another business or capital expenditure or other long-term/tangible assets, in each case, in the same or a similar line of business as the Company was engaged in on the Issuance Date. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Bank Indebtedness or otherwise invest such Net Proceeds in Cash Equivalents. Any Net Proceeds from the Asset Sale that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." If the aggregate amount of Excess Proceeds exceeds $5 million, the Company shall make an Asset Sale Offer to all Holders of Notes to purchase the maximum principal amount of Notes, that is an integral multiple of $1,000, that may be purchased out of the Excess Proceeds, 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 27 the date of purchase, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in the manner described under Section 3.02 hereof. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset to zero. Any Asset Sale Offer pursuant to this Section 4.10 shall be made pursuant to the provisions of Section 3.09 hereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes in connection with an Asset Sale. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with a Person who was not an Affiliate and (b) the Company delivers to the Trustee (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $2 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (a) above and that such Affiliate Transaction has been approved by a majority of the Board of Directors and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $5 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing; PROVIDED, HOWEVER, that (i) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary; (ii) transactions between or among the Company and/or its Subsidiaries; (iii) transactions permitted under Section 4.07 hereof; and (iv) the $1.5 million advisory fee paid to First Atlantic Capital, Ltd. in connection with the Offering and the CPI Acquisition, in each case, shall not be deemed Affiliate Transactions. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly (i) create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by the Company or any Subsidiary, or any income or profits therefrom or (ii) assign or convey any right to receive income therefrom, in any such case to secure any Indebtedness (other than Senior Indebtedness of the Company or Senior Indebtedness of a Guarantor permitted to be incurred pursuant to this Indenture) unless contemporaneously therewith or prior thereto, effective provision is made (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) whereby the Notes or a Note Guarantee are secured equally and ratably with such other Indebtedness (or if such other Indebtedness is subordinated to the Notes or a Note Guarantee, the Notes or a Note Guarantee, as the case may be, are secured on a basis with the same relative priority to such other Indebtedness). 28 SECTION 4.13. ADDITIONAL GUARANTEES. If the Company or any of its Subsidiaries shall (i) transfer or cause to be transferred, in one or a series of related transactions (other than a transaction or series of related transactions constituting a Restricted Payment permitted pursuant to Section 4.07 hereof), any assets, businesses, divisions, real property or equipment having a book value in excess of $1 million to any Subsidiary that is not a Guarantor or (ii) acquire another Subsidiary having (a) total assets with a book value in excess of $1 million or ~) Consolidated Cash Flow in excess of $1 million, then the Company shall cause such transferee or acquired Subsidiary to (A) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such transferee or acquired Subsidiary shall unconditionally guarantee (a "Note Guarantee," as defined in Article 10 hereof), on a senior subordinated basis, all of the Company's obligations under the Notes on the terms set forth in Article 10 hereof and (B) deliver to the Trustee an Opinion of Counsel as to the enforceability of such Note Guarantee. SECTION 4.14. CORPORATE EXISTENCE. Subject to Article 5 and Article 10 hereof, as the case may be, the Company and each of the Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, any such Guarantor or any such Subsidiary, as the case may be, and (ii) the rights (charter and statutory), licenses and franchises of the Company, the Guarantors and their respective Subsidiaries; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if the Board of Directors of Holding shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Guarantors and their Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company shall make an offer to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101 % of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (ii) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name 29 of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equ4 in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e- I under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent shall promptly mail to each Holder of Notes so accepted the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered by such Holder, if any; PROVIDED, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. Prior to making the Change of Control Payment, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Designated Senior Indebtedness or obtain the requisite consents, if any, under all agreements governing outstanding Designated Senior Indebtedness to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. SECTION 4.16. NO SENIOR SUBORDINATED INDEBTEDNESS. Notwithstanding the provisions of Section 4.09 hereof, (i) the Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to its Senior Indebtedness and senior in any respect in right of payment to its Note Guarantee. ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless (i) the Company is the surviving Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) the 30 Company or any Person formed by or surviving any such consolidation or merger, or to which such sale. assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth (immediately after the transaction) equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, 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 Section 4.09 hereof. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company or the Company and its Subsidiaries on a consolidated basis in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" or the "Guarantor,9' as the case may be, shall refer instead to the successor corporation and not to the Company or the Guarantor, as the case may be), and may exercise every right and power of the Company or the Guarantors, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or Guarantor, as the case may be, herein; PROVIDED, HOWEVER that the predecessor Company and the predecessor Subsidiaries that are Guarantors shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. The Trustee shall, at the written request of the Company and the Holders, authenticate and deliver new Notes representing such successor pursuant to the terms of Section 2.02 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company or the Guarantors default in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) and such default continues for a period of 30 days; (b) the Company or the Guarantors default in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company fails to comply with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof; 31 (d) the Company or the Guarantors fail to observe or perform any other covenant, representation, warranty or other agreement in this indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders df at least 25% in principal amount of the Notes then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the Issuance Date, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "PAYMENT DEFAULT") or (ii) 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 52 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company, Holding or any of their respective Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $2 million; (g) except as permitted by this Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee. (h) the Company, any Guarantor or any of their respective Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii)consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company, any Guarantor or any of their respective Subsidiaries in an involuntary case; 32 (ii) appoints a Custodian of the Company, any Guarantor or any of their respective Subsidiaries or for all or substantially all of the property of the Company, any Guarantor or any of their respective Subsidiaries; or (iii) orders the liquidation of the Company, any Guarantor or any of their respective Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 hereof with respect to the Company, any Guarantor or any of their respective Subsidiaries) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any Indebtedness is outstanding pursuant to the New Revolving Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable, upon the earlier of (i) the day which is five Business Days after notice of acceleration is given to the Company and the lender under the New Revolving Credit Facility or (ii) the date of acceleration of the Indebtedness under the New Revolving Credit Facility. Notwithstanding the foregoing, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, Holding or any of their respective Subsidiaries, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind any acceleration of the Notes and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after April 15, 1999 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to April 15, 1999 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on April 15 of the years set forth below, as set forth below (expressed as a percentage of the principal amount that would otherwise be due but for the provisions of this sentence): 33 YEAR PERCENTAGE ---- ---------- 1994......................... 112.250% 1995......................... 111.025% 1996......................... 109.800% 1997......................... 108.575% 1998......................... 107.350% SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture, including, but not limited to, notifying the Guarantors pursuant to the terms hereof and the Note Guarantees. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (including in connection with an 34 offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25 % in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense reasonably anticipated by the Trustee in complying with such request; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60 day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring Suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company 35 for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes, including the Guarantors), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or securities or other property payable or deliverable upon the exchange of the Notes or upon any such clairns and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; SECOND: to the holders of Senior Indebtedness of the Company or the Guarantors, as the case may be, to the extent required by Article 10 or Article 11 hereof, as applicable. THIRD: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and FOURTH: to the Company or to such party as a court of competent jurisdiction direct The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. 36 SECTION 6.11. UNDERTAKING FOR COST. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a Suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. 37 (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice and during normal business hours, to examine the books, records and premises of the Company, personally or by agent or attorney so long as such examination does not interfere with the Company's business. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or Omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that in the reasonable discretion of the Trustee, might be incurred by it in compliance with such request or direction. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may Otherwise deal with the Company, the Guarantors or any Affiliate of the Company or the Guarantors with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC 38 for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS DY TRUSTEE TO HOLDERS OF TI"E NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 3I3~)(2). The Trustee shall a]so transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company and the Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether 39 asserted by the Company, any Guarantor or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company and the Guarantors of their obligations hereunder. The Company and the Guarantors shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company and the Guarantors shall pay the reasonable fees and expenses of such counsel. The Company and the Guarantors need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's and the Guarantors' payment obligations in this Section, the Trustee shall have, and the Company does hereby grant, assign and convey to the Trustee, to the benefit of the Holders, a security interest in and a Lien on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. The Trustee's right to receive payment of any amounts due under this Section 7.07 shall not be subordinate to any other liability or indebtedness of the Company (even though the Notes may be subordinated) and the payments of principal and interest on the Notes shall be subordinate to the Trustee's right to receive such payment. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. 40 If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal ainount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, any Guarantor, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Guarantors' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310 (b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311 (b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. 41 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASAN~. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Note Guarantees on the date the conditions set forth below are satisfied (hereinafter, 'LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (1') below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, ~) the Company's and the Guarantors' obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15 and 4.16 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, 'COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected 42 thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(e) through 6.01(f) and Section 6.01(h) and 6.01(i) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States 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 on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, or interest on the outstanding Notes; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the 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 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; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) 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 incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the day on which all applicable preference periods have run; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; 43 (f) the Company shall have delivered to [he 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; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company or the Guarantors or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or the Guarantors; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest, if any, have become due and payable shall be paid to the Company on its written request accompanied by an Officers' Certificate or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying 44 Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07 REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company and the Guarantors make any payment of principal of, premium, if any, or interest, if any, on any Note following the reinstatement of its obligations, the Company and the Guarantors shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide. (or uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in the case of a merger or consolidation pursuant to Article Five or Article 10 hereof, as the case may be; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes (including providing for additional Note Guarantees pursuant to Section 4.13 hereof) or that does not adversely affect the legal rights hereunder of any Holder of the Note; or (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be 45 therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at 46 least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note; (h) make any change to the subordination provisions of Article 10 or Article 11 hereof that adversely affects Holders; (i) except pursuant to Article 8 and Article 10 hereof, release any Guarantor from its obligations under its Note Guarantee, or change any Note Guarantee in any manner that would adversely affect Holders; or (j) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or a supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. 47 SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company and the Guarantors may not sign an amendment or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 NOTE GUARANTEES SECTION 10.01. NOTE GUARANTEE. The Guarantors and each Subsidiary of the Company which in accordance with Section 4.13 hereof is required to guarantee the obligations of the Company under the Notes upon execution of a counterpart of this Indenture, hereby jointly and severally unconditionally guarantees (each such guarantee, a "NOTE GUARANTEE") to each Holder of a Note authenticated and delivered by the Trustee irrespective of the validity or enforceability of this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, that: (i) the principal of and interest on the Notes will be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under this Indenture or the Notes will be promptly paid in full or performed, all in accordance with the terms of this indenture and the Notes; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor will be obligated to pay the same whether or not such failure to pay has become an Event of Default which could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment not a guarantee of collection. Each Guarantor hereby agrees that its obligations with regard to this Note Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require the Trustee, the Holders or the Company (each, a "BENEIFITTED PARTY") to proceed against the Company or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any Benefitted Party's power before proceeding against such Guarantor; (b) the defense of the statute of limitations in any action hereunder or in any action for the collection of any Indebtedness or the performance of any obligation hereby guaranteed; (c) any defense that may arise by reason of the incapacity, lack of authority, death or 48 disability of any other Person or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (d) demand, protest and notice of any kind including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of such Guarantor, the Company, any Benefitted Party, any creditor of such Guarantor, the Company or on the part of any other Person whomsoever in connection with any Indebtedness or obligations hereby guaranteed; (e) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against such Guarantor for reimbursement; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (g) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code; or (h) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants that its Note Guarantee will not be discharged except by complete performance of the obligations contained in ITS Note Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian, trustee, or similar official acting in relation to either the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the applicable Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company or any other obligor on the Notes of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.02 hereof, those obligations (whether or not due and payable) will forthwith become due and payable by such Guarantor for the purpose of this Note Guarantee SECTION 10.02. SUBORDINATION. Each Guarantor, the Trustee, and each Holder by accepting a Note agrees, that the obligations of such Guarantor hereunder shall be subordinated in right of payment to the prior payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of Senior Indebtedness of such Guarantor and of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). The subordination provisions of this Article 10 are made for the benefit of the holders of all Senior Indebtedness (whether outstanding on the date hereof or issued hereafter) of each Guarantor, such holders of Senior Indebtedness of each Guarantor are made Obligees under this Article 10 and such holders of Senior Indebtedness of each Guarantor or any of them may enforce the provisions of this Article 10. Holders of Senior Indebtedness of each Guarantor are third party beneficiaries of this Article 10 and no amendment thereof shall be effected without the prior written consent of the holders of a majority of the outstanding principal amount of Senior Indebtedness of each Guarantor. 49 SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of any Guarant6r in a liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its property, in an assignment for the benefit of creditors or any marshaling of such Guarantor's assets and liabilities: (1) holders of Senior Indebtedness of such Guarantor shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness of such Guarantor (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness of such Guarantor, whether or not such interest was an allowed claim) before the Trustee or any Holder shall be entitled to receive any payment from the Guarantor under or pursuant to this Note Guarantee with respect to the Notes; and (2) until all Obligations with respect to Senior Indebtedness of such Guarantor (as provided in subsection (1) above) are paid in full, any distribution to which the Trustee or any Holder would be entitled but for this Article shall be made to holders of Senior Indebtedness of such Guarantor (except that Holders may receive securities that are subordinated in right and priority of payment to at least the same extent as the Note Guarantee to (a) Senior Indebtedness of such Guarantor and 0,) any securities issued in exchange for Senior Indebtedness of such Guarantor). SECTION 10.04. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF THE GUARANTOR. No Guarantor shall make any payment or distribution to the Trustee or any Holder upon or in respect of its Note Guarantee or the Notes, or any Obligation with respect thereto, and no Guarantor shall acquire from the Trustee or any Holder any Notes for cash or property (other than securities that are subordinated in right and priority of payment to at least the same extent as its Note Guarantee to (a) Senior Indebtedness of such Guarantor and (1)) any securities issued in exchange for Senior Indebtedness of such Guarantor) until all principal and other Obligations with respect to the Senior Indebtedness of such Guarantor have been paid in full if: (i) a default in the payment when due, whether upon acceleration or otherwise, of any principal, premium, if any, or interest on Senior Indebtedness of such Guarantor occurs and is continuing beyond any applicable grace period; or (ii) any other default on Designated Senior Indebtedness of such Guarantor occurs and is continuing and the Trustee receives a notice of the default from such Guarantor, or the holders of any such Designated Senior Indebtedness of such Guarantor, stating that such Guarantor or holders are invoking a payment blockage under this Section 10.04(u) (a "GUARANTOR PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. Each Guarantor may and shall resume payments on and distributions in respect of its Note Guarantee, the Notes and all Obligations with respect thereto, and may acquire such Notes, Obligations for value when: (1) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and 50 (2) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which a Guarantor Payment Blockage Notice is received if the maturity of such Designated Senior Indebtedness of such Guarantor has not been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 10.05. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, each Guarantor shall promptly notify each Representative of holders of Senior Indebtedness of such Guarantor of the acceleration. SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives from a Guarantor any payment of any Obligations with respect to the Notes or any other Obligation guaranteed hereby at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by Section 10.03 or Section 10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness of such Guarantor as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of such Guarantor. If a distribution is made to the Trustee or any Holder that because of this Article 10 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Indebtedness of such Guarantor as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of such Guarantor. With respect to any Guarantor, with respect to the holders of Senior Indebtedness of such Guarantor, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness of such Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of such Guarantor, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 51 SECTION 1O.07. NOTICE BY A GUARANTOR. Each Guarantor shall promptly notify the Trustee and the Paying Agent of any facts known to such Guarantor that would cause a payment of any Obligations with respect to the Notes or its Note Guarantee to violate this Article, but failure to give such notice shall not affect the subordination of its Note Guarantee or of the Notes to the Senior Indebtedness of such Guarantor as provided in this Article. SECTION 10.08. SUBROGATION. With respect to any Guarantor, after all Senior Indebtedness of such Guarantor is paid in full and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Indebtedness of such Guarantor to receive distributions applicable to Senior Indebtedness of such Guarantor to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness of such Guarantor. A distribution made under this Article to holders of Senior Indebtedness of such Guarantor that otherwise would have been made to Holders is not, as between such Guarantor and Holders, a payment by the Company on the Senior Indebtedness of such Guarantor. SECTION 10.09. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Indebtedness of such Guarantor. Nothing in this Indenture shall: (1) impair, as between such Guarantor and the Holders, the obligation of such Guarantor, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Senior Indebtedness of such Guarantor; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness of such Guarantor set forth herein to receive distributions and payments otherwise payable to Holders. SECTION 10.10. SUBORDINATION MAY NOT BE IMPATIRD BY ANY GUARANTOR. With respect to any Guarantor, no right of any holder of Senior Indebtedness of such Guarantor to enforce the subordination of the Note Guarantee shall be impaired by any act or failure to act by such Guarantor or any Holder or by failure of such Guarantor or any Holder to comply with this Indenture. SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. With respect to any Guarantor, whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of such Guarantor, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person 52 making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Note Guarantee to violate this Article. Only a Guarantor, the holder of any Senior Indebtedness of such Guarantor, or the Representative of holders of Senior Indebtedness of such Guarantor may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. With respect to any Guarantor, the Trustee in its individual or any other capacity may hold Senior Indebtedness of such Guarantor with the same rights it would have if it were not Trustee. SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee the Holder's artorney4n-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding relative any Guarantor referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Indebtedness of each Guarantor are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.14. LIMITATION OF GUARANTOR'S LIABILTY. Each Guarantor and by its acceptance hereof, each beneficiary hereof, hereby confirms that it is its intention that the Note Guarantee by such Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantees. To effectuate the foregoing intention, each such person hereby irrevocably agrees that the obligation of such Guarantor under its Note Guarantee under this Article 10 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent conveyance. Each beneficiary under the Note Guarantees, by accepting the benefits hereof, confirms its intention that, in the event of a bankruptcy, reorganization or other similar proceeding of the Company or any Guarantor in which concurrent claims are made upon such Guarantor hereunder, to the extent such claims will not be fully satisfied, each such claimant with a valid claim against the Company shall be entitled to a ratable share of all payments by such Guarantor in respect of such concurrent claims. 53 SECTION 10.15. EXECUTION AND DELIVERY OF NOTE GUARANTEE. To evidence its Note Guarantee set forth in Section 10.01 hereof, each Guarantor hereby agrees that this Indenture shall be executed on behalf of each Guarantor by its President or one of its Vice Presidents and attested to by an Officer and that the notation on each Note relating to the Note Guarantee shall be executed on behalf of each Guarantor by an Officer. SECTION 10.16. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person whether or not it is affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph and Section 10.17 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under its Note Guarantee and this Indenture, (ii) immediately after giving effect to such transaction, no Default or Event of Default exists, and (iii) in the case of any Guarantor other than Holding, such Guarantor, or any Person formed by or surviving any such consolidation or merger, (A) shall have Consolidated Net Worth (immediately after giving effect to such transaction), equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction and (B) will be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio to incur, immediately after giving effect to such transaction, at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test Set forth in Section 4.09 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee in this Indenture and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Notwithstanding the foregoing, (A) a Guarantor may consolidate with or merge with or into the Company, PROVIDED, that the surviving corporation (if other than the Company) shall expressly assume by supplemental indenture complying with the requirements of this Indenture, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company and (B) a Guarantor may consolidate with or merge with or into any other Guarantor. SECTION 10.17. RELEASES FOLLOWING SALE OF ASSETS. Upon a sale or other disposition of all or substantially all of the assets of any Guarantor (other than Holding), by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of its obligations under its Note Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with Section 4.10 hereof. 54 ARTICLE 11 SUBORDINATION SECTION 11.01. SUBORDINATION. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes shall be subordinated in right of payment to the prior payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of Senior Indebtedness of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). The subordination provisions of this Article 11 are made for the benefit of the holders of all Senior Indebtedness (whether outstanding on the date hereof or issued hereafter) of the Company, such holders of Senior Indebtedness of the Company are made obligees under this Article 11 and such holders of Senior Indebtedness of the Company or any of them may enforce the provisions of this Article 11. Holders of Senior Indebtedness of the Company are third party beneficiaries of this Article 11 and no amendment hereof shall be effected without the prior written consent of the holders of a majority of the outstanding principal amount of Senior Indebtedness of the Company. SECTION 11.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness of the Company (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness of the Company, whether or not such interest is an allowed claim) before the Holders shall be entitled to receive any payment with respect to the Notes; and (2) until all Obligations with respect to Senior Indebtedness of the Company (as provided in subsection (1) above) are paid in full, any distribution to which Holders would be entitled but for this Article shall be made to holders of Senior Indebtedness of the Company (except that Holders may receive securities that are subordinated in right and priority of payment to at least the same extent as the Notes to (a) Senior Indebtedness of the Company and (b) any securities issued in exchange for any such Senior Indebtedness of the Company). SECTION 11.03. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not make any payment or distribution to the Trustee or any Holder upon or in respect of the Notes, or any Obligation with respect thereto, and may not acquire from the Trustee or any Holder any Notes for cash or property (other than securities that are subordinated in right and priority of payment to at least the same extent as the Notes to (a) Senior Indebtedness of the Company and (b) any securities issued in exchange for Senior Indebtedness of the Company) until all principal and other Obligations with respect to the Senior Indebtedness of the Company have been paid in full if: 55 (i) a default in the payment when due, whether upon acceleration or otherwise, of the principal of, premium, if any, or interest on any Senior Indebtedness of the Company occurs and is continuing beyond any applicable grace period; or (ii) any other default on Designated Senior Indebtedness of the Company occurs and is continuing and the Trustee receives a notice of such default from the Company, or from, or on behalf of, the holders of any such Designated Senior Indebtedness of the Company, stating that it is or such holders are invoking a payment blockage under this Section 11.03(ii) (a "PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. The Company may and shall resume payments on and distributions in respect of the Notes, and all Obligations with respect thereto, and may acquire them when: (1) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and (2) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any such Designated Senior Indebtedness of the Company has been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 11.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify each Representative of holders of Senior Indebtedness of the Company of the acceleration. SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder has acknowledge that such payment is prohibited by Section 11.02 or Section 11.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness of the Company as their interests may appear, or their Representatives under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company. If a distribution is made to the Trustee or any Holder that because of this Article 11 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Indebtedness of the Company as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to 56 Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11 and no implied covenants or obligations with respect to the holders of Senior Indebtedness of the Company shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 11, except if such payment is made as a result of negligent action, its own negligent failure to act or its own willful conduct or gross negligence of the Trustee. SECTION 11.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness of the Company as provided in this Article. SECTION 11.07. SUBROGATION. After all Senior Indebtedness of the Company is paid in full and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to Senior Indebtedness of the Company to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness of the Company. A distribution made under this Article to holders of Senior Indebtedness of the Company that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on Senior Indebtedness of the Company. SECTION 11.08. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness of the Company; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness of the Company set forth herein to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. 57 SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness with respect to the Notes shall be impaired by any act or failure to act by the Company or any Holder or by failure of the Company or any Holder to comply with this Indenture. SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company, the holder of any Senior Indebtedness of the Company, or any Representative of holders of Senior Indebtedness of the Company may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Indebtedness of the Company are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 58 ARTICLE 12 MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, the Guarantors or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 Telecopier No.: (812) 421-9604 Attention: Martin R. Imbler With a copy to: O'Sullivan Graev & Karabell 30 Rockefeller Plaza New York, New York 10112 Telecopier No.: (212) 408-2420 Attention: Kenneth S. Siegel, Esq. If to the Trustee: United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Telecopier No.: (212) 852-1625 Attention: Corporate Trust Administration The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 59 Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company or any Guarantor mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312 (b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 12.04. CERTIFICATE AND OPINON AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantors to the Trustee to take any action under this Indenture, the Company or the Guarantors shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12. 05. STATEMENTS REQUIRED IN CERTIFICATE OR OPIMON. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 3 14(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and 60 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Note Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTE. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company and the Guarantors in this Indenture and the Notes and the Note Guarantees, as the case may be, shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY. In case any provision in this Indenture, or in the Notes or in the Note Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 61 SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 62 SIGNATURES Dated as of April 21, 1994 BERRY PLASTICS CORPORATION By:/s/ROBERTO BUARON Name: Roberto Buaron Title: Chairman Attest: /s/JAMES KRATOCHVIL (SEAL) James Kratochvil Secretary Dated as of April 21, 1994 BPC HOLDING CORPORATION, as Guarantor By:/s/ROBERTO BUARON Name: Roberto Buaron Title: Chairman Attest: /s/JAMES KRATOCHVIL (SEAL) James Kratochvil Secretary Dated as of April 21, 1994 BERRY IOWA CORPORATION, as Guarantor By:/s/ROBERTO BUARON Name: Roberto Buaron Title: Chairman Attest: /s/JAMES KRATOCHVIL (SEAL) James Kratochvil Secretary Dated as of April 21, 1994 BERRY-CPI PLASTICS CORP., as Guarantor By:/s/ROBERTO BUARON Name: Roberto Buaron Title: Chairman Attest: /s/JAMES KRATOCHVIL (SEAL) James Kratochvil Secretary Dated as of April 21, 1994 UNITED STATES TRUST COMPANY OF NEW YORK Trustee By:/s/JOHN GUILIANO Name: John Guiliano Title: Vice President Attest: (SEAL) Dated as of April 21, 1994 _______________________________________________________________________________ _______________________________________________________________________________ EXHIBIT A (Face of Note) 12 1/4% Senior Subordinated Notes due 2004 No. $____________ BERRY PLASTICS CORPORATION promises to pay to or registered assigns, the principal sum of Dollars on April 15, 2004. Interest Payment Dates: April 15 and October 15 Record Dates: April 1 and October 1 Dated:___________________ __, 1994 BERRY PLASTICS CORPORATION By: __________________________ Name: Title: By: __________________________ Name: Title: (SEAL) This is one of the Notes referred to in the within-mentioned Indenture: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: __________________________ Authorized Signatory _______________________________________________________________________________ _______________________________________________________________________________ (Back of Security) 12 1/4% SENIOR SUBORDINATED NOTE DUE April 15, 2004 "UNTIL THE EARLIEST TO OCCUR OF (I) OCTOBER 15, 1994, (II) SUCH EARLIER DATE AS MAY BE DETERMINED BY DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ("DLJ") WITH THE CONSENT OF BPC HOLDING CORPORATION ("HOLDING"), WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD, (III) IN THE EVENT OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE (THE "INDENTURE") GOVERNING THE 12 1/4% SENIOR SUBORDINATED NOTES DUE 2004 (THE "NOTES") OF BERRY PLASTICS CORPORATION ("BERRY")), THE DATE BERRY MAILS NOTICE THEREOF TO HOLDERS OF NOTES AND (iv) IN THE EVENT OF AN ASSET SALE OFFER (AS DEFINED IN THE INDENTURE), THE DATE BERRY MAILS NOTICE THEREOF TO HOLDERS OF NOTES, THE NOTES EVIDENCED HEREBY MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS, SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME TRANSFEREE FOR EACH ONE WARRANT (SUBJECT TO AN ADJUSTMENT UNDER SECTION 14 OF THE WARRANTY AGREEMENT, DATED AS OF APRIL 21, 1994, BETWEEN HOLDING AND UNITED STATES TRUST COMPANY OF NEW YORK, AS WAAAANT AGENT) TO PURCHASE 1.13237 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.00005 PER SHARE, OF HOLDING $1,000 PRINCIPAL AMOUNT OF NOTES SO TRANSFERRED." By accepting a Note bearing the legend above, each Holder of a Note shall be bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to Holding or the Warrant Agent) AS fully and effectively AS if such Holder had signed the same. Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. INTEREST. Berry Plastics Corporation, a Delaware corporation (the oCompany~), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of 12 1/4%. The Company will pay interest semi-annually on October 15 and April 15 of each year, or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"). Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. To the extent lawful, the Company shall pay interest on overdue principal at the rate of 1% per annum in excess of the then applicable interest rate on the Notes; it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. A-2 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. The Holder hereof must surrender this Note to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company or any Guarantor (as defined below) may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of April 21, 1994 (the "Indenture") among the Company, BPC Holding Corporation, a Delaware corporation ("Holding"), Berry Iowa Corporation, a Delaware corporation ("Berry Iowa"), Berry-CPI Plastics Corp., a Delaware corporation ("Berry-CPI Plastics"; Berry-CPI Plastics, together with Holding and Berry Iowa, the "Guarantors") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, and Holders of the Notes are referred to the Indenture and such act for a statement of such terms. The terms of the indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company limited to $100,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth below, the Company shall not have the option to redeem the Notes pursuant to Section 3.07 of the Indenture prior to April 15, 1999. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest thereon, to the applicable redemption date, if redeemed during the 12 month period beginning on April 15 of the years indicated below: YEAR PERCENTAGE 1999 106.125% 2000 104.083% 2001 102.042% 2002 AND THEREAFTER 100.000% Notwithstanding the foregoing, at any tune prior to April 15, 1997, the Company may redeem up to 25 % of the initial principal amount of the 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 the Company as a capital contribution or are used to purchase common equity securities of the Company at a redemption price equal to 111.25% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date; PROVIDED that at least 75 % of the principal of Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 60 days following the closing of any such public offering. 6. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. A-3 7 REDEMPTION OR REDEMPTION AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to offer to purchase all Notes at 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) When the aggregate amount of Excess Proceeds from Asset Sales exceeds $5 million, the Company shall be required to offer to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at 101 % of the principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer. If the aggregate principal amount of Notes tendered by Holders thereof exceeds the amount of Excess Proceeds, the Notes to be redeemed shall be selected pursuant to the terms of Section 3.02 of the Indenture (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased). To the extent that the aggregate amount of Notes tendered by Holders thereof is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. Holders of Notes which are the subject of an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but than 60 days before the redemption date to each Holder of Notes to be redeemed at its address. Notes may be redeemed in part but only in whole multiples of $1,000, unless all of held by a Holder are to be redeemed. On and after the redemption date, interest~ ceases to Notes or portions of them called for redemption. 9. SUBORDINATION. The Notes are subordinated to Senior Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed) and all Obligations with respect thereto. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Notes may be paid. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 10. NOTE GUARANTEES. Payment of principal of, premium, if any, and interest (including interest on overdue principal, premium, if any, and interest, if lawful) on the Notes is unconditionally guaranteed by the Guarantors, on a senior subordinated basis, pursuant to Article 10 of the Indenture. 11. DENOMINATIONS. TRANSFER. EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before ~ selection of Notes to be redeemed, during the period between a record date and the corresponding Interest Payment Date. 12. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of and interest on this Note and for all other purposes whatsoever, whether or not A-4 this Note is overdue, and neither the Trustee, any Agent, the Company nor any Guarantor shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 13. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Notes may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's or any Guarantor's obligations to Holders in the case of a merger or consolidation or to make any change that would provide any additional rights or benefits to the Holders (including providing for additional Note Guarantees pursuant to Section 4.13 of the Indenture) or that does not adversely affect the rights of any Holder under the Indenture or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA. 14. DEFAULTS AND REMEDIES. Events of Default include: default by the Company or the Guarantors in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) and such default continues for a period of 30 days; default by the Company or the Guarantors in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase or otherwise); failure by the Company to comply with Sections 4.07, 4.09, 4.10 or 4.15 of the Indenture; failure by the Company or the Guarantors to observe or perform any other covenant, representation, warranty or other agreement in the Notes for 60 days after the notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding; default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the Issuance Date, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $2 million or1T?~re; a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company, Holding or any of their respective Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $2 million; except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee; and certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any of their respective Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; except, that if any A-5 Indebtedness is outstanding pursuant to the New Revolving Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable upon the earlier of (1) the day which is five business days after notice of acceleration is given to the Company and the lender under the New Revolving Credit Facility or (2) the date of acceleration of the Indebtedness under the New Revolving Credit Facility and except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any of its Subsidiaries, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company must furnish an annual compliance certificate to the Trustee. 15. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Guarantors or their respective Affiliates, and may otherwise deal with the Company the Guarantors or their respective Affiliates, as if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Note Guarantees, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Note Guarantees. 17. AUTHENTICATION. Neither this Note nor any Note Guarantee shall be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO ~NSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: A-6 Berry Plastics Corporation 101 Oakley Street P.O. Box 959 Evansville, Indiana 47706-0959 Attention:Chief Financial Officer NOTE GUARANTEE Each of the Guarantors and each Subsidiary of the Company which in accordance with Section 4.13 of the Indenture is required to guarantee the obligations of the Company under the Notes upon execution of a counterpart of this Indenture, has jointly and severally unconditionally guaranteed (I) the due and punctual payment of the principal of and interest on the Notes, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and of interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture or the Notes and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. The obligations of each Guarantor to the Holder and to the Trustee pursuant to this Note Guarantee and the Indenture are as expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Note Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This is a continuing guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a guarantee of payment and not a guarantee of collection. This Note Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Note Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. A-7 Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. Guarantors: BPC HOLDING CORPORATION By:_____________________________________ Name: Title: Attest: _____________________________________ (SEAL) BERRY IOWA CORPORATION By:_____________________________________ Name: Title: Attest: _____________________________________ (SEAL) BERRY-CPI PLASTICS CORP. By:_____________________________________ Name: Title: Attest: _____________________________________ (SEAL) A-8 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _______________________________________________________________________________ (INSERT ASSIGNEE'S SOC. SEC. OR tax I.D. NO~) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE) and irrevocably appoint________________________________________________________ To transfer this Note on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date:__________________ Your Signature:_______________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 (upon the occurrence of an Asset Sale) or 4.15 (upon the occurrence of a Change of Control) of the Indenture, check the box below: []Section 4.10 []Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased: $__________ Date: _________________ Your Signature: ______________________________ (Sign exactly as your name appears on on the Note) Tax Identification No.:_____________ Signature Guarantee. A-10 EXHIBIT B [FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO THE NOTE GUARANTEES] Each of the Guarantors and each Subsidiary of the Company which in accordance with Section 4.13 of the Indenture is required to guarantee the obligations of the Company under the Notes upon execution of a counterpart of this Indenture, has jointly and severally unconditionally guaranteed (i) the due and punctual payment of the principal of and interest on the Notes, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and of interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture or the Notes and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. The obligations of each Guarantor to the Holder and to the Trustee pursuant to this Note Guarantee and the Indenture are as expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Note Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This is a continuing guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a guarantee of payment and not a guarantee of collection. This Note Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Note Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. B-1 EX-10.27 3 EXHIBIT 10.27 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY PLASTICS ACQUISITION CORPORATION BERRY IOWA CORPORATION BERRY TRI-PLAS CORPORATION BERRY STERLING CORPORATION AEROCON, INC. PACKERWARE CORPORATION, a Kansas corporation PACKERWARE CORPORATION, a Delaware corporation BERRY PLASTICS DESIGN CORPORATION VENTURE PACKAGING, INC. VENTURE PACKAGING MIDWEST, INC., an Ohio corporation VENTURE PACKAGING MIDWEST, INC., a Delaware corporation VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation NIM HOLDINGS LIMITED NORWICH INJECTION MOULDERS LIMITED NORWICH ACQUISITION LIMITED KNIGHT PLASTICS, INC. CPI HOLDING CORPORATION CARDINAL PACKAGING, INC. 11% SENIOR SUBORDINATED NOTES DUE 2007 - -------------------------------------------------------------------------------- INDENTURE Dated as of July 6, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES TRUST COMPANY OF NEW YORK - -------------------------------------------------------------------------------- Trustee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE* TRUST INDENTURE ACT SECTION INDENTURE SECTION 310(a)(1).................................................. 7.10 (a)(2).................................................. 7.10 (a)(3).................................................. N.A. (a)(4).................................................. N.A. (a)(5).................................................. 7.10 (b)..................................................... 7.10 (c)..................................................... N.A. 311(a)..................................................... 7.11 (b)..................................................... 7.11 (c)..................................................... N.A. 312(a)..................................................... 2.05 (b)..................................................... 12.03 (c)..................................................... 12.03 313(a)..................................................... 7.06 (b)(1).................................................. 7.06 (b)(2).................................................. 7.06; 7.07 (c)..................................................... 7.06; 12.02 (d)..................................................... 7.06 314(a)..................................................... 4.03; 12.02 (b)..................................................... N.A. (c)(1).................................................. 12.04 (c)(2).................................................. 12.04 (c)(3).................................................. N.A. (d)..................................................... N.A. (e)..................................................... 12.05 (f)..................................................... N.A. 315(a)..................................................... 7.01 (b)..................................................... 7.05; 12.02 (c)..................................................... 7.01 (d)..................................................... 7.01 (e)..................................................... 6.11 316(a)(last sentence)...................................... 2.09 (a)(1)(A)............................................... 6.05 (a)(1)(B)............................................... 6.04 (a)(2).................................................. 6.07; 9.02 (b)..................................................... 6.07 (c)..................................................... 2.13 317(a)(1).................................................. 6.08 (a)(2).................................................. 6.09 (b)..................................................... 2.04 318(a)..................................................... 12.01 (b)..................................................... N.A. (c)..................................................... 12.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE ................... 1 SECTION 1.01 DEFINITIONS .......................................... 1 SECTION 1.02 OTHER DEFINITIONS .................................... 15 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT .... 16 SECTION 1.04 RULES OF CONSTRUCTION ................................ 16 ARTICLE 2 THE NOTES .................................................... 16 SECTION 2.01 FORM AND DATING .................................... 16 SECTION 2.02 EXECUTION AND AUTHENTICATION ....................... 17 SECTION 2.03 REGISTRAR AND PAYING AGENT ......................... 18 SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST ................ 19 SECTION 2.05 LISTS OF HOLDERS OF THE NOTES ...................... 19 SECTION 2.06 TRANSFER AND EXCHANGE .............................. 19 SECTION 2.07 REPLACEMENT NOTES .................................. 30 SECTION 2.08 OUTSTANDING NOTES .................................. 31 SECTION 2.09 TREASURY NOTES ..................................... 31 SECTION 2.10 TEMPORARY NOTES .................................... 31 SECTION 2.11 CANCELLATION ....................................... 32 SECTION 2.12 DEFAULTED INTEREST ................................. 32 SECTION 2.13 RECORD DATE ........................................ 33 SECTION 2.14 CUSIP NUMBER ....................................... 33 ARTICLE 3 REDEMPTION AND PREPAYMENT .................................... 33 SECTION 3.01 NOTICES TO TRUSTEE ................................. 33 SECTION 3.02 SELECTION OF NOTES TO BE PURCHASED OR REDEEMED ..... 33 SECTION 3.03 NOTICE OF PURCHASE OR REDEMPTION ................... 34 SECTION 3.04 EFFECT OF NOTICE OF PURCHASE OR REDEMPTION ......... 34 SECTION 3.05 DEPOSIT OF PURCHASE OR REDEMPTION PRICE ............ 35 SECTION 3.06 NOTES PURCHASED OR REDEEMED IN PART ................ 35 SECTION 3.07 OPTIONAL REDEMPTION ................................ 35 SECTION 3.08 MANDATORY REDEMPTION ............................... 36 SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS 36 ARTICLE 4 COVENANTS .................................................... 37 SECTION 4.01 PAYMENT OF NOTES ................................... 37 SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY .................... 38 SECTION 4.03 REPORTS ............................................ 38 SECTION 4.04 COMPLIANCE CERTIFICATE ............................. 39 SECTION 4.05 TAXES .............................................. 39 SECTION 4.06 STAY, EXTENSION AND USURY LAWS ..................... 40 SECTION 4.07 RESTRICTED PAYMENTS ................................ 40 SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES ....................................... 42 i SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK ................................. 42 SECTION 4.10 ASSET SALES ........................................ 45 SECTION 4.11 TRANSACTIONS WITH AFFILIATES ....................... 46 SECTION 4.12 LIENS .............................................. 46 SECTION 4.13 ADDITIONAL GUARANTEES .............................. 46 SECTION 4.14 CORPORATE EXISTENCE ................................ 47 SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL ......... 47 SECTION 4.16 NO SENIOR SUBORDINATED INDEBTEDNESS ................ 48 SECTION 4.17 DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES 48 ARTICLE 5 SUCCESSORS ................................................... 49 SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS ............ 49 SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED .................. 49 ARTICLE 6 DEFAULTS AND REMEDIES ........................................ 49 SECTION 6.01 EVENTS OF DEFAULT .................................. 49 SECTION 6.02 ACCELERATION ....................................... 51 SECTION 6.03 OTHER REMEDIES ..................................... 52 SECTION 6.04 WAIVER OF PAST DEFAULTS ............................ 52 SECTION 6.05 CONTROL BY MAJORITY ................................ 53 SECTION 6.06 LIMITATION ON SUITS ................................ 53 SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT ...... 53 SECTION 6.08 COLLECTION SUIT BY TRUSTEE ......................... 54 SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM ................... 54 SECTION 6.10 PRIORITIES ......................................... 54 SECTION 6.11 UNDERTAKING FOR COSTS .............................. 55 ARTICLE 7 TRUSTEE ...................................................... 55 SECTION 7.01 DUTIES OF TRUSTEE .................................. 55 SECTION 7.02 RIGHTS OF TRUSTEE .................................. 56 SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE ....................... 56 SECTION 7.04 TRUSTEE'S DISCLAIMER ............................... 57 SECTION 7.05 NOTICE OF DEFAULTS ................................. 57 SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES ......... 57 SECTION 7.07 COMPENSATION AND INDEMNITY ......................... 57 SECTION 7.08 REPLACEMENT OF TRUSTEE ............................. 58 SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC ................... 59 SECTION 7.10 ELIGIBILITY; DISQUALIFICATION ...................... 59 SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY .. 60 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE ..................... 60 SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE ................................ 60 SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE ..................... 60 SECTION 8.03 COVENANT DEFEASANCE ................................ 60 SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE ......... 61 SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS ........... 62 SECTION 8.06 REPAYMENT TO COMPANY ............................... 62 ii SECTION 8.07 REINSTATEMENT ...................................... 63 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER ............................. 63 SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES ................ 63 SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES ................... 64 SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT ................ 65 SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS .................. 65 SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES ................... 66 SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC .................... 66 ARTICLE 10 NOTE GUARANTEES ............................................. 66 SECTION 10.01 NOTE GUARANTEE .................................... 66 SECTION 10.02 SUBORDINATION ..................................... 67 SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY .............. 68 SECTION 10.04 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF THE GUARANTOR ..................................... 68 SECTION 10.05 ACCELERATION OF NOTES ............................. 69 SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER ............... 69 SECTION 10.07 NOTICE BY A GUARANTOR ............................. 70 SECTION 10.08 SUBROGATION ....................................... 70 SECTION 10.09 RELATIVE RIGHTS ................................... 70 SECTION 10.10 SUBBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR 70 SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE .......... 70 SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT ................ 71 SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION ............. 71 SECTION 10.14 LIMITATION OF GUARANTOR'S LIABILITY ............... 71 SECTION 10.15 EXECUTION AND DELIVERY OF NOTE GUARANTEE .......... 72 SECTION 10.16 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS 72 SECTION 10.17 RELEASES FOLLOWING SALE OF ASSETS ................. 72 ARTICLE 11 SUBORDINATION ............................................... 73 SECTION 11.01 SUBORDINATION ..................................... 73 SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY .............. 73 SECTION 11.03 DEFAULT ON SENIOR INDEBTEDNESS .................... 73 SECTION 11.04 ACCELERATION OF NOTES ............................. 74 SECTION 11.05 WHEN DISTRIBUTION MUST BE PAID OVER ............... 74 SECTION 11.06 NOTICE BY COMPANY ................................. 75 SECTION 11.07 SUBROGATION ....................................... 75 SECTION 11.08 RELATIVE RIGHTS ................................... 75 SECTION 11.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY ...... 76 SECTION 11.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE .......... 76 SECTION 11.11 RIGHTS OF TRUSTEE AND PAYING AGENT ................ 76 SECTION 11.12 AUTHORIZATION TO EFFECT SUBORDINATION ............. 76 ARTICLE 12 MISCELLANEOUS ............................................... 77 SECTION 12.01 TRUST INDENTURE ACT CONTROLS ...................... 77 SECTION 12.02 NOTICES ........................................... 77 SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES .................................. 78 SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT 78 iii SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION ..... 78 SECTION 12.06 RULES BY TRUSTEE AND AGENTS ....................... 79 SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS ........................ 79 SECTION 12.08 GOVERNING LAW ..................................... 79 SECTION 12.09 CONSENT TO JURISDICTION ........................... 79 SECTION 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS ..... 79 SECTION 12.11 SUCCESSORS ........................................ 79 SECTION 12.12 SEVERABILITY ...................................... 80 SECTION 12.13 COUNTERPART ORIGINALS ............................. 80 SECTION 12.14 TABLE OF CONTENTS, HEADINGS, ETC .................. 80 EXHIBITS EXHIBIT A-1 FORM OF NOTE EXHIBIT A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE EXHIBIT B FORM OF CERTIFICATE OF TRANSFER EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE EXHIBIT D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR EXHIBIT E FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO THE NOTE GUARANTEES iv INDENTURE dated as of July 6, 1999 among Berry Plastics Corporation, a Delaware corporation (the "Company"), BPC Holding Corporation, a Delaware corporation ("Holding"), Berry Plastics Acquisition Corporation, a Delaware corporation ("Berry Acquisition"), Berry Iowa Corporation, a Delaware corporation ("Berry Iowa"), Berry Tri Plas Corporation, a Delaware corporation ("Berry Tri Plas"), Berry Sterling Corporation, a Delaware corporation ("Berry Sterling"), AeroCon, Inc., a Delaware corporation ("AeroCon"), PackerWare Corporation, a Kansas corporation ("PackerWare'), PackerWare Corporation, a Delaware corporation ("PackerWare Delaware"), Berry Plastics Design Corporation, a Delaware corporation ("Berry Design"), Venture Packaging, Inc., a Delaware corporation ("Venture Holdings"), Venture Packaging Midwest, Inc., an Ohio corporation ("Venture Midwest"), Venture Packaging Midwest Inc., a Delaware corporation ("Venture Midwest Delaware"), Venture Packaging Southeast, Inc., a South Carolina corporation ("Venture Southeast"), Venture Packaging Southeast, Inc., a Delaware corporation ("Venture Southeast Delaware"), NIM Holdings Limited, a company organized under the laws of England and Wales ("NIM Holdings"), Norwich Injection Moulders Limited, a company organized under the laws of England and Wales ("Norwich"), Norwich Acquisition Limited, a company organized under the laws of England and Wales ("Norwich Acquisition"), Knight Plastics, Inc., a Delaware corporation ("Knight"), CPI Holding Corporation, a Delaware corporation ("CPI"), Cardinal Packaging, Inc., an Ohio corporation ("Cardinal"), and United States Trust Company of New York, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 11% Series A Senior Subordinated Notes due 2007 (the "Series A Notes") and the 11% Series B Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 DEFINITIONS. "ACQUIRED DEBT" means, with respect to any specified Person (a) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person; and (b) Indebtedness encumbering any asset acquired by such specified Person. "ADDITIONAL NOTES" means an unlimited number of additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. Neither Chase Venture Capital Associates, L.P. nor its respective Affiliates shall be deemed an Affiliate of Holding, the Company or any of its Subsidiaries for purposes of this definition by reason of its direct or indirect beneficial ownership of 30% or less of the voting Common Stock of Holding or by reason of any employee thereof being appointed to the Board of Directors of Holding. "AGENT" means any Registrar, Paying Agent or co-registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "ASSET SALE" means (a) the sale, lease, conveyance or other disposition of any property or assets of the Company or any Restricted Subsidiary, including by way of a sale-and-leaseback, other than sales of inventory in the ordinary course of business; PROVIDED that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries shall be governed by Section 4.15 hereof and/or Section 5.01 hereof and not by the provisions of Section 4.10 hereof; or (b) the issuance or sale of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (a) or (b) above, whether in a single transaction or a series of related transactions. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales (i) any single transaction or series of related transactions that involves assets having a fair market value equal to or less than $1.0 million or for Net Proceeds equal to or less than $1.0 million; (ii) a transfer of assets between or among the Company and its Wholly Owned Restricted Subsidiaries, (iii) any Restricted Payment, dividend or purchase or retirement of Equity Interests that is permitted by Section 4.07 hereof; (iv) the issuance or sale of Equity Interests of any Restricted Subsidiary of the Company; PROVIDED that such Equity Interests are issued or sold in consideration for the acquisition of assets by such Restricted Subsidiary or in connection with a merger or consolidation of another Person into such Restricted Subsidiary; (v) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; and (vi) the sale or other disposition of cash or Cash Equivalents. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means (a) with respect to a corporation, the board of directors of the corporation; (b) with respect to a partnership, the board of directors of the general partner of the partnership; and (c) with respect to any other Person, the board or committee of such Person serving a similar function. "BORROWING BASE" means, as of any date, an amount equal to (a) 85% of the face amount of all accounts receivable owned by the Company and its Subsidiaries as of such date that were not more than 90 days past due; PLUS (b) 65% of the book value (calculated on a first in first out basis) of all inventory owned by the Company and its Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "BUSINESS DAY" means any day other than a Legal Holiday. 2 "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be so required to be capitalized on a balance sheet prepared in accordance with GAAP. "CAPITAL STOCK" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of such partnership. "CASH EQUIVALENTS" means (a) United States dollars; (b) 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; (c) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case, with any lender party to the Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above; and (e) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition. "CEDEL" means Cedel Bank, SA. "CHANGE OF CONTROL" means the occurrence of (a) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of Holding's or the Company's assets to any "person" or "group" (as those terms are used in Section 13(d)(3) of the Exchange Act) other than the Principal and his Related Parties; (b) the adoption of a plan relating to the liquidation or dissolution of Holding or the Company; (c) the acquisition by any "person" or "group" (as defined above), other than by the Principal and his Related Parties, of a direct or indirect interest in more than 35% of the voting power of the voting stock of Holding by way of purchase, merger or consolidation or otherwise if (i) such person or group (as defined above), other than the Principal and his Related Parties, owns, directly or indirectly, more of the voting power of the voting stock of Holding than the Principal and his Related Parties; and (ii) such acquisition occurs prior to an Initial Public Offering; (d) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than by the Principal and his Related Parties) of a direct or indirect interest in more than 50% of the voting power of the voting stock of Holding by way of purchase, merger or consolidation or otherwise if such acquisition occurs subsequent to an Initial Public Offering; or (e) the first day on which a majority of the members of the Board of Directors of Holding are not Continuing Directors. "COMMON STOCK OF HOLDING" means the Class A Common Stock, $.00005 par value per share, and the Class B Common Stock, $.00005 par value per share, of Holding. "CONSOLIDATED CASH FLOW" means, with respect to any specified 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 by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing Consolidated Net Income; PLUS (b) provision for taxes based on income or profits of such Person and its Restricted 3 Subsidiaries 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 and its Restricted Subsidiaries 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 and its Restricted Subsidiaries 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 Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount, non-cash interest payments, the interest component of capital leases, and net payments (if any) pursuant to Hedging Obligations); (b) commissions, discounts and other fees and charges paid or accrued with respect to letters of credit and bankers' acceptance financing; and (c) interest for such period whether or not paid by such Person or its Restricted Subsidiaries under a Guarantee of Indebtedness of any other Person. "CONSOLIDATED NET INCOME" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that (a) the Net Income of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the specified Person or a Guarantor; (b) the Net Income of any Person that is a Restricted Subsidiary (other than a Wholly Owned Restricted Subsidiary) shall be included only to the extent of the amount of dividends or distributions paid to the specified Person or a Guarantor; (c) 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; (d) the cumulative effect of a change in accounting principles shall be excluded; and (e) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded whether or not distributed to the specified Person or one of its Subsidiaries. "CONSOLIDATED STEP-UP DEPRECIATION AND AMORTIZATION" means, with respect to any Person for any period, the total amount of depreciation related to the write up of assets and amortization of such Person for such period on a consolidated basis as determined in accordance with GAAP to the extent such depreciation was deducted in computing Consolidated Net Income. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of Holding who (a) was a member of such Board of Directors on the date of this Indenture; or (b) 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. 4 "CREDIT FACILITY" means the Second Amended and Restated Financing and Security Agreement dated as of July 2, 1998, as amended through the date hereof by and among the Company, NIM Holdings Limited, Norwich Injection Moulders Limited, the financial institutions party thereto and NationsBank, N.A., as collateral and administrative agent, providing for up to $142.9 million of borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give written notice to the Company. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "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. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DESIGNATED SENIOR INDEBTEDNESS" means (a) the Senior Bank Indebtedness; and (b) any other Senior Indebtedness permitted to be incurred under this Indenture the principal amount of which is $15.0 million or more and that has been designated in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "DISTRIBUTION" means, for purposes of Articles 10 and 11, a distribution consisting of cash, securities or other property, by set-off or otherwise. "DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that was formed under the laws of the United States or any state thereof or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). 5 "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Facility) in existence on the date of this Indenture, until such amounts are repaid. "FIRST ATLANTIC" means First Atlantic Capital, Ltd. "FIXED CHARGES" means, with respect to any specified Person for any period, the sum, without duplication, of (a) the Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income; PLUS (b) the product of (i) all cash dividend payments and noncash dividend payments in the form of securities (other than Disqualified Stock) on any series of preferred stock of such Person and its Restricted Subsidiaries, times (ii) except to the extent such dividend payments are deemed tax deductible, a fraction, the numerator of which is one and the denominator of which is one minus the then current combined Federal, state and local statutory tax rate of such Person and its Restricted Subsidiaries, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than revolving credit borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of calculating the Fixed Charge Coverage Ratio, acquisitions, dispositions and discontinued operations (as determined in accordance with GAAP) that have been made by the specified Person or any of its Restricted Subsidiaries, including all mergers and consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they (and the reduction of any associated fixed charge obligations resulting therefrom) had occurred on the first day of the four-quarter reference period. 6 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. "GUARANTEE" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, through letters of credit and reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "GUARANTORS" means each of (a) each Domestic Restricted Subsidiary of the Company; (b) NIM Holdings Limited, a company organized under the laws of England and Wales, and Norwich Injection Moulders Limited, a company organized under the laws of England and Wales; and (c) any other Restricted Subsidiary that executes a Note Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDER" means a Person in whose name a Note is registered. "IAI GLOBAL NOTE" means a global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "INDEBTEDNESS" means, with respect to any specified Person, any indebtedness of such person, whether or not: (a) in respect of borrowed money; (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) representing Capital Lease Obligations; (d) in respect of the balance deferred and unpaid of the purchase price of any property, except such balance that constitutes an accrued expense or trade payable; or (e) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes the Guarantee by the specified Person of any indebtedness of any other Person. 7 The amount of any Indebtedness outstanding as of any date will be: (a) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (b) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INITIAL NOTES" means the first $75.0 million aggregate principal amount of Notes issued under this Indenture on the date hereof. "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. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB. "INTEREST PAYMENT DATE" shall have the meaning given to it in the Notes. "INVESTMENTS" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers, directors, consultants and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.07 hereof. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by the Holders in connection with the Exchange Offer. "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 8 filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "NET INCOME" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however (a) 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 (b) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that are the subject of such Asset Sale and any reserve for indemnification adjustment in respect of the sale price of such asset or assets. "1998 INDENTURE" means the Indenture dated August 24, 1998 among the Company, the Guarantors named therein and the Trustee, governing the 1998 Notes. "1994 INDENTURE" means the Indenture dated April 21, 1994 among the Company, the Guarantors named therein and the Trustee, governing the 1994 Notes. "1998 NOTES" means the $25.0 million in principal amount of the Company's 12 1/4% Senior Subordinated Notes due 2004. "1994 NOTES" means the $100.0 million in principal amount of the Company's 12 1/4% Senior Subordinated Notes due 2004. "NON-RECOURSE DEBT" means Indebtedness (a) as to which neither the Company nor any of its Restricted Subsidiaries (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly or indirectly liable as a guarantor or otherwise, or (iii) is the lender; (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (c) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "NON-U.S. PERSON" means a Person who is not a U.S. Person. 9 "NOTES" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes, if any, shall be treated as a single class for all purposes under this Indenture. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFICER" means, with respect to any unnatural Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "144A GLOBAL NOTE" means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to Holding, any Subsidiary of Holding or the Trustee. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the Company; or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (c) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (d) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; and (e) Hedging Obligations. "PERMITTED JUNIOR SECURITIES" means (a) Equity Interests in the Company or any Guarantor; or (b) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Indebtedness under this Indenture. "PERMITTED LIENS" means (a) Liens of the Company and any Guarantor securing Senior Indebtedness that was permitted by the terms of this Indenture to be incurred; (b) Liens in favor of the Company or the Guarantors; (c) Liens on property of a Person existing at the time such Person is merged 10 with or into or consolidated with the Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (d) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (e) 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; (f) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (d) of the second paragraph of Section 4.09 hereof covering only the assets acquired with such Indebtedness; (g) Liens existing on the date of this Indenture; (h) 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; (i) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; and (j) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "PERMITTED REFINANCING" means Refinancing Indebtedness if (a) the principal amount of Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums, accrued interest and reasonable expenses incurred in connection therewith); (b) the Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (c) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, the Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (d) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or any agency or political subdivision thereof or any other entity. "PRINCIPAL" means Roberto Buaron. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness referred to in the first paragraph of or in clauses (b), (c), (d) and (l) of the second paragraph of Section 4.09 hereof. 11 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of July 6, 1999, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act." "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S or a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "RELATED PARTY" means with respect to the Principal (a) any spouse, sibling or descendant of the Principal, whether or not such relationship arises from birth, adoption or marriage or despite such relationship being dissolved by divorce; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a controlling interest of which consist of the Principal and/or such other Persons referred to in the immediately preceding clause (a). "REPRESENTATIVE" means, for purposes of Articles 10 and 11, the indenture trustee or other trustee, agent or representative for any Senior Indebtedness or, with respect to any Guarantor, for any Senior Indebtedness of such Guarantor. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. 12 "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR BANK INDEBTEDNESS" means the Indebtedness outstanding under the Credit Facility as such agreement may be restated, further amended, supplemented or otherwise modified or replaced from time to time hereafter, together with any refunding or replacement of any such Indebtedness. "SENIOR INDEBTEDNESS" means (a) the Senior Bank Indebtedness; (b) any other Indebtedness permitted to be incurred by the Company or a Guarantor, as the case may be, under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is PARI PASSU with or subordinated in right of payment to the Notes or a Note Guarantee, as the case may be; and (c) all Obligations with respect to the items listed in the preceding clauses (a) and (b). Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (w) any liability for Federal, state, local or other taxes owed or owing by the Company or a Guarantor, as the case may be; (x) any Indebtedness of the Company or a Guarantor, as the case may be, to Holding or to any of Holding's other Subsidiaries or other Affiliates; (y) any trade payables; or (z) the portion of any Indebtedness that is incurred in violation of this Indenture. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "STOCK EXCHANGE" means the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market. "SUBSIDIARY" means, with respect to any specified Person (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and (b) any 13 partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person or any combination thereof. "TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, as in effect on the date of this Indenture, between the Company and Holding. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as IN effect on the date on which this Indenture is qualified under the TIA. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL NOTE" means a permanent global Note substantially in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Company's Board of Directors, but only to the extent that such Subsidiary (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Resolution of the Company's Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under Section 4.09 hereof, the Company shall be in default of such Section. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of 14 Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (a) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (b) no Default or Event of Default would be in existence following such designation. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) 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 (ii) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the due date of such payment; by (b) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. SECTION 1.02 OTHER DEFINITIONS. Defined in Term Section "AFFILIATE TRANSACTION"................ 4.11 "ASSET SALE OFFER"..................... 3.09 "BENEFITED PARTY"...................... 10.01 "CHANGE OF CONTROL OFFER".............. 4.15 "CHANGE OF CONTROL PAYMENT"............ 4.15 "CHANGE OF CONTROL PAYMENT DATE"....... 4.15 "COVENANT DEFEASANCE".................. 8.03 "EVENT OF DEFAULT"..................... 6.01 "EXCESS PROCEEDS"...................... 4.10 "GUARANTOR PAYMENT BLOCKAGE NOTICE".... 10.04 "INCUR"................................ 4.09 "LEGAL DEFEASANCE"..................... 8.02 "NOTE GUARANTEE"....................... 10.01 "OFFER AMOUNT"......................... 3.09 "OFFER PERIOD"......................... 3.09 "PAYING AGENT"......................... 2.03 "PAYMENT BLOCKAGE NOTICE".............. 11.03 "PAYMENT DEFAULT"...................... 6.01 "PURCHASE DATE"........................ 3.09 "REGISTRAR"............................ 2.03 "RESTRICTED PAYMENTS".................. 4.07 "TERMINATION DATE"..................... 2.06 15 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the Notes means the Company, the Guarantors and any successor obligor upon the Notes or any Note Guarantee, as the case may be. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04 RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES SECTION 2.01 FORM AND DATING. (a) GENERAL. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The notation on each Note relating to the Note Guarantee shall be substantially in the form set forth on 16 Exhibit B, which is part of this Indenture. The Notes may have notations, legends or endorsements approved as to form by the Company and required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject or usage. Each Note shall be dated the date of its authentication. The Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. (b) GLOBAL NOTES. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) TEMPORARY GLOBAL NOTES. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank. SECTION 2.02 EXECUTION AND AUTHENTICATION. 17 Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. An Officer of each Guarantor shall sign the Note Guarantee for such Guarantor by manual or facsimile signature. If an Officer of the Company or a Guarantor whose signature is on a Note or a Note Guarantee, as the case may be, no longer holds that office at the time the Note is authenticated, the Note or the Note Guarantee, as the case may be, shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature of the Trustee shall be conclusive evidence that the Note has been authenticated under this Indenture. The form of Trustee's authentication to be borne by the Notes shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a written order of the Company signed by two Officers of the Company, authenticate Notes with the Note Guarantees endorsed thereon for original issue up to an aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time shall not exceed the amount set forth herein except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or any Guarantor or an Affiliate of the Company or any Guarantor. Any authenticating agent may resign at any time by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of the authenticating agent by giving written notice of termination to the authenticating agent and the Company. Upon receiving notice of such resignation or upon such termination by the Trustee, the Trustee may appoint a successor authenticating agent acceptable to the Company, in which case it shall so notify the Holders. Upon its appointment hereunder, any successor authenticating agent shall become vested with all the rights, powers and duties of its predecessor hereunder. The Company shall agree, by separate instrument, to pay each authenticating agent from time to time reasonable compensation for its services. SECTION 2.03 REGISTRAR AND PAYING AGENT. The Company and the Guarantors shall maintain (1) an office or agency where Notes may be presented for registration of transfer or for exchange (including any co-registrar, the "REGISTRAR") and (2) an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "PAYING AGENT" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder of a Note. The Company shall notify the Trustee and the Trustee shall notify the Holders of the Notes of the name and address of any Agent not a party to this Indenture. The Company or any Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall 18 incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes. SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders of the Notes or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, and interest on the Notes, and shall notify the Trustee of any Default by the Company or any Guarantor in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Guarantor) shall have no further liability for the money delivered to the Trustee. If the Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders of the Notes all money held by it as Paying Agent. Upon the occurrence of either event specified in Section 6.01(h) or (i), the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05 LISTS OF HOLDERS OF THE NOTES. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of the Notes and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the CompanY and/or any Guarantor shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders of the Notes, including the aggregate principal amount of the Notes held by each thereof, and the Company and each Guarantor shall otherwise comply with TIA ss. 312(a). SECTION 2.06 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange 19 for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof 20 in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; 21 and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; 22 (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) BENEFICIAL INTERESTS IN REGULATION S TEMPORARY GLOBAL NOTE TO DEFINITIVE NOTES. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: 23 (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS. (i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; 24 (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from 25 such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: 26 (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 27 (iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) LEGENDS. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE OFFERED, SOLD PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL INVESTOR" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO BERRY PLASTICS CORPORATION OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS 28 AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) REGULATION S TEMPORARY GLOBAL NOTE LEGEND. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction 29 of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. SECTION 2.07 REPLACEMENT NOTES. 30 If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate and deliver a replacement Note (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) if the Trustee's requirements for replacements of Notes are met. If required by the Trustee, the Company or the Guarantors, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee, the Company and the Guarantors to protect the Company, the Guarantors, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. Each of the Company, the Guarantors and the Trustee may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and the Guarantors and shall be entitled to all of the benefits of this Indenture equally and proportionally with all other Notes duly issued hereunder. SECTION 2.08 OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Subject to Section 2.09 hereof, a Note does not cease to be outstanding because the Company, a Subsidiary of the Company or an Affiliate of the Company holds the Note. SECTION 2.09 TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor, any of their respective Subsidiaries or any Affiliate of the Company or any Guarantor shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Responsible Officer knows to be so owned shall be so considered. Notwithstanding the foregoing, Notes that are to be acquired by the Company, any Guarantor, any Subsidiary of the Company or any Guarantor or an Affiliate of the Company or any Guarantor pursuant to an exchange offer, tender offer or other agreement shall not be deemed to be owned by the Company, a Guarantor, a Subsidiary of the Company or a Guarantor or an Affiliate of the Company or a Guarantor until legal title to such Notes passes to the Company, Guarantor, Subsidiary of the Company or a Guarantor or Affiliate of the Company or a Guarantor, as the case may be. SECTION 2.10 TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors). Temporary Notes shall be substantially in the form of Definitive 31 Notes but may have variations that the Company and the Trustee consider appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company signed by two Officers of the Company, shall authenticate Definitive Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as Definitive Notes. SECTION 2.11 CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act), unless the Company directs cancelled Notes to be returned to it. The Company may not issue new Notes to replace Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All cancelled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by two Officers of the Company, the Company shall direct that cancelled Notes be returned to it. SECTION 2.12 DEFAULTED INTEREST. If the Company or any Guarantor defaults in a payment of interest on the Notes, the Company or such Guarantor (to the extent of their obligations under the Note Guarantees) shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders of the Notes on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the payment date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be fixed each such special record date and payment date, and shall, promptly thereafter, notify the Trustee of any such date. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such defaulted interest as in this Subsection provided. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such defaulted interest as provided in this Section 2.12. At least 15 days before the special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holders of the Notes a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13 RECORD DATE. The record date for purposes of determining the identity of Holders of the Notes entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA ss. 316(c). 32 SECTION 2.14 CUSIP NUMBER. The Company in issuing the Notes may use a "CUSIP" number and, if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in the CUSIP number. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01 NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (a) the clause of this Indenture pursuant to which the redemption shall occur, (b) the redemption date, (c) the principal amount of Notes to be redeemed and (d) the redemption price. If the Company is required to make an offer to purchase Notes pursuant to the provisions of Sections 4.10 or 4.15, it shall furnish to the Trustee, at least 30 days before the scheduled purchase date, an Officers' Certificate setting forth (a) the Section of this Indenture pursuant to which the offer to purchase shall occur, (b) the offer's terms, (c) the purchase price, (d) the principal amount of the Notes to be purchased, and (e) a statement to the effect that (i) the Company or one of its Subsidiaries has made an Asset Sale and there are Excess Proceeds aggregating more than $5.0 million and the amount of such Excess Proceeds, or (ii) a Change of Control has occurred, as applicable. SECTION 3.02 SELECTION OF NOTES TO BE PURCHASED OR REDEEMED. If less than all of the Notes are to be purchased in an Asset Sale Offer or redeemed at any time, the Trustee shall select the Notes to be purchased or redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a PRO RATA basis, by lot or in accordance with any other method the Trustee shall deem fair and appropriate. In the event of partial purchase or redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the purchase or redemption date by the Trustee from the outstanding Notes not previously called for redemption. In the event that less than all of the Notes properly tendered in an Asset Sale Offer are to be purchased, the particular Notes to be purchased shall be selected promptly upon the expiration of such Asset Sale Offer. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial purchase or redemption, the principal amount thereof to be purchased or redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be purchased or redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be purchased or redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for purchase or redemption also apply to portions of Notes called for purchase or redemption. 33 In the event the Company is required to make an Asset Sale Offer pursuant to Sections 3.09 and 4.10 hereof and the amount of Excess Proceeds to be applied to such purchase would result in the purchase of a principal amount of Notes which is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company the portion of such Excess Proceeds that is not necessary to purchase the immediately lesser principal amount of Notes that is so divisible. SECTION 3.03 NOTICE OF PURCHASE OR REDEMPTION. At least 30 days but not more than 60 days before a purchase or redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of purchase or redemption to each Holder whose Notes are to be purchased or redeemed at its registered address. The notice shall identify the Notes to be purchased or redeemed and shall state: (a) the purchase or redemption date; (b) the purchase or redemption price; (c) if any Note is being purchased or redeemed in part, the portion of the principal amount of such Note to be purchased or redeemed and that, after the purchase or redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unpurchased or unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for purchase or redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such purchase or redemption payment, interest on Notes called for purchase or redemption ceases to accrue on and after the purchase or redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being purchased or redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of purchase or redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 45 days prior to the purchase or redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04 EFFECT OF NOTICE OF PURCHASE OR REDEMPTION. Once notice of purchase or redemption is mailed in accordance with Section 3.03 hereof, Notes called for purchase or redemption become irrevocably due and payable on the purchase or redemption date at the purchase or redemption price. A notice of purchase or redemption may not be conditional. 34 SECTION 3.05 DEPOSIT OF PURCHASE OR REDEMPTION PRICE. One Business Day prior to the purchase or redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the purchase or redemption price of and accrued interest on all Notes to be purchased or redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the purchase or redemption price of, and accrued interest on, all Notes to be purchased or redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the purchase or redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for purchase or redemption. If a Note is purchased or redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for purchase or redemption shall not be so paid upon surrender for purchase or redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the purchase or redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06 NOTES PURCHASED OR REDEEMED IN PART. Upon surrender of a Note that is purchased or redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder and deliver at the expense of the Company a new Note (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) equal in principal amount to the unpurchased or unredeemed portion of the Note surrendered. SECTION 3.07 OPTIONAL REDEMPTION. (a) At any time prior to July 15, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 111% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company or a capital contribution to the Company's common equity made with the net cash proceeds of an Initial Public Offering; PROVIDED that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days of the date of the closing of such public offering or the making of such capital contribution. Except as set forth in this clause (a), the Notes shall not be redeemable at the Company's option prior to July 15, 2003. (b) After July 15, 2003, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal 35 amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below: YEAR PERCENTAGE ---- ---------- 2003................................................. 105.500% 2004 103.667% 2005................................................. 101.833% 2006 and thereafter.................................. 100.000% (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08 MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; 36 (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased pursuant to the terms of Section 3.02 hereof (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued (or transferred by book entry) new Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) equal in principal amount to the unpurchased portion of the Notes surrendered. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF NOTES. 37 The Company shall pay or cause to be paid the principal of, premium and Liquidated Damages, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Guarantor, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or the Guarantors in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03 REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall (a) furnish to the Trustee and to all Holders of Notes all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms l0-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants and (b) file a copy of all such information and any other information required by Section 13 or 15(d) of the Exchange Act with the SEC for public availability, in each case within the time periods specified in the Commission's rules and regulations (unless the SEC will not accept such a filing) and file such information with the Trustee and make such information available to investors who request it in writing. In addition, for so long as any Notes remain outstanding, the Company and the Guarantors will furnish to the Holders and to securities analysts and prospective investors, upon their request, the 38 information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Notwithstanding the foregoing, to the extent permitted under the rules and regulations of the SEC, the Company may instead supply such information with respect to Holding. The Company shall at all times comply with TIA ss. 314(a). If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. SECTION 4.04 COMPLIANCE CERTIFICATE. (a) Each of the Company and the Guarantors shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries and the Guarantors during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company, its Subsidiaries or such Guarantors have kept, observed, performed and fulfilled their respective obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company, its Subsidiaries or such Guarantors, as the case may be, have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company, its Subsidiaries or such Guarantor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company, its Subsidiaries or such Guarantor, as the case may be, is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) Each of the Company and the Guarantors shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company or such Guarantor, as the case may be, is taking or proposes to take with respect thereto. SECTION 4.05 TAXES. 39 The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06 STAY, EXTENSION AND USURY LAWS. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07 RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly (a) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than dividends or distributions payable in Equity Interests of the Person making such dividend or distribution, other than Disqualified Stock; or dividends or distributions payable to the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor); (b) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor); (c) purchase, redeem or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees, except a payment of interest or principal at the Stated Maturity (other than intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries that is a Guarantor); (d) directly or indirectly make any loan or advance to, or make any other payment to, Holding; or (e) make any Restricted Investment (all such payments and other actions set forth in clauses (a) through (e) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (b), (c), (e), (f) and (g) of the next succeeding paragraph), is less than the sum, without duplication, of (A) 50% of the Consolidated Net Income and Consolidated Step-Up Depreciation and Amortization of the Company for the period (taken as one accounting period) from the beginning of 40 the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income plus Consolidated Step-Up Depreciation and Amortization for such period is a deficit, less 100% of such deficit); plus (B) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus (C) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment. The preceding provisions shall not prohibit (a) 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 this Indenture; (b) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3) (B) of the preceding paragraph; (c) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor in a Permitted Refinancing; (d) a Restricted Payment to Holding pursuant to the Tax Sharing Agreement as the same may be amended from time to time in a manner that is not materially adverse to the Company; (e) a Restricted Payment to Holding to pay its operating and administrative expenses including, without limitation, directors fees, legal and audit expenses, SEC compliance expenses and corporate franchise and other taxes, in an aggregate amount not to exceed $500,000 in any fiscal year; (f) a Restricted Payment to Holding to pay management fees in an aggregate amount not to exceed $750,000 in any fiscal year of the Company; (g) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (h) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Holding from any current or former employee of Holding, the Company or any Subsidiary of the Company; PROVIDED, HOWEVER, that (1) the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any fiscal year, net of cash proceeds received from the sale of Equity Interests to employees and (2) no Default or Event of Default shall have occurred and be continuing immediately after such transaction; (i) Investments by the Company in joint ventures or similar projects in a business similar to that conducted by the Company and its Restricted Subsidiaries on the date of this Indenture in an aggregate amount not to exceed $5.0 million; (j) a Restricted Payment to Holding to pay cash interest payments on Holding's 12 1/2% Senior Secured Notes dUE 2006 and on any Refinancing Indebtedness incurred to refund, refinance or replace Holding's 12 1/2% Senior Secured Notes due 2006 in a Permitted Refinancing; and (k) other RestrictED Payments in an aggregate amount not to exceed $5.0 million since the date of this Indenture. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or 41 by the Company or its Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee if the fair market value exceeds $1.0 million. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $5.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, which calculations may be based upon the Company's latest available financial statements. SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make loans or advances to the Company or any of its Restricted Subsidiaries; or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions shall not apply to encumbrances or restrictions existing under or by reasons of (a) Existing Indebtedness as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the date of this Indenture; (b) the 1994 Indenture, the 1994 Notes and the guarantees thereof, the 1998 Indenture and the 1998 Notes and the guarantees thereof; (c) this Indenture, the Notes and the Note Guarantees; (d) applicable law; (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that the Consolidated Cash Flow of such Person, to the extent of such restriction, is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture; (f) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (c) of the preceding paragraph; and (h) Refinancing Indebtedness that is a Permitted Refinancing, PROVIDED that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including 42 Acquired Debt), and the Company shall not issue any, and shall not permit any of its Subsidiaries to issue any, shares of Disqualified Stock; provided, however, that the Company and its Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.25 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom and including the pro forma earnings of any business acquired by the Company or any of its Subsidiaries with the proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (a) the incurrence by the Company and its Restricted Subsidiaries of term Indebtedness, revolving credit Indebtedness and letters of credit under the Credit Facility in an aggregate principal amount at any one time outstanding under this clause (a) not to exceed the greater of (i) $150.0 million in principal amount (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder), less the aggregate amount of all Net Proceeds of Asset Sales that have been applied by the Company or any of its Restricted Subsidiaries since the date of this Indenture to repay any term Indebtedness under a Credit Facility pursuant to Section 4.10 hereof, and (ii) the Borrowing Base; (b) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (c) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of this Indenture and the New Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; (d) the incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (d) in a Permitted Refinancing, not to exceed $10.0 million at any time outstanding; (e) the incurrence by the Company or any of its Restricted Subsidiaries of Refinancing Indebtedness; provided, however, that such Refinancing Indebtedness is a Permitted Refinancing; (f) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries that is a Guarantor; PROVIDED, HOWEVER, that (iii) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all 43 Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (iv) (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary that is a Guarantor thereof; shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (f); (g) the incurrence by the Company of Indebtedness between the Company and Holding; PROVIDED that the advances evidenced by such Indebtedness are permitted under the covenant described above under Section 4.07 hereof; (h) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; (i) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (j) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt; PROVIDED, HOWEVER, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (j); (k) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; PROVIDED, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued; and (l) the incurrence by the Company or its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount, including all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (l) in a Permitted Refinancing, not to exceed the sum of $25.0 million at any time outstanding. Notwithstanding anything to the contrary, the Company shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt 44 described in clauses (a) through (l) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. SECTION 4.10 ASSET SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, conduct an Asset Sale unless (a) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of; (b) such fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee no later than immediately prior to the consummation of such proposed Asset Sale with respect to any Asset Sale involving aggregate payments in excess of $2.0 million; and (c) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash (i) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets; and (ii) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received). Within 180 days after any Asset Sale, the Company may apply the Net Proceeds from such Asset Sale to either (a) permanently reduce Senior Indebtedness; or (b) make an investment in another business, make a capital expenditure or acquire other long-term tangible assets, in each case, in the same or a similar line of business as the Company or any Restricted Subsidiary was engaged in on the date of this Indenture. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Bank Indebtedness or otherwise invest such Net Proceeds in Cash Equivalents. Any Net Proceeds from the Asset Sale that are not applied or invested as provided in the preceding paragraph shall constitute "Excess Proceeds." If the aggregate amount of Excess Proceeds exceeds $5.0 million, upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture, the Company shall make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other PARI PASSU Indebtedness, that is in an integral multiple of $1,000, that may be purchased out of the Excess Proceeds, if any, remaining upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture. The offer price in any Asset Sale Offer shall be equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and shall be payable in cash. If the aggregate amount of Notes and such other PARI PASSU Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes and such other PARI PASSU Indebtedness surrendered by Holders into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other PARI PASSU Indebtedness to be purchased in the manner described in Section 3.02 hereof. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero. 45 The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict. SECTION 4.11 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with a Person who was not an Affiliate; and (b) the Company 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 this Section 4.11 and that such Affiliate Transaction is approved by a majority of the Board of Directors; and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $5.0 million, an opinion as to the fairness to the Holders from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph: (a) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (b) transactions between or among Holding, the Company and/or its Restricted Subsidiaries; (c) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company; (d) Restricted Payments that are permitted by Section 4.07 hereof; and (e) the payment of annual fees and expenses to First Atlantic PROVIDED that such payment is permitted by Section 4.07 hereof. SECTION 4.12 LIENS. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens. SECTION 4.13 ADDITIONAL NOTE GUARANTEES. If the Company or any of its Subsidiaries transfers or causes to be transferred, in one or a series of related transactions, other than a transaction or series of related transactions constituting a Restricted Payment permitted by Section 4.07 hereof; any assets, businesses, divisions, real property or equipment having a book value in excess of $1.0 million to any Subsidiary that is not a Guarantor or if the Company or any of its Subsidiaries shall acquire another Domestic Restricted Subsidiary having (a) total assets with a book value in excess of $1.0 million or (b) Consolidated Cash Flow in excess of $1.0 million, then such transferee or acquired Subsidiary (if other than a Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with the terms of this Indenture) shall execute a Note Guarantee and deliver an Opinion of Counsel as to the enforceability of such 46 Note Guarantee, in accordance with the terms of this Indenture. SECTION 4.14 CORPORATE EXISTENCE. Subject to Article 5 and Article 10 hereof, as the case may be, the Company and each of the Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect (a) its corporate existence, and the corporate, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, any such Guarantor or any such Subsidiary, as the case may be, and (b) the rights (charter and statutory), licenses and franchises of the Company, the Guarantors and their respective Subsidiaries; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if the Board of Directors of Holding shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Guarantors and their Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase. Within 10 days following any Change of Control, the Company shall mail a notice to each Holder stating (i) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered shall be accepted for payment; (ii) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date the notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (iii) that any Note not tendered shall continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Company shall comply with the applicable securities laws and 47 regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of this Indenture by virtue of such conflict. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof tendered to the Company. The Paying Agent shall promptly mail to each Holder of Notes so accepted the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to making the Change of Control Payment, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Designated Senior Indebtedness or obtain the requisite consents, if any, under all agreements governing outstanding Designated Senior Indebtedness to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. SECTION 4.16 NO SENIOR SUBORDINATED INDEBTEDNESS. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness of the Company and senior in any respect in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to its Senior Indebtedness and senior in any respect in right of payment to its Note Guarantee. SECTION 4.17 DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an Investment made as of the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 hereof or Permitted Investments, as applicable. That designation shall only be permitted if such Restricted Payment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. Upon the designation of a Restricted Subsidiary as an Unrestricted Subsidiary or the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the Company shall notify the Trustee. 48 ARTICLE 5 SUCCESSORS SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company shall not (a) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (b) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless (i) the Company is the surviving corporation; or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company pursuant to agreements reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Registration Rights Agreement; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company or the Company and its Subsidiaries on a consolidated basis in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "COMPANY" or the "GUARANTOR," as the case may be, shall refer instead to the successor corporation and not to the Company or the Guarantor, as the case may be), and may exercise every right and power of the Company or the Guarantors, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or Guarantor, as the case may be, herein; PROVIDED, HOWEVER, that the predecessor Company and the predecessor Subsidiaries that are Guarantors shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. The Trustee shall, at the written request of the Company and the Holders, authenticate and deliver new Notes representing such successor pursuant to the terms of Section 2.02 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 EVENTS OF DEFAULT. 49 An "Event of Default" occurs if: (a) the Company or the Guarantors default in the payment when due of interest or Liquidated Damages, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) and such default continues for a period of 30 days; (b) the Company or the Guarantors default in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company fails to comply with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof; (d) the Company or the Guarantors fail to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes (including Additional Notes, if any) then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "PAYMENT DEFAULT") or (ii) 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; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company, Holding or any of their respective Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $2.0 million; (g) except as permitted by this Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee. (h) the Company, any Guarantor or any of their respective Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, 50 (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company, any Guarantor or any of their respective Subsidiaries in an involuntary case; (ii) appoints a Custodian of the Company, any Guarantor or any of their respective Subsidiaries or for all or substantially all of the property of the Company, any Guarantor or any of their respective Subsidiaries; or (iii) orders the liquidation of the Company, any Guarantor or any of their respective Subsidiaries and the order or decree remains unstayed and in effect for 60 consecutive days. SECTION 6.02 ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 hereof with respect to the Company, Holding or any of their respective Subsidiaries) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes (including Additional Notes, if any) may declare all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any Indebtedness is outstanding pursuant to the Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable, upon the earlier of (i) the day which is five Business Days after notice of acceleration is given to the Company and the lender under the Credit Facility or (ii) the date of acceleration of the Indebtedness under the Credit Facility. Notwithstanding the foregoing, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, Holding or any of their respective Subsidiaries, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of not less than a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) by written notice to the Trustee may on behalf of all of the Holders of the Notes and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest, premium or Liquidated Damages that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after July 15, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to July 15, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on July 15 of the years set forth below, as set forth below 51 (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this Indenture): YEAR PERCENTAGE 1999 . . . . . . . . . . . . . . . . . 112.932% 2000 . . . . . . . . . . . . . . . . . 111.099% 2001 . . . . . . . . . . . . . . . . . 109.166% 2002 . . . . . . . . . . . . . . . . . 107.333% SECTION 6.03 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Liquidated Damages, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture, including, but not limited to, notifying the Guarantors pursuant to the terms hereof and the Note Guarantees. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 6.04 WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding (including Additional Notes, if any) by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder, except a 52 continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, any Note held by a non-consenting Holder (including in connection with an offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05 CONTROL BY MAJORITY. Holders of not less than a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06 LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes (including Additional Notes, if any) make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense reasonably anticipated by the Trustee in complying with such request; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. 53 SECTION 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes, including the Guarantors), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or securities or other property payable or deliverable upon the exchange of the Notes or upon any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; SECOND: to the holders of Senior Indebtedness of the Company or the Guarantors, as the case may be, to the extent required by Article 10 or Article 11 hereof, as applicable; THIRD: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and 54 FOURTH: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes (including Additional Notes, if any) . ARTICLE 7 TRUSTEE SECTION 7.01 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and 55 (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02 RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice and during normal business hours, to examine the books, records and premises of the Company, personally or by agent or attorney so long as such examination does not interfere with the Company's business. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that in the reasonable discretion of the Trustee, might be incurred by it in compliance with such request or direction. SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. 56 The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, the Guarantors or any Affiliate of the Company or the Guarantors with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05 NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium and Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the tweLVE months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports aS required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the TrusteE when the Notes are listed on any stock exchange. SECTION 7.07 COMPENSATION AND INDEMNITY. The Company and the Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. 57 The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, any Guarantor or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company and the Guarantors of their obligations hereunder. The Company and the Guarantors shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company and the Guarantors shall pay the reasonable fees and expenses of such counsel. The Company and the Guarantors need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's and the Guarantors' payment obligations in this Section 7.07, the Trustee shall have, and the Company does hereby grant, assign and convey to the Trustee, to the benefit of the Holders, a security interest in and a Lien on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. The Trustee's right to receive payment of any amounts due under this Section 7.07 shall not be subordinate to any other liability or indebtedness of the Company (even though the Notes may be subordinated) and the payments of principal and interest on the Notes shall be subordinate to the Trustee's right to receive such payment. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extenT applicable. SECTION 7.08 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; 58 (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, any Guarantor, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes (including Additional Notes, if any) may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Guarantors' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). 59 SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationshiP listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to the outstanding Notes and the Note Guarantees upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes and Note Guarantees on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium and Liquidated Damages, if any, and interest on such Notes when such payments are due, (b) the Company's and the Guarantors' obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03 COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15 and 4.16 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes and the Note Guarantees shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, 60 Covenant Defeasance means that, with respect to the outstanding Notes, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(e) through 6.01(f) hereof shall not constitute Events of Default. SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, 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 and Liquidated Damages, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, interest or Liquidated Damages, if any, on the outstanding Notes; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the Issuance Date, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing either: (i) on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence) or (ii) insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the day on which all applicable preference periods have run; 61 (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the day on which all applicable preferences have run and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the day on which all applicable preferences have run, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or the Guarantors or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or the Guarantors; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06 REPAYMENT TO COMPANY. 62 Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Liquidated Damages, if any, or interest, if any, on any Note and remaining unclaimed for two years after such principal, premium or Liquidated Damages, if any, or interest, if any, have become due and payable shall be paid to the Company on its written request accompanied by an Officers' Certificate or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company and the Guarantors make any payment of principal of, premium or Liquidated Damages, if any, or interest, if any, on any Note following the reinstatement of its obligations, the Company and the Guarantors shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in the case of a merger or consolidation pursuant to Article Five or Article 10 hereof, as the case may be; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes (including providing for additional Note Guarantees pursuant to SECTION 4.13 hereof) or that does not adversely affect the legal rights hereunder of any Holder of the Notes; 63 (e) to provide for the issuance of Additional Notes in accordance with the provisions set forth herein; or (f) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding (including consents obtained in connection with a tender offer or exchange offer for Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder of Notes): 64 (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of, or premium, if any, interest or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium or Liquidated Damages, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note; (h) make any change to the subordination provisions of Article 10 or Article 11 hereof that adversely affects Holders; (i) except pursuant to Article 8 and Article 10 hereof, release any Guarantor from its obligations under its Note Guarantee, or change any Note Guarantee in any manner that would adversely affect Holders; or (j) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or a supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES. 65 The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes (accompanied by a notation of the Note Guarantee duly endorsed by the Guarantors) that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company and the Guarantors may not sign an amendment or supplemental Indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 NOTE GUARANTEES SECTION 10.01 NOTE GUARANTEE. The Guarantors and each Restricted Subsidiary of the Company which in accordance with Section 4.13 hereof is required to guarantee the obligations of the Company under the Notes upon execution of a counterpart of this Indenture, hereby jointly and severally unconditionally guarantees (each such guarantee, a "NOTE GUARANTEE") to each Holder of a Note authenticated and delivered by the Trustee irrespective of the validity or enforceability of this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, that: (a) the principal of, interest and Liquidated Damages, if any, on the Notes will be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under this Indenture or the Notes will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Notes; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor will be obligated to pay the same whether or not such failure to pay has become an Event of Default which could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment not a guarantee of collection. Each Guarantor hereby agrees that its obligations with regard to this Note Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors 66 and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require the Trustee, the Holders or the Company (each, a "BENEFITED PARTY") to proceed against the Company or any other Person or to proceed against or exhaust any security held by a Benefited Party at any time or to pursue any other remedy in any Benefited Party's power before proceeding against such Guarantor; (b) the defense of the statute of limitations in any action hereunder or in any action for the collection of any Indebtedness or the performance of any obligation hereby guaranteed; (c) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or the failure of a Benefited Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (d) demand, protest and notice of any kind including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of such Guarantor, the Company, any Benefited Party, any creditor of such Guarantor, the Company or on the part of any other Person whomsoever in connection with any Indebtedness or obligations hereby guaranteed; (e) any defense based upon an election of remedies by a Benefited Party, including but not limited to an election to proceed against such Guarantor for reimbursement; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (g) any defense arising because of a Benefited Party's election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 111l(b)(2) of the Federal Bankruptcy Code; or (h) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants that its Note Guarantee will not be discharged except by complete performance of the obligations contained in its Note Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian, trustee, or similar official acting in relation to either the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the applicable Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company or any other obligor on the Notes of the obligations guaranteed hereby, and (b) in the event of any declaration of acceleration of those obligations as provided in Section 6.02 hereof, those obligations (whether or not due and payable) will forthwith become due and payable by such Guarantor for the purpose of this Note Guarantee. SECTION 10.02 SUBORDINATION. Each Guarantor, the Trustee, and each Holder by accepting a Note agrees, that the obligations of such Guarantor hereunder shall be subordinated in right of payment to the prior payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of Senior Indebtedness of such Guarantor and of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). The subordination provisions of this Article 10 are made for the benefit of the holders of all Senior Indebtedness (whether outstanding on the date hereof or issued hereafter) of each Guarantor, such holders of Senior Indebtedness of each Guarantor are made obligees 67 under this Article 10 and such holders of Senior Indebtedness of each Guarantor or any of them may enforce the provisions of this Article 10. Holders of Senior Indebtedness of each Guarantor are third party beneficiaries of this Article 10 and no amendment thereof shall be effected without the prior written consent of the holders of a majority of the outstanding principal amount of Senior Indebtedness of each Guarantor. SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of any Guarantor in a liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its property, in an assignment for the benefit of creditors or any marshaling of such Guarantor's assets and liabilities: (1) holders of Senior Indebtedness of such Guarantor shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness of such Guarantor (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness of such Guarantor, whether or not such interest was an allowed claim) before the Trustee or any Holder shall be entitled to receive any payment from the Guarantor under or pursuant to this Note Guarantee with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments from the trust described in Article Eight hereof); and (2) until all Obligations with respect to Senior Indebtedness of such Guarantor (as provided in subsection (1) above) are paid in full, any distribution to which the Trustee or any Holder would be entitled but for this Article shall be made upon the proper written request of the holders of Senior Indebtedness of such Guarantor, to holders of Senior Indebtedness of such Guarantor or their proper Representative. SECTION 10.04 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF THE GUARANTOR. No Guarantor shall make any payment or distribution to the Trustee or any Holder upon or in respect of its Note Guarantee or the Notes, or any Obligation with respect thereto, and no Guarantor shall acquire from the Trustee or any Holder any Notes for cash or property (other than Permitted Junior Securities and payments from the trust described in Article Eight hereof) until all principal and other Obligations with respect to the Senior Indebtedness of such Guarantor have been paid in full if: (a) a default in the payment when due, whether upon acceleration or otherwise, of the principal, premium, if any, or interest on any Senior Indebtedness of such Guarantor occurs and is continuing; or (b) any other default on any series or Designated Senior Indebtedness of such Guarantor occurs and is continuing and the Trustee receives a notice of the default from such Guarantor, or the holders of any such Designated Senior Indebtedness of such Guarantor, stating that such Guarantor or holders are invoking a payment blockage under this Section 10.04(b) (a "GUARANTOR PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. Each Guarantor may and shall resume payments on and distributions in respect of its Note Guarantee, the Notes and all Obligations with respect thereto, and may acquire such Notes, Obligations for value when: 68 (a) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and (b) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which a Guarantor Payment Blockage Notice is received if the maturity of such Designated Senior Indebtedness of such Guarantor has not been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 10.05 ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, each Guarantor shall promptly notify each Representative of holders of Senior Indebtedness of such Guarantor of the acceleration. SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives from a Guarantor any payment of any Obligations with respect to the Notes or any other Obligation guaranteed hereby at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by Section 10.03 or Section 10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness of such Guarantor as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of such Guarantor. If a distribution is made to the Trustee or any Holder that because of this Article 10 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Indebtedness of such Guarantor as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of such Guarantor. With respect to any Guarantor, with respect to the holders of Senior Indebtedness of such Guarantor, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness of such Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of such Guarantor, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 69 SECTION 10.07 NOTICE BY A GUARANTOR. Each Guarantor shall promptly notify the Trustee and the Paying Agent of any facts known to such Guarantor that would cause a payment of any Obligations with respect to the Notes or its Note Guarantee to violate this Article, but failure to give such notice shall not affect the subordination of its Note Guarantee or of the Notes to the Senior Indebtedness of such Guarantor as provided in this Article. SECTION 10.08 SUBROGATION. With respect to any Guarantor, after all Senior Indebtedness of such Guarantor is paid in full and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Indebtedness of such Guarantor to receive distributions applicable to Senior Indebtedness of such Guarantor to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness of such Guarantor. A distribution made under this Article to holders of Senior Indebtedness of such Guarantor that otherwise would have been made to Holders is not, as between such Guarantor and Holders, a payment by the Company on the Senior Indebtedness of such Guarantor. SECTION 10.09 RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Indebtedness of such Guarantor. Nothing in this Indenture shall: (1) impair, as between such Guarantor and the Holders, the obligation of such Guarantor, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Senior Indebtedness of such Guarantor; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness of such Guarantor set forth herein to receive distributions and payments otherwise payable to Holders. SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR. With respect to any Guarantor, no right of any holder of Senior Indebtedness of such Guarantor to enforce the subordination of the Note Guarantee shall be impaired by any act or failure to act by such Guarantor or any Holder or by failure of such Guarantor or any Holder to comply with this Indenture. SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE. With respect to any Guarantor, whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of such Guarantor, the distribution may be made and the notice given to their Representative. 70 Upon any payment or distribution of assets referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Note Guarantee to violate this Article. Only a Guarantor, the holder of any Senior Indebtedness of such Guarantor, or the Representative of holders of Senior Indebtedness of such Guarantor may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. With respect to any Guarantor, the Trustee in its individual or any other capacity may hold Senior Indebtedness of such Guarantor with the same rights it would have if it were not Trustee. SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding relative to any Guarantor referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Indebtedness of each Guarantor are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.14 LIMITATION OF GUARANTOR'S LIABILITY. Each Guarantor and by its acceptance hereof, each beneficiary hereof, hereby confirms that it is its intention that the Note Guarantee by such Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, each such Person hereby irrevocably agrees that the obligation of such Guarantor under its Note Guarantee under this Article 10 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent conveyance. Each beneficiary under the Note Guarantees, by accepting the benefits hereof, confirms its intention that, in the event of a bankruptcy, reorganization or other similar proceeding of the Company or any Guarantor in which concurrent claims 71 are made upon such Guarantor hereunder, to the extent such claims will not be fully satisfied, each such claimant with a valid claim against the Company shall be entitled to a ratable share of all payments by such Guarantor in respect of such concurrent claims. SECTION 10.15 EXECUTION AND DELIVERY OF NOTE GUARANTEE. To evidence its Note Guarantee set forth in Section 10.01 hereof, each Guarantor hereby agrees that this Indenture shall be executed on behalf of each Guarantor by its President or one of its Vice Presidents and that the notation on each Note relating to the Note Guarantee shall be executed on behalf of each Guarantor by an Officer. SECTION 10.16 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) No Guarantor shall sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor unless (i) subject to the provisions of the following paragraph and Section 10.17 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under its Note Guarantee and this Indenture, (ii) immediately after giving effect to such transaction, no Default or Event of Default exists, and (iii) in the case of any Guarantor other than Holding, the person acquiring the property in such sale or disposition or the Person formed by or surviving any such consolidation or merger will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee in this Indenture and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Notwithstanding the foregoing, (a) a Guarantor may consolidate with or merge with or into the Company, PROVIDED, that the surviving corporation (if other than the Company) shall expressly assume by supplemental indenture complying with the requirements of this Indenture, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company and (b) a Guarantor may consolidate with or merge with or into any other Guarantor. SECTION 10.17 RELEASES OF NOTE GUARANTEE. The Note Guarantee of a Guarantor shall be released: (a) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (other than Holding), by way of merger, consolidation or otherwise, to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, if the Company applies the Net Proceeds of that sale or other disposition in accordance with Section 3.09 and 4.10 hereof; (b) in connection with the sale or other disposition of all of the Capital Stock of any Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, if the Company applies the Net Proceeds 72 of that sale or other disposition in accordance with Section 3.09 and 4.10 hereof; or (c) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with Section 4.17 hereof. ARTICLE 11 SUBORDINATION SECTION 11.01 SUBORDINATION. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes shall be subordinated in right of payment to the prior payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of Senior Indebtedness of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). The subordination provisions of this Article 11 are made for the benefit of the holders of all Senior Indebtedness (whether outstanding on the date hereof or issued hereafter) of the Company, such holders of Senior Indebtedness of the Company are made obligees under this Article 11 and such holders of Senior Indebtedness of the Company or any of them may enforce the provisions of this Article 11. Holders of Senior Indebtedness of the Company are third party beneficiaries of this Article 11 and no amendment hereof shall be effected without the prior written consent of the holders of a majority of the outstanding principal amount of Senior Indebtedness of the Company. SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness of the Company (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness of the Company, whether or not such interest was an allowed claim) before the Holders shall be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described in Article Eight hereof); and (2) until all Obligations with respect to Senior Indebtedness of the Company (as provided in subsection (1) above) are paid in full, any distribution to which Holders would be entitled but for this Article shall be made; upon the proper written request of the holders of Senior Indebtedness of the Company, to holders of Senior Indebtedness of the Company or their proper Representative (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described in Article Eight hereof). SECTION 11.03 DEFAULT ON SENIOR INDEBTEDNESS. The Company may not make any payment or distribution to the Trustee or any Holder upon or in respect of the Notes, or any Obligation with respect thereto, and may not acquire from the 73 Trustee or any Holder any Notes for cash or property (other than Permitted Junior Securities and payments from the trust described in Article Eight hereof) until all principal and other Obligations with respect to the Senior Indebtedness of the Company have been paid in full if: (a) a default in the payment when due, whether upon acceleration or otherwise, of the principal, premium, if any, or interest on any Senior Indebtedness of the Company occurs and is continuing; or (b) any other default on any series of Designated Senior Indebtedness of the Company occurs and is continuing and the Trustee receives a notice of such default from the Company, or from, or on behalf of, the holders of any such Designated Senior Indebtedness of the Company, stating that it is or such holders are invoking a payment blockage under this Section 11.03(b) (a "PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. The Company may and shall resume payments on and distributions in respect of the Notes, and all Obligations with respect thereto, and may acquire them when: (a) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and (b) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any such Designated Senior Indebtedness of the Company has been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 11.04 ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify each Representative of holders of Senior Indebtedness of the Company of the acceleration. SECTION 11.05 WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by Section 11.02 or Section 11.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness of the Company as their interests may appear, or their Representatives under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company. If a distribution is made to the Trustee or any Holder that because of this Article 11 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of 74 Senior Indebtedness of the Company as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11 and no implied covenants or obligations with respect to the holders of Senior Indebtedness of the Company shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 11, except if such payment is made as a result of negligent action, its own negligent failure to act or its own willful conduct or gross negligence of the Trustee. SECTION 11.06 NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness of the Company as provided in this Article. SECTION 11.07 SUBROGATION. After all Senior Indebtedness of the Company is paid in full and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to Senior Indebtedness of the Company to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness of the Company. A distribution made under this Article to holders of Senior Indebtedness of the Company that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on Senior Indebtedness of the Company. SECTION 11.08 RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness of the Company; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of 75 Senior Indebtedness of the Company set forth herein to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 11.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness with respect to the Notes shall be impaired by any act or failure to act by the Company or any Holder or by failure of the Company or any Holder to comply with this Indenture. SECTION 11.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. SECTION 11.11 RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company, the holder of any Senior Indebtedness of the Company, or any Representative of holders of Senior Indebtedness of the Company may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. SECTION 11.12 AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Indebtedness of the 76 Company are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. ARTICLE 12 MISCELLANEOUS SECTION 12.01 TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. SECTION 12.02 NOTICES. Any notice or communication by the Company, the Guarantors or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 Telecopier No.: (812) 421-9604 Attention: Martin R. Imbler With a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Telecopier No.: (212) 408-2420 Attention: Michael Joseph O'Brien, Esq. If to the Trustee: United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Telecopier No.: (212) 852-1625 Attention: Corporate Trust Administration The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt 77 acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to thE extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company or any Guarantor mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders witH respect to their rights under this Indenture or the Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantors to the Trustee to take any action under this Indenture, the Company or the Guarantors shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 78 (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06 RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Note Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. SECTION 12.08 GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES. SECTION 12.09 CONSENT TO JURISDICTION. To the fullest extent permitted by applicable law, each of the parties hereto hereby irrevocably submits to the jurisdiction of any New York State court or Federal court sitting in the borough of Manhattan in New York City in respect of any suit, action or proceeding arising out of or relating to the provisions of this Indenture and irrevocably agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court. Each of the parties hereto waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in any such court, and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.11 SUCCESSORS. All agreements of the Company and the Guarantors in this Indenture and the Notes and the Note Guarantees, as the case may be, shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. 79 SECTION 12.12 SEVERABILITY. In case any provision in this Indenture, or in the Notes or in the Note Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.13 COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.14 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 80 SIGNATURES Dated as of July 6, 1999 BERRY PLASTICS CORPORATION By: _____________________________________ Name: Title: BPC HOLDING CORPORATION By: _____________________________________ Name: Title: BERRY PLASTICS ACQUISITION CORPORATION By: _____________________________________ Name: Title: BERRY IOWA CORPORATION By: _____________________________________ Name: Title: BERRY STERLING CORPORATION By: _____________________________________ Name: Title: BERRY TRI-PLAS CORPORATION By: _____________________________________ Name: Title: AEROCON, INC. By: _____________________________________ Name: Title: PACKERWARE CORPORATION, a Kansas corporation By: _____________________________________ Name: Title: PACKERWARE CORPORATION, a Delaware corporation By: _____________________________________ Name: Title: BERRY PLASTICS DESIGN CORPORATION By: _____________________________________ Name: Title: VENTURE PACKAGING, INC. By: _____________________________________ Name: Title: VENTURE PACKAGING MIDWEST, INC., an Ohio corporation By: _____________________________________ Name: Title: 2 VENTURE PACKAGING MIDWEST, INC., a Delaware corporation By: _____________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation By: _____________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation By: _____________________________________ Name: Title: NIM HOLDINGS LIMITED By: _____________________________________ Name: Title: 3 NORWICH INJECTION MOULDERS LIMITED By: _____________________________________ Name: Title: NORWICH ACQUISITION LIMITED By: _____________________________________ Name: Title: KNIGHT PLASTICS, INC. By: _____________________________________ Name: Title: CPI HOLDING CORPORATION By: _____________________________________ Name: Title: CARDINAL PACKAGING, INC. By: _____________________________________ Name: Title: 4 UNITED STATES TRUST COMPANY OF NEW YORK Trustee By: ______________________________________ Name: Title: Dated as of July 6, 1999 5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT A-1 (Face of Note) CUSIP 11% Series A Senior Subordinated Notes due 2007 No.1 $75,000,000 BERRY PLASTICS CORPORATION promises to pay to CEDE & CO. or registered assigns, the principal sum of Seventy Five Million Dollars ($75,000,000) on July 15, 2007. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. A-1-1 Dated: July 6, 1999 BERRY PLASTICS CORPORATION By: _________________________________ Name: Title: By: _________________________________ Name: Title: (SEAL) A-1-2 This is one of the Notes referred to in the within-mentioned Indenture: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By:____________________________ Authorized Signatory A-1-3 (Back of Security) 11% SERIES A SENIOR SUBORDINATED NOTE DUE 2007 THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE OFFERED, SOLD PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL INVESTOR" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO BERRY PLASTICS CORPORATION OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. A-1-4 1. INTEREST. Berry Plastics Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of 11% from January 15, 2000 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreements referred to below. The Company will pay interest and Liquidated Damages semi-annually on January 15 and July 15 of each year, or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"). The first Interest Payment Date shall be January 15, 2000. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. To the extent lawful, the Company shall pay interest on overdue principal at the rate of 1% per annum in excess of the then applicable interest rate on the Notes; it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. The Company will pay principal, interest and Liquidated Damages in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, interest and Liquidated Damages by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company or any Guarantor (as defined below) may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of July 6, 1999 (the "Indenture") among the Company, the guarantors named therein (the "Guarantors") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to ALL such terms, and Holders of the Notes are referred to the Indenture and such Act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company unlimited in aggregate principal amount. 5. OPTIONAL REDEMPTION. On or after July 15, 2003, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve month period beginning on July 15 of the years indicated below: YEAR PERCENTAGE 2003 105.500% 2004 103.667% 2005 101.833% 2006 and thereafter 100.000% A-1-5 6. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REDEMPTION OR REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to offer to purchase all Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) When the aggregate amount of Excess Proceeds from Asset Sales exceeds $5 million, upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including any Additional Notes) and such other PARI PASSU Indebtedness that may be purchased out of the Excess Proceeds if any, remaining upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture at 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. If the aggregate principal amount of Notes and such other PARI PASSU Indebtedness surrendered by Holders into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Notes to be redeemed shall be selected pursuant to the terms of Section 3.02 of the Indenture (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased). To the extent that the aggregate amount of Notes (including any Additional Notes) and such other PARI PASSU Indebtedness tendered by Holders thereof is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. Holders of Notes which are the subject of an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the purchase or redemption date to each Holder of Notes to be purchased or redeemed at its registered address. Notes may be purchased or redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be purchased or redeemed. On and after the purchase or redemption date, interest ceases to accrue on Notes or portions of them called for purchase or redemption. 9. SUBORDINATION. The Notes are subordinated to Senior Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed) and all Obligations with respect thereto. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Notes may be paid. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 10. NOTE GUARANTEES. Payment of principal of, premium, if any, and interest (including interest on overdue principal, premium, if any, and interest, if lawful) on the Notes is unconditionally guaranteed by the Guarantors, on a senior subordinated basis, pursuant to Article 10 of the Indenture. 11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may A-1-6 require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for purchase or redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be purchased or redeemed, during the period between a record date and the corresponding Interest Payment Date. 12. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of and interest on this Note and for all other purposes whatsoever, whether or not this Note is overdue, and neither the Trustee, any Agent, the Company nor any Guarantor shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 13. AMENDMENTS, SUPPLEMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's or any Guarantor's obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders (including providing for additional Note Guarantees pursuant to Section 4.13 of the Indenture) or that does not adversely affect the legal rights under the Indenture of any Holder, to provide for the issuance of Additional Notes in accordance with the provisions of the Indenture or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA. 14. DEFAULTS AND REMEDIES. Events of Default include: default by the Company or the Guarantors in the payment when due of interest or Liquidated Damages, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) and such default continues for a period of 30 days; default by the Company or the Guarantors in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; failure by the Company to comply with Sections 4.07, 4.09, 4.10 or 4.15 of the Indenture; failure by the Company or the Guarantors to observe or perform any other covenant, representation, warranty or other agreement in the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes (including Additional Notes, if any) then outstanding; default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of A-1-7 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; a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company, Holding or any of their respective Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $2.0 million; except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee; and certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any of their respective Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes (including Additional Notes, if any) may declare all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any Indebtedness is outstanding pursuant to the Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable upon the earlier of (1) the day which is five Business Days after notice of acceleration is given to the Company and the lender under the Credit Facility or (2) the date of acceleration of the Indebtedness under the Credit Facility and except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, Holding or any of their respective Subsidiaries, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company must furnish an annual compliance certificate to the Trustee. 15. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Guarantors or their respective Affiliates, and may otherwise deal with the Company the Guarantors or their respective Affiliates, as if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Note Guarantees, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Note Guarantees. 17. AUTHENTICATION. Neither this Note nor any Note Guarantee shall be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-1-8 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES. A-1-9 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Request may be made to: Berry Plastics Corporation 101 Oakley Street P.O. Box 959 Evansville, Indiana 47710-0959 Attention: Chief Financial Officer A-1-10 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax ID. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:______________________________ Your Signature:______________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 (upon the occurrence of an Asset Sale) or 4.15 (upon the occurrence of a Change of Control) of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased: $_________ Date: ____________________ Your Signature:___________________________________ (Sign exactly as your name appears on the Note) Tax Identification No.: _________________________ Signature Guarantee. A-1-12 SCHEDULE OF EXCHANGES OF GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Global Note, have been made: Amount of Amount of decrease in increase in Principal Amount Signature of Principal Principal of this authorized Amount Amount Global Note officer of of of following such Trustee or DATE OF THIS GLOBAL THIS GLOBAL decrease Note EXCHANGE NOTE NOTE (OR INCREASE) CUSTODIAN A-1-13 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) CUSIP 11% Series A Senior Subordinated Notes due 2007 No.1 $ BERRY PLASTICS CORPORATION promises to pay to CEDE & CO. or registered assigns, the principal sum of _______________ ($___________) on July 15, 2007. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. A-2-1 Dated: July 6, 1999 BERRY PLASTICS CORPORATION By:__________________________________ Name: Title: By:__________________________________ Name: Title: (SEAL) B-4 This is one of the Notes referred to in the within-mentioned Indenture: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By:____________________________ Authorized Signatory B-4 (Back of Regulation S Temporary Global Note) 11% SERIES A SENIOR SUBORDINATED NOTE DUE 2007 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE OFFERED, SOLD PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL INVESTOR" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO BERRY PLASTICS CORPORATION OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND B-4 (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 21. INTEREST. Berry Plastics Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of 11% from January 15, 2000 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreements referred to below. The Company will pay interest and Liquidated Damages semi-annually on January 15 and July 15 of each year, or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"). The first Interest Payment Date shall be January 15, 2000. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. To the extent lawful, the Company shall pay interest on overdue principal at the rate of 1% per annum in excess of the then applicable interest rate on the Notes; it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Senior Subordinated Notes under the Indenture. 22. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. The Company will pay principal, interest and Liquidated Damages in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, interest and Liquidated Damages by check payable in such money. It may mail an interest check to a Holder's registered address. 23. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company or any Guarantor (as defined below) may act in any such capacity. 24. INDENTURE. The Company issued the Notes under an Indenture dated as of July 6, 1999 (the "Indenture") among the Company, the guarantors named therein (the "Guarantors") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to ALL such terms, and Holders of the Notes are referred to the Indenture and such Act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company unlimited in aggregate principal amount. B-4 25. OPTIONAL REDEMPTION. On or after July 15, 2003, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve month period beginning on July 15 of the years indicated below: YEAR PERCENTAGE 2003 105.500% 2004 103.667% 2005 101.833% 2006 and thereafter 100.000% 26. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 27. REDEMPTION OR REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to offer to purchase all Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) When the aggregate amount of Excess Proceeds from Asset Sales exceeds $5 million, upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including any Additional Notes) and such other PARI PASSU Indebtedness that may be purchased out of the Excess Proceeds if any, remaining upon completion of the Asset Sale Offers required under the 1994 Indenture and the 1998 Indenture at 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. If the aggregate principal amount of Notes and such other PARI PASSU Indebtedness surrendered by Holders into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Notes to be redeemed shall be selected pursuant to the terms of Section 3.02 of the Indenture (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased). To the extent that the aggregate amount of Notes (including any Additional Notes) and such other PARI PASSU Indebtedness tendered by Holders thereof is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. Holders of Notes which are the subject of an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 28. NOTICE OF REDEMPTION. Notice of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the purchase or redemption date to each Holder of Notes to be purchased or redeemed at its registered address. Notes may be purchased or redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be purchased or redeemed. On and after the purchase or redemption date, interest ceases to accrue on Notes or portions of them called for purchase or redemption. B-4 29. SUBORDINATION. The Notes are subordinated to Senior Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed) and all Obligations with respect thereto. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Notes may be paid. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 30. NOTE GUARANTEES. Payment of principal of, premium, if any, and interest (including interest on overdue principal, premium, if any, and interest, if lawful) on the Notes is unconditionally guaranteed by the Guarantors, on a senior subordinated basis, pursuant to Article 10 of the Indenture. 31. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for purchase or redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be purchased or redeemed, during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 32. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of and interest on this Note and for all other purposes whatsoever, whether or not this Note is overdue, and neither the Trustee, any Agent, the Company nor any Guarantor shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 33. AMENDMENTS, SUPPLEMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's or any Guarantor's obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders (including providing for additional Note Guarantees pursuant to Section 4.13 of the Indenture) or that does not adversely affect the legal rights under the Indenture of any Holder, to provide for the issuance of B-4 Additional Notes in accordance with the provisions of the Indenture or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA. 34. DEFAULTS AND REMEDIES. Events of Default include: default by the Company or the Guarantors in the payment when due of interest or Liquidated Damages, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) and such default continues for a period of 30 days; default by the Company or the Guarantors in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 of the Indenture, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; failure by the Company to comply with Sections 4.07, 4.09, 4.10 or 4.15 of the Indenture; failure by the Company or the Guarantors to observe or perform any other covenant, representation, warranty or other agreement in the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes (including Additional Notes, if any) then outstanding; default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company, Holding or any of their respective Subsidiaries (or the payment of which is guaranteed by the Company, Holding or any of their respective Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $2.0 million or more; a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company, Holding or any of their respective Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $2.0 million; except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Note Guarantee; and certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any of their respective Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes (including Additional Notes, if any) may declare all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any Indebtedness is outstanding pursuant to the Credit Facility, upon a declaration of acceleration, the principal and interest on the Notes shall be payable upon the earlier of (1) the day which is five Business Days after notice of acceleration is given to the Company and the lender under the Credit Facility or (2) the date of acceleration of the Indebtedness under the Credit Facility and except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, Holding or any of their respective Subsidiaries, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company must furnish an annual compliance certificate to the Trustee. B-4 35. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Guarantors or their respective Affiliates, and may otherwise deal with the Company the Guarantors or their respective Affiliates, as if it were not Trustee. 36. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Note Guarantees, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the Note Guarantees waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Note Guarantees. 37. AUTHENTICATION. Neither this Note nor any Note Guarantee shall be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 38. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 39. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 40. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES. B-4 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Request may be made to: Berry Plastics Corporation 101 Oakley Street P.O. Box 959 Evansville, Indiana 47710-0959 Attention: Chief Financial Officer B-4 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax ID. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:______________________________ Your Signature:______________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. B-4 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 (upon the occurrence of an Asset Sale) or 4.15 (upon the occurrence of a Change of Control) of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased: $_________ Date: ____________________ Your Signature:___________________________________ (Sign exactly as your name appears on the Note) Tax Identification No.: _________________________ Signature Guarantee. ________________________________________________________________________________ B-4 SCHEDULE OF EXCHANGES OF GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made: Amount of Amount of decrease in increase in Principal Amount Signature of Principal Principal of this authorized Amount Amount Global Note officer of of of following such Trustee or DATE OF THIS GLOBAL THIS GLOBAL decrease Note EXCHANGE NOTE NOTE (OR INCREASE) CUSTODIAN B-4 FORM OF CERTIFICATE OF TRANSFER Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Re: % Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of July 6, 1999 (the "INDENTURE"), among Berry Plastics Corporation, as issuer (the "COMPANY"), the Guarantors named therein and UNITED STATES TRUST COMPANY OF NEW YORK, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "TRANSFER"), to ___________________________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of B-1 Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. B-4 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _________________________________________ [Insert Name of Transferor] By: ______________________________________ Name: __________________________ Title: Dated: B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ___________ ), or (ii) [ ] Regulation S Global Note (CUSIP __________ ), or (iii) [ ] IAI Global Note (CUSIP __________ ); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP __________ ), or (ii) [ ] Regulation S Global Note (CUSIP __________ ), or (iii) [ ] IAI Global Note (CUSIP __________ ); or (iv) [ ] Unrestricted Global Note (CUSIP __________ ); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Re: 11% Senior Subordinated Notes due 2007 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of July 6, 1999 (the "INDENTURE"), among Berry Plastics Corporation, as issuer (the "COMPANY"), the Guarantors named therein and [UNITED STATES TRUST COMPANY OF NEW YORK], as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "OWNER") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note, |_| IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _____________________________________ [Insert Name of Transferor] By: _____________________________________ Name: Title: Dated: _____________________________ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Re: 11% Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of July 6, 1999 (the "INDENTURE"), among Berry Plastics Corporation, as issuer (the "COMPANY"), the Guarantors named therein and United States Trust Company of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. _____________________________________ [Insert Name of Accredited Investor] By: _____________________________________ Name: Title: Dated: _______________________ D-2 EXHIBIT E NOTE GUARANTEE Each of the Guarantors and each Restricted Subsidiary of the Company which in accordance with Section 4.13 of the Indenture is required to guarantee the obligations of the Company under the Notes upon execution of a counterpart of this Indenture, has jointly and severally unconditionally guaranteed (i) the due and punctual payment of the principal of, interest and Liquidated Damages, if any, on the Notes, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and of interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture or the Notes and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. The obligations of each Guarantor to the Holder and to the Trustee pursuant to this Note Guarantee and the Indenture are as expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Note Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This is a continuing guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a guarantee of payment and not a guarantee of collection. This Note Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Note Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. BPC HOLDING CORPORATION By: _____________________________________ Name: Title: BERRY PLASTICS ACQUISITION CORPORATION By: _____________________________________ Name: Title: BERRY IOWA CORPORATION By: _____________________________________ Name: Title: BERRY STERLING CORPORATION By: _____________________________________ Name: Title: BERRY TRI-PLAS CORPORATION By: _____________________________________ Name: Title: E-2 AEROCON, INC. By: _____________________________________ Name: Title: PACKERWARE CORPORATION, a Kansas corporation By: _____________________________________ Name: Title: PACKERWARE CORPORATION, a Delaware corporation By: _____________________________________ Name: Title: BERRY PLASTICS DESIGN CORPORATION By: _____________________________________ Name: Title: VENTURE PACKAGING, INC. By: _____________________________________ Name: Title: VENTURE PACKAGING MIDWEST, INC., an Ohio corporation By: _____________________________________ Name: Title: E-3 VENTURE PACKAGING MIDWEST, INC., a Delaware corporation By: _____________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation By: _____________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation By: _____________________________________ Name: Title: NIM HOLDINGS LIMITED By: _____________________________________ Name: Title: NORWICH INJECTION MOULDERS LIMITED By: _____________________________________ Name: Title: NORWICH ACQUISITION LIMITED By: _____________________________________ Name: Title: E-4 KNIGHT PLASTICS, INC. By: _____________________________________ Name: Title: CPI HOLDING CORPORATION By: _____________________________________ Name: Title: CARDINAL PACKAGING, INC. By: _____________________________________ Name: Title: E-5 EX-10.28 4 EXHIBIT 10.28 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT Dated as of July 6, 1999 by and among BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY PLASTICS ACQUISITION CORPORATION BERRY IOWA CORPORATION BERRY STERLING CORPORATION BERRY TRI-PLAS CORPORATION AEROCON, INC. PACKERWARE CORPORATION, a Kansas corporation PACKERWARE CORPORATION, a Delaware corporation BERRY PLASTICS DESIGN CORPORATION VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., an Ohio corporation VENTURE PACKAGING MIDWEST, INC., a Delaware corporation VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation NIM HOLDINGS LIMITED NORWICH INJECTION MOULDERS LIMITED NORWICH ACQUISITION LIMITED KNIGHT PLASTICS, INC. CPI HOLDING CORPORATION CARDINAL PACKAGING CORPORATION and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION CHASE SECURITIES INC. This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of July 6, 1999, by and among, Berry Plastics Corporation, a Delaware corporation (the "COMPANY"), BPC Holding Corporation, a Delaware corporation, Berry Plastics Acquisition Corporation, a Delaware corporation, Berry Iowa Corporation, a Delaware corporation, Berry Sterling Corporation, a Delaware corporation, Berry Tri-Plas Corporation, a Delaware corporation, AeroCon, Inc., a Delaware corporation, PackerWare Corporation, a Kansas corporation, PackerWare Corporation, a Delaware corporation, Berry Plastics Design Corporation, a Delaware corporation, Venture Packaging, Inc., a Delaware corporation, Venture Packaging Midwest, Inc., an Ohio corporation, Venture Packaging Midwest, Inc., a Delaware corporation, Venture Packaging Southeast, Inc., a South Carolina corporation, Venture Packaging Southeast, Inc., a Delaware corporation, NIM Holdings Limited, a company organized under the laws of England and Wales, Norwich Injection Moulders Limited, a company organized under the laws of England and Wales, Norwich Acquisition Limited, a company organized under the laws of England and Wales, Knight Plastics, Inc., a Delaware corporation, CPI Holding Corporation, a Delaware corporation and Cardinal Packaging Corporation, an Ohio corporation (collectively, the "GUARANTORS"), and Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc. (each an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS"), who have agreed to purchase the Company's 11% Series A Senior Subordinated Notes due 2007 (the "SERIES A NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated as of June 29, 1999, (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Series A Notes, the Company and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. BUSINESS DAY: Any day except a Saturday. Sunday or other day in the City of New York, or in the city of the corporate trust office of the Trustee, on which banks are authorized to close. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Series A Notes acquired directly from the Company or any of its affiliates). CERTIFICATED SECURITIES: As defined in the Indenture. CLOSING DATE: The date hereof. 1 COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (b) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of Series A Notes tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Series A Notes, each Interest Payment Date. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The registration by the Company under the Act of the Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to which the Company shall offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities for Series B Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchasers propose to sell the Series A Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and persons permitted to purchase the Series A Notes in offshore transactions in reliance upon Regulation S under the Act. HOLDERS: As defined in Section 2 hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated the Closing Date, among the Company, the Guarantors and the Trustee, pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. NOTES: The Series A Notes and the Series B Notes. PERSON: An individual, partnership, corporation, trust, unincorporated organization, or a governmental agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all 2 other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECORD HOLDER: With respect to any Damages Payment Date, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) which is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities. SERIES B NOTES: The Company's 11% Series B Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of any Holder of Series A Notes covered by a Shelf Registration Statement, in exchange for such Series A Notes. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Note, until (i) the date on which such Series A Note has been exchanged by a Person other than a broker-dealer for a Series B Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Series A Note for a Series B Note, the date on which such Series A 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 Series A 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 Series A Note is distributed to the public pursuant to Rule 144 under the Act. TRUSTEE: United States Trust Company of New York and any of its successors. UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. 3 SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 45 days after the Closing Date, the Exchange Offer Registration Statement, (ii) use their best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 210 days after the Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series B Notes to be offered in exchange for the Series A Notes that are Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer referred to in the second paragraph of Section 3(c) open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20 Business Days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 60 Business Days thereafter. (c) The Company and the Guarantors shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Restricted Broker-Dealer who holds Series A Notes that are Transfer Restricted Securities and that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities, may exchange such Series A Notes (other than Transfer Restricted Securities acquired directly from the Company or any affiliate of the Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of each Series B Note received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer, except to the extent required by the Commission. 4 The Company and the Guarantors shall use their respective best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that such Registration Statement conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer is Consummated (or such longer period if extended pursuant to Section 6(d) hereof). The Company and the Guarantors shall promptly provide sufficient copies of the latest version of such Prospectus to such Restricted Broker-Dealers promptly upon request, and in no event later than one day after such request, at any time during such one-year period in order to facilitate such sales. SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Company and the Guarantors are not required to file an Exchange Offer Registration Statement with respect to the Series B Notes because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 Business Days following the Consummation of the Exchange Offer that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A Notes acquired directly from the Company or one of its affiliates, then the Company and the Guarantors shall (x) cause to be filed, on or prior to 45 days after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above or 45 days after the date on which the Company receives the notice specified in clause (ii) above, a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (in either event, the "SHELF REGISTRATION Statement")), relating to all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof, and shall (y) use their respective best efforts to cause such Shelf Registration Statement to be declared effective by the Commission as promptly as possible after the date on which the Company and the Guarantors become obligated to file such Shelf Registration Statement. If, after the Company and the Guarantors have filed an Exchange Offer Registration Statement which satisfies the requirements of Section 3(a) above, the Company and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer shall not be permitted under applicable federal law, then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above. Such an event shall have no effect on the requirements of clause (y) above. The Company and the Guarantors shall use their respective best efforts to keep the Shelf Registration Statement discussed in this Section 4(a) continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least three years (as extended pursuant to Section 6(d)) following the date on which such Shelf Registration Statement first becomes effective under the Act,or 5 such shorter period ending when all Transfer Restricted Securities covered by the Shelf Registration Statement cease to be Transfer Restricted Securities. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, such information specified in item 507 of Regulation S-K under the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement, (iii) the Exchange Offer has not been Consummated within 60 Business Days after the Exchange Offer Registration Statement is first declared effective by the Commission or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages to each Holder of Transfer Restricted Securities 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 Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities 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 Transfer Restricted Securities. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid by the Company and the Guarantors on each Interest Payment Date to the Global Note Holder in the manner provided for thr payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. All 6 obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their respective best efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, following the date hereof there has been published a change in Commission policy with respect to exchange offers such as the Exchange Offer, such that in the reasonable opinion of counsel to the Company and the Guarantors there is a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Series A Notes. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as are requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company and the Guarantors setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Series B Notes to be issued in the Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course of business. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO.. INC., (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security 7 holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series B Notes obtained by such Holder in exchange for Series A Notes acquired by such Holder directly from the Company or an affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO.. INC., (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that the Company and the Guarantors have not entered into any arrangement or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's and the Guarantors' information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above. (b) SHELF REGISTRATION STATEMENT. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their respective best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company and the Guarantors pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (c) GENERAL PROVISIONS. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Exchange Offer Registration Statement and the related Prospectus, to the extent that the same are required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the Company and the Guarantors shall: (i) use their respective best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement, (1) in the case of clause (A), correcting any such misstatement or omission, and (2) in the case of clauses (A) and (B), use their respective best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for its intended purpose(s) as soon as practicable thereafter; 8 (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their respective best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to the Initial Purchasers, each selling Holder named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five Business Days, and the Company and the Guarantors will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which the selling Holders of the Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, shall reasonably object within five Business Days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have 9 reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Act; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document, upon request, to the selling Holders and to the underwriter(s) in connection with such sale, if any, make the Company's and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such selling Holders or any of such underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (viii) furnish to each selling Holder and each of the underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (ix) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (x) enter into such agreements (including an underwriting agreement) and make such representations and warranties that are reasonably acceptable to the Company and the 10 Guarantors and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish (or in the case of paragraphs (2) and (3), use their respective best efforts to furnish) to each selling Holder and each underwriter, if any, upon the effectiveness of the Shelf Registration Statement and to each Restricted Broker-Dealer upon Consummation of the Exchange Offer: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed on behalf of the Company and such Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and each Guarantor, confirming, as of the date thereof, the type of matters set forth in paragraphs (a) through (d) of Section 8 of the Purchase Agreement with respect to the relevant Registration Statement and the securities registered thereunder, and such other similar matters as the Holders, underwriter(s) and/or Restricted Broker Dealers may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors covering matters similar to those set forth in paragraph (f) of Section 8 of the Purchase Agreement and such other matter as the Holders, underwriters and/or Restricted Broker Dealers may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and have considered the matters required to be stated therein and the statements contained therein, and although such counsel has not independently verified the accuracy, completeness or fairness of such statements, such counsel advises that, on the basis of the foregoing, no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion nor express any statement 11 or belief with respect to the financial statements and schedules and other financial or statistical data included in, or omitted from, any Registration Statement contemplated by this Agreement or the related Prospectus); and (3) a customary comfort letter, dated as of the date of effectiveness of the Shelf Registration Statement or the date of Consummation of the Exchange Offer, as the case may be, from the Company's and the Guarantors' independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 8 of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, in connection with any sale or resale pursuant to any Shelf Registration Statement the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by the selling Holders, the underwriter(s), if any, and Restricted Broker Dealers, if any, to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Guarantors pursuant to this clause (x). The above shall be done at each closing under such underwriting or similar agreement, as and to the extent required thereunder, and if at any time the representations and warranties of the Company and the Guarantors contemplated in (A)(1) above cease to be true and correct, the Company shall so advise the underwriter(s), if any, the selling Holders and each Restricted Broker-Dealer promptly and if requested by such Persons, shall confirm such advice in writing; (xi) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xii) issue, upon the request of any Holder of Series A Notes covered by any Shelf Registration Statement contemplated by this Agreement, Series B Notes having an aggregate principal amount equal to the aggregate principal amount of Series A Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Series B Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such 12 Notes, as the case may be; in return, the Series A Notes held by such Holder shall be surrendered to the Company for cancellation; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xiv) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xi) above; (xv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xvi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xvii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use their respective best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xviii) otherwise use their respective best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as 13 may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use their respective best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xx) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(i) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(C) or (D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (the "Advice"). If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of either such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by the Initial Purchasers or any Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter") and its counsel that may be required by the rules and regulations of the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Guarantors and the Holders of Transfer Restricted Securities (subject to the provisions of Section 7(b) below); (v) all application and filing fees in connection with listing the Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting 14 duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the Persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "INDEMNIFIED HOLDER"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company and the Guarantors by any of the Holders expressly for use therein; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to indemnify any such Person if such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and any such loss, liability, claim, damage or expense suffered or incurred by the Indemnified Holder resulted from any action, claim or suit by any Person who purchased Transfer Restricted Securities or Series B Notes which are the subject thereof from such Indemnified Holder and it is established in the related proceeding that such Indemnified Holder failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Transfer Restricted Securities or Series B Notes sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Company or any Guarantor with Section 6 of this Agreement. 15 In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company or any Guarantor, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company in writing (PROVIDED, that the failure to give such notice shall not relieve the Company and such Guarantor of their obligations pursuant to this Agreement, unless and only to the extent that such failure directly results in the loss or compromise of any material rights or defenses by the Company and such Guarantor and the Company and such Guarantor were not otherwise aware of such action or claim). In such event, the Company and such Guarantor shall retain counsel reasonably satisfactory to the Indemnified Holders to represent the Indemnified Holders and any others the Company and such Guarantor may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding. The Company and such Guarantor shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders. The Company and the Guarantors shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless each Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. The Company and the Guarantors shall not, without the prior written consent of each Indemnified Holder, which shall not be unreasonably withheld, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and each Guarantor, and their respective directors, officers, and any Person controlling (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors, and the respective officers, directors, partners, employees, representatives and agents of each such Person, to the same extent as the foregoing indemnity from the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto). In case any action or proceeding shall be brought against the Company or any Guarantor or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company or such Guarantor, and the Company or such Guarantor, such directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. The liability of any Holder under this paragraph shall in no event exceed the proceeds received by such Holder from sales of Transfer Restricted Securities or Series B Notes giving rise to such obligations. (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each 16 applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or if such allocation is not permitted by applicable law, the relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Indemnified Holders on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of discounts and commissions but before deducting expenses) of the Notes received by the Company bears to the total proceeds received by such Indemnified Holder from the sale to Transfer Restricted Securities or Series B Notes, as the case may be. The relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission and any other equitable consideration appropriate in the circumstances. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and the Guarantors, and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Holder or its related Indemnified Holders shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of its Transfer Restricted Securities pursuant to a Registration Statement exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Series A Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company and each Guarantor hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Guarantor is not subject to Section 13 or 15(d) of the Securities Exchange Act, to make available, upon request of any Holder of Transfer Restricted 17 Securities, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS For any Underwritten Offering, the investment banker or investment bankers and manager or managers for any Underwritten Offering that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering and reasonably acceptable to the Company. Such investment bankers and managers are referred to herein as the "underwriters." SECTION 12. MISCELLANEOUS (a) REMEDIES. Each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture, the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Guarantor's securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. The Company and the Guarantors will not take any action, or voluntarily permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) the consent of the Company is obtained, which shall not be unreasonably withheld, (ii) in the case of Section 5 hereof and this Section 12(d)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (iii) in the case of all other 18 provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or any Guarantor: Berry Plastics Corporation 101 Oakley Street P.O. Box 959 Evansville, Indiana 47710-0959 Telecopier No.: (812) 421-9604 Attention: Martin R. Imbler With a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Telecopier No.: (212) 408-2420 Attention: Michael Joseph O'Brien, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities directly from such Holder. 19 (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement and the other agreements referenced herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (l) UNDERWRITING AGREEMENT. Notwithstanding the provisions of Section 6 hereof, in the event of a Shelf Registration pursuant to Section 4 hereof, to the extent that the Holders of Transfer Restricted Securities shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Section with substantially similar effect, the provisions contained in such Sections addressing such issue or issues shall be of no force or effect with respect to the registration of securities being effected in connection with such underwriting or similar agreement. (m) TERMINATION. This Agreement shall terminate and be of no further force or effect when there shall not be any Transfer Restricted Securities, except that the provisions of Section 5, 7, 8 and 12 shall survive any such termination. 20 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. BERRY PLASTICS CORPORATION By:_________________________________ Name: Title: BPC HOLDING CORPORATION By:_________________________________ Name: Title: BERRY PLASTICS ACQUISITION CORPORATION By:_________________________________ Name: Title: BERRY IOWA CORPORATION By:_________________________________ Name: Title: BERRY STERLING CORPORATION By:_________________________________ Name: Title: BERRY TRI-PLAS CORPORATION By:_________________________________ Name: Title: AEROCON, INC. By:_________________________________ Name: Title: PACKERWARE CORPORATION, a Kansas corporation By:_________________________________ Name: Title: PACKERWARE CORPORATION, a Delaware corporation By:_________________________________ Name: Title: BERRY PLASTICS DESIGN CORPORATION By:_________________________________ Name: Title: VENTURE PACKAGING, INC. By:_________________________________ Name: Title: VENTURE PACKAGING MIDWEST, INC., an Ohio corporation By:_________________________________ Name: Title: VENTURE PACKAGING MIDWEST, INC., a Delaware corporation By:_________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a South Carolina corporation By:_________________________________ Name: Title: VENTURE PACKAGING SOUTHEAST, INC., a Delaware corporation By:_________________________________ Name: Title: NIM HOLDINGS LIMITED By:_________________________________ Name: Title: NORWICH INJECTION MOULDERS LIMITED By:_________________________________ Name: Title: NORWICH ACQUISITION LIMITED By:_________________________________ Name: Title: KNIGHT PLASTICS, INC. By:_________________________________ Name: Title: CPI HOLDING CORPORATION By:_________________________________ Name: Title: CARDINAL PACKAGING CORPORATION By:_________________________________ Name: Title: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION CHASE SECURITIES INC. By: Donaldson, Lufkin & Jenrette Securities Corporation By:_________________________________ Name: Title: EX-23.2 5 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Historical Financial Data" and "Experts" and to the use of our report dated February 19, 1999 with respect to BPC Holding Corporation and the use of our report dated May 19, 1999 with respect to the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. in the Registration Statement (Form S-4) and related Prospectus of Berry Plastics Corporation for the registration of $75,000,000 of 11% Series B Senior Subordinated Notes due 2007. /s/ Ernst & Young LLP Indianapolis, Indiana August 20, 1999 EX-23.3 6 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement, relating to $75,000,000 of 11% Series B Senior Subordinated Notes due 2007, of Berry Plastics Corporation on Form S-4 of our report dated June 11, 1999 relating to the consolidated financial statements of CPI Holding, Inc. as of November 30, 1998 and 1997 and for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 to November 30, 1996 appearing in the Prospectus, which is part of such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Cleveland, Ohio August 20, 1999 EX-23.4 7 EXHIBIT 23.4 NORWICH INJECTION MOULDERS LIMITED We consent to the reference to our firm under the caption "Experts" and to the use of our report dated 22 December 1997 relating to the financial statements of Norwich Injection Moulders Limited for the years ended October 31, 1997, 1996 and 1995 in the Registration Statement (Form S-4) and related Prospectus of Berry Plastics Corporation for the registration of $75,000,000 of 11% Series B Senior Subordinated Notes due 2007. /s/ Lovewell Blake Norwich, England 20 August 1999 EX-27 8 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 6-MOS JAN-01-2000 JUL-03-1999 2,993 0 40,842 1,507 32,314 78,807 210,781 90,510 258,409 67,036 300,187 0 16,947 6 (137,620) 258,409 159,852 0 112,782 138,610 778 473 17,860 2,604 482 2,122 0 0 0 2,122 0 0
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