-----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, VEIQhvGsptC+DGKHzF6rwcxSlllP0HErgIOSInDu0zgjrJNZ8VevMg2MKSzF6xIs IFVxwrv3eqj7FY7lW1Ws/A== 0000919463-98-000001.txt : 19980325 0000919463-98-000001.hdr.sgml : 19980325 ACCESSION NUMBER: 0000919463-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971227 FILED AS OF DATE: 19980324 SROS: NONE 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: 10-K SEC ACT: SEC FILE NUMBER: 033-75706 FILM NUMBER: 98571539 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 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended DECEMBER 27, 1997 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [NO FEE REQUIRED] for the transition period from to Commission File Number 33-75706 BERRY PLASTICS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 35-1813706 (State or other jurisdiction (IRS employer of incorporation or organization) identification number) BPC HOLDING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 35-1814673 (State or other jurisdiction (IRS employer of incorporation or organization) identification number) BERRY IOWA CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 42-1382173 (State or other jurisdiction (IRS employer of incorporation or organization) identification number) BERRY TRI-PLAS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 56-1949250 (State or other jurisdiction (IRS employer of incorporation or organization) identification number) 101 Oakley Street 47710 Evansville, Indiana (Address of principal executive offices) (Zip code) Registrants' telephone number, including area code: (812) 424-2904 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: Not applicable. Other than with respect to BPC Holding Corporation ("Holding"), none of the voting stock of any registrant is held by a non-affiliate of such registrant. There is no public trading market for any class of voting stock of Holding, however, Holding estimates the market value of its voting stock that is held by non-affiliates to be $951,600. As of March 20, 1998, the following shares of capital stock of BPC Holding Corporation were outstanding: 91,000 shares of Class A Voting Common Stock; 259,000 shares of Class A Nonvoting Common Stock; 145,001 shares of Class B Voting Common Stock; 57,788 shares of Class B Nonvoting Common Stock; and 16,981 shares of Class C Nonvoting Common Stock. As of March 20, 1998 there were outstanding 100 shares of the Common Stock, $.01 par value, of Berry Plastics Corporation, 100 shares of the Common Stock, $.01 par value, of Berry Iowa Corporation, and 100 shares of the Common Stock, $.01 par value, of Berry Tri-Plas Corporation. DOCUMENTS INCORPORATED BY REFERENCE None BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY IOWA CORPORATION BERRY TRI-PLAS CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997 TABLE OF CONTENTS PAGE PART I Item 1. Business..................................................... 3 Item 2. Properties................................................... 13 Item 3. Legal Proceedings........................................... 13 Item 4. Submission of Matters to a Vote of Security Holders......... 13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................... 14 Item 6. Selected Financial Data..................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 17 Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 21 Item 8. Financial Statements and Supplementary Data................. 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................... 22 PART III Item 10. Directors and Executive Officers of the Registrants......... 23 Item 11. Executive Compensation...................................... 26 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................ 30 Item 13. Certain Relationships and Related Transactions.............. 31 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................... 34 PART I ITEM 1. BUSINESS GENERAL BPC Holding Corporation ("Holding"), is the parent of Berry Plastics Corporation ("Berry" or the "Company"), which is a leading domestic manufacturer and marketer of plastic packaging products focused on four key markets: aerosol overcaps, rigid open-top containers, drink cups and housewares. The Company had net sales of $227.0 million in fiscal 1997, $151.1 million in fiscal 1996 and $140.7 million in fiscal 1995. Within each of these markets, the Company concentrates on manufacturing value-added products sold to marketers of image-conscious industrial and consumer products that utilize the Company's proprietary molds, superior color matching capabilities and sophisticated multi-color printing capabilities. The Company believes that it is the largest supplier of aerosol overcaps in the United States, with sales of over 1.4 billion overcaps in 1997. Berry also believes that it is the largest domestic supplier of thinwall, child-resistant and pry-off open top containers. Berry has utilized its national sales force and existing molding and printing capacity at multiple-plant locations to become a leader in the plastic drink cup market, which includes the Company's 32 ounce and 44 ounce DT cups, which fit in standard vehicle cup holders. The Company entered the housewares market (which includes the lawn and garden market) for semi-disposable plastic products, sold primarily to national retail marketers, as a result of the acquisition of PackerWare Corporation ("PackerWare") in January 1997. For the 1997, 1996 and 1995 fiscal years, aerosol overcaps accounted for approximately 21%, 33% and 31%, respectively, of total net sales; open-top containers accounted for approximately 49%, 53% and 51%, respectively, of total net sales; drink cups accounted for approximately 17%, 9% and 12%, respectively; and housewares accounted for approximately 8% of total net sales for fiscal 1997. The Company supplies aerosol overcaps for a wide variety of commercial and consumer products. Similarly, the Company's containers are used for packaging a broad spectrum of commercial and consumer products. The Company's plastic drink cups are sold primarily to fast food restaurants, convenience stores, stadiums, table top restaurants and retail. The Company sells houseware products, primarily seasonal, semi-disposable housewares and lawn and garden items, to major retail marketers as a result of its acquisition of PackerWare in January 1997. Berry's customer base is comprised of over 4,000 customers with operations in a widely diversified range of markets. The Company's top ten customers accounted for approximately 19% of the Company's fiscal 1997 net sales, and no customer accounted for more than 4% of net sales. The Company believes that it derives a strong competitive position from its state-of-the-art production capabilities, extensive array of proprietary molds in a wide variety of sizes and styles and dedication to service and quality. In the aerosol overcap market, the Company distinguishes itself with superior color matching capabilities, which is of extreme importance to its base of image-conscious consumer products customers, and proprietary packing equipment, which enables the Company to deliver a higher quality product while lowering warehousing and shipping costs. Likewise, in the container market, an in-house graphic arts department and sophisticated printing and decorating capabilities permit the Company to offer extensive value-added decorating options. The Company's drink cup product line is strengthened by both the larger market share and diversification provided through its acquisition of PackerWare. Berry entered the housewares business with its acquisition of PackerWare, which has a reputation for outstanding quality and service among major retail marketers and for products which offer high value at a reasonable price to consumers. The Company is also characterized as an industry innovator, particularly in the area of decoration. These market-related strengths, combined with the Company's modern proprietary mold technology, high speed molding capabilities and multiple-plant locations, all contribute to the Company's strong market position. In addition to these marketing and manufacturing strengths, the Company believes that its close working relationships with customers are crucial to maintaining market positions and developing future growth opportunities. The Company employs a direct sales force which is focused on working with customers and the Company's production and product design personnel to develop customized packaging that enhances customer product differentiation and improves product performance. The Company works to develop innovative new products and identify and pursue non-traditional markets that can use existing Company products. HISTORY Imperial Plastics, the Company's predecessor, was established in 1967 in Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983 to purchase substantially all of the assets of Imperial Plastics. In 1988, Old Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading manufacturer of aerosol overcaps, and subsequently relocated Gilbert Plastics' production to Old Berry's Evansville, Indiana facility. In 1990, the Company and Holding, the holder of 100% of the outstanding capital stock of the Company, were formed to purchase the assets of Old Berry. The Company acquired substantially all of the assets (the "Mammoth Acquisition") of the Mammoth Containers division of Genpak Corporation in February 1992, adding plants in Forest City, North Carolina (which was subsequently sold by the Company) and Iowa Falls, Iowa. In March 1995, Berry Sterling Corporation, a Delaware corporation and a newly-formed wholly-owned subsidiary of the Company ("Berry Sterling"), acquired substantially all of the assets of Sterling Products, Inc. (the "Sterling Products Acquisition"), a producer of injection molded plastic drink cups and lids. Management believes that the Sterling Products Acquisition gave the Company immediate penetration into a rapidly expanding plastic drink cup market. In December 1995, Berry Tri-Plas Corporation (formerly Berry-CPI Corp.), a Delaware corporation and wholly-owned subsidiary of the Company ("Berry Tri- Plas"), acquired substantially all of the assets of Tri-Plas, Inc. (the "Tri-Plas Acquisition"), a manufacturer of injection molded containers and lids, and added manufacturing plants in Charlotte, North Carolina and York, Pennsylvania. Management believes that the Tri-Plas Acquisition gave the Company an immediate presence in the polypropylene container product line, which is mainly used for food and "hot fill" applications. In January 1996, the Company acquired the assets relating to the plastic drink cup product line and decorating equipment of Alpha Products, Inc., a subsidiary of Aladdin Industries, Inc. The addition of these assets complimented the drink cup product line acquired in the Sterling Products Acquisition. In January 1997, the Company acquired PackerWare Corporation of Lawrence, Kansas and certain assets of Container Industries, Inc. of Pacoima, California. In May 1997, Berry Plastics Design Corporation ("Berry Design"), a newly-formed wholly-owned subsidiary of the Company, acquired substantially all of the assets of Virginia Design Packaging Corp. of Suffolk, Virginia. In August 1997, the Company acquired Venture Packaging, Inc. of Monroeville, Ohio. See "The PackerWare Acquisition", "The Container Industries Acquisition", "The Virginia Design Acquisition" and "The Venture Packaging Acquisition" below. THE 1996 TRANSACTION On June 18, 1996, Holding consummated the transaction described below (the "1996 Transaction"). BPC Mergerco, Inc. ("Mergerco") was organized by Atlantic Equity Partners International II, L.P. ("International"), Chase Venture Capital Associates, L.P. ("CVCA") and certain other institutional investors to effect the acquisition of a majority of the outstanding capital stock of Holding. Pursuant to the terms of a Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, each of International, CVCA and certain other equity investors (collectively, the "Common Stock Purchasers") subscribed for shares of common stock of Mergerco. In addition, pursuant to the terms of a Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, CVCA and an additional institutional investor (the "Preferred Stock Purchasers") purchased shares of preferred stock of Mergerco (the "Preferred Stock") and warrants (the "1996 Warrants") to purchase shares of common stock of Mergerco. Immediately after the purchase of the common stock, the preferred stock and the 1996 Warrants of Mergerco, Mergerco merged (the "Merger") with and into Holding, with Holding being the surviving corporation. Upon the consummation of the Merger, each share of Class A Common Stock, $.00005 par value, and Class B Common Stock, $.00005 par value, of Holding and certain privately-held warrants exercisable for such Class A and Class B Common Stock were converted into the right to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the nominal exercise price therefor, and all other classes of common stock of Holding, a majority of which was held by certain members of management, were converted into shares of common stock of the surviving corporation. In addition, upon the consummation of the Merger, the holders of the warrants (the "1994 Warrants") to purchase capital stock of Holding that were issued in connection with the offering in April 1994 by Berry of $100 million aggregate principal amount of 12.25% Senior Subordinated Notes due 2004 (the "1994 Notes," and such transaction being the "1994 Transaction"), became entitled to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the exercise price therefor. The aggregate consideration paid to the sellers of the equity interests in Holding, including the holders of the 1994 Warrants, was approximately $119.6 million in cash. In order to finance the 1996 Transaction, including the payment of related fees and expenses: (i) Holding issued 12.50% Senior Secured Notes due 2006 (with such Notes being exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006 (the "1996 Notes") for net proceeds of approximately $100.2 million (or $64.6 million after deducting the amount of such net proceeds used to purchase marketable securities available for payment of interest on the 1996 Notes); (ii) the Common Stock Purchasers, the Preferred Stock Purchasers and certain members of management made equity and rollover investments in the aggregate amount of $70.0 million (which amount included rollover investments of approximately $7.1 million by certain members of management and $3.0 million by an existing institutional shareholder); and (iii) Holding received an aggregate of approximately $0.9 million in connection with the exercise of certain management stock options to purchase common stock of Holding. In connection with the 1996 Transaction, International, CVCA, certain other institutional investors and certain members of management entered into a Stockholders Agreement pursuant to which certain stockholders, among other things, (i) were granted certain registration rights and (ii) under certain circumstances, have the right to force a sale of Holding. See "Certain Relationships and Related Transactions - Stockholders Agreements." THE CONTAINER INDUSTRIES ACQUISITION On January 17, 1997, the Company acquired certain assets of Container Industries, Inc. ("Container Industries") of Pacoima, California (the "Container Industries Acquisition") . Container Industries, a manufacturer and marketer of injection molded industrial and pry-off containers for building products and other industrial markets, had fiscal 1996 net sales of approximately $4 million. Berry did not acquire Container Industries' manufacturing facility located in Pacoima; therefore, Berry transferred production to the Company's Henderson, Nevada plant. Management believes the acquisition of Container Industries has provided additional market presence on the west coast, primarily in the pry-off container product line. THE PACKERWARE ACQUISITION On January 21, 1997, the Company acquired PackerWare, a Kansas corporation, for aggregate consideration of approximately $28.1 million (including the payment of outstanding debt of PackerWare) by way of a merger of PackerWare with and into a newly-formed, wholly-owned subsidiary of the Company (the "PackerWare Acquisition"). PackerWare, a manufacturer and marketer of plastic containers, drink cups, housewares, and lawn and garden products, had fiscal 1996 net sales of approximately $43 million. Management believes that the PackerWare Acquisition significantly diversified and expanded the Company's position in the drink cup business and has given the Company immediate penetration into the housewares market. PackerWare's reputation among its major customers for outstanding quality and service is consistent with the customer-oriented goals of Berry. PackerWare's houseware product line is primarily in the seasonal semi-disposable plastic segment of the market, with some sales being in the complimentary lawn and garden segment. Customers for this product line are primarily large retail marketers with national chains. The acquisition also provided the Company with a plant located in Lawrence, Kansas, that is well-situated to service its markets. In addition, the PackerWare Acquisition provided additional product line breadth and market presence to Berry's existing open-top container product line. THE VIRGINIA DESIGN ACQUISITION On May 13, 1997, Berry Plastics Design Corporation, a newly-formed wholly- owned subsidiary of the Company, acquired substantially all the assets of Virginia Design Packaging Corp. of Suffolk, Virginia ("Virginia Design"). Virginia Design, a manufacturer and marketer of injection-molded containers used primarily for food packaging, had fiscal 1996 net sales of approximately $15 million. Management believes that the acquisition of these assets has enhanced the Company's position in the food packaging and food service markets. THE VENTURE PACKAGING ACQUISITION On August 29, 1997, the Company acquired Venture Packaging, Inc. of Monroeville, Ohio ("Venture Packaging"), for aggregate consideration of approximately $43.7 million which included cash, the payment or assumption of indebtedness, and $5.0 million of preferred stock of Holding and warrants to purchase stock of Holding (the "Venture Packaging Acquisition"). Venture Packaging, a manufacturer and marketer of injection-molded containers used in the food, dairy and various other markets, had fiscal 1996 net sales of approximately $42 million. Management believes that the Venture Packaging Acquisition will strategically assist in marketing the vast product line of open-top containers and lids. Venture Packaging is a leading supplier to the food service industry. The Monroeville, Ohio facility is ideally located to service the large northeastern U.S. market, and Venture Packaging has an excellent reputation for outstanding service. Management believes that their loyal customers will enhance the container division's market position. As a result of the acquisition, the Company also acquired the Anderson, South Carolina operations of Venture Packaging. The Company has been in the process of phasing down the operations of this facility and anticipates completion of this process by the end of 1998. The Company does not anticipate that this phase down will have a material effect on the financial operations of the Company. The majority of this business is being relocated to the Charlotte, North Carolina facility. Also, management anticipates that the Evansville, Indiana and Monroeville, Ohio facilities will likely receive a portion of this business. THE CREDIT FACILITY In August 1997, the Company entered into an Amended and Restated Financing and Security Agreement (the "Credit Agreement") with NationsBank, N.A. (the "Agent") for a senior secured line of credit in an aggregate principal amount of approximately $127.2 million (the "Credit Facility"). The indebtedness under the Credit Facility is guaranteed by Holding and the Company's subsidiaries. The Credit Facility amended and restated the facility previously provided by the Agent and certain other lenders. COMMITMENT. The Credit Facility provides the Company with a $50.0 million revolving line of credit (including a $5.0 million letter of credit subfacility), subject to a borrowing base formula discussed below, a $28.3 million "A" term loan facility, a $30.0 million "B" term loan facility and an $18.9 million standby letter of credit facility to support the Company's and its subsidiaries' obligations under certain industrial revenue bonds (the "Standby L/C Facility"). MATURITY. The Credit Facility matures on January 21, 2002, unless previously terminated either (i) voluntarily by the Company or (ii) by the lenders upon an Event of Default (as defined in the Credit Agreement). The loans under the term loan facility are subject to scheduled repayments and mandatory prepayments upon the occurrence of certain events including the sale of certain assets and the issuance of equity securities. BORROWING BASE. The total amount of revolving loans and stated amount of letters of credit (other than under the Standby L/C Facility) that may be outstanding under the Credit Facility is limited to not more than the lesser of (i) $50 million and (ii) the sum of (A) up to 85% of eligible accounts receivable of the Company and its subsidiaries and (B) the lesser of (x) up to 65% of the amounts of inventory of the Company and its subsidiaries and (y) $25 million, subject, in each case, to certain reserves and limitations set forth in the Credit Agreement. INTEREST AND FEES. The lenders under the Credit Facility will be paid commitment fees at a rate of 0.30% per annum on unused commitments and letter of credit fees equal to 2.00% per annum on the aggregate face amount of outstanding letters of credit (including under the Standby L/C Facility). The Company is also obligated to pay a fee, quarterly in arrears, equal to the product of the average outstanding balance of the "B" term loans and .375%; such fee may be reduced based upon the satisfaction of a financial ratio. In addition, the Agent and the lenders will receive such other fees as have been separately agreed upon. Borrowings under the Credit Facility will bear interest at a rate per annum equal to, at the option of the Company, either (i) the Base Rate (which is defined as the higher of the Agent's prime rate and the Federal Funds Rate plus 0.5%) plus .50% or (ii) the LIBOR Rate (as defined in the Credit Agreement) plus 2%. Interest and fees are subject to reductions based upon the satisfaction of certain financial ratios. SECURITY. 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. RESTRICTIVE AND FINANCIAL COVENANTS. The Credit Agreement contains, among other things, covenants restricting the ability of the Company and its subsidiaries to dispose of assets or merge, incur debt, pay dividends, repurchase or redeem capital stock and indebtedness, create liens, make capital expenditures, make certain investments or acquisitions, enter into transactions with affiliates and otherwise restricting corporate activities, including requiring the Company and its subsidiaries to satisfy certain financial ratios. AEROSOL OVERCAP MARKET The Company believes it is the leader in the U.S. market for aerosol overcaps. Approximately one-third of this market consists of national marketers who produce overcaps in-house for their own needs. Management believes that a portion of these in-house producers will increase the outsourcing of their production to high technology, low cost manufacturers, such as the Company, as a means of reducing manufacturing assets and focusing on their core marketing objectives. The Company's aerosol overcaps are used in a wide variety of end-use markets including spray paints, household and personal care products, insecticides and a myriad of other commercial and consumer products. Most U.S. manufacturers and contract fillers of aerosol products are customers of the Company for some portion of their needs. In fiscal 1997, no single overcap customer accounted for more than 3% of the Company's total net sales. Management believes that, over the years, the Company has developed several significant competitive advantages, including a reputation for outstanding quality, short lead-time requirements, long-standing relationships with major customers, the ability to accurately reproduce over 3,500 colors, proprietary packing technology that minimizes freight cost and warehouse space, high-speed, low-cost molding and decorating capability and a broad product line of proprietary molds. The Company continues to develop new products in the overcap market, including the "spray-thru" line of aerosol overcaps. The Company's major competitor in this product line is Knight Engineering. In addition, a number of companies, including several of the Company's customers (e.g., S.C. Johnson, Cheseborough-Ponds and Reckitt & Colman), currently produce aerosol overcaps for their own use. CONTAINER MARKET The Company classifies its containers into six product lines: "thinwall," "child-resistant," "pry-off," "dairy," "polypropylene" and "industrial." Management believes that the Company is the leading U.S. manufacturer in the thinwall, child-resistant and pry-off product lines. Management considers industrial containers to be a commodity market, characterized by little product differentiation and an absence of higher margin niches. The following table describes each of the Company's six product lines.
PRODUCT LINE DESCRIPTION SIZES MAJOR END MARKETS Thinwall Thinwalled, multi-purpose 6 oz. to 2 gallons Food, promotional products, toys containers with or without and a wide variety of other uses handles and lids Child-resistant Containers that meet Consumer 2 lb. to 2 gallons Pool and other chemicals Product Safety Commission standards for child safety Pry-off Containers having a tight lid-fit 4 oz. to 2 gallons Building products, adhesives, and requiring an opening device other industrial uses Dairy Thinwall containers in 6 oz. to 5 lbs., Multi- Cultured dairy products including traditional dairy market sizes pack yogurt, cottage cheese, sour and styles cream and dips Polypropylene Usually clear containers in 6 oz. to 5 lbs. Food, deli, sauces, salads round, oblong or rectangular shapes Industrial Thick-walled, larger pails 2.5 to 5 gallons Building products, chemicals, designed to accommodate heavy paints, other industrial uses loads
The largest end-uses for the Company's containers are food products, building products, chemicals and dairy products. The Company has a diverse customer base for its container lines, and no single container customer exceeded 3% of the Company's total net sales in fiscal 1997. Management believes that no other container manufacturer in the U.S. has the breadth of product line offered by the Company. The Company's container capacities range from 4 ounces to 5 gallons and are offered in various styles with accompanying lids, bails and handles, as well as a wide array of decorating options. In addition to a complete product line, the Company has sophisticated printing capabilities, an in-house graphic arts department, low cost manufacturing capability with nine plants strategically located throughout the United States and a dedication to high quality products and customer service. Product engineers, located in most of the Company's facilities, work with customers to design and commercialize new containers. The Company seeks to develop niche container products and new applications by taking advantage of the Company's state-of-the-art decorating and graphic arts capabilities and dedication to service and quality. Management believes that these capabilities have given the Company a significant competitive advantage in certain high-margin niche container applications for specialized products. Examples include popcorn containers for new movie promotions and professional and college sporting and entertainment events, where the ability to produce sophisticated and colorful graphics is crucial to the product's success. In order to identify new applications for existing products, the Company relies extensively on its national sales force. Once these opportunities are identified, the Company's sales force interfaces with product design engineers to meet customers' needs. Finally, the quality and performance of the Company's dairy product line have enabled the Company to establish a solid and growing reputation in this market. In non-industrial containers, the Company's strongest competitors include Airlite, Sweetheart, Landis, Cardinal and Polytainers. The Company also produces commodity industrial pails for a market which is dominated by large volume competitors such as Letica, Plastican, NAMPAC and Ropak. The Company does not participate heavily in this market due to generally lower margins. The Company intends to selectively participate in the industrial container market when higher margin opportunities, equipment utilization or customer requirements make participation an attractive option. DRINK CUP MARKET The Company believes that it is a leading provider of plastic drink cups in the U.S. As beverage producers, convenience stores and fast food restaurants increase their marketing efforts for larger sized drinks, the Company believes that the plastic drink cup market will expand because of plastic's desirability over paper for larger drink cups. Injection-molded plastic cups range in size from 12 to 64 ounces, and often come with lids. Primary markets are fast food restaurants, convenience stores, stadiums, table top restaurants and retail. Virtually all cups are decorated, often as promotional items, and Berry is known in the industry for innovative, state-of-the-art graphics capability. Berry historically supplies a full line of traditional straight-sided and DT 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, the Company expanded its presence while diversifying into the stadium and table top restaurant markets. The 64 ounce cup, which has been highly successful with convenience stores, is one of the Company's fastest growing drink cups. In addition to a full product line, Berry has the advantage of being the only supplier that can provide sophisticated printing and/or labeling capacity on a nation-wide basis; in 1997, five different plants molded and decorated drink cups. Major drink cup competitors include Packaging Resources Incorporated, Pescor Plastics and WNA (formerly Cups Illustrated). CUSTOM MOLDED PRODUCTS MARKET The Company also produces custom molded products by utilizing molds provided by its customers. Typically, the low cost of entry in the custom molded products market creates a commodity-like marketplace. However, the Company has focused its custom molding efforts on those customers that are cognizant of the Company's mold and product design expertise, superior color matching abilities and sophisticated multi-color printing capabilities. The majority of the Company's custom business in 1997 required specialized equipment and expertise, supporting the Company's desire to pursue higher volume-added niche opportunities in every market in which it participates. HOUSEWARES MARKET The Company entered the housewares market as a result of the PackerWare Acquisition in January 1997. The housewares market is a multi-billion dollar market. The Company's participation is limited to seasonal (spring and summer) semi-disposable plastic housewares and plastic lawn and garden products, which consists primarily of outdoor flower pots. Berry sells virtually all of its products in this market through major national markets and national chain stores. PackerWare's historical position with this market was to provide a high value to consumers at a relatively modest price, consistent with the key price points of the retail marketers. Berry believes outstanding service and fashion capabilities further enhance its position in this market. MARKETING AND SALES The Company reaches its large and diversified base of over 4,000 customers primarily through its direct field sales force which has been expanded from 14 sales representatives in fiscal 1990 to 45 at the end of fiscal 1997. These field sales representatives are focused on individual product lines, but are encouraged to sell all Company products to serve the needs of the Company's customers. The Company believes that a direct field sales force is able to better focus on target markets and customers, with the added benefit of permitting the Company to control pricing decisions centrally. The Company also utilizes the services of manufacturing representatives to augment its direct sales force. The Company believes that it has a reputation for a high level of customer satisfaction. Highly skilled customer service representatives are located in each of the Company's facilities to support the national field sales force. In addition, telemarketing representatives, marketing managers and sales/marketing executives oversee the marketing and sales efforts. Manufacturing and engineering personnel work closely with field sales personnel to satisfy customers' needs through the production of high quality, value-added products and on-time deliveries. Additional marketing and sales techniques include a Graphic Arts department with computer-assisted graphic design capabilities and in-house production of photopolymer printing plates. Berry also has a centralized Color Matching and Materials Blending department that utilizes a computerized spectrophotometer to insure that colors match those requested by customers. MANUFACTURING GENERAL The Company manufactures its products using the plastic injection molding process. The process begins when plastic resin, in the form of small pellets, is fed into an injection molding machine. The injection molding machine then melts the plastic resin and injects it into a multi-cavity steel mold, forcing the plastic resin to take the final shape of the product. At the end of each molding cycle (generally five to 25 seconds), the plastic parts are ejected from the mold into automated handling systems from which they are packed in corrugated containers for further processing or shipment. After molding, the product may be either decorated (printing, silk-screening, labeling) or assembled (e.g., bail handles fitted to containers). The Company believes that its molding and decorating capabilities are among the best in the industry. Each of the Company's plants is managed by a local plant manager and is treated as a profit center. The Company's overall manufacturing philosophy is to be a low-cost producer by using high speed molding machines, modern multi-cavity hot runner, cold runner and insulated runner molds, extensive material handling automation and sophisticated printing technology. The Company utilizes state-of-the-art robotic packaging processes for large volume products, which enables the Company to deliver a higher quality product (due to reduced breakage) while lowering warehousing and shipping costs (due to more efficient use of space). Each plant has complete tooling maintenance capability to support molding and decorating operations. The Company has historically made, and intends to continue to make, significant capital investments in plant and equipment because of the Company's objectives to grow, to improve productivity, to maintain competitive advantages, and meet the asset-intensive nature of the injection molding business. The Company operates 175 molding machines ranging from 150 to 825 ton clamp capacity. The Company's largest overcap machines are capable of producing 10 thousand to 15 thousand aerosol overcaps per hour. Due to the wide variety of container and drink cup styles and sizes produced by the Company, production rates vary significantly. The Company owns over 750 active molds. PRODUCT DEVELOPMENT The Company utilizes full-time product engineers who use three-dimensional computer-aided-design (CAD) technology to design and modify new products and prepare mold drawings. Engineers use an in-house model shop, which includes a thermoforming machine, to produce prototypes and sample parts. The Company can simulate the molding environment by running unit-cavity prototype molds in a small injection molding machine dedicated to research and development of new products. Production molds are then designed and outsourced for production by various companies in the United States and Canada with whom the Company has extensive experience and established relationships. The Company's engineers oversee the mold-building process from start to finish. QUALITY ASSURANCE Each plant extensively utilizes Total Quality Management philosophies, including the use of statistical process control and extensive involvement of employees to increase productivity. This teamwork approach to problem-solving increases employee participation and provides necessary training at all levels. The Evansville, Henderson and Iowa Falls plants were approved for ISO 9000 certification in 1994, 1995 and 1996, respectively, which certifies compliance by a company with a set of shipping, trading and technology standards promulgated by the International Standardization Organization. The Company is actively pursuing ISO certification in all of the remaining facilities. Extensive testing of parts for size, color, strength and material quality using statistical process control (SPC) techniques and sophisticated technology is also an ongoing part of the Company's traditional quality assurance activities. SYSTEMS Berry utilizes a fully integrated computer software system at its plants capable of producing complete financial and operational reports by plant as well as by product line. This accounting and control system is easily expandable to add new features and/or locations as the Company grows. In addition, the Company has in place a sophisticated quality assurance system based on ISO 9000 certification, a bar code based material management system and an integrated manufacturing system. SOURCES AND AVAILABILITY OF RAW MATERIALS The most important raw material purchased by the Company is plastic resin. The Company purchased approximately $68 million of resin in fiscal 1997 (excluding specialty resins), of which 74% was high density polyethylene ("HDPE"), 11% linear low density polyethylene and 15% polypropylene. The Company's purchasing strategy is to deal with only high quality, dependable suppliers, such as Dow, Union Carbide, Chevron, and Phillips. The Company does not anticipate having any material difficulties obtaining raw materials in the foreseeable future. All resin suppliers commit to the Company to provide uninterrupted supply at competitive prices. Management believes that the Company has maintained outstanding relationships with these key suppliers over the past several years and expects that such relationships will continue into the foreseeable future. EMPLOYEES As of December 31, 1997, the Company had approximately 2,100 employees. No employees of the Company 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 Venture Packaging acquisition and was the Company's only plant with a collective bargaining agreement during 1997. PATENTS AND TRADEMARKS The Company has numerous patents and trademarks with respect to its products. None of the patents or trademarks are considered by management to be material to the business of the Company. See "Legal Proceedings" below. ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION The past and present operations of the Company and the past and present ownership and operations of real property by the Company are subject to extensive and changing Federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes or otherwise relating to the protection of the environment. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. However, the Company cannot predict with any certainty that it will not in the future incur liability under environmental statutes and regulations with respect to contamination of sites formerly or currently owned or operated by the Company (including contamination caused by prior owners and operators of such sites) and the off-site disposal of hazardous substances. The Food and Drug Administration (the "FDA") regulates the material content of direct-contact food containers and packages, including certain thinwall containers manufactured by the Company. The Company uses approved resins and pigments in its direct contact food products and believes it is in material compliance with all such applicable FDA regulations. The plastics industry in general, and the Company in particular, also are subject to existing and potential Federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other similar measures. The principal resin used in the Company's products, HDPE, is recyclable, and, accordingly, the Company believes that the legislation promulgated to date and such initiatives to date have not had a material adverse effect on the Company. There can be no assurance that any such future legislative or regulatory efforts or future initiatives would not have a material adverse effect on the Company. On January 1, 1995, legislation in Oregon, California and Wisconsin went into effect requiring products packaged in rigid plastic containers to comply with standards intended to encourage recycling and increased use of recycled materials. Although the regulations vary by state, the principal requirement is the use of post consumer regrind ("PCR") as an ingredient in containers sold for non-food uses. Additionally, Oregon and California allow lightweighting of the container or concentrating the product sold in the container as options for compliance. Oregon and California provide for an exemption from all such regulations if statewide recycling reaches or exceeds 25% of rigid plastic containers. In September 1996, California passed a new bill permanently exempting food and cosmetics containers from the requirement to use recycled plastics to comply with the earlier recycling law. 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, is in compliance for the 1997 calendar year. However, in January 1998, California finally 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 go ahead and begin enforcing its recycled content mandate on any non-food plastic containers from 8 oz. to 5 gallons. The Company, in order to facilitate individual customer compliance with these regulations, is providing customers the option of purchasing containers which contain PCR or using containers with reduced weight. ITEM 2. PROPERTIES The following table sets forth the Company's principal facilities:
LOCATION ACRES SQUARE FOOTAGE USE Evansville, IN 12.4 397,000 Headquarters and manufacturing Henderson, NV 12.0 168,000 Manufacturing Iowa Falls, IA 14.0 101,000 Manufacturing Charlotte, NC 32.0 48,000 Manufacturing Lawrence, KS 19.3 423,000 Manufacturing York, PA 10.0 40,000 Manufacturing Suffolk, VA 14.0 102,000 Manufacturing Monroeville, OH 19.0 112,000 Manufacturing Anderson, SC 37.0 169,000 Manufacturing
The Company believes that its property and equipment are well-maintained, in good operating condition and adequate for its present needs. ITEM 3. LEGAL PROCEEDINGS The Company is party to various legal proceedings involving routine claims which are incidental to its business. Although the Company's legal and financial liability with respect to such proceedings cannot be estimated with certainty, the Company believes that any ultimate liability would not be material to its financial condition. The Company and/or Berry Sterling are currently litigating two lawsuits that involve United States Patent No. Des. 362,368 (the "'368 Patent"). The '368 Patent claims an ornamental design for a cup that fits an automobile cup holder. On September 21, 1995, Berry Sterling filed suit in United States District Court, Eastern District of Virginia, against Pescor Plastics, Inc. ("Pescor Plastics") for infringement of the '368 Patent. Pescor Plastics filed counterclaims seeking a declaratory judgment of invalidity and non-infringement, and damages under the Lanham Act. On December 28, 1995, Berry Sterling filed suit against Packaging Resources Incorporated ("Packaging Resources") in United States District Court, Southern District of New York, for infringement of the '368 Patent. Packaging Resources has filed counterclaims against Berry Sterling alleging violation of the Lanham Act, tortious interference with Packaging Resources' prospective business advantage, consumer fraud and requesting a declaratory judgment that its "Drive-N-Go" cup does not infringe the '368 Patent. On February 25, 1998, after trial, a jury rendered a verdict in Berry Sterling's action against Pescor Plastics. The jury found the `368 Patent to be invalid on the grounds of functionality and obviousness and awarded Pescor $150,000 on its counterclaim. The jury also found that Pescor willfully infringed the `368 Patent and awarded Berry Sterling damages of $1.2 million, but this award was not included in the judgment because of the finding of the invalidity of the 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. On March 6, 1998, the Court in the Packaging Resources case put the case on its suspense calendar pending the appeal in the Pescor Plastics case. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no public trading market for any class of common stock of the Company, Holding, Berry Iowa or Berry Tri-Plas. With respect to the capital stock of Holding, as of March 20, 1998, there were three holders of the Class A Voting Common Stock, three holders of the Class A Nonvoting Common Stock, 40 holders of the Class B Voting Common Stock, 58 holders of the Class B Nonvoting Common Stock and 40 holders of the Class C Nonvoting Common Stock. All of the issued and outstanding common stock of the Company is held by Holding, and all of the issued and outstanding common stock of Berry Iowa and Berry Tri-Plas is held by the Company. On April 21, 1994, in connection with the 1994 Transaction, the Company paid a $50.0 million dividend to Holding, the holder of all of its common stock. Holding utilized the $50.0 million dividend to make a distribution to the holders of its common stock and holders of certain other equity interests. Other than the payment of the $50.0 million distribution described above, Holding has not paid cash dividends on its capital stock. Because Holding intends to retain any earnings to provide funds for the operation and expansion of the Company's business and to repay outstanding indebtedness, Holding does not intend to pay cash dividends on its common stock in the foreseeable future. Furthermore, as a holding company with no independent operations, the ability of Holding to pay cash dividends will be dependent on the receipt of dividends or other payments from the Company. Under the terms of the Indenture dated as of April 21, 1994 (the "1994 Indenture"), among the Company, Holding, Berry Iowa, Berry Tri-Plas and United States Trust Company of New York, as Trustee, which relates to the 1994 Transaction, and also the Indenture dated June 18, 1996 (the "1996 Indenture"), between Holding and First Trust of New York, National Association, as Trustee, which relates to the 1996 Transaction, Holding and the Company are not permitted to pay any dividends on their common stock for the foreseeable future. In addition, the Credit Facility contains covenants which, among other things, restricts the payment of dividends by the Company. In addition, Delaware law limits Holding's ability to pay dividends from current or historical earnings or profits or capital surplus. Any determination to pay cash dividends on common stock of the Company or Holding in the future will be at the discretion of the Board of Directors of the Company and Holding, respectively. On June 18, 1996, in connection with the 1996 Transaction, Holding issued (i) 91,000 shares of Class A Voting Common Stock to CVCA and certain other institutional investors, (ii) 259,000 shares of Class A Nonvoting Common Stock to CVCA and certain other institutional investors, (iii) 145,058 shares of Class B Voting Common Stock to International and certain members of management of the Company, (iv) 54,942 shares of Class B Nonvoting Common Stock to certain members of management of the Company, (v) 17,000 shares of Class C Nonvoting Common Stock to International and certain members of management of the Company, and (vi) units consisting of an aggregate of 600,000 shares of Series A Senior Cumulative Exchangeable Preferred Stock and detachable warrants to purchase shares of Class B Common Stock (both voting and nonvoting) to CVCA and another institutional investor. The exercise price of the warrants is $.01 per share and the warrants are currently exercisable. Holding sold the Common Stock and Preferred Stock referred to above for aggregate consideration of approximately $70.0 million, which included rollover investments of approximately $7.1 million by certain members of management and $3.0 million by an existing institutional shareholder. All of the Common Stock and Preferred Stock described above were privately placed in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Rule 506 of Regulation D promulgated thereunder. In addition, in connection with the 1996 Transaction, Holding issued $105.0 million aggregate principal amount of the 1996 Notes on June 18, 1996, whereby Donaldson, Lufkin & Jenrette Securities Corporation acted as the initial purchaser in an offering exempt from the registration requirements under the Securities Act pursuant to Rule 144A promulgated thereunder. Underwriting discounts and commissions for the offering were $3,150,000. In August 1997, Holding authorized the creation of 200,000 shares of Series B Cumulative Preferred Stock. In conjunction with the Venture Packaging acquisition, on August 29, 1997, these shares were issued by Holding to certain selling shareholders of Venture Packaging as partial consideration for stock 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. The securities described above were privately placed in a transaction exempt from the registration requirements of the Securities Act pursuant to Rule 505 of Regulation D promulgated thereunder. On August 1, 1997, Holding issued 3,009 shares of its Class B Nonvoting Common Stock to 19 members of management. The shares were sold for aggregate consideration of $324,972. The shares of stock were privately placed in a transaction exempt from the registration requirements of the Securities Act pursuant to Rule 505 of Regulation D promulgated thereunder. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data are derived from the consolidated financial statements of Holding which have been audited by Ernst & Young LLP, independent auditors. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "1997," "1996," "1995," "1994" and "1993" relate to the fiscal years ended December 27, 1997, December 28, 1996, December 30, 1995, December 31, 1994 and January 1, 1994, respectively.
BPC HOLDING CORPORATION AND ITS SUBSIDIARIES FISCAL ------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------------------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS) Statement of Operations Data: Net sales $226,953 $151,058 $140,681 $106,141 $87,830 Cost of goods sold 180,249 110,110 102,484 73,997 65,652 ------------------------------------------------------------------------------------- Gross margin 46,704 40,948 38,197 32,144 22,178 Operating expenses (a) 30,505 23,679 17,670 15,160 17,227 ------------------------------------------------------------------------------------- Operating income 16,199 17,269 20,527 16,984 4,951 Other expenses (b) 226 302 127 184 - Interest expense, net (c) 30,246 20,075 13,389 10,972 6,582 ------------------------------------------------------------------------------------- Income (loss) before income taxes and (14,273) (3,108) 7,011 5,828 (1,631) extraordinary charge Income taxes 138 239 678 11 72 ------------------------------------------------------------------------------------- Income (loss) before extraordinary charge (14,411) (3,347) 6,333 5,817 (1,703) Extraordinary charge (d) - - - 3,652 - ------------------------------------------------------------------------------------- Net income (loss) $ (14,411) $ (3,347) $ 6,333 $ 2,165 $(1,703) ===================================================================================== Preferred stock dividends $ (2,558) $ (1,116) $ - $ - $ - Common stock dividends - - - 50,000 - Balance Sheet Data (at end of year): Working capital $ 20,863 $ 15,910 $ 13,012 $ 13,393 $ 384 Fixed assets 108,218 55,664 52,441 38,103 36,615 Total assets 239,444 145,798 103,465 91,790 60,143 Total debt 306,335 216,046 111,676 112,287 40,936 Stockholders' equity (deficit) (108,975) (97,550) (32,484) (38,838) 5,973 Other Data: Depreciation and amortization (e) 19,026 11,331 9,536 8,176 11,198 Capital expenditures 16,774 13,581 11,247 9,118 5,586
(a) Operating expenses include business start-up and machine integration expenses of $3,255 related to the 1997 Acquisitions (as hereinafter defined), plant consolidation expenses of $480 and $368 related to the shutdown of the Winchester, Virginia and Reno, Nevada facilities, respectively, during fiscal 1997; compensation expense related to the 1996 Transaction of $2,762, Tri-Plas Acquisition start-up expenses of $671 and $907 for costs related to the consolidation of the Winchester, Virginia facility during fiscal 1996; pursued acquisition costs of $473 and business start-up expenses of $394 in fiscal 1995; $116 in pursued acquisition costs in fiscal 1994; and $3,675 of costs associated principally with the shutdown and disposal of a facility acquired in the Mammoth Acquisition and $330 of costs related to an unsuccessful acquisition in fiscal 1993. (b) Other expenses consist of loss on disposal of property and equipment for the respective periods. (c) Includes non-cash interest expense of $2,005, $1,212, $950, $1,178, and $1,617 in fiscal 1997, 1996, 1995, 1994 and 1993, respectively. (d) During 1994, an extraordinary charge of $3.7 million (including a non-cash portion of $3.2 million) was recognized as a result of the retirement of debt concurrent with the issuance of the 1994 Notes. (e) Depreciation and amortization excludes non-cash amortization of deferred financing and origination fees and debt discount amortization which are included in interest expense. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context discloses otherwise, the "Company" as used in this Management's Discussion and Analysis of Financial Condition and Results of Operations shall include Holding and its subsidiaries on a consolidated basis. The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward-looking statements in the discussion, and a number of factors could adversely affect future results, liquidity and capital resources. These factors include, among other things, the Company's ability to pass through raw material price increases to its customers, its ability to service debt, the availability of plastic resin, the impact of changing environmental laws and changes in the level of the Company's capital investment. Although management believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted. 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 $34.4 million in 1997, primarily due to the continued market strength of base products and the Venture Packaging, Virginia Design, and Container Industries Acquisitions (such acquisitions, together with the PackerWare Acquisition, being collectively referred to as the "1997 Acquisitions"). Net sales in the drink cup product line increased $23.8 million in 1997 as a result of the PackerWare Acquisition and a strong increase in existing drink cup business. Aerosol overcap net sales were relatively flat, decreasing approximately $2.6 million. The PackerWare Acquisition also brought the Company 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 $2.8 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 attributed to increased sales volume as described above. The gross margin as a percent of net sales derived from the 1997 Acquisitions was approximately 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 the Company's facilities. These productivity improvements were offset by increased resin prices in 1997 and the transition of the 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 a result of the 1997 Acquisitions ($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 1996 Transaction. Intangible amortization increased from $0.5 million in 1996 to $2.2 million for 1997, primarily a result of the amortization of $1.6 million related to the 1997 Acquisitions. Other expense increased $2.5 million from $1.6 million for 1996 to $4.1 million in 1997. The 1997 Acquisitions resulted in a charge of $3.2 million in 1997 for start-up related expenses. The PackerWare Acquisition included a facility in Reno, Nevada, which was closed in 1997. Expense related to the closing of the Reno facility was $0.5 million 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 expense associated with the Tri-Plas Acquisition 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 1996 Transaction, which occurred in June 1996. The 1996 Transaction included an offering of $105.0 million aggregate principal amount of Senior Secured Notes due 2006 which bear interest at 12.5% annually. $35.6 million of the proceeds from the Notes were placed in escrow to pay the first three years' of interest on the 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 1996 Transaction. INCOME TAXES. During fiscal 1997, the Company incurred $0.1 million in federal and state income tax compared to $0.2 million for fiscal 1996. The Company continues to operate in a net operating loss carryforward position for Federal income tax purposes. NET INCOME (LOSS) AND EBITDA. The Company 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. Adjusted EBITDA for 1997 increased 18.3% to $39.4 million from $33.3 million in 1996. Adjusted EBITDA is calculated as follows:
1997 1996 --------- -------- ($ million) Earnings Before Interest, Taxes, Depreciation and Amortization $35.1 $31.3 Loss on the Disposal of Assets 0.2 0.3 Other Adjustments 4.1 1.7 --------- -------- Total Adjusted EBITDA $39.4 $33.3 ========= ========
Year Ended December 28, 1996 Compared to Year Ended December 30, 1995 NET SALES. Net sales increased 7.0% to $151.1 million in 1996, up $10.4 million from $140.7 million in 1995. Sales of aerosol overcaps increased $6.1 million. This growth of 14% was mainly due to a strengthening of base business and the addition of new products. Container sales increased $9.7 million in 1996, due to the continued market strength of base products and the Tri-Plas Acquisition. Sales in the drink cup product line declined $3.2 million principally because a national promotion from a major marketer that was received in 1995 was not repeated in 1996. Other product lines, including custom molded products and custom mold building, decreased $2.2 million also due to a custom program that occurred in 1995 but was not repeated in 1996. Overall, prices declined approximately 2.0% from 1995 due to both market response to changing raw material prices and competitive market conditions. GROSS MARGIN. Gross margin increased $2.7 million or 7.1% from $38.2 million (27.2% of net sales) for 1995 to $40.9 million (27.1% of net sales) in 1996. The increase in gross margin is primarily attributed to increased sales volume. Significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of the Company's facilities. The increase in operating efficiency offset the previously mentioned price declines, preserving the Company's gross margin as a percent of sales. The Winchester, Virginia facility, which was added to the Company as part of the Sterling Products Acquisition and used primarily for the production of drink cups, was consolidated into other Berry locations late in 1996 to better utilize the operating leverage at other manufacturing facilities throughout the Company. OPERATING EXPENSES. Operating expenses during 1996 were $23.7 million (15.7% of net sales), compared with $17.7 million (12.6% of net sales) for 1995. Sales related expenses, including the cost of expanded sales coverage, and higher product development and marketing expenses, increased $1.3 million. General and administrative expenses increased $4.3 million, including $2.7 million due to a one-time compensation expense directly related to the 1996 Transaction, patent litigation expenses of $0.8 million, and $0.6 million of additional expense as a result of the Tri-Plas Acquisition. Other expense increased $0.7 million from $0.9 million for 1995 to $1.6 million in 1996. Included in 1996 was a charge of $0.9 million for plant closing expenses related to the Winchester, Virginia facility, and $0.6 million of start-up related expense associated with the Tri-Plas Acquisition. Included in 1995 expense was a charge of $0.5 million due to the discontinued pursuit of a potential acquisition and $0.2 million of costs associated with the transfer of the Tri-Plas business. INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of deferred financing costs for 1996, was $20.1 million (13.3% of net sales) compared to $13.4 million (9.5% of net sales) in 1995, an increase of $6.7 million. This increase is due to the 1996 Transaction, when the Company completed an offering of $105.0 million aggregate principal amount of Senior Secured Notes due 2006 which bear interest at 12.5% annually. Interest is payable semi-annually on June 15 and December 15 of each year. Cash interest paid in 1996 was $19.7 million as compared to $13.4 million for 1995. Interest income for 1996 was $1.3 million and 1995 was $0.6 million. INCOME TAXES. During fiscal 1996, the Company incurred $0.2 million in federal and state income tax compared to $0.7 million of regular income tax for fiscal 1995. NET INCOME (LOSS) AND EBITDA. The Company recorded a net loss of $3.3 million in 1996 compared to net income in 1995 of $6.3 million for the reasons stated above. Adjusted EBITDA for 1996 increased 8.5% to $33.3 million from $30.7 million in 1995. Adjusted EBITDA is calculated as follows:
1996 1995 --------- -------- ($ million) Earnings Before Interest, Taxes, Depreciation and Amortization $31.3 $29.7 Loss on the Disposal of Assets 0.3 0.1 Other Adjustments 1.7 0.9 --------- -------- Total Adjusted EBITDA $33.3 $30.7 ========= ========
Income Tax Matters Holding has unused operating loss carryforwards of $21.7 million for federal income tax purposes which begin to expire in 2010. AMT credit carryforwards of approximately $2.0 million are available to Holding indefinitely to reduce future years' federal income taxes. LIQUIDITY AND CAPITAL RESOURCES On January 21, 1997, in conjunction with the PackerWare Acquisition, the Company entered into the Credit Agreement with NationsBank, N.A. for a senior secured line of credit in an aggregate principal amount of $60.0 million. As a result of the Virginia Design and Venture Acquisitions, the Credit Facility was amended and increased to $127.2 million. The Credit Facility provides Berry with a $50.0 million revolving line of credit, subject to a borrowing base formula, $58.3 million in term loan facilities, and $18.9 million in letters of credit to support Berry's and its subsidiaries' obligations under the Nevada, Iowa, and South Carolina Industrial Revenue Bonds. The indebtedness under the Credit Facility is guaranteed by Holding and the Company's subsidiaries. See "Business - The Credit Facility". The 1994 Indenture and the 1996 Indenture restrict the Company's ability to incur additional debt and contains other provisions which could limit the liquidity of the Company. Net cash provided by operating activities was $14.2 million in 1997 as compared to $14.4 million in 1996. The decrease can be attributed to a reduction in accounts payable of approximately $3.5 million resulting from a discounting program with a key supplier offset partially by positive operating cash flows generated primarily from increased sales volume. Capital expenditures in 1997 were $16.8 million, an increase of $3.2 million from $13.6 million in 1996. Included in capital expenditures during 1997 was $3.3 million relating to the addition of a new warehouse, production systems and offices necessary to support production operating levels throughout the Company. Capital expenditures also included investment of $8.7 million for molds, $1.2 million for molding machines, $1.4 million for printing equipment and $2.2 million for miscellaneous accessory equipment and systems. The capital expenditure budget for 1998 is expected to be $24.6 million, including approximately $5.3 million for building and systems which includes a warehouse addition, $10.6 million for molds, $5.8 million for molding and printing machines, and $2.9 million for miscellaneous accessory equipment. Increased working capital needs occur whenever the Company experiences strong incremental demand or a significant rise in the cost of raw material, particularly plastic resin. However, the Company anticipates that its cash interest, working capital and capital expenditure requirements for 1998 will be satisfied through a combination of funds generated from operating activities and cash on hand, together with funds available under the Credit Facility. Management bases such belief on historical experience and the substantial funds available under the Credit Facility. However, the Company cannot predict its future results of operations. The 1994 Indenture restricts, and the Credit Facility prohibits, Berry's ability to pay any dividend or make any distribution of funds to Holding to satisfy interest and other obligations on the 1996 Notes. Based upon historical operating results, without a substantial increase in the operating results of Berry, management anticipates that it will be unable to generate sufficient cash flow to permit a dividend to Holding in an amount sufficient to meet Holding's interest payment obligations under the 1996 Notes which begin after the depletion of the escrow account that was established to pay such interest and the expiration of Holding's option to pay interest by issuing additional 1996 Notes. In that event, management anticipates that such obligations will only be met by refinancing the 1996 Notes or raising capital through equity offerings. At December 27, 1997, the Company's cash balance was approximately $2.7 million, and the Company had unused borrowing capacity under the Credit Facility's borrowing base of approximately $12.5 million. GENERAL ECONOMIC CONDITIONS AND INFLATION The Company faces various economic risks ranging from an economic downturn adversely impacting the Company's primary markets to market fluctuations in plastic resin prices. In the short-term, rapid increases in resin cost, such as those experienced during 1996, may not be fully recovered through price increases to customers. Also, shortages of raw materials may occur from time to time. In the long-term, however, raw material availability and price changes generally do not have a material adverse effect on gross margin. Cost changes generally are passed through to customers. In addition, the Company believes that its sensitivity to economic downturns in its primary markets is less significant due to its diverse customer base and its ability to provide a wide array of products to numerous end markets. The Company believes that it is not affected by inflation except to the extent that the economy in general is thereby affected. Should inflationary pressures drive costs higher, the Company believes that general industry competitive price increases would sustain operating results, although there can be no assurance that this will be the case. IMPACT OF YEAR 2000 The Company has been working on modifying or replacing portions of its software since 1991 so that its computer systems will function properly with respect to dates in the Year 2000 and thereafter. Because the Company commenced this process early, the costs incurred to address this issue in any single year have not been significant. However, the Company is currently evaluating the necessity to replace significant portions of its primary information systems, principally because of the growth the Company has experienced in recent years due to acquisitions. Such replacement, when undertaken, will allow the Company to continue to achieve its future growth plans and will be fully Year 2000 compliant. The Company anticipates that the selection and implementation of such systems is likely to occur before the Year 2000, but it is not necessary for the replacement to occur in order for the Company to minimize its exposure to Year 2000 system failures. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors F- 1 Consolidated Balance Sheets at December 27, 1997 and December 28, 1996 F- 2 Consolidated Statements of Operations for the years ended December 27, 1997, December 28, 1996 and December 30, 1995 F- 4 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 28, 1997, December 28, 1996 and December 30, 1995 F- 5 Consolidated Statements of Cash Flows for the years ended December 27, 1997, December 28, 1996 and December 30, 1995 F- 6 Notes to Consolidated Financial Statements F- 7 INDEX TO FINANCIAL STATEMENT SCHEDULES I. Condensed Financial Information of the Parent Company S- 1 II. Valuation and Qualifying Accounts S- 5 All other schedules have been omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information with respect to the executive officers, directors and certain key personnel of Holding and its subsidiaries:
NAME AGE TITLE ENTITY Roberto Buaron(1)(4) 51 Chairman and Director Company and Holding Martin R. Imbler(1)(4) 50 President, Chief Executive Company Officer and Director President and Director Holding Douglas E. Bell 46 Executive Vice President, Sales Company and Marketing and Director Ira G. Boots 44 Executive Vice President, Company Operations and Director James M. Kratochvil 41 Executive Vice President, Chief Company Financial Officer, Treasurer and Secretary Executive Vice President, Chief Holding Financial Officer and Secretary R. Brent Beeler 45 Executive Vice President, Sales Company and Marketing Ruth Richmond 35 Vice President, Planning and Company Administration David Weaver 35 Vice President and Plant Manager Company - Lawrence Fredrick A. Heseman 45 Vice President and Plant Manager Company - Evansville Bruce J. Sims 48 Vice President - Sales and Company Marketing, Housewares George A. Willbrandt 53 Vice President - Sales and Company Marketing Lawrence G. Graev(2)(3) 53 Director Company and Holding James A. Long(2)(3) 55 Vice President, Assistant Company Secretary and Director Vice President, Treasurer and Holding Director Donald J. Hofmann, Jr. (1)(2)(3)(4) 40 Director Company and Holding Mathew J. Lori 34 Director Company and Holding David M. Clarke 47 Director Company and Holding
(1) Member of the Stock Option Committee of Holding. (2) Member of the Audit Committee of Holding. (3) Member of the Audit Committee of the Company. (4) Member of the Compensation Committee of the Company. ROBERTO BUARON has been Chairman and a Director of the Company since it was organized in December 1990. He has also served as Chairman and a Director of Holding since 1990. He is the Chairman and Chief Executive Officer of First Atlantic Capital, Ltd. ("First Atlantic"), which he founded in 1989. From 1987 to 1989, he was an Executive Vice President with Overseas Partners, Inc., an investment management firm. From 1983 to 1986 he was First Vice President of Smith Barney, Inc., and a General Partner of First Century Partnership, its venture capital affiliate. Prior to 1983, he was a Principal at McKinsey & Company. MARTIN R. IMBLER has been President, Chief Executive Officer and a Director of the Company since January 1991. He has also served as a Director of Holding since January 1991, and as President of Holding since May 1996. From June 1987 to December 1990, he was President and Chief Executive Officer of Risdon Corporation, a cosmetic packaging company. Mr. Imbler was employed by American Can Company from 1981 to 1987, as Vice President and General Manager of the East/South Region Food and General Line Packaging business from 1985 to 1987 and as Vice President, Marketing, from 1981 to 1985. Mr. Imbler is also a Director of Portola Packaging, Inc., a manufacturer of closures used in the dairy industry. DOUGLAS E. BELL has been Executive Vice President, Sales and Marketing, and a Director of the Company since March 1991. From December 1990 to March 1991, Mr. Bell was Chief Operating Officer of the Company. Mr. Bell was employed by Old Berry, acting as interim Chief Operating Officer from July 1990 to December 1990, and prior to July 1990, as Vice President, Sales of Imperial Plastics. IRA G. BOOTS has been Executive Vice President, Operations, and a Director of the Company since April 1992. Prior to that, Mr. Boots was Vice President of Operations, Engineering and Product Development of the Company from December 1990 to April 1992. Mr. Boots was employed by Old Berry from 1984 to December 1990 as Vice President, Operations. JAMES M. KRATOCHVIL was promoted to Executive Vice President, Chief Financial Officer, Secretary and Treasurer of the Company in December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of the Company since 1991, and as Treasurer of the Company since May 1996. He was also promoted to Executive Vice President, Chief Financial Officer and Secretary of Holding in December 1997. He has formerly served as Vice President, Chief Financial Officer and Secretary of Holding since 1991. Mr. Kratochvil was employed by Old Berry from 1985 to 1991 as Controller. R. BRENT BEELER was promoted to Executive Vice President, Sales and Marketing in February, 1996. He formerly served as Vice President, Sales and Marketing of the Company since December 1990. Mr. Beeler was employed by Old Berry from October 1988 to December 1990 as Vice President, Sales and Marketing. RUTH RICHMOND has been Vice President, Planning and Administration of the Company since January 1995. From January 1994 to December 1994, Ms. Richmond was Vice President and Plant Manager-Henderson. Ms. Richmond was Plant Manager-Henderson from February 1993 to January 1994 and Assistant General Manager-Henderson from February 1991 to February 1993. Ms. Richmond joined the accounting department of Old Berry in 1986. DAVID WEAVER has been Vice President and Plant Manager-Lawrence of the Company 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 Old Berry. FREDRICK A. HESEMAN was promoted to Vice President and Plant Manager-Evansville of the Company 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 Old Berry from June 1987 to December 1990 as Engineering Manager. BRUCE J. SIMS has been Vice President, Sales and Marketing, Housewares of the Company since January 1997. Prior to the PackerWare Acquisition, Mr. Sims served as President of PackerWare from March 1996 to January 1997 and as Vice President from October 1994 to March 1996. From January 1990 to October 1994 he was Vice President of the Miner Container Corporation, a national injection molder. Mr. Sims was Executive Vice President of MKM Distribution Company from 1985 to 1990. GEORGE A. WILLBRANDT was promoted to Vice President, Sales and Marketing of the Company 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 the Company and Holding since August 1995. Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP of New York, where he has been a partner since 1974. Mr. Graev is also a Director of First Atlantic. JAMES A. LONG has been Vice President, Assistant Secretary and a Director of the Company since 1991. He has also served as Vice President, Treasurer and a Director of Holding since 1991. He has been an Executive Vice President of First Atlantic since March 1991. From January 1990 to February 1991, Mr. Long was an Executive Vice President at Kleinwort Benson N.A., Inc., an equity leveraged buyout fund. Prior to 1989, he was an Executive Vice President and a member of various executive and operating committees of Primerica Corporation. DONALD J. HOFMANN, JR. has been a director of Holding and the Company since June 1996. Mr. Hofmann has been a General Partner of Chase Capital Partners since 1992. Prior to that, he was head of MH Capital Partners Inc., the equity investment arm of Manufacturers Hanover. Mr. Hofmann is also a director of USN Communications, Inc., a local exchange carrier that offers a bundled package of telecommunications products. MATHEW J. LORI has been a director of Holding and the Company since October 1996. Mr. Lori has been a Principal with Chase Capital Partners since January 1998, and prior to that, Mr. Lori had been an Associate since April 1996. From September 1993 to March 1996, he was an Associate in the Merchant Banking Group of The Chase Manhattan Bank, N.A. DAVID M. CLARKE has been a director of Holding and the Company since June 1996. Mr. Clarke is a Managing Director with Aetna, Inc., a private equity investment group and, prior to that, he had been a Vice President in the Investment Group of Aetna Life Insurance Company from 1988 to 1996. The New Stockholders Agreement contains provisions regarding the election of directors. See "Certain Relationships and Related Transactions - Stockholders Agreements." BOARD COMMITTEES The Board of Directors of Holding has an Audit Committee and a Stock Option Committee, and the Board of Directors of the Company has an Audit Committee and a Compensation Committee. The Audit Committees oversee the activities of the independent auditors and internal controls. The Stock Option Committee administers the BPC Holding Corporation 1996 Stock Option Plan. The Compensation Committee makes recommendations to the Board of Directors of the Company concerning salaries and incentive compensation for officers and employees of the Company. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth a summary of the compensation paid by the Company to its Chief Executive Officer and the four other most highly compensated executive officers of the Company (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company during fiscal 1997, 1996 and 1995: SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------- -------------- SECURITIES FISCAL UNDERLYING OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1) ------------------------------- ---- ------- -------- -------- ------------ Martin R. Imbler 1997 $ 307,396 $ 87,623 - $ 1,520 President and Chief Executive 1996 292,078 128,993 8,472 595,848 Officer 1995 275,625 157,500 - 1,424 Douglas E. Bell 1997 154,485 72,868 - 1,520 Executive Vice President, Sales 1996 145,735 94,205 5,214 239,335 and Marketing 1995 137,525 124,428 - 1,424 Ira G. Boots 1997 151,691 72,868 - 1,520 Executive Vice President, 1996 145,735 94,205 5,214 239,335 Operations 1995 137,525 124,428 - 1,424 James M. Kratochvil 1997 119,459 56,307 - 1,520 Executive Vice President, Chief 1996 112,614 72,796 3,259 120,427 Financial Officer, Treasurer and 1995 106,270 96,150 - 1,424 Secretary R. Brent Beeler 1997 125,973 60,554 - 1,520 Executive Vice President, 1996 121,108 72,796 3,259 120,427 Sales and Marketing 1995 106,270 96,150 - 1,424
(1) Amounts shown reflect contributions by the Company under the Company's 401(k) plan and payments made under a one-time deferred bonus award plan. See "Certain Relationships and Related Transactions - Management." FISCAL YEAR-END OPTION HOLDINGS The following table provides information on the number of exercisable and unexercisable management stock options at December 27, 1997. FISCAL YEAR-END OPTION VALUES(1)
Number of Unexercised Value of Unexercised Options at In-the-Money Options Fiscal Year-End at Fiscal Year-End NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - -------------------------- ------------------------- -------------------------- (#)(2) (2) Martin R. Imbler 2,541/5,931 $55,902/$130,482 Douglas E. Bell 1,564/3,650 34,408/80,300 Ira G. Boots 1,564/3,650 34,408/80,300 James M. Kratochvil 977/2,282 21,494/50,204 R. Brent Beeler 977/2,282 21,494/50,204
(1) None of Holding's capital stock is currently publicly traded. The values reflect management's estimate of the fair market value of the Class B Nonvoting Common Stock at December 27, 1997. (2) All options granted to management of the Company are exercisable for shares of Class B Nonvoting Common Stock, par value $.01 per share, of Holding. DIRECTOR COMPENSATION Directors receive no cash consideration for serving on the Board of Directors of Holding or the Company, but directors are reimbursed for out-of-pocket expenses incurred in connection with their duties as directors. EMPLOYMENT AGREEMENTS The Company has an employment agreement with Mr. Imbler (the "Imbler Employment Agreement") that expires on June 30, 2001. Base compensation under the Imbler Employment Agreement for fiscal 1997 was $307,396. The Imbler Employment Agreement also provides for an annual performance bonus of $50,000 to $175,000 based upon the Company's attainment of certain financial targets. The Company may terminate Mr. Imbler's employment for "cause" or upon a "disability" (as such terms are defined in the Imbler Employment Agreement). If the Company terminates Mr. Imbler "without cause" (as defined in the Imbler Employment Agreement), Mr. Imbler is entitled to receive, among other things, the greater of (i) one year's salary or (ii) 1/12 of one year's salary for each year (not to exceed 24 years in the aggregate) of employment with the Company. The Imbler Employment Agreement also contains customary noncompetition, nondisclosure and nonsolicitation provisions. The Company also has employment agreements with each of Messrs. Bell, Boots, Kratochvil and Beeler (each, an "Employment Agreement" and, collectively, the "Employment Agreements"), each of which expires on June 30, 2001. The Employment Agreements provided for fiscal 1997 base compensation of $154,485, $151,691, $119,459 and $125,973, respectively. Salaries are subject in each case to annual adjustment at the discretion of the Compensation Committee of the Board of Directors of the Company. The Employment Agreements entitle each executive to participate in all other incentive compensation plans established for executive officers of the Company. The Company may terminate each Employment Agreement for "cause" or a "disability" (as such terms are defined in the Employment Agreements). If the Company terminates an executive's employment without "cause" (as defined in the Employment Agreements), the Employment Agreements require the Company to pay certain amounts to the terminated executive, including (i) the greater of (A) one year's salary or (B) 1/12 of one year's salary for each year (not to exceed 24 years in the aggregate) of employment with the Company, and (ii) certain benefits under applicable incentive compensation plans. Each Employment Agreement also includes customary noncompetition, nondisclosure and nonsolicitation provisions. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company established the Compensation Committee in October 1996. The annual salary and bonus paid to Messrs. Imbler, Bell, Boots, Kratochvil and Beeler are determined by the Compensation Committee in accordance with their respective employment agreements. All other compensation decisions with respect to officers of the Company are made by Mr. Imbler pursuant to policies established in consultation with the Compensation Committee. The Company is party to an Amended and Restated Management Agreement (the "FACL Management Agreement") with First Atlantic pursuant to which First Atlantic provides the Company with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, the Company paid First Atlantic fees and expenses of $771,200 for fiscal 1997, $787,600 for fiscal 1996 and $816,900 for fiscal 1995. First Atlantic also received a $100,000 advisory fee in both March and December 1995 for originating, structuring and negotiating the Sterling Products Acquisition and the Tri-Plas Acquisition, respectively. In connection with the 1996 Transaction, the FACL Management Agreement was amended to provide for a fee for services rendered in connection with certain transactions equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any such transaction consummated plus out-of-pocket expenses in respect of such transaction, whether or not consummated. Also in connection with the 1996 Transaction, Holding paid a fee of $1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic for advisory services, including originating, structuring and negotiating the 1996 Transaction. First Atlantic received advisory fees of approximately $287,500 and $28,700 in January 1997 for originating, structuring and negotiating the PackerWare Acquisition and the Container Industries Acquisition, respectively. First Atlantic received advisory fees of approximately $117,900 and $531,600 in May 1997 and August 1997, respectively, for originating, structuring and negotiating the Virginia Design Acquisition and the Venture Packaging Acquisition, respectively. See "Certain Relationships and Related Transactions." Mr. Buaron, the Chairman and a director of Holding and the Company, is the Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a director, and Mr. Long is an officer, of First Atlantic. As an officer and the sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic on its capital stock, including any bonuses paid as a result of, and any dividends paid out of, the $1,250,000 fee paid by Holding to First Atlantic in connection with the 1996 Transaction or any of the fees paid with respect to the acquisitions described above. First Atlantic is engaged by International to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and International have completely distinct ownership and equity structures. See "Certain Relationships and Related Transactions." Atlantic Equity Partners, L.P. (the "Fund"), a stockholder of Holding prior to the consummation of the 1996 Transaction, received approximately $67.6 million from the sale of its common stock in Holding and warrants to purchase common stock. First Atlantic is engaged by the Fund to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and the Fund have completely distinct ownership and equity structures. Atlantic Equity Associates, L.P., a Delaware limited partnership ("AEA"), is the sole general partner of the Fund. Mr. Buaron is the sole shareholder of Buaron Capital Corporation ("Buaron Capital"). Buaron Capital is the managing and sole general partner of AEA. By virtue of their direct and indirect ownership interests in the Fund, Buaron Capital and Mr. Long were entitled to receive a portion of the proceeds from the sale of the equity interests in Holding. See "Certain Relationships and Related Transactions." In connection with the 1996 Transaction, Mr. Imbler, a director of the Company and Holding, and Messrs. Bell and Boots, directors of the Company, received approximately $5.9 million, $2.5 million and $2.4 million, respectively, from their sale of certain equity interests in Holding. In connection with the 1994 Transaction, the Company paid a $50.0 million dividend on its common stock to Holding, and Holding distributed that amount to its holders of equity interests. In connection therewith, Holding agreed to pay cash bonuses, upon the occurrence of certain events, to the members of management who held options under Holding's 1991 Stock Option Plan in amounts equal to the amounts they would have been entitled to had the shares of common stock underlying their unvested options been outstanding at the time of the declaration of the $50.0 million dividend by Holding. As a result of the 1996 Transaction, such bonuses were paid to Messrs. Imbler, Bell and Boots in the amounts of approximately $594,000, $238,000 and $238,000, respectively. See "Certain Relationships and Related Transactions." In connection with the 1996 Transaction, Chase Securities Inc. ("Chase Securities"), an affiliate of CVCA and Messrs. Hofmann and Lori, received a fee of $500,000 for arranging the sale of $15.0 million of Holding's Common Stock to certain of the Common Stock Purchasers and the sale of $15.0 million of Holding's Preferred Stock to CVCA. Chase Manhattan Investment Holdings, Inc. ("CMIHI"), an affiliate of Chase Securities and Messrs. Hofmann and Lori, received approximately $13.6 million from the sale of equity interests of Holding in the 1996 Transaction. Mr. Graev, a member of the Board of Directors of Holding and the Company, is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP, New York, New York. O'Sullivan Graev & Karabell, LLP provides legal services to the Company and Holding in connection with certain matters, principally relating to transactional, securities law, general corporate and litigation matters. See "Certain Relationships and Related Transactions." STOCK OPTION PLAN Employees, directors and certain independent consultants of the Company and its subsidiaries are entitled to participate in the BPC Holding Corporation 1996 Stock Option Plan (the "Option Plan"), which provides for the grant of both "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and stock options that are non-qualified under the Code. The total number of shares of Class B Nonvoting Common Stock of Holding for which options may be granted pursuant to the Option Plan is 51,620. The Option Plan will terminate on October 3, 2003 or such earlier date on which the Board of Directors of Holding, in its sole discretion, determines. The Stock Option Committee of the Board of Directors of Holding administers all aspects of the Option Plan, including selecting which of the Company's directors, employees and independent consultants will receive options, the time when options are granted, whether the options are incentive stock options or non-qualified stock options, the manner and timing for vesting of such options, the terms of such options, the exercise date of any options and the number of shares subject to such options. Directors who are also employees are eligible to receive options under the Option Plan. The exercise price of incentive stock options granted by Holding under the Option Plan may not be less than 100% of the fair market value of the Class B Nonvoting Common Stock at the time of grant and the term of any option may not exceed seven years. With respect to any employee who owns stock representing more than 10% of the voting power of the outstanding capital stock of Holding, the exercise price of any incentive stock option may not be less than 110% of the fair market value of such shares at the time of grant and the term of such option may not exceed five years. The exercise price of a non-qualified stock option is determined by the Stock Option Committee on the date the option is granted. However, the exercise price of a non-qualified stock option may not be less than 100% of the fair market value of Class B Nonvoting Common Stock if the option is granted at any time after the initial public offering of such stock. Options granted under the Option Plan are nontransferable except by will and the laws of descent and distribution. Options granted under the Option Plan typically expire after seven years and vest over a five-year period based on timing as well as achieving financial performance targets. Under the Option Plan, as of December 27, 1997, there were outstanding options to purchase an aggregate of 47,708 shares of Class B Nonvoting Common Stock to 52 employees of the Company, at an exercise price between $100 and $108 per share. Of that amount, options to purchase an aggregate of 25,418 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, and 3,259 to each of Messrs. Beeler and Kratochvil. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT STOCK OWNERSHIP All of the outstanding capital stock of the Company is owned by Holding. The following table sets forth certain information regarding the ownership of the capital stock of Holding with respect to (i) each person known by Holding to own beneficially more than 5% of the outstanding shares of any class of its voting capital stock, (ii) each of Holding's directors, (iii) the Named Executive Officers and (iv) all directors and officers 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 VOTING NONVOTING COMMON STOCK(1) COMMON STOCK(1) PERCENTAGE OF PERCENTAGE OF ALL CLASSES OF NAME AND ADDRESS OF VOTING COMMON STOCK BENEFICIAL OWNER CLASS A CLASS B COMMON STOCK CLASS A CLASS B CLASS C (FULLY-DILUTED) - ------------------------- ------- ------- ------------ ------- ------- ------- --------------- Atlantic Equity Partners International II, - 125,750 53.3% - - 10,688 21.0% L.P.(2) Chase Venture Capital Associates, L.P.(3) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4 BPC Equity, LLC(5) 31,200 - 13.2 88,800 - - 18.5 Roberto Buaron(6) - 125,750 53.3 - - 10,688 21.0 Martin R. Imbler - 5,494 2.3 - 18,177 (7) 1,795 3.8 James A. Long(8) - 195 * - 555 64 * Lawrence G. Graev(9) - - - - - - - Donald J. Hofmann, Jr.(10) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4 Mathew J. Lori(11) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4 David M. Clarke(12) 31,200 - 13.2 88,800 - - 18.5 Douglas E. Bell - 2,392 1.0 - 8,372(13) 782 1.7 Ira G. Boots - 2,280 1.0 - 8,054(14) 744 1.7 James M. Kratochvil - 1,196 * - 4,381(15) 391 * R. Brent Beeler - 1,196 * - 4,381(16) 391 * All officers and directors as a group (17 persons) 83,200 140,448 94.8 236,800 42,526 15,491 88.8
* Less than one percent. (1) The authorized capital stock of Holding consists of 3,500,000 shares of capital stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding Common Stock"), and 1,000,000 shares of Preferred Stock, $.01 par value (the "Holding Preferred Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000 shares are designated Class A Voting Common Stock, 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 Holding Preferred Stock, 600,000 shares are designated Series A Senior Cumulative Exchangeable Preferred Stock, and 200,000 shares are designated Series B Cumulative Preferred Stock. (2) Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman, Cayman Islands, British West Indies. Atlantic Equity Associates International II, L.P., a Delaware limited partnership ("AEA II"), is the sole general partner of International and as such exercises voting and/or investment power over shares of capital stock owned by International, including the shares of Holding Common Stock held by International (the "International Shares"). Mr. Buaron is the sole shareholder of Buaron Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II. As the general partner of AEA II, BHL may be deemed to beneficially own the International Shares. BHL disclaims any beneficial ownership of any shares of capital stock owned by International, including the International Shares. Through his affiliation with BHL and AEA II, Mr. Buaron controls the sole general partner of International and therefore has the authority to control voting and/or investment power over, and may be deemed to beneficially own, the International Shares. Mr. Buaron disclaims any beneficial ownership of any of the International Shares. (3) Address is 380 Madison Avenue, 12th Floor, New York, New York 10017. (4) Represents warrants to purchase such shares of common stock held by CVCA which are currently exercisable. (5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance Company exercises voting and/or investment power over shares of capital stock owned by BPC Equity, LLC ("BPC Equity"), including shares of Holding Common Stock held by BPC Equity. (6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. Represents shares of Holding Common Stock owned by International. Mr. Buaron is the sole shareholder of BHL. BHL is the sole general partner of AEA II. AEA II is the sole general partner of International and as such, exercises voting and/or investment power over shares of capital stock owned by International, including the International Shares. Mr. Buaron, as the sole shareholder and Chief Executive Officer of BHL, controls the sole general partner of International and therefore has voting and/or investment power over, and may be deemed to beneficially own, the International Shares. Mr. Buaron disclaims any beneficial ownership of the International Shares. (7) Includes 2,541 options granted to Mr. Imbler, which are presently exercisable. (8) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. (9) Address is c/o O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112. (10) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017. Represents shares owned by CVCA. Mr. Hofmann is a General Partner of Chase Capital Partners, which is the private equity investment arm of Chase Manhattan Corporation, which is an affiliate of CVCA. Mr. Hofmann disclaims any beneficial ownership of the shares of Holding Common Stock held by CVCA. (11) Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017. Represents shares owned by CVCA. Mr. Lori is a Principal with Chase Capital Partners, which is the private equity investment arm of Chase Manhattan Corporation, which is an affiliate of CVCA. Mr. Lori disclaims any beneficial ownership of the shares of Holding Common Stock held by CVCA. (12) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Represents shares owned by BPC Equity. Mr. Clarke is a Managing Director of Aetna, Inc., an affiliate of Aetna Life Insurance Company, which is a member of BPC Equity. Mr. Clarke disclaims any beneficial ownership of the shares of Holding Common Stock held by BPC Equity. (13) Includes 1,564 options granted to Mr. Bell, which are currently exercisable. (14) Includes 1,564 options granted to Mr. Boots, which are currently exercisable. (15) Includes 977 options granted to Mr. Kratochvil, which are currently exercisable. (16) Includes 977 options granted to Mr. Beeler, which are currently exercisable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS FIRST ATLANTIC Pursuant to the FACL Management Agreement, First Atlantic provides the Company with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, the Company paid First Atlantic fees and expenses of approximately $771,200 for fiscal 1997, $787,600 for fiscal 1996 and $816,900 for fiscal 1995. First Atlantic also received a $100,000 advisory fee in both March and December 1995 for originating, structuring and negotiating the Sterling Products Acquisition and the Tri-Plas Acquisition, respectively. In connection with the 1996 Transaction, the FACL Management Agreement was amended to provide for a fee for services rendered in connection with certain transactions equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any such transaction consummated plus out-of-pocket expenses in respect of such transaction, whether or not consummated. Also in connection with the 1996 Transaction, Holding paid a fee of $1,250,000 plus reimbursement for out-of-pocket expenses to First Atlantic for advisory services, including originating, structuring and negotiating the 1996 Transaction. First Atlantic received advisory fees of approximately $287,500 and $28,700 in January 1997 for originating, structuring and negotiating the PackerWare Acquisition and the Container Industries Acquisition, respectively. First Atlantic received advisory fees of approximately $117,900 and $531,600 in May 1997 and August 1997, respectively, for originating, structuring and negotiating the Virginia Design Acquisition and the Venture Packaging Acquisition, respectively. Mr. Buaron, the Chairman and a director of Holding and the Company, is the Chairman and Chief Executive Officer of First Atlantic. As an officer and the sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic on its capital stock, including any bonuses paid as a result of, and any dividends paid out of, the $1,250,000 fee paid by Holding to First Atlantic in connection with the 1996 Transaction or any of the fees paid with respect to the acquisitions described above. Mr. Long is also an officer of First Atlantic, and Mr. Graev is a director. First Atlantic is engaged by International to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and International have completely distinct ownership and equity structures. Atlantic Equity Partners, L.P. (the "Fund"), a stockholder of Holding prior to the consummation of the 1996 Transaction, received approximately $67.6 million from the sale of its common stock in Holding and warrants to purchase common stock. First Atlantic is engaged by the Fund to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and the Fund have completely distinct ownership and equity structures. AEA is the sole general partner of the Fund. Mr. Buaron is the sole shareholder of Buaron Capital, and Buaron Capital is the managing and sole general partner of AEA. By virtue of their direct and indirect ownership interests in the Fund, Mr. Long and Buaron Capital are entitled to receive a portion of the proceeds from the sale of the equity interests in Holding. MANAGEMENT In connection with the 1996 Transaction, Messrs. Imbler, Bell, Boots, Kratochvil and Beeler received approximately $5.9 million, $2.5 million, $2.4 million, $1.3 million and $1.3 million, respectively, from their sale of certain equity interests in Holding. In connection with the 1994 Transaction, the Company paid a $50.0 million dividend on its common stock to Holding, and Holding distributed that amount to its holders of equity interests. In connection therewith, Holding agreed to pay cash bonuses, upon the occurrence of certain events, to the members of management who held options under Holding's 1991 Stock Option Plan in amounts equal to the amounts they would have been entitled to had the shares of common stock underlying their unvested options been outstanding at the time of the declaration of the $50.0 million dividend by Holding. As a result of the 1996 Transaction, such bonuses were paid to Messrs. Imbler, Bell, Boots, Kratochvil and Beeler in the amounts of approximately $594,000, $238,000, $238,000, $119,000 and $119,000, respectively. STOCKHOLDERS AGREEMENTS In connection with the 1996 Transaction, Holding entered into a Stockholders Agreement dated as of June 18, 1996 (the "New Stockholders Agreement") with the Common Stock Purchasers, certain Management Stockholders (as defined below) and, for limited purposes thereunder, the Preferred Stock Purchasers. The New Stockholders Agreement grants the Common Stock Purchasers certain rights and obligations, including the following: (i) until the occurrence of certain events specified in the New Stockholders Agreement, to designate the members of a seven person Board of Directors as follows: (A) one director will be Roberto Buaron or his designee; (B) International will have the right to designate three directors (who are currently Messrs. Graev, Imbler and Long); (C) CVCA will have the right to designate two directors (who are currently Messrs. Hofmann and Lori); and (D) the institutional holders (excluding International and CVCA) will have the right to designate one director (who is currently Mr. Clarke); (ii) in the case of certain Common Stock Purchasers, to subscribe for a proportional share of future equity issuances by Holding; (iii) under certain circumstances and in the case of International or CVCA, to cause the initial public offering of equity securities of Holding or a sale of Holding subsequent to the fifth anniversary of the closing of the 1996 Transaction and (iv) under certain circumstances and in the case of a majority in interest of the institutional holders, to cause the initial public offering of equity securities of Holding or a sale of Holding subsequent to the sixth anniversary of the closing of the 1996 Transaction. Provisions under the New Stockholders Agreement also (i) prohibit Holding from taking certain actions without the consent of holders of a majority of voting stock held by CVCA and the institutional holders other than International (or, following the occurrence of certain events, International's consent), including certain transactions between Holding and any subsidiary, on the one hand, and First Atlantic or any of its affiliates, on the other hand; (ii) obligate Holding to provide certain Common Stock Purchasers with financial and other information regarding Holding and to provide access and inspection rights to all Common Stock Purchasers; and (iii) restrict transfers of equity by the Common Stock Purchasers, subject to certain exceptions (including for transfers of up to 10% of the equity (including warrants to purchase equity) held by each Common Stock Purchaser on the date of the New Stockholders Agreement). Pursuant to the New Stockholders Agreement, under certain circumstances the Preferred Stock Purchasers (and their transferees) have tag-along rights with respect to the 1996 Warrants and the Holding Common Stock issuable upon exercise of the 1996 Warrants. Under specified circumstances and subject to certain exceptions, the Preferred Stock Purchasers (and their transferees) are entitled to include a pro rata share of their Preferred Stock in a transaction (or series of related transactions) involving the transfer by International, CVCA and the Institutional Holders (as defined in the New Stockholders Agreement) of more than 50% of the aggregate amount of securities held by them immediately following the closing of the 1996 Transaction. The New Stockholders Agreement grants registration rights, under certain circumstances and subject to specified conditions, to the Common Stock Purchasers. International and CVCA each have the right, on three occasions, to demand registration, at Holding's expense, of their shares of Holding Common Stock. Under certain circumstances, a majority in interest of the institutional holders (excluding International and CVCA) have the right, on one occasion, to demand registration, at Holding's expense, of their shares of Holding Common Stock. The New Stockholders Agreement provides that if Holding proposes to register any of its securities, either for its own account or for the account of other stockholders, Holding will be required to notify all Common Stock Purchasers and to include in such registration the shares of Holding Common Stock requested to be included by them. All shares of Holding Common Stock owned by the Common Stock Purchasers requested to be included in a registration will be subject to cutbacks under certain circumstances in connection with an underwritten public offering. The provisions of the New Stockholders Agreement regarding voting rights, negative covenants, information/inspection rights, the right to force a sale of Holding, preemptive rights and transfer restrictions generally will expire on the earlier to occur of (i) the later of (A) the fifth anniversary of the closing of the 1996 Transaction if an underwritten public offering of equity securities of Holding resulting in gross proceeds of at least $20.0 million occurs prior to such fifth anniversary and (B) the occurrence of such underwritten public offering that occurs subsequent to such fifth anniversary of the closing of the 1996 Transaction; (ii) the twentieth anniversary of the closing of the 1996 Transaction; and (iii) a sale of Holding. In addition, the New Stockholders Agreement provides that certain rights of a Common Stock Purchaser (to the extent such rights apply to such Common Stock Purchaser) to designate members of the Board of Directors of Holding and/or to approve certain actions by Holding will terminate if certain circumstances occur. Holding is also party to the Amended and Restated Stockholders Agreement dated June 18, 1996 (the "Management Stockholders Agreement"), with International and all management shareholders including, among others, Messrs. Imbler, Bell, Boots, Kratochvil and Beeler (collectively, the "Management Stockholders"). The Management Stockholders Agreement contains provisions (i) limiting transfers of equity by the Management Stockholders; (ii) requiring the Management Stockholders to sell their shares as designated by Holding or International upon the consummation of certain transactions; (iii) granting the Management Stockholders certain rights of co-sale in connection with sales by International; (iv) granting Holding rights to repurchase capital stock from the Management Stockholders upon the occurrence of certain events; and (v) requiring the Management Stockholders to offer shares to Holding prior to any permitted transfer. CHASE SECURITIES, INC. In connection with the 1996 Transaction, Chase Securities, an affiliate of CVCA and Messrs. Hofmann and Lori, who are members of the Board of Directors of Holding and the Company, received a fee of $500,000 for arranging the sale of $15.0 million of Holding's Common Stock to certain of the Common Stock Purchasers and the sale of $15.0 million of Holding Preferred Stock to CVCA. CMIHI, an affiliate of Chase Securities and Messrs. Hofmann and Lori, received approximately $13.6 million from the sale of equity interests of Holding in the 1996 Transaction. LEGAL SERVICES Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP, New York, New York. O'Sullivan Graev & Karabell, LLP provides legal services to the Company and Holding in connection with certain matters, principally relating to transactional, securities law, general corporate and litigation matters. TRANSACTIONS WITH AFFILIATES The 1996 Indenture, the New Stockholders Agreement, the 1994 Indenture and the Credit Facility restrict the Company's and its affiliates' ability to enter into transactions with their affiliates, including their officers, directors and principal stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents Filed as Part of the Report 1. FINANCIAL STATEMENTS The financial statements listed under Item 8 are filed as part of this report. 2. FINANCIAL STATEMENT SCHEDULES The financial statement schedules listed under Item 8 are filed as part of this report. Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the financial statements or notes thereto. 3. EXHIBITS The exhibits listed on the accompanying Exhibit Index are filed as part of this report. (b) Reports on Form 8-K A report on Form 8-K/A was filed by each of Berry and Holding on November 14, 1997. Under Item 7 on Form 8-K/A, Financial Statements, Pro Forma Financial Information and Exhibits, Berry and Holding filed financial statements and pro forma financial information related to the Venture Packaging Acquisition. REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors BPC Holding Corporation We have audited the accompanying consolidated balance sheets of BPC Holding Corporation and subsidiaries as of December 27, 1997 and December 28, 1996, 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 December 27, 1997. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of Holding's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BPC Holding Corporation and subsidiaries at December 27, 1997 and December 28, 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 27, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /S/ ERNST & YOUNG LLP Indianapolis, Indiana February 13, 1998 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 2,688 $ 10,192 Accounts receivable (less allowance for doubtful accounts of $1,038 at December 27, 1997 and $618 at 28,385 17,642 December 28, 1996 Inventories: Finished goods 22,029 9,100 Raw materials and supplies 7,429 4,507 ------------ ------------ 29,458 13,607 Prepaid expenses and other receivables 1,834 957 Income taxes recoverable 1,167 436 ------------ ------------ Total current assets 63,532 42,834 Assets held in trust 19,738 30,188 Property and equipment: Land 5,811 4,598 Buildings and improvements 33,891 18,290 Machinery, equipment and tooling 122,991 79,043 Automobiles and trucks 1,241 639 Construction in progress 10,357 3,476 ------------ ------------ 174,291 106,046 Less accumulated depreciation 66,073 50,382 ------------ ------------ 108,218 55,664 Intangible assets: Deferred financing and origination fees, net 10,849 9,912 Covenants not to compete, net 3,940 40 Excess of cost over net assets acquired, net 30,303 4,273 Deferred acquisition costs 13 527 ------------ ------------ 45,105 14,752 Deferred income taxes 2,049 2,003 Other 802 357 ------------ ------------ Total assets $239,444 $145,798 ============ ============
BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 16,732 $ 12,877 Accrued expenses and other liabilities 7,162 4,676 Accrued interest 3,612 3,286 Employee compensation and payroll taxes 7,489 5,230 Income taxes 55 117 Current portion of long-term debt 7,619 738 ------------ ------------ Total current liabilities 42,669 26,924 Long-term debt, less current portion 298,716 215,308 Accrued dividends on preferred stock 3,674 1,116 Other liabilities 3,360 - ------------ ------------ 348,419 243,348 Stockholders' equity (deficit): Class A Preferred Stock; 800,000 shares authorized; 600,000 shares issued and outstanding (net of discount of $3,062 at December 27, 1997 and $3,355 11,509 11,216 at December 28, 1996) Class B Preferred Stock; 200,000 shares authorized, 5,000 - issued and outstanding 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; 145,001 shares issued and outstanding 1 1 Nonvoting; 500,000 shares authorized; 57,788 shares issued and outstanding 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 16,981 shares issued and outstanding - - Treasury stock: 239 shares (22) (22) Additional paid-in capital 49,374 51,681 Warrants 3,511 3,511 Retained earnings (deficit) (178,353) (163,942) ------------ ------------ Total stockholders' equity (deficit) (108,975) (97,550) ------------ ------------ Total liabilities and stockholders' equity (deficit) $ 239,444 $ 145,798 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
YEAR ENDED ---------------------------------------------------------- DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ Net sales $226,953 $151,058 $140,681 Cost of goods sold 180,249 110,110 102,484 Gross margin 46,704 40,948 38,197 Operating expenses: Selling 11,320 6,950 5,617 General and administrative 11,505 13,769 9,500 Research and development 1,310 858 718 Amortization of intangibles 2,226 524 968 Other expense 4,144 1,578 867 ------------ ------------ ------------ Operating income 16,199 17,269 20,527 Other expenses: Loss on disposal of property and equipment 226 302 127 ------------ ------------ ------------ Income before interest and taxes 15,973 16,967 20,400 Interest: Expense (32,237) (21,364) (14,031) Income 1,991 1,289 642 ------------ ------------ ------------ Income (loss) before income taxes (14,273) (3,108) 7,011 Income taxes 138 239 678 ------------ ------------ ------------ Net income (loss) (14,411) (3,347) 6,333 ------------ ------------ ------------ Preferred stock dividends (2,558) (1,116) - ------------ ------------ ------------ Net income (loss) attributable to common shareholders $ (16,969) $ (4,463) $ 6,333 ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS OF DOLLARS)
COMMON STOCK PREFERRED STOCK ----------------- -------------- ADDITIONAL DEFERRED RETAINED CLASS CLASS CLASS CLASS CLASS TREASURY PAID-IN COST- EARNINGS A B C A B STOCK CAPITAL WARRANTS RESTRICTED (DEFICIT) TOTAL ----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ---------- Balance at January 1, 1995(1) $ - $ - $ - $ - $ - $ (58) $ 871 $ 4,124 $ (22) $(43,753) $(38,838) Net income - - - - - - - - - 6,333 6,333 Amortization of deferred cost-restricted stock - - - - - - - - 22 - 22 Market value adjustment - warrants - - - - - - 90 (90) - - - Purchase vested options from management - - - - - - - (1) - - (1) ----- ----- ----- ------- ----- -------- ---------- -------- ----------- ---------- ---------- Balance at December 30, 1995(1) - - - - - (58) 960 4,034 - (37,420) (32,484) Net loss - - - - - - - - - (3,347) (3,347) Market value adjustment - warrants - - - - - - (1,145) 9,399 - (8,254) - Exercise of stock options - - - - - - 1,130 - - - 1,130 Distribution on sale of equity interests - - - - - 58 (1,424) (13,433) - (114,921) (129,720) Proceeds from newly issued equity 4 2 - 14,571 - - 52,797 - - - 67,374 Payment of deferred compensation - - - - - - 479 - - - 479 Issuance of private warrants - - - (3,511) - - - 3,511 - - - Accrued dividends on preferred stock - - - - - - (1,116) - - - (1,116) Amortization of preferred stock discount - - - 156 - - - - - - 156 Purchase treasury stock from management - - - - - (22) - - - - (22) ----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ---------- Balance at December 28, 1996 4 2 - 11,216 - (22) 51,681 3,511 - (163,942) (97,550) Net loss - - - - - - - - - (14,411) (14,411) Sale of stock to management - - - - - - 325 - - - 325 Issuance of preferred stock - - - - 5,000 - - - - - 5,000 Accrued dividends on preferred stock - - - - - - (2,558) - - - (2,558) Amortization of preferred stock discount - - - 293 - - (74) - - - 219 ----- ----- ----- ------- ------ ------- ---------- -------- ----------- ---------- ---------- Balance at December 27, 1997 $4 $2 $- $11,500 $5,000 $(22) $49,374 - - $(178,353) $(108,975) ===== ===== ===== ======= ====== ======= ========== ======== =========== ========== ==========
{ (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. BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEAR ENDED -------------------------------------------------------- DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ OPERATING ACTIVITIES Net income (loss) $ (14,411) $ (3,347) $ 6,333 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 16,800 10,807 8,568 Non-cash interest expense 2,005 1,212 950 Amortization 2,226 524 968 Interest funded by assets held in trust 11,255 5,412 - Non-cash compensation - 358 (215) Write-off of deferred acquisition costs 515 - 390 Loss on sale of property and equipment 226 302 127 Deferred income taxes - 53 (964) Changes in operating assets and liabilities: Accounts receivable, net (2,290) (1,716) (1,989) Inventories 2,767 (1,710) 926 Prepaid expenses and other (137) 520 (964) receivables Other assets (225) (5) (14) Accounts payable and accrued expenses (4,516) 1,899 (1,000) Income taxes payable (61) 117 (147) ------------ ------------ ------------ Net cash provided by operating activities 14,154 14,426 12,969 INVESTING ACTIVITIES Additions to property and equipment (16,774) (13,581) (11,247) Proceeds from disposal of property and equipment 1,078 94 20 Acquisitions of businesses (86,406) (1,152) (14,158) ------------ ------------ ------------ Net cash used for investing activities (102,102) (14,639) (25,385) FINANCING ACTIVITIES Proceeds from long-term borrowings 85,703 105,000 - Payments on long-term borrowings (2,584) (500) (500) Payments on capital lease (237) (217) (198) Reclassification of cash held for acquisition - - 12,000 Exercise of management stock options - 1,130 - Proceeds from issuance of common stock 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 (2,763) (5,090) (178) ------------ ------------ ------------ Net cash provided by financing activities 80,444 2,370 11,124 ------------ ------------ ------------ Net increase(decrease)in cash and cash equivalents (7,504) 2,157 (1,292) Cash and cash equivalents at beginning of year 10,192 8,035 9,327 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 2,688 $ 10,192 $ 8,035 ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) NOTE 1. ORGANIZATION BPC Holding Corporation ("Holding"), through its subsidiaries Berry Plastics Corporation ("Berry" or the "Company"), Berry Iowa Corporation ("Berry Iowa"), Berry Sterling Corporation ("Berry Sterling"), Berry Tri-Plas Corporation ("Berry Tri-Plas"), Berry Plastics Design Corporation ("Berry Design"), PackerWare Corporation ("PackerWare"), and Venture Packaging, Inc. ("Venture Packaging") and its subsidiaries Venture Packaging Midwest, Inc. and Venture Packaging Southeast, 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; Anderson, South Carolina; Monroeville, Ohio; and Lawrence, Kansas. On September 16, 1996, Berry announced the consolidation of its Winchester, Virginia facility with other Company locations, including Charlotte, North Carolina; Evansville, Indiana; and Iowa Falls, Iowa. 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. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "1997," "1996" and "1995" relate to the fiscal years ended December 27, 1997, December 28, 1996, and December 30, 1995, respectively. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND BUSINESS The consolidated financial statements include the accounts of Holding and its subsidiaries all of which are wholly-owned. Intercompany accounts and transactions have been eliminated in consolidation. Holding, through its wholly-owned subsidiaries, operates in one industry segment. The Company is a domestic manufacturer and marketer of plastic packaging, with sales concentrated in four product groups within this market: aerosol overcaps, rigid open-top containers, plastic drink cups, and housewares/lawn and garden. 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 $68 million in 1997 (excluding specialty resins). Dow Chemical Corporation is the principal supplier (approximately 56%) of the Company's total resin material requirements. The Company also uses other suppliers such as Union Carbide, Chevron, Phillips and Equistar (formerly Lyondell and Millennium) 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 significant impact on the Company's business as would legislation providing for disposal fees or limiting the use of plastic products. CASH AND CASH EQUIVALENTS All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost (first in, first out method) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the assets ranging from three to 25 years. INTANGIBLE ASSETS Origination fees relating to the 1994 Notes and 1996 Notes and deferred financing fees are being amortized using the straight-line method over the lives of the respective debt agreements. The costs in excess of net assets acquired 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. Covenants not to compete relating to agreements made with certain selling shareholders of acquired companies are being amortized over the respective life of the agreement. Holding periodically evaluates the value of intangible assets to determine if an impairment has occurred. This evaluation is based on various analyses including reviewing anticipated cash flows. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATIONS Certain amounts on the 1996 and 1995 financial statements have been reclassified to conform with the 1997 presentation. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME, and No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. The Statements will affect the disclosure requirement for financial statements beginning in 1998. The Company expects that the new reporting requirements will have no material effect on its financial position or results of operations. NOTE 3. ACQUISITIONS On March 10, 1995, the Company acquired through its newly-formed subsidiary, Berry Sterling Corporation, substantially all of the assets and assumed certain liabilities of Sterling Products, Inc. for a purchase price of $7.3 million (the "Sterling Acquisition"). The operations of Berry Sterling Corporation are included in the Company's operations since the acquisition date using the purchase method of accounting. On December 21, 1995, the Company acquired substantially all of the assets and assumed certain liabilities of Tri-Plas, Inc. through its subsidiary Berry Tri- Plas Corporation (formerly Berry-CPI Corporation) for $6.6 million (the "Tri- Plas Acquisition"). The operations of Berry Tri-Plas are included in the Company's operations since the acquisition date using the purchase method of accounting. On January 17, 1997, the Company acquired certain assets and assumed certain liabilities of Container Industries, Inc. ("Container Industries") of Pacoima, California for $2.9 million. The purchase was funded out of operating funds. The operations of Container Industries are included in the Company's operations since the acquisition date using the purchase method of accounting. On January 21, 1997, the Company acquired the outstanding stock of PackerWare Corporation, a Kansas corporation, for aggregate consideration of approximately $28.1 million and merged PackerWare with a newly-formed, wholly-owned subsidiary of the Company (with PackerWare being the surviving corporation). The purchase was primarily financed through the Credit Facility (see Note 5). The operations of PackerWare are included in the Company's operations since the acquisition date using the purchase method of accounting. On May 13, 1997, Berry Design, a newly-formed wholly-owned subsidiary of the Company, acquired substantially all of the assets and assumed certain liabilities of Virginia Design Packaging Corp. ("Virginia Design") for approximately $11.1 million. The purchase was financed through the Credit Facility (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. The pro forma results listed below are unaudited and reflect purchase accounting adjustments assuming the Sterling Acquisition and the Tri-Plas Acquisition occurred on January 1, 1995; and the Container Industries, PackerWare, Virginia Design, and Venture acquisitions occurred on December 31, 1995.
YEAR ENDED --------------------------------------------------------------------------- DECEMBER 27, 1997 DECEMBER 28, 1996 DECEMBER 30, 1995 -------------------- ------------------- ------------------- Net sales $ 261,531 $ 257,098 $ 157,263 Income (loss)before income taxes (17,699) (9,932) 4,274 Net income (loss) (17,837) (10,171) 3,859
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 effect. NOTE 4. INTANGIBLE ASSETS Intangible assets consist of the following:
DECEMBER 27, DECEMBER 28, 1997 1996 -------------- -------------- Deferred financing and origination fees $ 14,578 $ 12,593 Covenants not to compete 4,598 100 Excess of cost over net assets acquired 32,464 5,029 Deferred acquisition costs 13 527 Accumulated amortization (6,548) (3,497) -------------- -------------- $ 45,105 $ 14,752 ============== ==============
Excess of cost over net assets acquired increased due to the acquisitions of PackerWare, Container Industries, Virginia Design, and Venture Packaging to the extent the purchase price exceeded the fair value of the net assets acquired. The increase in covenants not to compete represents agreements entered into with certain selling shareholders of the acquired companies in 1997. NOTE 5. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 27, DECEMBER 28, 1997 1996 -------------- -------------- Holding 12.50% Senior Secured Notes $105,000 $105,000 Berry 12.25% Senior Subordinated Notes 100,000 100,000 Term loans 58,300 - Revolving line of credit 25,654 - Nevada Industrial Revenue Bonds 5,000 5,500 Iowa Industrial Revenue Bonds 5,400 5,400 South Carolina Industrial Development Bonds 6,985 - Capital lease obligation payable through December 547 785 1999 Debt discount (551) (639) -------------- -------------- 306,335 216,046 Less current portion of long-term debt 7,619 738 -------------- -------------- $298,716 $215,308 ============== ==============
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 December 27, 1997 is $18.9 million. The 1996 Notes rank senior in right of payment to all existing and future subordinated indebtedness of Holding, including Holding's subordinated guarantee of the 1994 Notes (as defined hereinafter) and PARI PASSU in right of payment with all senior indebtedness of Holding. The 1996 Notes are effectively subordinated to all existing and future senior indebtedness of Berry, including borrowings under the Credit Facility, the Nevada and Iowa Industrial Revenue Bonds, and the South Carolina Industrial Development Bonds. 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 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 Holding and all of Berry's subsidiaries. The net proceeds to Berry from the sale of the notes, after expenses, were $93.0 million. Berry is not required to make mandatory redemption or sinking fund payments with respect to the 1994 Notes. Subsequent to April 15, 1999, the 1994 Notes may be redeemed at the option of Berry, in whole or in part, at redemption prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter. Upon a change in control, as defined in the indenture entered into in connection with the 1994 Transaction (the "1994 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 rank PARI PASSU with or senior in right of payment to all existing and future subordinated indebtedness of Berry. The notes rank junior in right of payment to all existing and future senior indebtedness of Berry, including borrowings under the Credit Facility, the Nevada and Iowa Industrial Revenue Bonds, and the South Carolina Industrial Development Bonds. The 1994 Indenture contains certain covenants which, among other things, limit Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell, lease or transfer assets, make dividend payments and engage in transactions with affiliates. CREDIT FACILITY Concurrent with the PackerWare acquisition, the Company entered into a financing and security agreement (the "Security Agreement") with NationsBank, N.A. for a senior secured line of credit in an aggregate principal amount of $60.0 million (the "Credit Facility"). As a result of the acquisition of assets of Virginia Design and the acquisition of Venture Packaging, the Credit Facility was amended and increased to $127.2 million. The indebtedness under the Credit Facility is guaranteed by Holding and the Company's subsidiaries. The Credit Facility replaced the facility previously provided by Fleet Capital Corporation. The Credit Facility provides the Company with a $50 million revolving line of credit, subject to a borrowing base formula, a $58.3 million term loan facility and a $18.9 million standby letter of credit facility to support the Company's and its subsidiaries' obligations under the Nevada and Iowa Industrial Revenue Bonds and the South Carolina Industrial Development Bonds. The Company borrowed all amounts available under the term loan facility to finance the PackerWare, Virginia Design and Venture Packaging acquisitions. At December 27, 1997, the Company had unused borrowing capacity under the Credit Facility's borrowing base with respect to the revolving line of credit of approximately $12.5 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 quarterly payments, varying in amount, beginning in 1998 through the maturity of the facility. Interest on borrowings on the Credit Facility will be based on the lender's base rate plus .5% or LIBOR plus 2.0%, at the Company's option. The Credit Facility contains various covenants which include, among other things: (i) maintenance of certain financial ratios and compliance with certain financial tests and limitations, (ii) limitations on the issuance of additional indebtedness, and (iii) limitations on capital expenditures. NEVADA INDUSTRIAL REVENUE BONDS The Nevada Industrial Revenue Bonds bear interest at a variable rate (4.6% at December 27, 1997 and December 28, 1996), 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. IOWA INDUSTRIAL REVENUE BONDS The Iowa Industrial Revenue Bonds bear interest at a variable rate (4.4% and 4.0% at December 27, 1997 and December 28, 1996, respectively), require no periodic principal payments, are collateralized by irrevocable letters of credit issued by NationsBank under the Credit Facility and mature in August 1998. The Company plans to refinance these bonds through a term loan under the Credit Facility. SOUTH CAROLINA INDUSTRIAL DEVELOPMENT BONDS The South Carolina Industrial Bonds bear interest at a variable rate (4.3% at December 27, 1997), require semi-annual principal payments of $0.3 million on April 1 and October 1 with a final balloon payment of $0.9 on April 1, 2010, and are collateralized by irrevocable letters of credit issued by NationsBank under the Credit Facility. OTHER Future maturities of long-term debt are as follows: 1998, $7,619; 1999, $17,643; 2000, $13,875; 2001, $13,510; 2002, $43,104 and $211,135 thereafter. Interest paid was $29,927, $19,744 and $13,432 for 1997, 1996 and 1995, respectively. Interest capitalized was $341, $225 and $350 for 1997, 1996 and 1995, respectively. NOTE 6. LEASE AND OTHER COMMITMENTS Certain property and equipment are leased using capital and operating leases. Capitalized lease property consisted of manufacturing equipment with a cost of $1,661 and related accumulated amortization of $831 and $664 at December 27, 1997 and December 28, 1996, respectively. Capital lease amortization is included in depreciation expense. Total rental expense for operating leases was approximately $3,332, $2,344, and $1,515 for 1997, 1996, and 1995, respectively. Future minimum lease payments for capital leases and noncancellable operating leases with initial terms in excess of one year are as follows:
AT DECEMBER 28, 1997 -------------------------------------- CAPITAL LEASES OPERATING LEASES -------------- ---------------- 1998 $ 301 $ 4,041 1999 301 3,064 2000 - 2,824 2001 - 2,696 2002 - 1,987 Thereafter - 1,921 -------------- ---------------- 602 $ 16,533 ================ Less: amount representing interest 55 -------------- Present value of net minimum lease payments $ 547 ==============
NOTE 7. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax liabilities and assets at December 27, 1997 and December 28, 1996 are as follows:
DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ Deferred tax liabilities: Tax over book depreciation $ 11,073 $ 2,316 Other - 104 ------------ ------------ Total deferred tax liabilities 11,073 2,420 Deferred tax assets: Allowance for doubtful accounts 590 331 Inventory 1,391 350 Compensation and benefit accruals 1,198 719 Insurance reserves 338 207 Net operating loss carryforwards 8,372 1,916 Alternative minimum tax (AMT) credit 2,049 2,003 carryforwards ------------ ------------ Total deferred tax assets 13,938 5,526 ------------ ------------ 2,865 3,106 Valuation allowance for net deferred tax assets (816) (1,103) ------------ ------------ Net deferred tax assets $ 2,049 $ 2,003 ============ ============
Income tax expense consists of the following:
DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ Current Federal $ - $ - $ 1,404 State 138 186 237 Deferred Federal - 69 (900) State - (16) (63) ------------ ------------ ------------ Income tax expense $ 138 $ 239 $ 678 ============ ============ ============
Holding has unused operating loss carryforwards of approximately $21.7 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 1997, 1996 and 1995 approximated $47, $528, and $2,001, respectively. 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 ------------------------------------------ DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ Federal income tax expense (benefit) at statutory rate $(4,853) $(1,057) $2,384 State income tax expense, net of 138 112 115 federal benefit Amortization of goodwill 285 - - Expenses not deductible for income tax 219 51 19 purposes Change in valuation allowance for net deferred tax assets 4,298 1,103 (1,869) Other 51 30 29 ------------ ------------ ------------ Income tax expense $ 138 $ 239 $ 678 ============ ============ ============
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 $629, $531, and $384 for 1997, 1996 and 1995, 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. 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 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") which reserved 45,620 shares for future issuance, Holding has granted options to certain officers and key employees to acquire shares of Class B Nonvoting Common Stock. During 1997, amendments were approved to the Option Plan reserving an additional 6,000 shares for future issuance. These options are subject to various option agreements, which among other things, set forth the class of stock, option price and performance thresholds to determine exercisability and vesting requirements. The Option Plan expires October 3, 2003 or such earlier date on which the Board of Directors of Holding, in its sole discretion, determines. Option prices range from $100 to $108 per share. 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. Pro forma effects on Holding's 1997, 1996 and 1995 consolidated statements of operations using the fair value method prescribed by Statement 123 have not been disclosed because there is no material difference between results obtained using this method and using the criteria set forth in APB 25. Information related to the Option Plan is as follows:
DECEMBER 27, 1997 DECEMBER 28, 1996 ----------------------------- ---------------------------- Weighted Weighted Number Average Number Average of Exercise of Exercise Shares Price Shares Price ----------------------------- ----------------------------- Options outstanding, beginning of year 43,393 $100 - $ - Options granted 5,425 106 43,768 100 Options exercised - - - - Options canceled (1,110) 100 (375) 100 Options outstanding, end of year 47,708 101 43,393 100
Option price range at end of year $100 - $108 $100 Options available for grant at year end 3,912 2,227 Weighted average fair value of options granted during year $106 $100
The following table summarizes information about the options outstanding at December 27, 1997:
Weighted Range of Weighted Average Average Number Exercise Number Outstanding Remaining Contractual Exercise Exercisable at Prices at December 27, 1997 Life Price December 27, 1997 - ------------------------------------------------------------------------------------------------------------- $100 - $108 47,708 4 years $100.72 13,561
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 a $100 advisory fee in both March and December 1995 for originating, structuring and negotiating the Sterling Products acquisition and the Tri-Plas acquisition, respectively. In consideration of financial advisory and management consulting services, the Company paid First Atlantic fees and expenses of $771, $788 and $817 for fiscal 1997, 1996, and 1995, 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 December 27, 1997, except for the 1994 Notes and the 1996 Notes for which the fair value exceed the carrying value by approximately $10.0 million and $10.5 million, respectively. NOTE 12. SUMMARY UNAUDITED FINANCIAL INFORMATION (IN THOUSANDS) The following summarizes unaudited financial information of Holding's wholly- owned subsidiary, Berry Plastics Corporation and subsidiaries:
DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ CONSOLIDATED BALANCE SHEETS Current assets $ 62,824 $ 42,445 Property and equipment - net of accumulated depreciation 108,218 55,664 Other noncurrent assets 44,480 12,046 Current liabilities 42,158 26,220 Noncurrent liabilities 205,172 113,113 Equity (deficit) (31,808) (29,177)
YEAR ENDED ------------------------------------------ DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ CONSOLIDATED STATEMENTS OF OPERATIONS Net sales $226,954 $151,058 $140,681 Cost of goods sold 180,249 110,110 102,484 Income (loss) before income taxes (2,493) 6,490 6,861 Net income (loss) (2,631) 5,989 6,183
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of March, 1998. BERRY PLASTICS CORPORATION By /S/ MARTIN R. IMBLER ----------------------------- Martin R. Imbler President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Roberto Buaron Chairman of the Board of Directors March 20, 1998 ---------------------- Roberto Buaron President, Chief Executive Officer and Director (Principal Executive /s/ Martin R. Imbler Officer) March 20, 1998 ---------------------- Martin R. Imbler Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting /s/ James M. Kratochvil Officer) March 20, 1998 ---------------------- James M. Kratochvil /s/ Douglas E. Bell Director March 20, 1998 ---------------------- Douglas E. Bell /s/ Ira G. Boots Director March 20, 1998 ---------------------- Ira G. Boots /s/ David M. Clarke Director March 20, 1998 ---------------------- David M. Clarke /s/ Lawrence G. Graev Director March 20, 1998 ---------------------- Lawrence G. Graev /s/ Donald J. Hofmann Director March 20, 1998 ---------------------- Donald J. Hofmann /s/ James A. Long Director March 20, 1998 ---------------------- James A. Long /s/ Mathew J. Lori Director March 20, 1998 --------------------- Mathew J. Lori
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of March, 1998. BPC HOLDING CORPORATION By /S/ MARTIN R. IMBLER ----------------------------- Martin R. Imbler President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Roberto Buaron Chairman of the Board of Directors March 20, 1998 ---------------------- Roberto Buaron President and Director (Principal /s/ Martin R. Imbler Executive Officer) March 20, 1998 ---------------------- Martin R. Imbler Executive Vice President, Chief Financial Officer and Secretary (Principal /s/ James M. Kratochvil Financial and Accounting Officer) March 20, 1998 ---------------------- James M. Kratochvil /s/ David M. Clarke Director March 20, 1998 ---------------------- David M. Clarke /s/ Lawrence G. Graev Director March 20, 1998 ---------------------- Lawrence G. Graev /s/ Donald J. Hofmann Director March 20, 1998 ---------------------- Donald J. Hofmann /s/ James A. Long Director March 20, 1998 ---------------------- James A. Long /s/ Mathew J. Lori Director March 20, 1998 ---------------------- Mathew J. Lori
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of March, 1998. BERRY IOWA CORPORATION By /S/ MARTIN R. IMBLER ----------------------------- Martin R. Imbler President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Roberto Buaron Chairman of the Board of Directors March 20, 1998 ---------------------- Roberto Buaron President, Chief Executive Officer and /s/ Martin R. Imbler Director (Principal Executive Officer) March 20, 1998 ---------------------- Martin R. Imbler Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal /s/ James M. Kratochvil Financial and Accounting Officer) March 20, 1998 ---------------------- James M. Kratochvil /s/ James A. Long Director March 20, 1998 ---------------------- James A. Long
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of March, 1998. BERRY TRI-PLAS CORPORATION By /S/ MARTIN R. IMBLER ----------------------------- Martin R. Imbler President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Roberto Buaron Chairman of the Board of Directors March 20, 1998 ---------------------- Roberto Buaron President, Chief Executive Officer and /s/ Martin R. Imbler Director (Principal Executive Officer) March 20, 1998 ---------------------- Martin R. Imbler Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal /s/ James M. Kratochvil Financial and Accounting Officer) March 20, 1998 ---------------------- James M. Kratochvil /s/ James A. Long Director March 20, 1998 ---------------------- James A. Long
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT The Registrants have not sent any annual report or proxy material to securityholders. BPC HOLDING CORPORATION (PARENT COMPANY) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS
DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ (IN THOUSANDS) ASSETS Cash $ 708 $ 389 Other assets (principally investment in subsidiary) (31,808) (29,177) Assets held in trust 18,933 30,188 Intangible assets 4,281 4,789 Due from Berry Plastics Corporation 8,095 2,804 Other - 277 ------------ ------------ Total assets $ 209 $ 9,270 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities $ 510 $ 704 Accrued dividends 3,674 1,116 Long-term debt 105,000 105,000 ------------ ------------ Total liabilities 109,184 106,820 Preferred stock 16,509 11,216 Class A common stock 4 4 Class B common stock 2 2 Class C common stock - - Treasury stock (22) (22) Additional paid-in capital 49,374 51,681 Warrants 3,511 3,511 Retained earnings (deficit) (178,353) (163,942) ------------ ------------ Total stockholders' equity (deficit) (108,975) (97,550) ------------ ------------ Total liabilities and stockholders' equity (deficit) $ 209 $ 9,270 ============ ============
BPC HOLDING CORPORATION CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED ------------------------------------------ DECEMBER 27, DECEMBER 28, DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ (In thousands) Net sales $ - $ - $ - Cost of goods sold - - - Gross profit - - - Operating expenses 220 3,304 (150) Other expense 11,560 6,294 - ------------ ------------ ------------ Income(loss)before income taxes and equity in net income of subsidiary (11,780) (9,598) 150 Equity in net income (loss) of subsidiary (2,631) 5,989 6,183 ------------ ------------ ------------ Income (loss) before income taxes (14,411) (3,609) 6,333 Income taxes - (262) - ------------ ------------ ------------ Net income (loss) (14,411) (3,347) 6,333 Preferred stock dividends (2,558) (1,116) - ------------ ------------ ------------ Net income (loss)attributable to common shareholders $ (16,969) $ (4,463) $ 6,333 ============ ============ ============
BPC HOLDING CORPORATION CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED ------------------------------------------ DECEMBER 27 DECEMBER 28 DECEMBER 30, 1997 1996 1995 ------------ ------------ ------------ (In thousands) Net income (loss) $ (14,411) $ (3,347) $ 6,333 Adjustments to reconcile net loss provided by operating activities: Net loss (income) of subsidiary 2,631 (5,989) (6,183) Amortization and non cash interest 726 441 - Interest funded by assets held in trust 11,256 5,412 - Non-cash compensation - 358 (215) Changes in operating assets and liabilities (208) 427 66 ------------ ------------ ------------ Net cash provided by (used for)operating activities (6) (2,698) 1 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 325 67,369 - Rollover investments and share - (125,219) - repurchases Assets held in trust - (35,600) - Net payments to warrant holders - (4,502) - Debt issuance costs - (5,069) - Other - (22) (1) ------------ ------------ ------------ Net cash from financing activities 325 3,087 - ------------ ------------ ------------ Net increase in cash and cash 319 389 - equivalents Cash and cash equivalents at beginning 389 - - of year ------------ ------------ ------------ Cash and equivalents at end of year $ 708 $ 389 $ - ============ ============ ============
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 $201.3 million and $111.0 million of long-term debt outstanding at December 27, 1997 and December 28, 1996, respectively. Under the terms of the debt agreements, Holding has guaranteed the payment of all principal and interest. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
CHARGED TO BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE YEAR - ----------------------------- ---------- ---------- ------------- ------------ ----------- 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 Year ended December 30, 1995: Allowance for doubtful accounts $ 503 $ 216 $ 299 (2) $ 281 (1) $ 737
(1) Uncollectible accounts written off, net of recoveries. (2) Primarily relates to purchase of accounts receivable and related allowance through acquisitions. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits EXHIBIT NO. DESCRIPTION OF EXHIBIT 2.1 Asset Purchase Agreement dated February 12, 1992, among Berry Plastics Corporation (the "Company"), Berry Iowa, Berry Carolina, Inc., Genpak Corporation, a New York corporation, and Innopac International Inc., a public Canadian corporation (filed as Exhibit 10.1 to the Registration Statement on Form S-1 filed on February 24, 1994 (the "Form S-1") and incorporated herein by reference) 2.2 Asset Purchase Agreement dated December 24, 1994, between the Company and Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form S-1 and incorporated herein by reference) 2.3 Asset Purchase Agreement dated March 1, 1995, among Berry Sterling Corporation, Sterling Products, Inc. and the stockholders of Sterling Products, Inc. (filed as Exhibit 2.3 to the Annual Report on Form 10-K filed on March 31, 1995 (the "1994 Form 10-K") and incorporated herein by reference) 2.4 Asset Purchase Agreement dated December 21, 1995, among Berry Tri-Plas Corporation, Tri-Plas, Inc. and Frank C. DeVore (filed as Exhibit 2.4 to the Annual Report on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated herein by reference) 2.5 Asset Purchase Agreement dated January 23, 1996, between the Company and Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K and incorporated herein by reference) 2.6 Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, by and among Holding, BPC Mergerco, Inc. ("Mergerco") and the other parties thereto (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 3, 1996 (the "Form 8-K") and incorporated herein by reference) 2.7 Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, by and among Holding, Mergerco, Chase Venture Capital Associates, L.P. ("CVCA") and The Northwestern Mutual Life Insurance Company ("Northwestern") (filed as Exhibit 2.2 to the Form 8-K and incorporated herein by reference) 2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and between Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K and incorporated herein by reference) 2.9 Certificate of Merger of Mergerco with and into Holding, dated as of June 18, 1996 (filed as Exhibit 2.9 to the Registration Statement on Form S-4 filed on July 17, 1996 (the "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, Inc. and the shareholders of Container Industries, Inc. (filed as Exhibit 2.12 to the Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (the "1996 Form 10- K) and incorporated herein by reference) 2.13 Agreement and Plan of Reorganization dated as of January 14, 1997, as amended on January 20, 1997, among the Company, PackerWare Acquisition Corporation, PackerWare Corporation and the Shareholders of PackerWare Corporation (filed as Exhibits 2.1 and 2.2 to the Current Report on Form 8-K filed February 3, 1997 and incorporated herein by reference) *2.14 Asset Purchase Agreement dated May 13, 1997, among the Company, Berry Plastics Design Corporation, Virginia Design Packaging Corp. and the shareholders of Virginia Design Packaging Corp. 3.1 Amended and Restated Certificate of Incorporation of Holding (filed as Exhibit 3.1 to the Form S-4 and incorporated herein by reference) 3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and incorporated herein by reference) 3.3 Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Form S-1 and incorporated herein by reference) 3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and incorporated herein by reference) 3.5 Certificate of Incorporation of Berry Iowa Corporation ("Berry Iowa") (filed as Exhibit 3.5 to the Form S-1 and incorporated herein by reference) 3.6 By-laws of Berry Iowa (filed as Exhibit 3.6 to the Form S-1 and incorporated herein by reference) 3.7 Certificate of Incorporation of Berry Tri-Plas Corporation ("Berry Tri-Plas") (filed as Exhibit 3.7 to the Form S-1 and incorporated herein by reference) 3.8 By-laws of Berry Tri-Plas (filed as Exhibit 3.8 to the Form S-1 and incorporated herein by reference) 3.9 Certificate of Amendment to the Certificate of Incorporation of Berry Tri-Plas Corporation (filed as Exhibit 3.9 to the 1996 Form 10-K and incorporated herein by reference) *3.10 Certificate of Designation, Preferences, and Rights of Series B Cumulative Preferred Stock of BPC Holding Corporation. 4.1 Form of Indenture between the Company and United States Trust Company of New York, as Trustee (including the form of Note and Guarantees as Exhibits A and B thereto respectively) (filed as Exhibit 4.1 to the Form S-1 and incorporated herein by reference) 4.2 Warrant Agreement between Holding and United States Trust Company of New York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and incorporated herein by reference) 4.3 Indenture dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Trustee (the "Trustee"), relating to Holding's Series A and Series B 12.5% Senior Secured Notes Due 2006 (filed as Exhibit 4.3 to the Form S-4 and incorporated herein by reference) 4.4 Pledge, Escrow and Disbursement Agreement dated as of June 18, 1996, by and among Holding, the Trustee and First Trust of New York, National Association, as Escrow Agent (filed as Exhibit 4.4 to the Form S-4 and incorporated herein by reference) 4.5 Holding Pledge and Security Agreement dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Collateral Agent (filed as Exhibit 4.5 to the Form S-4 and incorporated herein by reference) 4.6 Registration Rights Agreement dated as of June 18, 1996, by and among Holding and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") (filed as Exhibit 4.6 to the 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) *10.1 Amended and Restated Financing and Security Agreement dated as of August 29, 1997, by and between NationsBank, N.A. and the Company 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 Form S-4 and incorporated herein by reference) 10.5 Employment Agreement dated December 24, 1990, as amended, between the Company and R. Brent Beeler ("Beeler") (filed as Exhibit 10.10 to the Form S-1 and incorporated herein by reference) 10.6 Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated herein by reference) 10.7 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.7 to the Form S-4 and incorporated herein by reference) 10.8 Employment Agreement dated December 24, 1990, as amended, between the Company and Douglas E. Bell ("Bell") (filed as Exhibit 10.11 to the Form S-1 and incorporated herein by reference) 10.9 Amendment to Bell Employment Agreement dated November 30, 1995 (filed as Exhibit 10.10 to the 1995 Form 10-K and incorporated herein by reference) 10.10 Amendment to Bell Employment Agreement dated June 30, 1996 (filed as Exhibit 10.10 to the Form S-4 and incorporated herein by reference) 10.11 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) 10.12 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) 10.13 Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as Exhibit 10.13 to the Form S-4 and incorporated herein by reference) 10.14 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) 10.15 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) 10.16 Amendment to Boots Employment Agreement dated June 30, 1996 (filed as Exhibit 10.16 to the Form S-4 and incorporated herein by reference) 10.17 Guaranty dated as of February 12, 1992, by the Company in favor of the City of Iowa Falls, Iowa, The First National Bank of Boston and certain other parties named therein (filed as Exhibit 10.14 to the Form S-1 and incorporated herein by reference) 10.18 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) 10.19 Loan and Trust Agreement dated as of August 30, 1988, as amended, among the City of Iowa Falls, Iowa, Berry Iowa, the First National Bank of Boston, as Trustee, and Canadian Imperial Bank of Commerce (New York) (filed as Exhibit 10.19 to the Form S-1 and incorporated herein by reference) 10.20 Irrevocable Standby Letter of Credit of NationsBank, N.A. dated March 12, 1997 (filed as Exhibit 10.20 to the 1996 Form 10-K and incorporated herein by reference) 10.21 Letter of Credit of Fleet National Bank of Connecticut (filed as Exhibit 10.26 to the 1995 Form 10-K and incorporated herein by reference) 10.22 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 Form S-4 and incorporated herein by reference) 10.23 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 Form S-4 and incorporated herein by reference) 10.24 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 Form S-4 and incorporated herein by reference) 10.25 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 Form S-4 and incorporated herein by reference) 10.26 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 Form S-4 and incorporated herein by reference) 10.27 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 Form S-4 and incorporated herein by reference) 10.28 Amended and Restated Stockholders Agreement dated June 18, 1996, among Holding and certain stockholders of Holding (filed as Exhibit 10.28 to the Form S-4 and incorporated herein by reference) 10.3 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 Form S-4 and incorporated herein by reference) *10.30 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Willard J. Rathbun. *10.31 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Craig Rathbun. *21 List of Subsidiaries *27 Financial Data Schedule * Filed herewith. EX-2.14 2 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT AMONG BERRY PLASTICS CORPORATION, BERRY PLASTICS DESIGN CORPORATION, VIRGINIA DESIGN PACKAGING CORP. AND THE SHAREHOLDERS OF VIRGINIA DESIGN PACKAGING CORP. MAY 13, 1997 TABLE OF CONTENTS PAGE SECTION 1. TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF CERTAIN SPECIFIED LIABILITIES AND RELATED MATTERS.. 1 1.1. Transfer of Assets 1 1.2. Assets Not Being Transferred 3 1.3. Liabilities Being Assumed 4 1.4. Liabilities Not Being Assumed 4 1.5. Instruments of Conveyance and Transfer, Etc. 6 1.6. Further Assurances, Assumed Taxes, Etc. 6 1.7. Assignment of Contracts, Rights, Etc. 7 1.8. Bulk Sales Laws 7 SECTION 2. CLOSING PAYMENTS; ESCROW; PURCHASE PRICE ADJUSTMENT; ALLOCATION................................. 8 2.1. Purchase Price; Other Payments 8 2.2. Closing Payment 8 2.3. Debt Payments by Buyer 8 2.4. Escrow Account 9 2.5. Purchase Price Adjustment 9 (a) Preparation of Final Working Capital Statement 9 (b) Review by the Seller 10 (c) Adjustment 11 2.6. Allocation of Purchase Price 11 2.7. Closing 12 SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS 12 3.1. Title to the Shares 12 3.2. Authority; Noncontravention; Consents 12 SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS.............................. 13 4.1. Organization; Good Standing; Qualification and Power 13 4.2. Equity Investments 13 4.3. Capital Stock 13 4.4. Authority; Noncontravention; Consents 14 4.5. Financial Statements 14 4.6. Absence of Undisclosed Liabilities 15 4.7. Absence of Changes 15 4.8. Tax Matters 16 4.9. Title to Assets, Properties and Rights and Related Matters................................... 17 4.10. Real Property-Owned 18 4.11. Intellectual Property 18 4.12. Agreements, No Defaults, Etc. 19 4.13. Litigation, Etc. 20 4.14. Compliance; Governmental Authorizations 21 4.15. Labor Relations; Employees 21 4.16. ERISA Compliance 22 4.17. Environmental Matters 23 4.18. Brokers 24 4.19. Related Transactions 24 4.20. Accounts and Notes Receivable 25 4.21. Accounts and Notes Payable 25 4.22. Inventories 25 4.23. Warranties of Products; Products Liability; Regulatory Compliance................................ 26 4.24. Suppliers and Vendors 26 4.25. Customers 26 4.26. Disclosure 26 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER 27 5.1. Authority 27 5.2. Noncontravention; Consents 27 5.3. Brokers 28 SECTION 6. CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL PRE-CLOSING AGREEMENTS......... 28 6.1. Affirmative Covenants of the Seller 28 6.2. Negative Covenants of the Seller 29 6.3. Confidentiality 30 6.4. Consents 30 6.5. Efforts to Consummate 30 6.6. Notice of Prospective Breach 30 6.7. Public Announcements 30 6.8. Negotiation with Others. 31 SECTION 7. CONDITIONS 31 7.1. Conditions to Each Party's Obligations 31 (a) Approvals 32 (b) No Injunctions or Restraints 32 (c) Statutes 32 7.2. Conditions to Obligations of the Buyer 32 (a) Accuracy of Representations and Warranties 32 (b) Performance of Obligations of the Seller and the Shareholders.............................. 32 (c) Authorization 33 (d) Opinion of the Seller's and the Shareholders' Counsel 33 (e) Consents and Approvals 33 (f) Government Consents, Authorizations, Etc. 33 (g) Corporate Resolutions. 33 (h) Absence of Material Adverse Change 33 (i) Officer's Certificate. 34 (j) Instruments of Transfer 34 (k) Proprietary Information Agreements 34 (l) Change and Use of Seller's Name 34 (m) Releases of Encumbrances 34 (n) Due Diligence 34 (o) Employment Agreement 34 (p) Consulting and Noncompetition Agreement. 35 (q) Escrow Agreement 35 (r) Financing 35 (s) Environmental 35 (t) Foreign Person Affidavit 35 (u) Transfer of Cash 35 (v) Real Property Matters 35 (w) Forms 5500 36 (x) Power of Attorney 36 (y) Audited Financial Statements 36 (z) Equipment Purchase 36 7.3. Conditions to Obligations of the Seller and the Shareholders.............................. 36 (a) Accuracy of Representations and Warranties 36 (b) Performance of Obligations of the Buyer 36 (c) Authorization 37 (d) Government Consents, Authorizations, Etc. 37 (e) Corporate Resolutions 37 (f) Officer's Certificate 37 (g) Payment of Closing Payment and Debt 37 (h) Employment Agreement 37 (i) Consulting and Noncompetition Agreement 37 (j) Escrow Agreement 38 (k) Opinion of Parent's and the Buyer's Counsel 38 (l) Equipment Purchase 38 SECTION 8. INDEMNIFICATION 38 8.1. Indemnification Generally; Etc. 38 (a) By the Seller Group in Favor of the Buyer Group 38 (b) By Each Shareholder in Favor of the Buyer Group 39 (c) By the Buyer in Favor of the Seller and the Shareholders.............................. 40 8.2. Limitations on Indemnification 40 (a) Indemnity Basket for the Seller and the Shareholders 40 (b) Indemnity Cap for the Seller and the Shareholders 40 (c) Indemnity Basket for the Buyer Group 41 8.3. Assertion of Claims; Payment of Claims; Right of Set- Off; Levy Debt Not Subject to Escrow...... 41 8.4. Notice and Defense of Third Party Claims 41 8.5. Survival of Representations and Warranties 43 8.6. No Third Party Reliance 43 8.7. Remedies Exclusive 43 SECTION 9. ADDITIONAL AGREEMENTS 44 9.1. Expenses 44 9.2. Disclosure of Information; Noncompetition 44 9.3. Use of Name 45 9.4. Relationships with Vendors and Customers 45 9.5. Health Insurance 46 9.6. .......................................... 46 9.7. Undertakings of the Buyer 46 9.8. Employees; Seniority; WARN Act Compliance 46 9.9. COBRA Coverage 47 SECTION 10. TERMINATION; EFFECT OF TERMINATION 47 10.1. Termination 47 10.2. Effect of Termination 48 SECTION 11. MISCELLANEOUS PROVISIONS 48 11.1. Amendment 48 11.2. Extension; Waiver 48 11.3. Entire Agreement 49 11.4. Severability 49 11.5. No Third-Party Beneficiaries; Successors and Assigns 49 11.6. Headings 49 11.7. Notices 49 11.8. Counterparts 50 11.9. Governing Law 50 11.10. Incorporation of Exhibits and Schedules 51 11.11. Construction 51 11.12. Remedies 51 11.13. Waiver of Jury Trial 51 11.14. Recovery of Attorney's Fees and Costs 51 -i- SCHEDULES AND EXHIBITS Annex I - Definitions Schedule I - Machinery, Equipment, etc. Schedule II - Real Property Schedule III - Permits Schedule IV - Excluded Assets Schedule V - Retained Contracts Schedule VI - Designated Debt Schedule VII - Allocation of Purchase Price Schedule VIII - Capitalization Schedule IX - Compensation Rates Exhibit A - Bill of Sale Exhibit B - Escrow Agreement Exhibit C - Form of Opinion of Seller's and Shareholders' Counsel Exhibit D - Form of Consent Exhibit E - Form of Employment Agreement for Larry Goldstein Exhibit F - Form of Noncompetition Agreement for Lee Goldstein Exhibit G - Form of Power of Attorney Exhibit H - Form of Opinion of Parent's and the Buyer's Counsel ASSET PURCHASE AGREEMENT dated as of May 13, 1997, among BERRY PLASTICS CORPORATION, a Delaware corporation ("Parent"), BERRY PLASTICS DESIGN CORPORATION, a Delaware corporation (the "Buyer"), VIRGINIA DESIGN PACKAGING CORP., a Virginia corporation (the "Seller"), and LEE D. GOLDSTEIN and IDA S. GOLDSTEIN, each an individual and a shareholder of the Seller (the "Shareholders"). The Seller is engaged in the business (the "Subject Business") of developing, manufacturing, distributing and selling packaging products including expandable polystyrene. The parties desire that the Seller sell, transfer, convey and assign to the Buyer substantially all the assets, properties, interests in properties and rights of the Seller, and that the Buyer assume certain specified liabilities of the Seller, and that the Buyer purchase and acquire the same, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties hereby agree as follows: SECTION 1. TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF CERTAIN SPECIFIED LIABILITIES AND RELATED MATTERS. 1.1. TRANSFER OF ASSETS. (a) On the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, transfer, convey and assign to the Buyer, and the Buyer shall purchase and acquire from the Seller, all of the assets, properties, interests in properties and rights of the Seller of every kind and description, wherever located (other than the Excluded Assets), as the same shall exist immediately prior to the Closing, free and clear of all Encumbrances (other than Permitted Encumbrances), including, without limitation, the following: (i) all cash, accounts and notes receivable, deposits, credits, prepaid expenses and other current assets; (ii) all owned machinery, equipment, vehicles, furniture, removable leasehold improvements, molds, office equipment, supplies, spare parts and other items of tangible personal property, substantially all of which are set forth on SCHEDULE I; (iii) the real property, together with the buildings and other structures, fixtures and improvements situated thereon, located in Suffolk, Virginia, as more fully described on SCHEDULE II (the "Real Property"); (iv) the entire right, title and interest in and to the Requisite Rights, including, without limitation, the trademarks set forth in the Disclosure Letter and all variations thereof, the name "Virginia Design Packaging Corp.", "Virginia Design" and all variations thereof, and all logos of the Seller; (v) all inventories of work-in-process, raw materials, finished products, supplies, spare parts, shipping containers and other materials; (vi) subject to Section 1.7, all rights in, to and under all Contracts relating to the Subject Business or the Purchased Assets and set forth in the Disclosure Letter in response to Section 4.12 (other than such items that constitute Excluded Assets) or not required to be set forth therein because of the limitations contained in Section 4.12 (the "Assumed Contracts"); (vii) all records of the Seller relating to the Subject Business or the Purchased Assets, either in original or photostatic form (except in the case of all computer software, which must be in original form, whether in machine or man readable format), wherever located, including, without limitation, property records, production records, engineering records, purchasing and sales records, personnel and payroll records, copies of financial and accounting records, mailing lists, customer and vendor lists and records and computer programs and related software; (viii) all interests in and to telephone and telex numbers and all listings in all telephone books and directories; (ix) all stationery, purchase orders, forms, labels, shipping material, catalogs, brochures, art work, photographs and advertising and sales material and literature; (x) to the extent transferable, all Permits of the Seller, all of which that are material to the Subject Business being set forth on SCHEDULE III; (xi) all rights (including experience ratings) with respect to unemployment, workers' and workmen's compensation, and other similar insurance reserves relating to employees of the Seller who become employees of the Buyer; PROVIDED, HOWEVER, that the Seller shall retain any liability or obligation arising out of any retroactively increased premium relating to the insurance described in this subsection (xi); (xii) all rights in and to insurance and indemnity claims (other than such rights relating exclusively to the Excluded Assets); (xiii) all rights, choses in action and claims (known or unknown, matured or unmatured, accrued or contingent) of the Seller against third parties that relate to the Subject Business or the Purchased Assets (unless such right or chose in action is a claim or counterclaim related to litigation which is not an Assumed Obligation); and (xiv) all other assets, properties, rights and businesses of every kind and nature owned by the Seller relating to the Subject Business or the Purchased Assets or in which the Seller has an interest as of the Closing, known or unknown, fixed or unfixed, choate or inchoate, accrued, absolute, contingent or otherwise, whether or not specifically referred to in this Agreement, other than the Excluded Assets. (b) For convenience of reference, the assets, properties, interests in properties and rights that are to be sold, transferred, conveyed and assigned to the Buyer by the Seller pursuant to Section 1.1(a) are hereinafter collectively referred to as the "Purchased Assets." 1.2. ASSETS NOT BEING TRANSFERRED. Anything contained in Section 1.1 or elsewhere herein to the contrary notwithstanding, there are expressly excluded from the assets, properties, interests in properties and rights of the Seller to be sold, transferred, conveyed and assigned to the Buyer the following (collectively, the "Excluded Assets"): (i) the consideration delivered to the Seller pursuant to this Agreement; (ii) originals of financial and accounting records, the minute books, ownership record books and information, originals of all financial statements and information and Tax Returns; (iii) all right, title and interest in, to and under the assets set forth on SCHEDULE IV; (iv) all rights and interests of the Seller and the Shareholders in, to and under the Contracts listed on SCHEDULE V (the "Retained Contracts"); (v) all rights and interest of the Seller in the account receivable of the Seller in the amount of $60,000 representing an amount owed to the Seller by Lee Goldstein; and (vi) all assets, interests and rights related to or owned by any Employee Plan, sponsored or maintained by the Company or any of its ERISA Affiliates. 1.3. LIABILITIES BEING ASSUMED. (a) Except as otherwise provided herein and subject to the terms and conditions of this Agreement, simultaneously with the sale, transfer, conveyance and assignment to the Buyer of the Purchased Assets, the Buyer shall assume, and hereby agrees to perform and discharge when due: (i) all liabilities and obligations of the Seller (other than those liabilities and obligations described in Sections 1.4 (a) through (h)) which are accrued or reserved against on the December Balance Sheet and which remain unpaid as of the Closing to the extent of any remaining reserve or accrual; (ii) all liabilities and obligations of the Seller (other than those liabilities and obligations described in Sections 1.4(a) through (h)) which are incurred in the ordinary course of the Subject Business, consistent with past practice, subsequent to the December Balance Sheet Date and through the Closing Date and which remain unpaid as of the Closing (together with the liabilities and obligations described in (i) above, the "Assumed Payables"); and (iii) all liabilities and obligations arising or to be performed after the Closing under the Assumed Contracts that are effectively assigned and transferred to the Buyer including any Assumed Contracts the benefits and burdens of which are assigned to the Buyer under Section 1.7. (b) For convenience of reference, the foregoing liabilities and obligations of the Seller being assumed by the Buyer are collectively referred to herein as the "Assumed Obligations." 1.4. LIABILITIES NOT BEING ASSUMED. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, EXCEPT FOR THE ASSUMED OBLIGATIONS, THE BUYER SHALL NOT AND DOES NOT ASSUME ANY LIABILITIES OR OBLIGATIONS (FIXED OR CONTINGENT, KNOWN OR UNKNOWN, MATURED OR UNMATURED) OF THE SELLER WHETHER OR NOT ARISING OUT OF OR RELATING TO THE PURCHASED ASSETS OR THE SUBJECT BUSINESS OR ANY OTHER BUSINESS OF THE SELLER, ALL OF WHICH LIABILITIES AND OBLIGATIONS SHALL AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF THE SELLER (the "Excluded Obligations"). Without limiting the generality of the foregoing, the Buyer is not assuming any of the following liabilities and obligations of the Seller: (a) all liabilities and obligations for (1) income Taxes and (2) Taxes that are neither accrued nor reserved against on the December Balance Sheet nor incurred in the ordinary course of the Subject Business, consistent with past practice, subsequent to the December Balance Sheet Date; (b) all liabilities and obligations relating to or arising under any Environmental, Health and Safety Law relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling or emission, migration, discharge or release of pollutants, contaminants, chemicals or industrial, hazardous or toxic substances, crude oil or any fraction thereof or wastes of any kind into the environment or otherwise, in any such case, to the extent such liability or obligation results from or arises out of events, facts or circumstances occurring or existing on or prior to the Closing, notwithstanding that the date on which such action or claim is commenced or made is after the Closing; (c) all liabilities and obligations relating to or arising out of any claim, action, suit, investigation or legal or administrative or arbitration proceeding which is based on or related to products (or parts or components thereof) manufactured, sold, distributed or otherwise disposed of or services performed by the Seller on or before the Closing Date, or which is based on events occurring on or before the Closing Date, in each case notwithstanding that the date on which such action, suit, claim, investigation or proceeding is commenced or made is after the Closing; (d) all liabilities and obligations of any nature whatsoever of the Seller to any Affiliate of the Seller (provided that, pursuant to Section 2.3, the Buyer is obligated to pay, on behalf of the Seller, certain Designated Debt that is owed to an Affiliate of the Seller); (e) all liabilities and obligations associated with, related to or owed by any Employee Plan sponsored or maintained by the Seller or any of its ERISA Affiliates; (f) all liabilities and obligations of the Seller or any Shareholder under any guarantee for the payment of money or otherwise; (g) all liabilities and obligations of the Seller or any Shareholder under the Promissory Note issued by the Seller to Nancy R. Levy in the face amount of $300,000 dated September 25, 1986 and all documents and instruments related thereto (the "Levy Debt"); (h) all liabilities and obligations of any nature whatsoever relating to the Excluded Assets. 1.5. INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC. At the Closing, the Seller shall deliver (or cause to be delivered) to the Buyer, such deeds, bills of sale, endorsements, assignments and other good and sufficient instruments of sale, transfer, conveyance and assignment as shall be necessary to sell, transfer, convey and assign to the Buyer, in accordance with the terms hereof, title to the Purchased Assets, free and clear of all Encumbrances (other than Permitted Encumbrances), including, without limitation, the delivery of a bill of sale, assignment and assumption agreement (the "Bill of Sale"), substantially in the form of EXHIBIT A hereto. Simultaneously therewith, the Seller shall take all steps as may be required to put the Buyer in possession and operating control of the Purchased Assets. 1.6. FURTHER ASSURANCES, ASSUMED TAXES, ETC. (a) The Seller shall promptly transfer to the Buyer any amounts which shall be received by the Seller after the Closing which constitute Purchased Assets. The Seller shall, at any time and from time to time after the Closing, upon the reasonable request of the Buyer, do, execute, acknowledge, deliver and file, or shall cause to be done, executed, acknowledged, delivered or filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better selling, transferring, conveying, assigning and assuring to the Buyer, or for aiding and assisting in the collection of or reducing to possession by the Buyer, any of the assets, properties, interests in properties or rights being purchased by the Buyer hereunder. The Seller shall pay its own costs and legal expenses incurred in connection with complying with the provisions of this Section 1.6; PROVIDED, HOWEVER, that the Buyer shall pay the costs and legal expenses (other than expenses of legal counsel to the Seller) of creating the necessary documents to comply with the provisions of this Section 1.6. (b) After the Closing, the Seller or either Shareholder shall, promptly upon receiving notice or gaining knowledge thereof, notify the Buyer of the existence of any Tax Liability that constitutes an Assumed Obligation that must be discharged and/or included in a Tax Return required to be filed. In connection therewith, the Seller and the Shareholders shall cooperate with the Buyer to the extent necessary or appropriate to prepare, execute and file any Tax Return or other filing required in connection with such Assumed Obligation. In addition, the amounts of any refunds for any payments made by the Buyer, the Seller or the Shareholders with respect to any Taxes that are Assumed Obligations shall be for the benefit of the Buyer, and the Seller and the Shareholders shall either promptly pay over any such amounts actually received (including interest received, if any) by them with respect to such refunds or take whatever actions are necessary to assist the Buyer in recovering such amounts. (c) After the Closing, the Buyer shall, promptly upon receiving notice or gaining knowledge thereof, notify the Seller and the Shareholders of the existence of any Tax Liability that constitutes an Excluded Obligation that must be discharged and/or included in a Tax Return required to be filed. In connection therewith, the Buyer shall cooperate with the Seller and the Shareholders to the extent necessary or appropriate to prepare, execute and file any Tax Return or other filing required in connection with such Excluded Obligation. In addition, the amounts of any refunds for any payments made by the Buyer, the Seller or the Shareholders with respect to any Taxes that are Excluded Obligations shall be for the benefit of the Seller and the Shareholders, and the Buyer shall either promptly pay over any such amounts actually received (including interest received, if any) by the Buyer with respect to such refunds or take whatever actions are necessary to assist the Seller and the Shareholders in recovering such amounts. 1.7. ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything contained in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any Contract or any claim of or right to any benefit arising thereunder or resulting therefrom or any Permit if an attempted transfer, sublease or assignment thereof, without the consent of any other party thereto, would constitute a breach thereof, is prohibited by law or would in any way affect the rights of the Buyer or the Seller thereunder. The Seller and the Shareholders shall use their best efforts (and the Buyer shall assist the Seller and the Shareholders) both after and prior to the Closing to obtain such consents to the assignment or transfer thereof to vest in the Buyer all of the Seller's right, title and interest in such Contracts, in all cases in which such consent is required for assignment or transfer. If such consent is not obtained, the Seller and the Shareholders shall cooperate with the Buyer in any arrangements necessary or desirable, on commercially reasonable terms, to provide for the Buyer the benefits and to have the Buyer assume the burdens arising after the Closing thereunder, including, without limitation, enforcement for the benefit of the Buyer, and assumption by the Buyer of the costs of enforcing, any and all rights of the Seller thereunder against the other party thereto arising out of the cancellation thereof by such other party or otherwise. 1.8. BULK SALES LAWS. The Buyer, the Seller and the Shareholders hereby waive compliance with the provisions of any applicable bulk sales laws. SECTION 2. CLOSING PAYMENTS; ESCROW; PURCHASE PRICE ADJUSTMENT; ALLOCATION. 2.1. PURCHASE PRICE; OTHER PAYMENTS. (a) The aggregate purchase price (the "Purchase Price") to be paid for the Purchased Assets shall be $1,761,000{*} plus the Additional Escrow Amount, if any, payable as follows: (i) pursuant to Section 2.2 below, $1,761,000 (as adjusted based on the amount of Designated Debt){*} is payable to the Seller on the Closing Date; and (ii) pursuant to Section 2.4 below, $300,000 shall be deposited in an escrow account pursuant to the Escrow Agreement. (b) In addition, (i) pursuant to Section 2.3 below, the Buyer, on behalf of the Seller, shall pay on the Closing Date, and/or shall deposit funds with the Buyer on the Closing Date for the payment of, the Designated Debt; and (ii) pursuant to the Consulting and Noncompetition Agreement, the Buyer shall pay $800,000 to Lee Goldstein, payable as set forth in the Consulting and Noncompetition Agreement. 2.2. CLOSING PAYMENT. As used herein, "Closing Payment" shall mean an amount equal to $1,761,000 (as such amount is increased or decreased based on the Designated Debt). Subject to the conditions set forth herein, the Closing Payment shall be paid, or caused to be paid, by the Buyer at the Closing by wire transfer to the account or accounts designated by written notice from the Seller to the Buyer at least two Business Days before the Closing Date. 2.3. DEBT PAYMENTS BY BUYER. Subject to the conditions set forth herein, on the Closing Date and on behalf of the Seller, the Buyer shall pay and satisfy, or cause to be paid and satisfied, in full certain outstanding indebtedness of the Seller, the amounts and general description of which as of the date hereof are set forth on SCHEDULE VI (the "Designated Debt"). The outstanding amounts of all notes, debentures and other payables set forth on SCHEDULE VI shall be paid on the Closing Date by check or by wire transfer (with wire transfers being made to those from whom encumbrance releases are required) to the accounts designated in writing by the payees to the Buyer or the Seller. In addition, the Buyer shall pay the lesser of $40,000 and 50% of the prepayment penalty (which amount shall not constitute Designated Debt and shall not therefore reduce the Closing Payment) relating to the payment of the indebtedness outstanding under the Industrial Development Authority of the City of Suffolk Industrial Development Refunding Revenue Bonds; provided that any interest earned on amounts placed in escrow to repay such bonds shall be for the benefit of the Seller. 2.4. ESCROW ACCOUNT. On the Closing Date, the Buyer, the Seller, the Shareholders and Lawyers Title Insurance Corporation shall enter into the escrow agreement substantially in the form of EXHIBIT B hereto (the "Escrow Agreement"), pursuant to which, on the Closing Date, the Buyer shall deposit with Lawyers Title Insurance Corporation the amount of $300,000 in an escrow account (the "Escrow Account"). As used herein, "Additional Escrow Amount" shall mean any amount payable to the Seller from time to time pursuant to the Escrow Agreement. 2.5. PURCHASE PRICE ADJUSTMENT. (a) PREPARATION OF FINAL WORKING CAPITAL STATEMENT. As promptly as practicable following the Closing Date (but in no event later than 60 days after the Closing Date), the Buyer shall prepare, and cause Ernst & Young LLP, the accountants of the Buyer (the "Buyer's Accountants"), to certify, a statement (the "Final Working Capital Statement") setting forth the computation of the Final Working Capital (as defined below) of the Seller as of the Closing Date, which statement shall be prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied with the historical financials of the Seller. For purposes of preparing the Final Working Capital Statement, "Final Working Capital" shall mean working capital as determined in accordance with Chapter 3 of Accounting Research Bulletin 43 and other GAAP, consistently applied with the Seller's historical financials, and (i) specifically including the Seller's prepaid deposits to the extent such deposits have value and are recoverable, but specifically excluding security deposits on outstanding operating leases considered as other assets on the Seller's financial statements, (ii) specifically excluding current liabilities included in Designated Debt, (iii) specifically excluding prepaid expenses with no value on a going-forward basis, and (iv) inventory shall be, as of the Closing Date, good, usable and of merchantable quality. The Seller's inventory shall include no items, unless a reserve has been established with respect thereto on the books of the Seller, which are (A) over one year old, (B) in excess of one year's sales requirements, based on the Seller's historical sales to its continuing customers, (C) decorated or colored items (other than white) for which the Seller has no customer purchase orders, or any item, or the matching component to any item, which has been discontinued in the Seller's product line or (D) discontinued by the Seller's customers for which there are no other current customers. (b) REVIEW BY THE SELLER. (i) Upon completion of the certified Final Working Capital Statement, the Buyer shall promptly deliver the same to the Seller with a notice ("Buyer's Notice of Adjustment") of the Buyer setting forth its proposed adjustment, if any, of the Purchase Price as contemplated by Section 2.1. The Buyer's Notice of Adjustment will include adequate detail including, without limitation, descriptions of any write-downs or reserves proposed by the Buyer and the reasons therefore, to reasonably facilitate the Seller's review. During and after the preparation of the Final Working Capital Statement until the Final Determination Date (as defined below), the Buyer shall consult with the Seller and its advisors and provide the Seller and its advisors with timely access to the employees and records of the Buyer and the work papers, trial balances and similar materials used in connection with the preparation of the Final Working Capital Statement. (ii) Following receipt of the Buyer's Notice of Adjustment, the Seller will be afforded a period of 20 Business Days (the "First 20-Day Period") to review the Buyer's Notice of Adjustment. At or before the end of the First 20-Day Period, the Seller will either (A) accept the Final Working Capital (as set forth in the Buyer's Notice of Adjustment) in its entirety, in which case the Final Working Capital will be as set forth in the Buyer's Notice of Adjustment or (B) deliver to the Buyer a written notice (the "Objection Notice") containing a sufficiently detailed written explanation of those items in the Final Working Capital Statement (as set forth in the Buyer's Notice of Adjustment) which the Seller disputes, in which case the items identified by the Seller shall be deemed to be in dispute. The failure by the Seller to deliver the Objection Notice within the First 20-Day Period shall constitute the Seller's acceptance of the Final Working Capital as set forth in the Buyer's Notice of Adjustment. If the Seller delivers the Objection Notice in a timely manner, then, within a further period of 20 Business Days from the end of the First 20-Day Period the parties and, if desired, their accountants will attempt to resolve in good faith any disputed items and reach a written agreement (the "Settlement Agreement") with respect thereto. Failing such resolution, the unresolved disputed items will be referred for final binding resolution to an independent nationally- recognized firm of certified public accountants mutually acceptable to the Seller and the Buyer (the "Arbitrating Accountants"), the fees and expenses of which shall be borne equally by the Shareholders, on the one hand, and the Buyer, on the other hand. The Final Working Capital will be deemed to be as determined by the Arbitrating Accountants. Such determination (the "Accountants' Determination") shall be (A) in writing, (B) furnished to the Seller and the Buyer as soon as practicable after the items in dispute have been referred to the Arbitrating Accountants, (C) made in accordance with Chapter 3 of Accounting Research Bulletin 43 and other GAAP, consistently applied with the Seller's historical financials and (D) nonappealable and incontestable by the Seller, any Shareholder, the Buyer or any of their respective Affiliates and not subject to collateral attack for any reason. (iii) For purposes of this Section 2.5, the "Final Determination Date" shall mean the earliest to occur of (A) the 21st day following the receipt by the Seller of the Buyer's Notice of Adjustment if the Seller shall have failed to deliver the Objection Notice to the Buyer within the First 20-Day Period, (B) the date on which either the Seller or the Buyer gives the other a written notice to the effect that such party has no objection to the other party's determination of the Final Working Capital, (C) the date on which the Seller and the Buyer execute and deliver a Settlement Agreement and (D) the date as of which the Seller and the Buyer shall have received the Accountants' Determination. (c) ADJUSTMENT. (i) If the Final Working Capital is greater than $690,000 (the amount of such excess over $690,000 being referred to herein as the "Underpayment Amount"), then, within five Business Days following the Final Determination Date, the Buyer shall pay, or cause to be paid, to the Seller the Underpayment Amount with interest from the Closing Date at an annualized rate of 5%. Parent and the Buyer shall be jointly and severally liable for the obligations of the Buyer in this Section 2.5(c). (ii) If the Final Working Capital is less than $640,000 (the amount of such shortfall being referred to herein as the "Overpayment Amount"), then, within five Business Days following the Final Determination Date, the Seller and the Shareholders shall pay, or cause to be paid, to the Buyer the Overpayment Amount with interest from the Closing Date at an annualized rate of 5%. The Seller and each of the Shareholders shall be jointly and severally liable for the obligations of the Shareholders in this Section 2.5(c). 2.6. ALLOCATION OF PURCHASE PRICE. The Purchase Price and the Assumed Obligations that are properly treated as purchase price for Federal income Tax purposes shall initially be allocated to the Purchased Assets in accordance with SCHEDULE VII. The Seller and the Buyer shall complete a Form 8594 Asset Acquisition Statement under Section 1060 of the Code promptly upon determination of Final Working Capital at the Final Determination Date, in a manner consistent with SCHEDULE VII; PROVIDED, HOWEVER, that the amount of purchase price allocated to current assets in working capital will be adjusted in accordance with Final Working Capital. The parties shall each file a copy of such form with their respective federal income Tax returns for the period that included the Closing Date. None of the parties shall take any action inconsistent with the allocation of the Purchase Price set forth on SCHEDULE VII. 2.7. CLOSING. The closing (the "Closing") for the consummation of the transactions contemplated by this Agreement, unless another date or place is agreed to by the parties, shall take place at the offices of O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112, as soon as practicable after the satisfaction or waiver (to the extent the same may be waived) of the conditions set forth in Section 7 (such date on which the Closing is consummated being referred to herein as the "Closing Date"). SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each Shareholder severally represents and warrants to the Buyer as follows: 3.1. TITLE TO THE SHARES. Such Shareholder is the lawful owner, of record and beneficially, of those shares of capital stock set forth opposite his or her name on SCHEDULE VIII hereto and has good and marketable title to such shares. 3.2. AUTHORITY; NONCONTRAVENTION; CONSENTS. (a) Such Shareholder has full and absolute legal right, capacity, power and authority to enter into this Agreement and any Related Document to which he or she is a party and this Agreement and each such Related Document is the valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except as enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other Laws affecting creditors rights generally or by general principles of equity. (b) Except as set forth in Section 3.2 of the Disclosure Letter, neither the execution, delivery and performance of this Agreement by such Shareholder or any Related Document to which he or she is a party nor the consummation of the transactions contemplated hereby or thereby nor compliance by such Shareholder with any of the provisions hereof or thereof will (i) conflict with, or result in any violations of, or cause a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, amendment, cancellation or acceleration of any obligations contained in or the loss of any material benefit under, any term, condition or provision of any Contract to which such Shareholder is a party, or by which such Shareholder or any of his or her properties may be bound or (ii) violate any Law applicable to such Shareholder or any of his or her properties, which conflict or violation would prevent the consummation of the transactions contemplated by this Agreement or result in an Encumbrance on the Purchased Assets or give rise to any claim against the Seller, the Buyer, or any Affiliate of the Buyer or have a Material Adverse Effect. (c) Except as contemplated by this Agreement, no Permit, authorization, consent or approval of or by, or any notification of or filing with, any Person or Governmental Entity is required in connection with the execution, delivery and performance by such Shareholder of this Agreement or any Related Document to which he or she is a party or the consummation by such Shareholder of the transactions contemplated hereby and thereby. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS. The Seller and the Shareholders jointly and severally represent and warrant to the Buyer and Parent as follows: 4.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Virginia, has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted and, except as set forth in Section 4.1 of the disclosure letter dated the date of this Agreement (the "Disclosure Letter") certified by the Chief Executive Officer of the Seller and each of the Shareholders and delivered by the Seller and the Shareholders to the Buyer, is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, each of which jurisdictions is set forth in Section 4.1 of the Disclosure Letter. The Seller has delivered to the Buyer true and complete copies of the Seller's Charter and the Seller's By-laws, in each case as amended to the date hereof. 4.2. EQUITY INVESTMENTS. Except as set forth in Section 4.2 of the Disclosure Letter, the Seller has never had, nor does it currently have, any subsidiaries, nor has it owned in the last five years, nor does it currently own, any capital stock or other proprietary interest, directly or indirectly, in any Person. 4.3. CAPITAL STOCK. The authorized capital stock of the Seller consists of 50,000 shares of Common Stock, no par value, of which 20,000 shares are issued and outstanding. All of such issued and outstanding shares are owned of record by the Shareholders in the amounts set forth on SCHEDULE VIII. Other than the Common Stock described above and an option issued to Mr. Alan J. Strassman to acquire 2,000 shares of Common Stock of the Seller, there are no outstanding securities, options, warrants, rights or agreements or other commitments pursuant to which the Seller is or may become obligated to issue any shares of its capital stock, or any securities convertible into or exercisable or exchangeable for such capital stock. 4.4. AUTHORITY; NONCONTRAVENTION; CONSENTS. (a) The Seller has all the requisite corporate power and authority to enter into this Agreement and each Related Document to which it is a party and any and all instruments necessary or appropriate in order to effectuate fully the terms and conditions of this Agreement and each Related Document to which it is a party and all related transactions contemplated thereby and to perform its obligations hereunder and thereunder; the execution, delivery and performance of this Agreement and each Related Document to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Seller; and this Agreement and each Related Document to which it is a party has been duly and validly executed and delivered by the Seller and this Agreement and each Related Document to which it is a party is the valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other Laws affecting creditors rights generally or by general principles of equity. (b) Neither the execution, delivery and performance of this Agreement and the Related Documents to which the Seller is a party nor the consummation by the Seller of the transactions contemplated hereby or thereby nor compliance by the Seller with any provision hereof will (i) conflict with, or result in any violations of, or cause a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, amendment, cancellation or acceleration of any obligation contained in or the loss of any material benefit under, or result in the creation of any Encumbrance upon any of the Purchased Assets under any term, condition or provision of (x) the Seller's Charter or the Seller's By-laws or (y) except as set forth in Section 4.4(b) of the Disclosure Letter, any Contract to which the Seller is a party or by which its properties or assets are bound, or (ii) violate any Laws applicable to the Seller or any of its properties. (c) Except as set forth in Section 4.4(c) of the Disclosure Letter, no consent, approval, Order or authorization of, registration, declaration or filing with, or notification to any Governmental Entity or any other third party is required in connection with the execution, delivery and performance by the Seller of this Agreement or the Related Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby. 4.5. FINANCIAL STATEMENTS. The Seller has previously delivered to the Buyer: (i) the audited balance sheets of the Seller as of December 31, 1995 and the related statements of income, stockholders' equity, cash flows and supplemental data for the fiscal period then ended; (ii) the draft of the audited balance sheet of the Seller as of December 31, 1996 and the related statements of income, stockholders' equity, cash flows and supplemental data for the fiscal period then ended; (iii) the internally prepared balance sheet of the Seller as of March 31, 1997 and the related statements of income and cash flows for the three months then ended; (all of such statements being, collectively, the "Financial Statements," and the balance sheet as of December 31, 1996 being the "December Balance Sheet" and the date thereof being the "December Balance Sheet Date"). Except as set forth in Section 4.5 of the Disclosure Letter, the Financial Statements (i) are in accordance with the books and records of the Seller, (ii) fairly present the financial condition of the Seller on the respective dates indicated and the results of operations, stockholders' equity and cash flows of the Seller for the respective periods indicated and (iii) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby. 4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section 4.6 of the Disclosure Letter, the Seller has no material Liability, except for (i) Liabilities reflected in the Liabilities section of the December Balance Sheet, (ii) Liabilities under Contracts that are set forth in the Disclosure Letter which have arisen in the ordinary course of business (none of which relates to a breach of contract), and (iii) Liabilities that have arisen since the date of the December Balance Sheet in the ordinary course of business (none of which relates to breach of contract, breach of warranty, tort, infringement, violation of Law, or any action, suit or Proceeding (including any Liability under any Environmental, Health and Safety Laws)). There were no loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975) that were not adequately provided for on the December Balance Sheet and the related Financial Statements for the period then ended. Except as set forth in Section 4.6 of the Disclosure Letter, the Seller has not, either expressly or by operation of law, assumed or undertaken any Liability of any other Person, including, without limitation, any obligation for corrective or remedial action relating to Environmental, Health and Safety Laws. 4.7. ABSENCE OF CHANGES. Except as set forth in Section 4.7 of the Disclosure Letter, since December 31, 1996, there has not been any Material Adverse Change. Since that date, except as set forth in Section 4.7 of the Disclosure Letter, the Seller has been operated in the ordinary course, consistent with past practice, and: (a) no fee, interest, dividend, royalty or any other payment of any kind has been made by the Seller to any Shareholder or any Affiliate of the Seller or any Shareholder; (b) no party (including the Seller) has accelerated, terminated, modified or canceled any Contract (or series of related Contracts) involving more than $5,000 to which the Seller is a party or by which the Seller is bound and, to the Best Knowledge of the Seller and the Shareholders, no party intends to take any such action; (c) the Seller has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (d) the Seller has not taken any action that would violate any of the negative covenants set forth in Section 6.2 of this Agreement; and (e) there has been no agreement, understanding or authorization, whether in writing or otherwise, for the Seller to take any of the actions specified in items (a) through (d) above. 4.8. TAX MATTERS. Except as set forth in Section 4.8 of the Disclosure Letter, the Seller (a) has paid all Taxes required to be paid by it through the date hereof and (b) has filed or caused to be filed in a timely manner (within any applicable extension periods) all Tax Returns with appropriate Governmental Entities in all jurisdictions in which the Tax Returns are required to be filed, and all such Tax Returns are true and complete. The Seller is not, nor has it ever been, included in any consolidated or combined Tax Return for Federal, state or local Tax purposes or is it a member of an affiliated group within the meaning of Section 1504 of the Code. All Taxes, including those shown to be due on each of the Tax Returns, have been timely paid in full. No Tax liens have been filed and neither the Seller nor any Shareholder has been notified by the Internal Revenue Service or any other taxing authority that any issues have been raised (and are currently pending) by the Internal Revenue Service or any other taxing authority in connection with any Tax Return, and no waivers of statutes of limitation have been given or requested with respect to the Seller. To the Best Knowledge of the Seller and the Shareholder, there are no pending Tax audits of any Tax Returns. No unresolved deficiencies or additions to Taxes have been proposed, asserted or assessed against the Seller. The Seller has no predecessors, nor is it a member of any affiliated or combined group. The Seller has made full and adequate provision (i) on the December Balance Sheet for all Taxes payable by it for all periods prior to the date thereof, and (ii) on its books for all Taxes payable by it for all periods beginning on or after such date. The Seller has not incurred any Tax Liability since the December Balance Sheet Date, except for Taxes incurred in the ordinary course of business. The Seller has not made an election to be treated as a "consenting corporation" under Section 341(f) of the Code and the Seller is not nor has it ever been a "personal holding company" within the meaning of Section 542 of the Code. The Seller has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has withheld and paid over all amounts required by Law to be withheld and paid from the wages or salaries of employees, and the Seller is not liable for any Taxes for failure to comply with such Laws. The Seller neither is nor has it ever been a party to any Tax sharing agreement. The Seller has been a "small business corporation" (within the meaning of Section 1361 of the Code) for all taxable years beginning after 1984, and has duly elected under Section 1362(a) of the Code to be taxed as an "S corporation" for Federal income tax purposes. The Seller is treated as an "S" corporation under Virginia law. The Seller has not agreed to nor is it required to make any adjustments pursuant to Section 481 of the Code, and the Internal Revenue Service has not proposed any such adjustments or changes in the Seller's accounting method. There is no Contract covering any Person that individually or collectively could, as a result of the transactions contemplated hereby, or otherwise, give rise to the payment of any amount being non-deductible by the Seller by reason of Section 280(G) of the Code. 4.9. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS. The Seller has good title to the Intellectual Property Rights as provided in Section 4.11 and to all other assets, properties and interests in properties, real, personal or mixed, reflected on the December Balance Sheet or acquired after the December Balance Sheet Date (except inventory or other property sold or otherwise disposed of since the December Balance Sheet Date in the ordinary course of business and accounts receivable and notes receivable paid in full subsequent to the December Balance Sheet Date), free and clear of all Encumbrances, of any kind or character, except for those Encumbrances set forth in Section 4.9 of the Disclosure Letter and Permitted Encumbrances. To the Best Knowledge of the Seller and the Shareholders and except as set forth on Schedule 4.9 of the Disclosure Letter, there does not exist any condition which materially interferes with the economic value or use of any such assets. Except for inventory and supplies in transit in the ordinary course of business, all material tangible personal property owned by the Seller is located on the premises of the Seller. Except as set forth in Section 4.9 of the Disclosure Letter, the Purchased Assets are in good operating condition (ordinary wear and tear excepted). Except as set forth in Section 4.9 of the Disclosure Letter, the assets, properties and interests in properties of the Seller to be owned by the Buyer after the Closing shall include all assets, properties and interests in properties (real, personal and mixed, tangible and intangible) and all Contracts necessary to enable the Buyer to carry on the Subject Business as presently conducted by the Seller. 4.10. REAL PROPERTY-OWNED. (a) Section 4.10 of the Disclosure Letter contains a list and brief description of all of the Real Property. The Real Property constitutes all real properties used or occupied by the Seller in connection with the Subject Business. (b) With respect to the Real Property, except as set forth in Section 4.10 of the Disclosure Letter: (i) no portion thereof is subject to any pending condemnation Proceeding or Proceeding by any public or quasi-public authority and, to the Best Knowledge of the Seller and the Shareholders, there is no threatened condemnation or Proceeding with respect thereto; (ii) the physical condition of the Real Property is sufficient to permit the continued conduct of the Subject Business as presently conducted subject to the provision of usual and customary maintenance and repair performed in the ordinary course with respect to similar properties of like age and construction; (iii) no notice of any increase in the assessed valuation of the Real Property and no notice of any contemplated special assessment has been received by the Seller and to the Best Knowledge of the Seller and the Shareholders, there is no threatened special assessment pertaining to any of the Real Property; and (iv) there are no Contracts, written or oral, to which the Seller is a party, granting to any party or parties the right of use or occupancy of any portion of the parcels of the Real Property. 4.11. INTELLECTUAL PROPERTY. Except in each case as set forth in Section 4.11 of the Disclosure Letter: (a) the Seller owns, has the right to use, sell, license and dispose of, and has the right to bring actions for the infringement of, and, where necessary, in the Seller's reasonable opinion, has made timely and proper application for all Intellectual Property Rights necessary or required for the conduct of the Subject Business as currently conducted (such Intellectual Property Rights, collectively, the "Requisite Rights") and such rights to use, sell, license, dispose of and bring actions are exclusive with respect to Requisite Rights developed by the Seller and in the Seller's reasonable opinion are sufficient for such conduct of the Subject Business as currently conducted by the Seller in the case of all other Requisite Rights; (b) there are no royalties, honoraria, fees or other payments payable by the Seller to any Person by reason of the ownership, use, license, sale or disposition of Requisite Rights; (c) no activity, service or procedure currently conducted by the Seller violates or will violate any Contract of the Seller with any third party or infringe any Intellectual Property Right of any other party; (d) the Seller has not received from any third party in the past five years any notice, charge, claim or other assertion that the Seller is infringing any Intellectual Property Right of any third party or committed any acts of unfair competition, and no such claim is impliedly threatened by an offer to license from a third party under a claim of use; and (e) the Seller has not sent to any third party in the past five years nor otherwise communicated to another Person any notice, charge, claim or other assertion of, or has any knowledge of, present, impending or threatened infringement by, or misappropriation of any Intellectual Property Right of the Seller by such other Person or any acts of unfair competition by such other Person. Section 4.11 of the Disclosure Letter contains a true and complete list of all applications, filings and other formal actions made or taken pursuant to Federal, state, local and foreign Laws by the Seller to perfect or protect its interest in the Requisite Rights, including, without limitation, all patents, patent applications, trademarks, trademark applications, service marks and service mark applications. 4.12. AGREEMENTS, NO DEFAULTS, ETC. Except in each case as set forth in Section 4.12 of the Disclosure Letter, the Seller is not a party to any: (a) Contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis or agreement with any Affiliates, other than advances in the ordinary course of business; (b) Contract relating to the borrowing of money or to the mortgaging, pledging or otherwise placing an Encumbrance on any asset or group of assets of the Seller; (c) Contract relating to any guarantee of any obligation for borrowed money or otherwise; (d) Contract with respect to the lending or investing of funds; (e) Contract or indemnification with respect to any form of intangible property, including any Intellectual Property Rights or confidential information; (f) Contract or group of related Contracts with the same party (excluding purchase orders entered into in the ordinary course of business which are to be completed within three months of entering into such purchase orders) for the purchase or sale of products or services under which the undelivered balance of such products and services has a selling price in excess of $5,000; (g) Contract that prohibits it from freely engaging in business anywhere in the world; (h) other Contract (x) that is not terminable by either party without penalty upon advance notice of 30 days or less and involves aggregate consideration in excess of $5,000 or (y) that involves aggregate consideration in excess of $10,000 (excluding in the case of clauses (x) and (y) above any purchase order entered into in the ordinary course of business which is to be completed within three months of entering into such purchase orders); or (i) other Contract material to the Subject Business. Except as set forth in Section 4.12 of the Disclosure Letter, there are no vehicles, boats, aircraft, apartments or other residential or recreational properties or facilities owned or operated by the Seller for executive, administrative or sales purposes or any social club memberships owned or paid for by it. Except as set forth in Section 4.12 of the Disclosure Letter, the Seller has in all material respects performed all the obligations required to be performed by it to date and is not in default or alleged to be in default in any material respect under any Contract, and there exists no event, condition or occurrence which, after notice or lapse of time, or both, would constitute such a material default by the Seller of any of the foregoing. The Seller has furnished to the Buyer, Parent or the Affiliates of either of them true and complete copies of all documents listed in Section 4.12 of the Disclosure Letter or complete descriptions of all material terms of any oral Contracts listed in Section 4.12 of the Disclosure Letter. 4.13. LITIGATION, ETC. Except as set forth in Section 4.13 of the Disclosure Letter, there are no (i) Proceedings pending or, to the Best Knowledge of the Seller and the Shareholders, threatened against the Seller, whether at law or in equity, or before or by any Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or arbitrator against the Seller. The Seller has delivered to the Buyer all material documents and correspondence relating to such matters referred to in Section 4.13 of the Disclosure Letter. 4.14. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Except as set forth in Section 4.14 of the Disclosure Letter, the Subject Business has not and is not being conducted in violation in any material respect of any Law, Order or Permit, including, without limitation, Environmental, Health and Safety Laws. Except as set forth in Section 4.14 of the Disclosure Letter, no investigation or review by any Governmental Entity with respect to the Seller is pending or, to the Best Knowledge of the Seller and the Shareholders, threatened, nor has any Governmental Entity notified the Seller of its intention to conduct the same. The Seller has all Permits necessary for the conduct of its business, including those required under any Environmental, Health and Safety Laws, such Permits are in full force and effect, no violations are or have been recorded in respect of any thereof and no Proceeding is pending or, to the Best Knowledge of the Seller and the Shareholders, threatened to revoke or limit any thereof. Section 4.14 of the Disclosure Letter contains a true and complete list of all material Permits under which the Seller is operating or bound, and the Seller has furnished to the Buyer, Parent or the Affiliates of either of them true and complete copies thereof. 4.15. LABOR RELATIONS; EMPLOYEES. Except as set forth in Section 4.15 of the Disclosure Letter, (i) the Seller is not delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them to date or amounts required to be reimbursed to such employees, (ii) upon termination of the employment of any such employees, neither the Seller nor the Buyer will by reason of any action taken or not taken, which is required to be taken by the Seller, prior to the Closing be liable to any of such employees for severance pay or any other payments, (iii) the Seller is in compliance in all material respects with all Laws respecting labor, employment and employment practices, terms and conditions of employment and wages and hours, (iv) there is no unfair labor practice complaint against the Seller pending before the National Labor Relations Board or any other Governmental Entity, (v) there is no labor strike, material dispute or grievance, slowdown or stoppage actually pending or, to the Best Knowledge of the Seller and the Shareholders, threatened against or involving the Seller, (vi) no labor union currently represents the employees of the Seller and, to the Best Knowledge of the Seller and the Shareholders, no labor union has taken any action with respect to organizing the employees of the Seller, and (vii) no key employee has informed the Seller, any Shareholder or any senior executive of the Seller that such employee will or may terminate his or her employment or engagement with the Seller. The Seller is not a party to or bound by any collective bargaining agreement, union Contract or similar agreement. 4.16. ERISA COMPLIANCE. (a) Set forth in Section 4.16 of the Disclosure Letter is a true and complete list of all Employee Plans. All Employee Plans have been operated and administered in compliance in all material respects with ERISA, the Code and other applicable Laws. (b) Except as set forth in Section 4.16 of the Disclosure Letter: (i) neither the Seller nor any of its ERISA Affiliates, nor to the Best Knowledge of the Seller and its ERISA Affiliates, any other "disqualified person" or "party in interest" (as such terms are defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to an Employee Plan has breached the fiduciary rules of ERISA or engaged in a prohibited transaction that could subject the Seller or any of its ERISA Affiliates to any Tax or penalty imposed under Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA; (ii) all required or declared Seller contributions (or premium payments) to (or in respect of) all Employee Plans have been properly made when due, and the Seller has timely deposited all amounts withheld from employees for pension, welfare or other benefits into the appropriate trusts or accounts; (iii) no Proceedings (other than routine claims for benefits) are pending, or to the Best Knowledge of the Seller, threatened, with respect to or involving any Employee Plan; (iv) none of the Employee Plans obligate the Seller to provide any employee or former employee, or their spouses, family members or beneficiaries, any post-employment or post-retirement health or life insurance, accident or other "welfare-type" benefits; (v) each Employee Plan that is a "group health plan" within the meaning of Section 5000 of the Code has been maintained in compliance with Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA and no tax payable on account of Section 4980B of the Code has been or is expected to be incurred; (vi) neither the Seller nor any of its ERISA Affiliates is or has ever maintained or been obligated to contribute to a "multiple employer plan" (as defined in Section 413 of the Code), a "multiemployer plan" (as defined in Section 3(37) of ERISA), a "defined benefit pension plan" (as defined in Section 3(35) of ERISA) or a "defined contribution plan" (as defined in Section 3(34) of ERISA); and (vii) all reporting and disclosure obligations imposed under ERISA and the Code have been satisfied with respect to each Employee Plan. (c) The Seller has provided the Buyer with true and complete copies of all documents pursuant to which each Employee Plan is maintained and administered, the two most recent annual reports (Form 5500 and attachments) and financial statements therefor, all governmental rulings, determinations, and opinions (and pending requests therefor), and the most recent valuation (but in any case one that has been completed within the last calendar year) of the present and future obligations under each Employee Plan that provides post-retirement or post-employment health and life insurance, accident, or other "welfare-type" benefits. The foregoing documents accurately reflect all material terms of each of the Employee Plans (including, without limitation, any agreement or provision which would limit the ability of the Seller to make any prospective amendments or terminate any Employee Plan). 4.17. ENVIRONMENTAL MATTERS. (a) Neither the Seller nor any of its past owned or leased property or operations are subject to or the subject of, any Proceeding, Order, settlement, or other Contract arising under Environmental, Health and Safety Laws, nor, to the Best Knowledge of the Seller and the Shareholders, has any investigation been commenced or is any Proceeding threatened against the Seller under the Environmental, Health and Safety Laws with regard to the Subject Business. For purposes of this Section 4.17, the term "Seller" shall include any predecessor of the Seller, including any Person to whose Liabilities the Seller may have succeeded, in whole or in part, pursuant to Environmental, Health and Safety Laws, contract, common Law or the operation of Law. (b) Except as set forth in Section 4.17 of the Disclosure Letter, neither the Seller nor any Shareholder has received any written or oral notice, report or other information that the Seller is potentially responsible under the Environmental, Health and Safety Laws for any damages, sanctions or remedies, including for response costs or natural resource damages, as those terms are defined under the Environmental, Health and Safety Laws, at any location and the Seller has not transported or disposed of, or allowed or arranged for any third party to transport to or dispose of, any Hazardous Materials at any location that was then or since has been (1) included on the National Priorities List, as defined under CERCLA, (2) proposed for inclusion on that List, or (3) included on the CERCLIS database prepared under CERCLA or any analogous list prepared by any state. (c) Section 4.17 of the Disclosure Letter sets forth a complete and accurate list of all properties and facilities previously owned or operated by the Seller. Except as set forth in Section 4.17 of the Disclosure Letter, none of the following has existed or occurred at any such property or facility or at any of the Real Property either (1) at any time when owned or operated by the Seller or (2) to the Best Knowledge of the Seller and the Shareholders, at any time prior to when owned or operated by the Seller: a release of Hazardous Materials in an amount then or now exceeding a reportable quantity as defined under, or in a manner that then or now would support an Order by a Governmental Entity under, Environmental, Health and Safety Laws; hazardous waste treatment, storage or disposal facilities, as those terms are defined under the Environmental, Health and Safety Laws; any asbestos-containing material, underground storage tank, aboveground storage tank, landfill, waste pile, other waste disposal area, surface impoundment, or article or equipment containing polychlorinated biphenyls; and no facts, events or conditions that would prevent compliance by the Seller with, or could give rise to any Liability or corrective or remedial obligation of the Seller under, Environmental, Health and Safety Laws. (d) The Seller has provided the Buyer, Parent or an Affiliate of either of them with correct and complete copies of all reports and studies performed by or on behalf of, or within the possession or control of, the Seller with respect to past or present environmental conditions or events at any of the Real Property or any property formerly owned, leased, or operated by the Seller, and to the Best Knowledge of the Seller and the Shareholders, there are no other environmental reports or studies with respect thereto, other than as contemplated hereby. (e) Except as set forth in Section 4.17 of the Disclosure Letter, the Seller has not by Contract, consent Order or other agreement assumed (1) any obligations or Liabilities of any other Person arising under Environmental, Health and Safety Laws or (2) responsibility for, either directly or indirectly, the remediation of any condition arising from or relating to the release or threatened release of Hazardous Materials. 4.18. BROKERS. None of the Seller or any of its officers, directors, Shareholders or employees (or any Affiliate of the foregoing) have employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. 4.19. RELATED TRANSACTIONS. Except as set forth in Section 4.19 of the Disclosure Letter, and except for compensation to regular employees of the Seller, no current or former Affiliate of the Seller or any associate (as defined in the rules promulgated under the Securities Exchange Act of 1934, as amended) thereof, is now, or has been during the last five fiscal years, (i) a party to any transaction or Contract with the Seller, or (ii) other than Alan Strassman and his Affiliates as to which the Seller and the Shareholders have no knowledge, the direct or indirect owner of an interest in any Person which is a competitor, supplier or customer of the Seller (other than non-affiliated holdings in publicly-held companies), nor does any such Person receive income from any source other than the Seller which relates to the business of, or should properly accrue to, the Seller. 4.20. ACCOUNTS AND NOTES RECEIVABLE. Except as set forth in Section 4.20 of the Disclosure Letter and as reserved against in the December Balance Sheet, all the accounts receivable and notes receivable owing to the Seller as of the date hereof constitute, and as of the Closing will constitute, valid and enforceable claims arising from bona fide transactions in the ordinary course of business, and there are no known or asserted claims, refusals to pay or other rights of set-off against any thereof. Except as set forth in Section 4.20 of the Disclosure Letter, as of the date hereof, there is (i) no account debtor or note debtor delinquent in its payment by more than 90 days, (ii) no account debtor or note debtor that has refused or, to the Best Knowledge of the Seller and the Shareholders, threatened to refuse to pay its obligations for any reason, (iii) to the Best Knowledge of the Seller and the Shareholders, no account debtor or note debtor that is insolvent or bankrupt and (iv) no account receivable or note receivable pledged to any third party by the Seller. 4.21. ACCOUNTS AND NOTES PAYABLE. Except as set forth in Section 4.21 of the Disclosure Letter, all accounts payable and notes payable by the Seller to third parties as of the date hereof arose, and as of the Closing will have arisen, in the ordinary course of business, and, except as set forth in Section 4.21 of the Disclosure Letter, there is no such account payable or note payable more than 30 days past due, except those contested in good faith. 4.22. INVENTORIES. Except to the extent written down on the books of account of the Seller or reserved against thereon, the inventories of the Seller as of the date hereof are of good, usable and merchantable quality. Except to the extent written down on the books of account of the Seller or reserved against thereon, the Seller's inventory includes no items which are below customary quality control standards of the plastics industry and any applicable governmental quality control, or of a quality or quantity not usable or salable in the normal course of business (it being understood that inventory not usable or saleable within one year constitutes obsolete inventory). The aggregate value of the inventory has been written down on the books of account of the Seller to realizable market value or adequate reserves have been provided in accordance with GAAP. 4.23. WARRANTIES OF PRODUCTS; PRODUCTS LIABILITY; REGULATORY COMPLIANCE. (a) Except to the extent written down on the books of account of the Seller or reserved against thereon, each group of products manufactured, sold, distributed, used or held in inventory by the Seller is, subject to customary and reasonable tolerances, free from any significant defects in workmanship and materials, and conforms in all material respects with all customary and reasonable standards for products of such type. (b) Neither the United States Food and Drug Administration nor any other Governmental Entity regulating the marketing, testing or advertising of any of the products currently manufactured, sold, distributed or used in connection with the Subject Business has requested that any such product be removed from the market, that substantial new product testing be undertaken as a condition to the continued manufacturing, selling, distribution or use of any such product or that such product be modified in a way likely to have a Material Adverse Effect. 4.24. SUPPLIERS AND VENDORS. Except as set forth in Section 4.24 of the Disclosure Letter and except in the ordinary course of business, since January 1, 1996, whether as a result of the transactions contemplated hereby or otherwise, no material supplier or vendor of the Seller has canceled or otherwise terminated, or threatened to cancel or otherwise terminate, its relationship with the Seller or has decreased, limited or otherwise modified, or threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to the Seller. 4.25. CUSTOMERS. Except to the extent any such business relationship is impaired solely by virtue of an account or note receivable past 90 days due as disclosed in Section 4.25 of the Disclosure Letter, to the Best Knowledge of the Seller and the Shareholders, the business relationship between the Seller and its customers is generally good and no material disagreement or problem exists between the Seller and any customer. Except as set forth in Section 4.25 of the Disclosure Letter, no customer to which more than $20,000 of the Seller's annual sales are attributable has threatened, or has notified the Seller that it intends, to terminate its relationship and dealings with the Seller, whether as a result of the transactions contemplated by this Agreement or otherwise. 4.26. DISCLOSURE. To the Best Knowledge of the Seller and the Shareholders, neither this Agreement nor any of the schedules, attachments or exhibits hereto contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained herein or therein, taken as a whole, in light of the circumstances in which they were made, not misleading. There is no fact that has not been disclosed to the parties referred to above of which Lee D. Goldstein, Laurence A. Goldstein or Gordon Saffold is aware and which constitutes or could reasonably be anticipated to result in a Material Adverse Change. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Seller and the Shareholders as follows: 5.1. AUTHORITY. Each of Parent and the Buyer has all requisite power and authority to enter into this Agreement and the Related Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby; the execution, delivery and performance by each of Parent and the Buyer of this Agreement and the Related Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Parent and the Buyer; and this Agreement and the Related Documents to which Parent or the Buyer is a party has been duly executed and delivered by such party and constitute the valid and legally binding obligations of such party, enforceable in accordance with its terms and conditions, except as enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other Laws affecting creditors' rights generally or by general principles of equity. 5.2. NONCONTRAVENTION; CONSENTS. (a) Neither the execution and delivery of this Agreement and the Related Documents to which Parent or the Buyer is a party nor the consummation of the transactions contemplated hereby or thereby by Parent or the Buyer shall (i) violate any Law, the result of which would prevent the consummation by Parent and the Buyer of the transactions contemplated hereby or (ii) other than with respect to the Financing and Security Agreement by and between Nations Bank, N.A. and Parent dated as of January 21, 1997, conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract to which Parent or the Buyer is a party or by which Parent or the Buyer is bound or to which any of their respective properties is subject the result of which would prevent the consummation by Parent and the Buyer of the transactions contemplated hereby. (b) Except as contemplated by this Agreement or any Related Document, no material permit, authorization, consent or approval of or by, or any material notification of or filing with, any Person (governmental or private) is required in connection with the execution, delivery and performance by Parent and the Buyer of this Agreement and the Related Documents to which either Parent or the Buyer is a party or the consummation by Parent and the Buyer of the transactions contemplated hereby or thereby. 5.3. BROKERS. Neither Parent, the Buyer nor any of their respective officers, directors, stockholders or employees (or any Affiliate of any of the foregoing) has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. SECTION 6. CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL PRE-CLOSING AGREEMENTS. 6.1. AFFIRMATIVE COVENANTS OF THE SELLER. From and after the date of this Agreement until the Closing or the earlier termination of this Agreement pursuant to Section 10.1 (the "Transition Period"), except as otherwise consented to in writing by the Buyer, the Seller shall, and the Shareholders shall cause the Seller to: (a) conduct the operations of the Seller according to the ordinary and usual course of business consistent with past custom and practice (including the collection of receivables, the payment of payables and the maintenance of supplies) and use best efforts to preserve intact its business organization, keep available the services of officers and employees, and maintain satisfactory relationships with suppliers, customers and others having business relationships with them; (b) maintain the assets of the Seller in customary repair, order and condition, maintain insurance reasonably comparable to that in effect on the December Balance Sheet Date, replace in accordance with past practice inoperable, worn out or obsolete assets with modern assets of comparable quality and, in the event of a casualty, loss or damage to any of such assets or properties prior to the Closing Date for which the Seller is insured or the condemnation of any assets or properties, either repair or replace such assets or property or, if the Buyer agrees, cause the Seller to retain such insurance or condemnation proceeds; (c) promptly inform the Buyer in writing of any material variances from the representations and warranties contained in Section 4; and (d) permit representatives of the Buyer to have full access to the Seller's books, records, property, facilities, customers, suppliers, sales representatives, consultants, key employees and independent accountants in connection with the Buyer's due diligence review of the Seller (it being understood that such investigation shall in no way affect or otherwise obviate or diminish any representations or warranties of the Seller or the Shareholders, or conditions to the obligations of the Buyer, in each case as set forth herein). 6.2. NEGATIVE COVENANTS OF THE SELLER. During the Transition Period, without the prior written consent of the Buyer, except as expressly contemplated by this Agreement or the Related Documents, the Seller shall not, and the Shareholders shall cause the Seller not to: (a) sell, lease, transfer or assign any of the assets of the Seller, tangible or intangible, other than inventory in the ordinary course of business consistent with past custom and practice; (b) delay or postpone the payment of accounts payable and other obligations and Liabilities or accelerate the collection of accounts receivable, other than in the ordinary course of business consistent with past custom and practice (provided that the Seller may delay the payment of accounts payable as cash flow dictates); (c) enter into any Contract (or series of related Contracts) other than in the ordinary course of business or with respect to the design of a line of tamper evident lids; (d) enter into any employment Contract or collective bargaining agreement, written or oral, or modify the terms of any existing such Contract; (e) grant any increase in the base compensation of any of the officers or employees of the Seller other than in the ordinary course of business consistent with past custom and practice; (f) adopt, amend, modify or terminate any bonus, profit- sharing, incentive, severance or other plan, Contract or commitment for the benefit of any of the officers or employees of the Seller; (g) other than as contemplated by this Agreement or any Related Document, enter into any transaction with any of the officers, employees or Affiliates of the Seller (or any directors, officers or employees of such Affiliate), other than ordinary course employment arrangements entered into in accordance with past custom or practice; (h) in any manner take or cause to be taken any action which is designed, intended or might reasonably be anticipated to have the effect of discouraging customers, employees, suppliers, lessors and other associates of the Seller from maintaining the same business relationships with the Seller after the date of this Agreement as were maintained with the Seller prior to the date of this Agreement; or (i) intentionally take any action which would require disclosure under Section 6.1(c). 6.3. CONFIDENTIALITY. Each Shareholder agrees that all confidential or proprietary information or workproducts relating to the Subject Business or the Purchased Assets which is known to such Shareholder as of the Closing Date is the sole property of the Seller. Each Shareholder agrees that it will not use or disclose such information or workproduct except for the benefit of the Seller, and such Shareholder will take reasonable steps to protect such information and workproduct from misuse, loss, theft or accidental disclosure. 6.4. CONSENTS. Each party shall use its reasonable best efforts, and the other party shall cooperate with such efforts, to obtain any consents and approvals of, or effect the notification of or filing with, each Person or authority, whether private or governmental, whose consent or approval is required in order to permit the consummation of the transactions contemplated hereby. 6.5. EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein provided, the parties shall do or cause to be done all such reasonable acts and things as may be necessary, proper or advisable, consistent with all applicable Laws, to consummate and make effective the transactions contemplated hereby as soon as reasonably practicable. 6.6. NOTICE OF PROSPECTIVE BREACH. Each party shall immediately notify the other parties in writing upon the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date of this Agreement to the Closing as if such representation and warranty were made at such time or (ii) any material failure of any party hereto or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 6.7. PUBLIC ANNOUNCEMENTS. Each party agrees that, except (i) as otherwise required by Law or public disclosure obligations of any party and (ii) for disclosure to its respective directors, officers, employees, financial advisors, potential financing sources, legal counsel, independent certified public accountants or other agents, advisors or representatives on a need-to-know basis and with whom such party has a confidential relationship, it will not issue any reports, statements or releases, in each case pertaining to this Agreement or the transactions contemplated hereby, without the prior written consent of the Seller or the Buyer, as the case may be, which consent shall not unreasonably be withheld or delayed; PROVIDED, HOWEVER, that the Seller may disclose such information to its employees after the execution of this Agreement as it deems necessary provided that the Seller shall have given prior written notice to the Buyer of its intent to make such disclosure. 6.8. NEGOTIATION WITH OTHERS. (a) During the Transition Period, the Seller and the Shareholders shall deal exclusively with the Buyer and its Affiliates regarding the acquisition of or investment in the Seller, whether by way of merger, purchase of capital stock, purchase of assets or otherwise (a "Potential Transaction") and, without the prior written consent of the Buyer, neither the Seller nor any Shareholder shall, and the Shareholders shall cause the Seller not to, directly or indirectly, (i) solicit, initiate discussions with or engage in negotiations with any Person (whether such negotiations are initiated by the Seller or any Shareholder or otherwise), other than the Buyer or a party designated by the Buyer, relating to a Potential Transaction, (ii) provide information or documentation with respect to the Seller or the Subject Business to any Person, other than the Buyer or a party designated by the Buyer, relating to a Potential Transaction or (iii) enter into an agreement with any Person, other than the Buyer, providing for any Potential Transaction. If the Seller or any Shareholder receives an unsolicited inquiry, offer or proposal relating to any of the above, the Seller or such Shareholder shall immediately notify the Buyer thereof. The Seller and the Shareholders represent to the Buyer that they are not bound to negotiate a Potential Transaction with any other Person. (b) The parties recognize and acknowledge that a breach by the Seller or any Shareholder of this Section 6.8 will cause irreparable and material loss and damage to the Buyer and its Affiliates as to which it will not have an adequate remedy at law or in damages. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach. SECTION 7. CONDITIONS. 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each party to effect the transactions contemplated hereby are subject to the satisfaction prior to the Closing Date of the following conditions unless waived (to the extent such conditions can be waived) by the Buyer or the Seller, as applicable: (a) APPROVALS. All authorizations, consents, Orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any Governmental Entity necessary for the consummation of the transactions contemplated hereby shall have been obtained or made. (b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order, preliminary or permanent injunction or other Order issued by any Governmental Entity nor other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. (c) STATUTES. No action shall have been taken or threatened, and no Law or Order shall have been enacted, promulgated or issued or deemed applicable to the transactions contemplated hereby by any Governmental Entity that would (i) make the consummation of the transactions contemplated hereby illegal or substantially delay the consummation of any material aspect of the transactions contemplated hereby, (ii) compel the Seller or the Buyer to dispose or hold separate all or a material portion of the business or assets of the Seller, the Buyer or any Affiliate thereof as a result of the consummation of the transactions contemplated hereby or (iii) render any party unable to consummate the transactions contemplated hereby. 7.2. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer to purchase the Purchased Assets and consummate the transactions contemplated hereby are subject to the satisfaction of the following conditions unless waived (to the extent such conditions can be waived) by the Buyer: (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by the Seller and the Shareholders in this Agreement shall be true and correct in all material respects (except for such representations and warranties which are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true in all respects) at and as of the Closing Date with the same effect as if such representations and warranties had been made at and as of the Closing Date, and the Buyer shall have received a certificate signed by the Chief Executive Officer of the Seller and the Shareholders to that effect. (b) PERFORMANCE OF OBLIGATIONS OF THE SELLER AND THE SHAREHOLDERS. The Seller and the Shareholders shall have performed in all material respects all obligations and covenants required to be performed by them under this Agreement as of the Closing Date, and the Buyer shall have received a certificate signed by the Chief Executive Officer of the Seller and the Shareholders to that effect. (c) AUTHORIZATION. All action necessary to authorize the execution, delivery and performance of this Agreement and the Related Documents by the Seller and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the requisite shareholder approvals, shall have been duly and validly taken by the Seller, and the Seller shall have full power and right to consummate the transactions contemplated hereby and thereby on the terms provided herein. (d) OPINION OF THE SELLER'S AND THE SHAREHOLDERS' COUNSEL. The Buyer shall have received an opinion of Clark & Stant, P.C., counsel for the Seller and the Shareholders, dated the Closing Date, in substantially the form of EXHIBIT C attached hereto. (e) CONSENTS AND APPROVALS. The Buyer shall have received duly executed copies of all consents and approvals in form and substance satisfactory to the Buyer and its counsel, that are (i) required for consummation of the transactions contemplated hereby or (ii) that are required in order to prevent a breach of or a default under or a termination of any Contract to which the Seller is a party or to which any portion of property of the Seller is subject. With respect to each party to the Assumed Contracts, the Buyer shall have received a copy of a duly executed consent to the assignment and assumption of such Assumed Contract in the form of EXHIBIT D hereto, which shall contain the statement that, as of the Closing Date, all sums due by the Seller have been paid in full and the Seller is not in default under any of the terms, covenants or conditions of the Assumed Contract. (f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents, authorizations, Orders or approvals of, and filings or registrations with, any Governmental Entity which are required for or in connection with the execution and delivery by the Seller and the Shareholders of this Agreement and the Related Documents and the consummation by the Seller and the Shareholders of the transactions contemplated hereby and thereby shall have been obtained or made. (g) CORPORATE RESOLUTIONS. The Buyer shall have received certified copies of the resolutions of the Seller's board of directors and the Shareholders, approving this Agreement, all other agreements and documents contemplated hereby and the consummation of the transactions contemplated hereby. (h) ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1996, there shall have been no Material Adverse Change. (i) OFFICER'S CERTIFICATE. The Seller shall have delivered an Officer's Certificate dated as of the Closing Date to the Buyer certifying (i) that attached thereto is a true and complete copy of the Seller's Charter and all amendments thereto; (ii) that attached thereto is a true and complete copy of the Seller's By-laws as in effect on the date of such certification; and (iii) as to the incumbency and genuineness of the signature of each officer of the Seller executing this Agreement or any of the other documents contemplated hereby. (j) INSTRUMENTS OF TRANSFER. The Buyer shall have received duly executed instruments of sale, transfer, conveyance and assignment, including, but not limited to, the Bill of Sale, as contemplated by Section 1.5, and such documents shall be in full force and effect. (k) PROPRIETARY INFORMATION AGREEMENTS. The Seller shall have entered into proprietary information agreements, or other agreements reasonably acceptable to the Buyer and its counsel, with Lee D. Goldstein, Larry A. Goldstein, Lisa S. Deitelbaum and Joseph P. Danowski with respect to (i) the confidentiality of all non-public, proprietary information of the Seller and (ii) the ownership by the Seller of all patents, copyrights, inventions and other intellectual property discovered, developed or improved by such individuals. (l) CHANGE AND USE OF SELLER'S NAME. The Seller shall have filed with the appropriate official of the Seller's jurisdiction of incorporation an amendment to its articles of organization so as to change the name of the Seller to a name which, in the reasonable opinion of the Buyer, is sufficiently distinct from the Seller's current name so as not to be confused therewith. (m) RELEASES OF ENCUMBRANCES. The Buyer shall have received duly executed releases of all Encumbrances on the Purchased Assets, each in the form specified by the Buyer, and UCC termination statements with respect to all such Encumbrances. (n) DUE DILIGENCE. The Buyer shall be satisfied in all respects with the results of their business, legal, environmental and accounting due diligence investigation and review of the Seller (including, without limitation, customer interviews and discussions) which shall be performed by counsel for the Buyer, accountants and other representatives. (o) EMPLOYMENT AGREEMENT. The Buyer and Larry Goldstein shall have entered into the Employment Agreement substantially in the form of EXHIBIT E, and such agreement shall be in full force and effect. (p) CONSULTING AND NONCOMPETITION AGREEMENT. The Buyer and Lee Goldstein shall have entered into the Consulting and Noncompetition Agreement substantially in the form of EXHIBIT F, and such agreement shall be in full force and effect. (q) ESCROW AGREEMENT. The Buyer, the Seller, the Shareholders and the Lawyers Title Insurance Corporation shall have entered into the Escrow Agreement and such agreement shall be in full force and effect. (r) FINANCING. Parent and the Buyer shall have obtained on terms and conditions satisfactory to Parent and the Buyer in their sole discretion all of the financing needed in order to consummate the transactions contemplated hereby. (s) ENVIRONMENTAL. The Buyer and its representatives shall have satisfactorily completed the environmental audits and analyses with respect to the Real Property located in Suffolk, Virginia and other potential liability under Environmental, Health and Safety Laws, and the results of such audits and analyses shall be satisfactory to the Buyer in its sole discretion. (t) FOREIGN PERSON AFFIDAVIT. The Buyer shall have received from the Seller a duly executed certificate pursuant to Section 1.1445-2(b)(2)(i) of the Treasury Regulations under Section 1445 of the Code. (u) TRANSFER OF CASH. The Buyer shall have received an officer's certificate, signed by the President and the chief accounting officer of the Seller, certifying the amount of cash held by the Seller as of the Closing Date (including, but not limited to, all cash held in the bank accounts of the Seller), and the Seller shall have liquidated any securities and used any such cash to pay down the Assumed Payables or transferred any such cash to an account designated by the Buyer. (v) REAL PROPERTY MATTERS. The Buyer shall have received, at the Buyer's cost, (i) surveys with respect to each parcel of Real Property, in form, substance and content satisfactory to the Buyer in its discretion, (ii) an ALTA owner's policy (and, if required by the Buyer's lender, if any, a lender's policy) of title insurance insuring each parcel of Real Property (each, a "Title Policy") which shall be in full force and effect as of the Closing and in form and substance and in such amount and with such affirmative coverage and endorsements as are satisfactory to the Buyer in its sole discretion and (iii) such title affidavits and title and zoning opinions as are satisfactory to the Buyer in its discretion. In connection with the foregoing, the Seller shall have delivered to the Buyer or the Title Insurance Company all title affidavits and undertakings that may be required as a condition to the issuance by such Title Insurance Company of the Title Policies. (w) FORMS 5500. The Seller shall have filed all Forms 5500 (Annual Report - Report of Employee Benefits) required to be filed by it pursuant to the rules and regulations of the Code and the Seller shall have paid all penalties related thereto. (x) POWER OF ATTORNEY. The Seller shall have executed and delivered to the Buyer the Power of Attorney in the form attached hereto as EXHIBIT G, and such Power of Attorney shall be in full force and effect. (y) AUDITED FINANCIAL STATEMENTS. The Buyer shall have received an audited balance sheet of the Seller as of December 31, 1996, and the related statements of income, stockholders' equity and cash flows for the fiscal year then ended. (z) EQUIPMENT PURCHASE. The Paul J. Goldstein Trust shall have sold to the Buyer the equipment currently leased by the Seller for $582,500, and such Trust shall have executed and delivered all documentation related thereto that is reasonably requested by the Buyer. 7.3. CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE SHAREHOLDERS. The obligations of the Seller and the Shareholders to sell the Purchased Assets and to consummate the transactions contemplated hereby are subject to the satisfaction of the following conditions unless waived (to the extent such conditions can be waived) by the Seller and the Shareholders: (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by Parent and the Buyer in this Agreement shall be true and correct in all material respects (except for such representations and warranties which are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true in all respects) at and as of the Closing Date with the same effect as if such representations and warranties had been made at and as of the Closing Date, and the Seller shall have received a certificate signed by an authorized officer of Parent and the Buyer to that effect. (b) PERFORMANCE OF OBLIGATIONS OF THE BUYER. Parent and the Buyer shall have performed in all material respects their respective obligations and covenants required to be performed by them under this Agreement prior to or as of the Closing Date, and the Seller shall have received a certificate signed by an authorized officer of Parent and the Buyer to that effect. (c) AUTHORIZATION. All action necessary to authorize the execution, delivery and performance of this Agreement and the Related Documents by Parent and the Buyer and the consummation of the transactions contemplated hereby and thereby shall have been duly and validly taken by Parent and the Buyer. (d) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents, authorizations, Orders or approvals of, and filings or registrations with, any Governmental Entity which are required for or in connection with the execution and delivery of this Agreement and the Related Documents by Parent and the Buyer and the consummation by Parent and the Buyer of the transactions contemplated hereby and thereby shall have been obtained or made. (e) CORPORATE RESOLUTIONS. The Seller shall have received certified copies of the resolutions of the board of directors of Parent and the Buyer and the Buyer's sole shareholder, approving this Agreement, all other agreements and documents contemplated hereby to which the Buyer is a party and the consummation of the transactions contemplated hereby. (f) OFFICER'S CERTIFICATE. The Buyer shall have delivered an Officer's Certificate dated as of the Closing Date to the Seller certifying (i) that attached thereto is a true and complete copy of the Buyer's certificate of incorporation and all amendments thereto, if any; (ii) that attached thereto is a true and complete copy of the Buyer's by-laws as in effect on the date of such certification; and as to the incumbency and genuineness of the signature of each officer of the Buyer executing this Agreement or any of the other documents contemplated hereby. (g) PAYMENT OF CLOSING PAYMENT AND DEBT. The Buyer shall have paid the Closing Payment and, on behalf of the Seller (and/or shall have paid amounts to the Seller for payment thereof), all outstanding indebtedness set forth on SCHEDULE VI. (h) EMPLOYMENT AGREEMENT. The Employment Agreement shall have been duly and validly executed by the parties thereto and shall be in full force and effect. (i) CONSULTING AND NONCOMPETITION AGREEMENT. The Consulting and Noncompetition Agreement shall have been duly and validly executed by the parties thereto and shall be in full force and effect. (j) ESCROW AGREEMENT. The Escrow Agreement shall have been duly and validly executed by the parties thereto and shall be in full force and effect. (k) OPINION OF PARENT'S AND THE BUYER'S COUNSEL. The Seller and the Shareholders shall have received an opinion of O'Sullivan Graev & Karabell, LLP, dated the Closing Date, in substantially the form of EXHIBIT H attached hereto. (l) EQUIPMENT PURCHASE. The Buyer shall have purchased from the Paul J. Goldstein Trust the equipment currently leased from the Seller for $582,500. SECTION 8. INDEMNIFICATION. 8.1. INDEMNIFICATION GENERALLY; ETC. From and after the Closing Date: (a) BY THE SELLER GROUP IN FAVOR OF THE BUYER GROUP. The Seller Group jointly and severally agrees to indemnify and hold harmless the Buyer Group for any and all Losses they may suffer, sustain or incur as a result of: (i) the untruth, inaccuracy or breach of any representation or warranty of the Seller and/or any Shareholder contained in Section 4 or in the Disclosure Letter, any Related Document or any certificate delivered in connection herewith at or before the Closing; or (ii) the breach of any agreement or covenant of the Seller contained in this Agreement or in the Disclosure Letter or any Related Document; or (iii) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with (A) any action or inaction of any Shareholders in connection with the action of the Shareholders of the Seller required to approve the transactions contemplated by this Agreement and the Related Documents or (B) any assertion by any current or former shareholder or optionholder of the Seller or the heirs, representatives or estate thereof of any impropriety with respect to any actions or transactions of or involving the Seller prior to or at the Closing (including, without limitation, the actions and transactions contemplated by this Agreement and the Related Documents); or (iv) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with any of the Excluded Assets or Excluded Obligations; or (v) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with the failure to provide any benefit under any Contract contemplated by and subject to the provisions of Section 1.7; or (vi) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with the non-compliance by the Seller and the Buyer with the bulk sales laws of any jurisdiction; or (vii) other than with respect to any matter set forth on Schedule 4.17 to the Disclosure Letter and which is accrued on the books of the Seller, (A) any environmental condition existing or event occurring on or before the Closing Date at any property currently or formerly owned, leased, or used by the Seller or any predecessor of Seller, or (B) any generation, storage, treatment, disposal, transportation, shipment offsite, or other management of Hazardous Materials by the Seller or any predecessor of the Seller on or before the Closing Date; or (viii) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with the Seller's failure to file, or lateness in filing, any Annual Report - Report of Employee Benefits on Form 5500; or (ix) the assertion of any claim, demand, Liability or obligation against any member of the Buyer Group arising from or in connection with the Levy Debt. (b) BY EACH SHAREHOLDER IN FAVOR OF THE BUYER GROUP. Each of the Shareholders and their respective heirs, estate and assigns (severally as to himself or herself and not jointly) agrees to indemnify and hold harmless the Buyer Group for any and all Losses they may suffer, sustain or incur as a result of: (i) the untruth, inaccuracy or breach of any representation or warranty of such Shareholder contained in Section 3 or in the Disclosure Letter, any Related Document to which such Shareholder is a party or any certificate delivered by such Shareholder in connection herewith at or before the Closing; or (ii) the breach by such Shareholder of any agreement or covenant to be performed by such Shareholder contained in this Agreement or in any Related Document to which such Shareholder is a party. (c) BY THE BUYER IN FAVOR OF THE SELLER AND THE SHAREHOLDERS. The Buyer agrees to indemnify and hold harmless the Seller and the Shareholders for any and all Losses they may suffer, sustain or incur as a result of: (i) the untruth, inaccuracy or breach of any representation or warranty of Parent or the Buyer contained in Section 5 or in any Related Document or any certificate delivered in connection herewith or therewith at or before the Closing; or (ii) the breach of any agreement or covenant of Parent or the Buyer contained in this Agreement or in any Related Document; or (iii) the incurrence of any sales tax that arises out of the purchase of the mold (2x8 seven ounce) from Signet Business Leasing Corporation and the subsequent sale of such mold to the Buyer; or (iv) the assertion of any claim, demand, Liability or obligation against the Seller or the Shareholders arising from or in connection with any of the Assumed Obligations with respect to events or circumstances that arise after the Closing Date. 8.2. LIMITATIONS ON INDEMNIFICATION. Anything contained herein to the contrary notwithstanding: (a) INDEMNITY BASKET FOR THE SELLER AND THE SHAREHOLDERS. The Buyer Group shall not have the right to be indemnified pursuant to Section 8.1(a) and (b) for breaches of representations and warranties (other than under Sections 4.8, 4.18 and 4.19 and willful breaches) unless and until the Buyer Group shall have incurred on a cumulative basis since the Closing Date aggregate Losses for breaches of representations and warranties (other than under Sections 4.8, 4.18 and 4.19 and willful breaches) in an amount exceeding $25,000 in which event the right to be indemnified shall apply only to the extent such Losses exceed $25,000. (b) INDEMNITY CAP FOR THE SELLER AND THE SHAREHOLDERS. The sum of all Losses pursuant to which indemnification is payable by the Seller and the Shareholders pursuant to Section 8.1(a) shall not exceed $1,500,000 in the aggregate; PROVIDED, HOWEVER, that in no event shall the limitation set forth in this Section 8.2(b) apply to the rights of the Buyer Group to be indemnified pursuant to (i) Section 8.1(a)(i) with respect to the representations and warranties set forth in Sections 4.1, 4.4, 4.8, 4.9, 4.17, 4.18 and willful breaches or (ii) Sections 8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv), 8.1(a)(vii), 8.1(a)(viii) and 8.1(a)(ix). (c) INDEMNITY BASKET FOR THE BUYER GROUP. The Shareholders and the Seller shall not have the right to be indemnified pursuant to Section 8.1(c) for breaches of representations and warranties (other than under Section 5.3 and willful breaches) unless and until the Shareholders and the Seller shall have incurred on a cumulative basis since the Closing Date aggregate Losses for breaches of representations and warranties (other than under Section 5.3 and willful breaches) in an amount exceeding $25,000 in which event the right to be indemnified shall apply only to the extent such Losses exceed $25,000. 8.3. ASSERTION OF CLAIMS; PAYMENT OF CLAIMS; RIGHT OF SET-OFF; LEVY DEBT NOT SUBJECT TO ESCROW. (a) No claim shall be brought under Section 8.1 hereof unless the Indemnified Persons, or any of them, at any time prior to the applicable Survival Date, give the Indemnifying Persons (i) written notice of the existence of any such claim, specifying the nature and basis of such claim and the amount thereof, to the extent known or (ii) written notice pursuant to Section 8.4 of any Third Party Claim, the existence of which might give rise to such a claim. Upon the giving of such written notice as aforesaid, the Indemnified Persons, or any of them, shall have the right to commence legal proceedings subsequent to the Survival Date for the enforcement of their rights under Section 8.1 hereof. (b) The obligation of the Seller or any Shareholder to indemnify the Buyer Group shall be paid (i) first, by the release of funds from the Escrow Account (other than with respect to the Levy Debt), and (ii) second, after making a demand in writing against the Seller and the Shareholders that remains unsatisfied for 30 calendar days, by offset against the payments to be made to Lee Goldstein under the Consulting and Noncompetition Agreement in the order of payments to be made thereunder from the time of such set-off. 8.4. NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. The obligations and Liabilities of an Indemnifying Person with respect to Losses resulting from the assertion of liability by third parties (each, a "Third Party Claim") shall be subject to the following terms and conditions: (a) The Indemnified Persons shall promptly give written notice to the Indemnifying Persons of any Third Party Claim which might give rise to any Loss by the Indemnified Persons within 15 days of obtaining knowledge thereof, stating the nature and basis of such Third Party Claim and the amount thereof to the extent known; PROVIDED, HOWEVER, that no delay on the part of the Indemnified Persons in notifying any Indemnifying Persons shall relieve the Indemnifying Persons from any Liability or obligation hereunder unless (and then solely to the extent) the Indemnifying Persons thereby is prejudiced by the delay. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including, without limitation, any summons, complaint or other pleading which may have been served, any written demand or any other document or instrument. (b) If the Indemnifying Persons shall acknowledge in a writing delivered to the Indemnified Persons that the Indemnifying Persons shall be obligated under the terms of their indemnification obligations hereunder in connection with such Third Party Claim, then the Indemnifying Persons shall have the right to assume the defense of any Third Party Claim at their own expense and by their own counsel, which counsel shall be reasonably satisfactory to the Indemnified Persons; PROVIDED, HOWEVER, that the Indemnifying Persons shall not have the right to assume the defense of any Third Party Claim, notwithstanding the giving of such written acknowledgment, if (i) the Indemnified Persons shall have been advised by counsel that there are one or more legal or equitable defenses available to them which are different from or in addition to those available to the Indemnifying Persons, and, in the reasonable opinion of the Indemnified Persons, counsel for the Indemnifying Persons could not adequately represent the interests of the Indemnified Persons because such interests could be in conflict with those of the Indemnifying Persons, (ii) such action or Proceeding involves, or could have a material effect on, any material matter beyond the scope of the indemnification obligation of the Indemnifying Persons or (iii) the Indemnifying Persons shall not have assumed the defense of the Third Party Claim in a timely fashion. (c) If the Indemnifying Persons shall assume the defense of a Third Party Claim (under circumstances in which the proviso to the first sentence of Section 8.4(b) is not applicable), the Indemnifying Persons shall not be responsible for any legal or other defense costs subsequently incurred by the Indemnified Persons in connection with the defense thereof. If the Indemnifying Persons do not exercise their right to assume the defense of a Third Party Claim by giving the written acknowledgement referred to in Section 8.4(b), or are otherwise restricted from so assuming by the proviso to the first sentence of Section 8.4(b), the Indemnifying Persons shall nevertheless be entitled to participate in such defense with their own counsel and at their own expense; and in any such case, the Indemnified Persons may assume the defense of the Third Party Claim, with counsel which shall be reasonably satisfactory to the Indemnifying Persons, and shall act reasonably and in accordance with their good faith business judgment and shall not effect any settlement without the consent of the Indemnifying Persons, which consent shall not unreasonably be withheld or delayed. (d) If the Indemnifying Persons exercise their right to assume the defense of a Third Party Claim, they shall not make any settlement of any claims without the written consent of the Indemnified Persons, which consent shall not be unreasonably withheld. 8.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the further provisions of this Section 8.5, the representations and warranties of the Shareholders contained in Section 3 and the representations and warranties of the Seller and the Shareholders contained in Section 4 and the representations and warranties of the Buyer contained in Section 5 shall survive the Closing Date until the second anniversary of the Closing Date; PROVIDED, HOWEVER, that the representations and warranties of the Shareholders and the Seller contained in Sections 3.2, 4.4, 4.9, 4.17 and 4.18 shall survive the Closing Date without any time limit and the representations and warranties set forth in Sections 4.8 and 4.16 shall survive the Closing Date until the expiration of the statute of limitations, if any, applicable to the matters set forth therein. The covenants and other agreements of the parties contained in this Agreement shall survive the Closing Date until they are otherwise terminated, whether by their terms or as a matter of applicable law. For convenience of reference, the date upon which any representation, warranty, covenant or other agreement contained herein shall terminate, if any, is referred to herein as the "Survival Date". 8.6. NO THIRD PARTY RELIANCE. Anything contained herein to the contrary notwithstanding, the representations and warranties of the Seller and the Shareholders contained in this Agreement (including, without limitation, the Disclosure Letter) (i) are being given by the Seller and the Shareholders as an inducement to the Buyer and Parent to enter into this Agreement (and the Seller and each Shareholder acknowledges that the Buyer and Parent have expressly relied thereon) and (ii) are solely for the benefit of the Buyer and Parent. Accordingly, no third party (including, without limitation, the Shareholders or any other holder of capital stock of the Seller) or anyone acting on behalf of any thereof other than the Indemnified Persons, and each of them, shall be a third party or other beneficiary of such representations and warranties and no such third party shall have any rights of contribution against the Seller with respect to such representations or warranties or any matter subject to or resulting in indemnification under this Section 8, or otherwise. 8.7. REMEDIES EXCLUSIVE. The remedies provided for in this Section 8 shall be the exclusive remedies of the Indemnified Persons in connection with any claim, demand, loss, liability or obligation arising under this Agreement or in connection with the transactions contemplated hereby; PROVIDED, HOWEVER, that nothing in this Section 8.7 shall be construed to limit in any way the rights and benefits of, or the remedies available to, any party to this Agreement under or in respect of any other instrument or agreement to which such person may be a party or for fraud. SECTION 9. ADDITIONAL AGREEMENTS. 9.1. EXPENSES. Each of the Seller and the Shareholders, on the one hand, and the Buyer, on the other hand, shall bear their own fees and expenses incurred in connection with the preparation, execution and delivery of this Agreement and the Related Documents and the consummation of the transactions contemplated hereby and thereby (the "Transaction Expenses") including, without limitation, the payment by the Seller of the Grantor's Tax relating to the transfer of the Real Property and the payment by the Buyer of all other transfer taxes relating to the Real Property. 9.2. DISCLOSURE OF INFORMATION; NONCOMPETITION. (a) From and after the Closing, the Shareholders shall not use or disclose to any Person, except as required by law or judicial process, any Confidential Information for any reason or purpose whatsoever, nor shall they make use of any of the Confidential Information for their own purposes or for the benefit of any Person except the Buyer or any Affiliate thereof. (b) Reference is made to the Consulting and Noncompetition Agreement pursuant to which, in connection with the sale of the Purchased Assets by the Seller to the Buyer and the other transactions contemplated hereby, Lee Goldstein is entering into a noncompetition covenant in favor of the Buyer and its Affiliates. Such Consulting and Noncompetition Agreement is incorporated herein by reference as if set forth herein in its entirety. (c) The Seller acknowledges that the Subject Business has been conducted by the Seller, and substantial sales of the Seller's products have been made, in each State of the United States, and acknowledge and recognize the highly competitive nature of the industry in which the Subject Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder and in consideration of and as an inducement to Parent and the Buyer to consummate the transactions contemplated hereby, the Seller and Ida S. Goldstein shall not from and after the Closing until the fourth anniversary of the Closing (i) directly or indirectly represent or engage in any Competitive Business, whether such representation or engagement shall be for profit or not or whether such engagement shall be as an officer, director, partner, stockholder (other than ownership of up to 1% of the outstanding securities of any public company whose securities are traded on an established national or international securities exchange or investment in mutual funds), Affiliate or other participant, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Buyer (or any Affiliate thereof) and any third party, including, without limitation, any customer, supplier or employee of the Buyer, or (iii) affirmatively assist or induce (including, by way of example but not in limitation thereof, providing financing or advisory or consulting services) any third party to engage in any Competitive Business in any manner described in the foregoing clauses (i) and (ii); PROVIDED, HOWEVER, that nothing contained in this Section 9.2 shall prohibit Ida Goldstein from engaging in any activity that is an activity which Lee Goldstein is permitted to engage in under the terms of the Consulting and Noncompetition Agreement. (d) The parties hereto recognize and acknowledge that a breach by the Seller or any Shareholder of this Section 9.2 will cause irreparable and material loss and damage to the Buyer and its Affiliates as to which they will not have an adequate remedy at law or in damages. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach. 9.3. USE OF NAME. Neither the Seller nor any Shareholder shall allege or assert that the name "Virginia Design" or any variant thereof has not become distinctive and unique and neither the Seller nor any Shareholder shall allege or assert that such names have not obtained secondary meaning, identifying "Virginia Design" or any variant thereof as the source of goods associated with such name. The Seller and the Shareholders recognize and acknowledge that they are proscribed by operation of law from, and undertake in this Agreement as a matter of contract to refrain from, (A) owning any interest, directly or indirectly, in, or becoming associated with or otherwise lending any aid or support to, any Person (other than the Buyer or any Affiliate thereof) using "Virginia Design" or any variant thereof or (B) performing any service or offering any goods identified with the name "Virginia Design" or any variant thereof in a manner that is likely to cause confusion in the minds of ordinary purchasers, except on behalf of the Buyer or any Affiliate thereof. In connection therewith, it is agreed that the undertaking under this Section 9.3 is of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Section 9.3 would cause the Buyer and its Affiliates irreparable harm. In the event of any such breach, the Buyer shall be entitled, as a matter of right, to injunctive and other equitable relief without waiving any other rights which they may have to damages or otherwise. 9.4. RELATIONSHIPS WITH VENDORS AND CUSTOMERS. From and after the date hereof, neither the Seller nor any Shareholder shall take or fail to take any action which could reasonably be expected to, directly or indirectly, have an adverse effect on the Subject Business or the Purchased Assets or the business or operations of the Buyer after the Closing, or on the business relationship between the Seller or the Buyer and any vendor, supplier or customer thereof. 9.5. HEALTH INSURANCE. From and after the Closing Date until May 2, 2002, the Buyer shall provide, and Parent shall cause the Buyer to provide, to Lee Goldstein the medical benefits that are provided to employees of the Buyer on the same terms and conditions as those provided to such employees. 9.6. [INTENTIONALLY OMITTED] 9.7. UNDERTAKINGS OF THE BUYER. Except as otherwise consented to in writing by the Seller, the Buyer shall, and Parent shall cause the Buyer to: (a) in the event that the Buyer or Parent elect to sell the expandable polystyrene business of the Buyer, the Buyer shall promptly notify Lee Goldstein and permit him to submit a bid for the purchase of such business; (b) use its commercially reasonable best efforts to have Lee and Ida Goldstein released as guarantors on any of the Assumed Obligations including, without limitation, the indebtedness owed to United Leasing Company; and (c) provide the Seller and its accountants with reasonable access to employees of the Buyer (in a manner that does not interfere with their duties) and books and records transferred to the Buyer to aid the Seller in the closing of its books for the 1996 and 1997 tax years, to assemble information required to prepare its 1996 and 1997 tax returns and to handle any lawsuit, audit or claim for which the Seller or the Shareholders are responsible. 9.8. EMPLOYEES; SENIORITY; WARN ACT COMPLIANCE. On the Closing Date, the Buyer shall offer employment to all of the Seller's employees, except those who resign or whose employment is terminated between the date hereof and the Closing Date, at the rate of compensation paid to such employees as of April 1, 1997, which compensation rates are set forth on SCHEDULE IX; PROVIDED, HOWEVER, that in no event shall the Buyer or Parent be obligated to employ such employees for any period of time. In addition, the Seller's employees who become employees of the Buyer shall, for purposes of employee benefit matters, be given past service credit that gives effect to the period of time employed by the Seller. The Buyer shall be solely responsible for (i) providing any notices required pursuant to the WARN Act regarding any proposed or anticipated plant shutdown, employee layoffs or other events which may give rise to WARN Act requirements (including attorneys' fees) and (ii) any expenses or losses (including attorneys' fees) incurred as a result of any violations of the WARN Act by the Buyer. 9.9. COBRA COVERAGE. COBRA continuation coverage obligations under Section 4980B of the Code with respect to the current and former employees of the Seller and their covered spouses and dependents shall be divided as follows: (i) the Seller's health care plans shall provide such coverage for qualifying events occurring prior to the Closing Date and (ii) the Buyer's health care plans shall provide such coverage for qualifying events occurring on or after the Closing Date and thereafter with respect to the Seller's employees. The Buyer shall handle the administration of COBRA coverage for the Seller's former employees after the Closing Date. SECTION 10. TERMINATION; EFFECT OF TERMINATION. 10.1. TERMINATION. This Agreement may be terminated at any time prior to the Closing by: (a) the mutual consent of the Buyer and the Seller; or (b) the Buyer, if there has been a breach by the Seller or any Shareholder of any representation, warranty, covenant or agreement set forth in this Agreement on the part of the Seller or any Shareholder which is material and which the Seller or such Shareholder fails to cure within 10 Business Days after notice thereof is given by the Buyer (except no cure period shall be provided for a breach by the Seller or any Shareholder which by its nature cannot be cured); or (c) the Seller, if there has been a breach by Parent or the Buyer of any representation, warranty, covenant or agreement set forth in this Agreement on the part of Parent or the Buyer which is material and which Parent or the Buyer fails to cure within 10 Business Days after notice thereof is given by the Seller (except no cure period shall be provided for a breach by the Buyer which by its nature cannot be cured); or (d) the Buyer or the Seller, if the conditions set forth in Section 7.1 shall not have been satisfied or waived (to the extent they may be waived) by May 16, 1997; or (e) the Buyer, if the conditions set forth in Section 7.2 shall not have been satisfied or waived (to the extent they may be waived) by May 16, 1997; or (f) the Seller, if the conditions set forth in Section 7.3 and 7.2(n), (r) and (s) shall not have been satisfied or waived (to the extent they may be waived) by May 16, 1997; or (g) the Buyer or the Seller, if any permanent injunction or other Order of a court or other competent authority preventing the Closing shall have become final and nonappealable; PROVIDED, HOWEVER, that neither the Seller nor the Buyer shall be entitled to terminate this Agreement pursuant to Section 10.1(d), (e) or (f) if such party's intentional breach (or, with respect to the Seller, any Shareholder's intentional breach) of this Agreement has prevented the satisfaction of a condition. Any termination pursuant to Section 10.1(a) shall be effected by a written instrument signed by the Buyer and the Seller, and any termination pursuant to this Section 10.1 (other than a termination pursuant to Section 10.1(a)) shall be effected by written notice from the party or parties so terminating to the other parties hereto, which notice shall specify the Section hereof pursuant to which this Agreement is being terminated. 10.2. EFFECT OF TERMINATION. In the event of the termination of this Agreement as provided in Section 10.1, this Agreement shall be of no further force or effect, except for Sections 6.3, 6.7, Section 9.1, this Section 10.2 and Section 11 and the provisions of the Confidentiality Agreement dated October 18, 1996, between the Seller and Parent (the "Confidentiality Agreement"), each of which shall survive the termination of this Agreement; PROVIDED, HOWEVER, that the Liability of any party for any breach by such party of the representations, warranties, covenants or agreements of such party set forth in this Agreement occurring prior to the termination of this Agreement shall survive the termination of this Agreement and, in addition, in the event of any action for breach of contract in the event of a termination of this Agreement, the prevailing party shall be reimbursed by the other party to the action for reasonable attorneys' fees and expenses relating to such action. SECTION 11. MISCELLANEOUS PROVISIONS. 11.1. AMENDMENT. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Buyer and the Seller. 11.2. EXTENSION; WAIVER. At any time prior to the Closing, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement and (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party, and any such waiver shall not operate or be construed as a waiver of any subsequent breach by the other party. 11.3. ENTIRE AGREEMENT. This Agreement and the other agreements and documents referenced herein (including, but not limited to, the Disclosure Letter, the Confidentiality Agreement, the Related Documents and the Exhibits (in their executed form) attached hereto) contain all of the agreements among the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements or understandings among the parties with respect thereto (including, but not limited to, the letter of intent dated as of February 20, 1997, among Parent, the Seller and the Shareholders). 11.4. SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the Law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 11.5. NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, representatives, heirs and estates, as the case may be. This Agreement shall not be assignable by any party hereto without the consent of the other parties hereto; PROVIDED, HOWEVER, that anything contained herein to the contrary notwithstanding, the Buyer may, without the prior written consent of any other party, assign any or all of its rights and interests hereunder to any lender providing financing for the transactions contemplated hereby. 11.6. HEADINGS. Descriptive headings are for convenience only and shall not control or affect in any way the meaning or construction of any provision of this Agreement. 11.7. NOTICES. All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to the Seller or the Shareholders, to: Virginia Design Packaging Corp. 3120 South Ocean Boulevard Palm Beach, Florida 33480 Attention: Lee D. Goldstein; with a copy to: Clark & Stant, P.C. 900 One Columbus Center Virginia Beach, Virginia 23462 Attention: Thomas R. Frantz, Esq. Telecopier: (804) 473-0395; and (b) if to the Buyer or Parent, to them at: Berry Plastics Corporation Berry Plastics Design Corporation 101 Oakley Street Evansville, Indiana 47706 Attention: Martin R. Imbler Telecopier: (812) 421-9604; with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Michael Joseph O'Brien, Esq. Telecopier: (212) 408-2420. All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch, and (iv) in the case of mailing, on the third Business Day following such mailing. 11.8. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. 11.9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic Laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the Commonwealth of Virginia. 11.10. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 11.11. CONSTRUCTION. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. 11.12. REMEDIES. Subject to the provisions of Sections 8.7 and 10.2, the parties shall each have and retain all other rights and remedies existing in their favor at law or equity, including, without limitation, any actions for specific performance and/or injunctive or other equitable relief (including, without limitation, the remedy of rescission) to enforce or prevent any violations of the provisions of this Agreement. 11.13. WAIVER OF JURY TRIAL. Each of the parties hereto hereby irrevocably waives all right to trial by jury in any action, Proceeding or counterclaim arising out of or relating to this Agreement. 11.14. RECOVERY OF ATTORNEY'S FEES AND COSTS. If any party to this Agreement files any action or brings any proceeding against any other party to this Agreement that arises out of this Agreement, the prevailing party shall be entitled to recover, as an element of its costs of suit and not its damages, reasonable attorney's fees to be fixed by the court or arbitrator plus any other related out-of-pocket fees, costs and expenses incurred in connection with such action or proceeding; PROVIDED, HOWEVER, that in the event of any conflict between the provisions of this Section 11.14 and any provision of Section 8, the provisions of Section 8 shall govern. * * * **FOOTNOTES** {*} Such amount to be increased by the amount by which $7,874,350.02 exceeds the Designated Debt on the Closing Date; and such amount to be decreased by the amount by which the Designated Debt exceeds $7,874,350.02 on the Closing Date (whereby Designated Debt will include accounts payable that are 30 days past due and prepayment penalties (other than the portion of a prepayment penalty to be paid by the Buyer pursuant to Section 2.3), if any). IN WITNESS WHEREOF, each of the parties hereto has duly executed this Asset Purchase Agreement as of the date first written above. PARENT: BERRY PLASTICS CORPORATION By: /S/ JAMES M. KRATOCHVIL ------------------------------ James M. Kratochvil Vice President, Chief Financial Officer, Treasurer and Secretary THE BUYER: BERRY PLASTICS DESIGN CORPORATION By: /S/ JAMES M. KRATOCHVIL ------------------------------ James M. Kratochvil Vice President, Chief Financial Officer, Treasurer and Secretary SELLER: VIRGINIA DESIGN PACKAGING CORP. By: /S/ LEE D. GOLDSTEIN ------------------------------ Lee D. Goldstein President SHAREHOLDERS: /S/ LEE D. GOLDSTEIN ------------------------------ Lee D. Goldstein /S/ IDA S. GOLDSTEIN ------------------------------ Ida S. Goldstein ANNEX I DEFINITIONS The following terms used in the Stock Purchase Agreement shall have the following respective meanings: "ACCOUNTANTS' DETERMINATION" has the meaning set forth in Section 2.5(b)(ii). "ADDITIONAL ESCROW AMOUNT" has the meaning set forth in Section 2.4. "AFFILIATE" means, with respect to any Person, (i) a director, officer or stockholder of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or spouse, parent, sibling or descendant of any director or executive officer of such Person), and (iii) any other Person that, directly or indirectly through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. "ARBITRATING ACCOUNTANTS" has the meaning set forth in Section 2.5(b)(ii). "ASSUMED CONTRACTS" has the meaning set forth in Section 1.1(a)(vi). "ASSUMED OBLIGATIONS" has the meaning set forth in Section 1.3(b). "ASSUMED PAYABLES" has the meaning set forth in Section 1.3(a)(ii). "BEST KNOWLEDGE" of any Person shall mean and include (i) actual knowledge and (ii) that knowledge which a prudent businessperson could have obtained after making a reasonable investigation. In connection therewith, the knowledge (both actual and constructive) of each of Lee D. Goldstein, Larry A. Goldstein and Gordon Saffold shall be imputed to be the knowledge of the Seller. "BILL OF SALE" has the meaning set forth in Section 1.5. "BUSINESS DAY" means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are not required to be open. "BUYER" has the meaning set forth in the caption. "BUYER GROUP" means the Buyer, Parent and each of their respective successors and assigns, officers, directors, employees, representatives and Affiliates, other than any Shareholder. "BUYER'S ACCOUNTANTS" has the meaning set forth in Section 2.5(a). "BUYER'S NOTICE OF ADJUSTMENT" has the meaning set forth in Section 2.5(b)(i). "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act. "CERCLIS" means the Comprehensive Environmental Response, Compensation, and Liability Information System. "CLOSING" has the meaning set forth in Section 2.7. "CLOSING DATE" has the meaning set forth in Section 2.7. "CLOSING PAYMENT" has the meaning set forth in Section 2.2. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPETITIVE BUSINESS" means any business involving the sale of products or provision of services in any city or county in any State of the United States if such business or the products sold or services provided by it are competitive, directly or indirectly, with the business of or any product sold by the Buyer (after the Closing Date) or any Affiliate thereof. "CONFIDENTIAL INFORMATION" means Intellectual Property Rights of the Seller and the Buyer and all information of a proprietary or confidential nature relating to the Seller, the Buyer or the Subject Business (other than information that is in the public domain at the time of receipt thereof by any Shareholder at the time of its use or disclosure by a Shareholder other than as a result of the breach by any Shareholder of his or her agreement hereunder). "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 10.2. "CONSULTING AND NONCOMPETITION AGREEMENT" shall mean the Consulting, Noncompetition, Nonsolicitation and Nondisclosure Agreement to be entered into by the Buyer and Lee D. Goldstein, which is attached hereto as EXHIBIT F. "CONTRACT" means any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or other agreement, instrument, permit, concession, franchise or license. "CONTROL" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "DECEMBER BALANCE SHEET" has the meaning set forth in Section 4.5. "DECEMBER BALANCE SHEET DATE" has the meaning set forth in Section 4.5. "DESIGNATED DEBT" has the meaning set forth in Section 2.3. "DISCLOSURE LETTER" has the meaning set forth in Section 4.1. "EMPLOYEE PLAN" means any "employee benefit plan" (as defined in Section 3(3) of ERISA) as well as any other plan, program or arrangement involving direct and indirect compensation, under which the Seller or any ERISA Affiliate of the Seller has any present or future obligations or Liability on behalf of its employees or former employees, contractual employees or their dependents or beneficiaries. "EMPLOYMENT AGREEMENT" means the Employment Agreement to be entered into between the Buyer and Larry Goldstein. "ENCUMBRANCES" means and includes security interests, mortgages, liens, pledges, charges, easements, reservations, restrictions, clouds, equities, rights of way, options, rights of first refusal and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money. "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all Laws, Permits and Contracts with Governmental Entities relating to or addressing pollution or protection of the environment, public health and safety, or employee health and safety, including, but not limited to, the Solid Waste Disposal Act, as amended, 42 U.S.C.
6901, ET SEQ., the Clean Air Act, as amended, 42 U.S.C.
7401 ET SEQ., the Federal Water Pollution Control Act, as amended, 33 U.S.C.
1251 ET SEQ., the Emergency Planning and Community Right- to-Know Act, 42 U.S.C.
11001 ET SEQ., the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C.
9601 ET SEQ., the Hazardous Materials Transportation Uniform Safety Act, as amended, 49 U.S.C.
1804 ET SEQ., the Occupational Safety and Health Act of 1970, the regulations promulgated thereunder, and any similar Laws and other requirements having the force or effect of Law, and all Orders issued or promulgated thereunder, and all related common law theories. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" means, with respect to any Person, any entity that is a member of a "controlled group of corporations" with, or is under "common control" with, or is a member of the same "affiliated service group" with such Person as defined in Section 414(b), 414(c) or 414(m) of the Code. "ESCROW ACCOUNT" has the meaning set forth in Section 2.4. "ESCROW AGREEMENT" has the meaning set forth in Section 2.4. "EXCLUDED ASSETS" has the meaning set forth in Section 1.2. "EXCLUDED OBLIGATIONS" has the meaning set forth in Section 1.4. "FINAL DETERMINATION DATE" has the meaning set forth in Section 2.5(b)(iii). "FINAL WORKING CAPITAL" has the meaning set forth in Section 2.5(a). "FINAL WORKING CAPITAL STATEMENT" has the meaning set forth in Section 2.5(a). "FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5. "FIRST 20-DAY PERIOD" has the meaning set forth in Section 2.5(b)(ii). "GAAP" has the meaning set forth in Section 2.5(a). "GOVERNMENTAL ENTITY" means any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, Federal, state or local. "HAZARDOUS MATERIALS" means any hazardous or toxic chemicals, materials or substances; any pollutants or contaminants; or crude oil or any fraction thereof (as such terms are defined under any Environmental, Health and Safety Law). "INDEMNIFIED PERSONS" means the Buyer Group, the Seller or the Shareholders, as the case may be. "INDEMNIFYING PERSONS" means the Seller Group, the Shareholders or the Buyer, as the case may be. "INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, trade secrets, proprietary processes and formulae, confidential information, franchises, licenses, inventions, instructions, marketing materials, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. "LAW" means any law, statute, treaty, rule, directive or regulation or Order of any Governmental Entity. "LEVY DEBT" has the meaning set forth in Section 1.4(g). "LIABILITY" means any liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due, regardless of when asserted. "LOSSES" means any and all losses, claims, damages, liabilities, expenses (including reasonable attorneys' fees actually incurred) and assessments arising from or in connection with any such matter that is the subject of indemnification under Section 8.1. "MATERIAL ADVERSE CHANGE" means, with respect to any Person, any material adverse change in the business, operations, assets (including levels of working capital and components thereof), condition (financial or otherwise), operating results, Liabilities, employee relations or, to the Best Knowledge of such Person, business prospects of such Person or any material casualty loss or damage to the assets of such Person, whether or not covered by insurance. "MATERIAL ADVERSE EFFECT" on any Person means a material adverse effect on the business, operations, assets (including levels of working capital and components thereof), condition (financial or otherwise), operating results, Liabilities, employee relations or, to the Best Knowledge of such Person, business prospects of such Person. "OBJECTION NOTICE" has the meaning set forth in Section 2.5(b)(ii). "ORDERS" means judgments, writs, decrees, compliance agreements, injunctions or orders of any Governmental Entity or arbitrator. "OVERPAYMENT AMOUNT" has the meaning set forth in Section 2.5(c)(ii). "PARENT" has the meaning set forth in the caption. "PERMITS" means all permits, licenses, authorizations, registrations, franchises, approvals, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Entities. "PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which there are adequate reserves on the books, (ii) workers or unemployment compensation liens arising in the ordinary course of business; and (iii) mechanic's, materialman's, supplier's, vendor's or similar liens arising in the ordinary course of business securing amounts that are not delinquent. "PERSON" shall be construed broadly and shall include an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity (or any department, agency or political subdivision thereof). "POTENTIAL TRANSACTION" has the meaning set forth in Section 6.8(a). "PROCEEDINGS" means actions, suits, claims, investigations or legal or administrative or arbitration proceedings. "PURCHASE PRICE" has the meaning set forth in Section 2.1(a). "PURCHASED ASSETS" has the meaning set forth in Section 1.1(b). "REAL PROPERTY" has the meaning set forth in Section 1.1(a)(iii). "RELATED DOCUMENTS" means, collectively, the Escrow Agreement, the Bill of Sale, the Consulting and Noncompetition Agreement and the Employment Agreement. "REQUISITE RIGHTS" has the meaning set forth in Section 4.11(a). "RETAINED CONTRACTS" has the meaning set forth in Section 1.2(iv). "SELLER" has the meaning set forth in the caption. "SELLER GROUP" means the Seller, each of the Shareholders and their respective successors, assigns, representatives, heirs and estate. "SELLER'S BY-LAWS" means the by-laws of the Seller. "SELLER'S CHARTER" means the certificate or articles of incorporation of the Seller. "SETTLEMENT AGREEMENT" has the meaning set forth in Section 2.5(b)(ii). "SHAREHOLDER(S)" has the meaning set forth in the caption. "SUBJECT BUSINESS" has the meaning set forth in the preamble. "SURVIVAL DATE" has the meaning set forth in Section 8.5. "TAX" means any of the Taxes. "TAX RETURNS" means Federal, state, local and foreign tax returns, reports, statements, declarations of estimated tax and forms. "TAXES" means, with respect to any entity, (i) all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes, fees, assessments or charges of any kind whatsoever, together with all interest and penalties, additions to tax and other additional amounts imposed by any taxing authority (domestic or foreign) on such entity (if any) and (ii) any liability for the payment of any amount of the type described in the immediately preceding clause (i) as a result of (A) being a "transferee" (within the meaning of Section 6901 of the Code or any other applicable law) of another entity, (B) being a member of an affiliated or combined group or (C) any contractual obligation. "THIRD PARTY CLAIM" has the meaning set forth in Section 8.4. "TITLE POLICY" has the meaning set forth in Section 7.2(v). "TRANSACTION EXPENSES" has the meaning set forth in Section 9.1. "TRANSITION PERIOD" has the meaning set forth in Section 6.1. "UNDERPAYMENT AMOUNT" has the meaning set forth in Section 2.5(c)(i). "WARN ACT" means the Workers Adjustment and Retraining Notification Act, 29 U.S.C.
2101, et. seq. EX-3.10 3 CERTIFICATE OF DESIGNATION CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B CUMULATIVE PREFERRED STOCK OF BPC HOLDING CORPORATION Pursuant to Section 151 of the Corporation Law of the State of Delaware I, Martin R. Imbler, President of BPC Holding Corporation (the "CORPORATION"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 151 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of Incorporation of the Corporation (the "RESTATED CERTIFICATE"), the Board of Directors on August 29, 1997, adopted the following resolution creating a series of 200,000 shares of Preferred Stock designated as Series B Cumulative Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board by ARTICLE FOURTH of the Restated Certificate and out of the Preferred Stock authorized therein, the Board hereby authorizes that a series of Preferred Stock of the Corporation be, and it hereby is, created and that the designation and amount thereof and the voting powers (full or limited, or no voting powers), preferences and relative participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: SECTION 1. DESIGNATION AND AMOUNT; RANK. (a) The shares of such series of Preferred Stock shall be designated as the "Series B Cumulative Preferred Stock" (the "SERIES B PREFERRED STOCK") and the number of shares initially constituting such series shall be 200,000, which number may be decreased (but not increased) by the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") without a vote of stockholders; PROVIDED, HOWEVER, that such number may not be decreased below the number of then currently outstanding shares of Series B Preferred Stock. The stated value and liquidation preference per share (the "LIQUIDATION PREFERENCE") of the Series B Preferred Stock shall be $25.00. (b) The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the Corporation, junior to the Series A Preferred Stock and prior to all other Capital Stock of the Corporation (such other Capital Stock, other than the Series A Preferred Stock, being herein referred to as the "JUNIOR STOCK"). SECTION 2. DEFINITIONS. Capitalized terms used herein shall have the meanings set forth in this Section 2: "AFFILIATE" means, with respect to any specified Person, any other Person which, directly or indirectly, controls, is under common control with, or is owned or controlled by, such specified Person. For purposes of this definition, (i) "control" means, with respect to any specified Person, either (x) the beneficial ownership of more than 30 percent of any class of equity securities or (y) the power to direct the management or policies of the specified Person through the ownership of voting securities, by contract, voting agreement or otherwise and (ii) the terms "controlling", "control with" and "controlled by", etc., shall have meanings correlative to the foregoing. "BERRY" means Berry Plastics Corporation. "BERRY CREDIT FACILITY" means the credit facility provided pursuant to the Amended and Restated Financing and Security Agreement dated as of August 29, 1997, by and among Berry, NationsBank, N.A. and the other Lenders thereunder, as amended, modified, renewed, refunded, replaced or refinanced from time to time which includes the addition, substitution or replacement of any or all lenders thereunder under the same or any replacement agreement. "BOARD OF DIRECTORS" has the meaning ascribed to such term in Section 1(a). "BPC SENIOR SUBORDINATED NOTES" means the 12-1/4% Senior Subordinated Notes due 2004 issued pursuant to the BPC Senior Subordinated Notes Indenture. "BPC SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture dated as of April 21, 1994, as amended and supplemented from time to time, among the Corporation and the other Guarantors thereunder, Berry, and United States Trust Company of New York, as Trustee, regarding the BPC Senior Subordinated Notes. "BUSINESS DAY" means any day other than Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "BY-LAWS" means the by-laws of the Corporation, as they may be amended or restated from time to time. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet prepared in accordance with GAAP. "CAPITAL STOCK" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including, without limitation, any preferred stock, and 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, but excluding any debt securities convertible into such equity. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case with any lender party to the Berry 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. "CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation of the Corporation, as it may be amended or restated from time to time. "CLOSING DATE" has the meaning ascribed to such term in the Reorganization Agreement. "COMMON STOCK" means the Common Stock, of all classes, of the Corporation. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue 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. "CORPORATION" means BPC Holding Corporation, a Delaware corporation. "DGCL" means the General Corporation Law of the State of Delaware, as in effect from time to time. "DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the terms of any Capital Stock 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 December 31, 2006; PROVIDED, HOWEVER, that any Capital Stock that would otherwise be Disqualified Stock will not be Disqualified Stock solely as a result of a maturity or redemption event that is conditioned upon and subject to compliance with Section 4.07 of the Senior Secured Notes Indenture. "DIVIDEND ACCRUAL DATE" means the last day of March, June, September and December in each year. "DIVIDEND PERIOD" means each quarterly period ending on a Dividend Accrual Date. "DIVIDEND RATE" means, with respect to each share of Series B Preferred Stock, a rate of 14.75% per annum of the Liquidation Preference. "EVENT OF NONCOMPLIANCE" means the failure of the Corporation to perform, observe, or comply with any covenant, agreement, obligation, or restriction required hereunder, after giving effect to any grace period provided herein. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXISTING INDEBTEDNESS" means Indebtedness of the Corporation and its Subsidiaries (including, without limitation, the Berry Credit Facility, the Senior Secured Notes and the BPC Senior Subordinated Notes) in existence on the Closing Date, and including any Indebtedness incurred in connection with the refinancing, substitution or replacement of any such Indebtedness in existence on the Closing Date. "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 Issue Date. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of any Indebtedness of such Person or any other Person. "INTERNATIONAL" means Atlantic Equity Partners International II, L.P. "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, Capital Stock or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "ISSUE DATE" means the Closing Date, on which date shares of Series B Preferred Stock were issued by the Corporation pursuant to the Reorganization Agreement. "JUNIOR PAYMENT" has the meaning ascribed to such term in Section 6.1(a). "JUNIOR STOCK" has the meaning ascribed to such term in Section 1(b). "LIQUIDATION PREFERENCE" has the meaning ascribed to such term in Section 1(a). "OFFICER" means the President, any Vice President, the Treasurer or the Secretary of the Corporation, as applicable. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers. "PERMITTED INVESTMENTS" means (a) any Investments in the Corporation or in a Wholly Owned Subsidiary of the Corporation that is engaged in the same or similar line of business as the Corporation and its Subsidiaries were engaged in on the Issue Date and (b) any Investments in Cash Equivalents. "PERSON" means any individual, corporation, general or limited partnership, joint venture, association, limited liability company, joint stock company, trust, business trust, bank, trust company, estate (including any beneficiaries thereof), unincorporated organization, cooperative, association or governmental branch, authority, agency or political subdivision thereof. "PREFERRED STOCK" means the preferred stock, par value $0.01 per share, of the Corporation. "REDEMPTION DATE" means the date of any redemption of the Series B Preferred Stock pursuant to Section 7. "REORGANIZATION AGREEMENT" means the Agreement and Plan of Reorganization dated as of the Closing Date among the Corporation, Berry, VABC Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Berry, Venture Packaging, Inc., a Delaware corporation ("Venture"), the subsidiaries of Venture and certain shareholders of Venture. "RESTATED CERTIFICATE" means the Restated Certificate of Incorporation of the Corporation. "SENIOR SECURED NOTES" means the 12-1/2% senior secured notes issued by the Corporation pursuant to the terms of the Senior Secured Notes Indenture. "SENIOR SECURED NOTES INDENTURE" means the Indenture dated as of June 18, 1996, between the Corporation and First Trust of New York, National Association, as trustee, regarding the Senior Secured Notes as the same may be modified and supplemented, and in effect from time to time. "SENIOR STOCK" means the Series A Preferred Stock and any stock of the Corporation ranking prior to, or on a parity with, the Series B Preferred Stock either with respect to the payment of dividends or the distribution of assets, whether upon liquidation or otherwise. "SERIES A PREFERRED STOCK" means the Series A Senior Cumulative Exchangeable Preferred Stock of the Corporation. "SERIES B PREFERRED STOCK" has the meaning ascribed to such term in Section 1(a). "SUBSIDIARY" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) 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 (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. Unless otherwise specified herein, each reference to a Subsidiary shall refer to a Subsidiary of the Corporation. "SUCCESSOR CORPORATION" has the meaning ascribed to such term in Section 6.7(b). "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. SECTION 3. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of Series B Preferred Stock, in preference to the holders of shares of Junior Stock but subject to the preferences of the Series A Preferred Stock in effect on the Closing Date, shall be entitled to receive cumulative dividends at the Dividend Rate, and no more, when and as declared by the Board of Directors, out of funds legally available for that purpose. Such dividends shall accrue quarterly on each Dividend Accrual Date, commencing on September 30, 1997, and shall be paid in cash only (i) if, when and as declared by the Board of Directors, out of funds legally available for that purpose, or (ii) upon redemption as provided in Section 7. (b) Dividends payable pursuant to Section 3(a) shall begin to accrue and be cumulative from the Issue Date. The amount of dividends payable for any period shorter or longer than a full Dividend Period, including the first Dividend Period, shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series B Preferred Stock, including dividends paid in an amount less than the total amount of such dividends at the time accrued and payable on such shares, shall be allocated PRO RATA on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days nor less than ten (10) days prior to the date fixed for the payment thereof. If no record date is fixed, the record date for determining holders of shares of Series B Preferred Stock entitled to receive payment of a dividend declared thereon shall be at the close of business on the day on which the Board of Directors declares such dividend. SECTION 4. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, subject in all events to the prior rights of the Series A Preferred Stock, an amount equal to the Liquidation Preference per share of Series B Preferred Stock plus all accrued and unpaid dividends thereon to the date of such payment, and no distribution shall be made to the holders of shares of Junior Stock upon liquidation, dissolution or winding up unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received an amount equal to the Liquidation Preference per share plus all accrued and unpaid dividends thereon to the date of such payment (whether or not the declaration or payment of such dividends is legally permissible or is prohibited by any agreement or instrument to which the Corporation is subject). (b) Neither the consolidation, merger or other business combination of the Corporation with or into any other Person or Persons nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 4. SECTION 5. VOTING RIGHTS. Except for any voting rights provided by law, the holders of shares of Series B Preferred Stock shall have no voting rights and their consent shall not be required for the taking of any corporate action. SECTION 6. RESTRICTIVE COVENANTS. For so long as any shares of Series B Preferred Stock shall be outstanding, and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the holders of at least 66-2/3% of the shares of Series B Preferred Stock then outstanding, voting as a single class: 6.1. LIMITATION ON JUNIOR PAYMENTS. (a) Subject to Section 6.1(b), the Corporation shall not, directly or indirectly, (i) declare, pay, or set apart for payment on any Junior Stock, any dividend or make any distribution on or in respect of Junior Stock (including any payment in connection with any merger or consolidation involving the Corporation or any of its Subsidiaries), except dividends or distributions payable in shares (other than Disqualified Stock) of the classes or series upon which such dividends are declared or paid, or payable in shares of Common Stock with respect to Junior Stock other than Common Stock, together with cash in lieu of fractional shares, or (ii) purchase, redeem, retire or otherwise acquire for value any Junior Stock (any such dividend, distribution, purchase, redemption, or other acquisition being herein referred to as a "JUNIOR PAYMENT"). (b) The provisions of Section 6.1(a) shall not prohibit: (i) any purchase or redemption of Capital Stock of the Corporation made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Corporation (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary); (ii) the repurchase, redemption or other acquisition or retirement for value of Capital Stock of the Corporation pursuant to any management equity subscription, stockholder or stock option agreement; PROVIDED, HOWEVER, that (X) the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock shall not exceed $1.0 million in any fiscal year and (Y) no Default or Event of Default (as defined in the Senior Secured Notes Indenture) or Event of Noncompliance shall have occurred and be continuing immediately after such transaction; and (iii) any repurchase of Capital Stock from an "SBIC Holder" pursuant to Section 6.1(b)(iii) of the Restated Certificate. 6.2. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Corporation 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 (i)(a) pay dividends or make any other distributions to the Corporation or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Corporation or any of its Subsidiaries, (ii) make loans or advances to the Corporation or any of its Subsidiaries, (iii) transfer any of its properties or assets to the Corporation or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (A) Existing Indebtedness, (B) Indebtedness of Berry or Berry's Subsidiaries permitted to be incurred under the Senior Secured Notes Indenture or the BPC Senior Subordinated Notes Indenture, (C) applicable law, (D) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Corporation 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, (E) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, or (F) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired. 6.3. AMENDMENT OF FINANCING DOCUMENTS. The Corporation will not amend or supplement the Senior Secured Notes or the Senior Secured Notes Indenture, as in effect on the Closing Date (or enter into any refinancing or replacement thereof, or any new financing agreement) if such amended or supplemented or new financing agreement would contain covenants that are more restrictive with respect to the ability of the Corporation to perform its obligations set forth herein, or in the Reorganization Agreement (only to the extent that such covenants relate to the Corporation's obligations to the holders of the Preferred Stock), than those currently set forth under the terms of the Existing Indebtedness or any document relating to any class of Capital Stock of the Corporation. 6.4. LIMITATION ON ISSUANCE OF SUBSIDIARY SECURITIES. The Corporation will cause its Subsidiaries not to issue any Capital Stock (other than to the Corporation or any wholly-owned subsidiary of the Corporation), unless the proceeds of such issuance are used to redeem all (but not less than all) of the then outstanding shares of Series B Preferred Stock on the terms and conditions set forth herein. 6.5. SENIOR STOCK. Except as may be required in order to comply with the terms and provisions relating to the Series A Preferred Stock, the Corporation shall not (i) authorize, create or issue any class or series, or any shares of any class or series, of Senior Stock, unless the proceeds from such issuance are used to redeem or repurchase all (but not less than all) of the then outstanding shares of Series B Preferred Stock pursuant to the terms and conditions set forth herein and in the Reorganization Agreement; (ii) reclassify any shares of capital stock of the Corporation into shares of Senior Stock; or (iii) authorize or issue any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock. 6.6. CERTIFICATE OF INCORPORATION; BY-LAWS. The Corporation shall not amend, alter or repeal the Certificate of Incorporation or By-Laws to alter or change the preferences, rights or powers of the Series B Preferred Stock so as to affect the holders of the Series B Preferred Stock adversely, to otherwise impair the rights of the holders of Series B Preferred Stock, or to increase the authorized number of shares of Series B Preferred Stock. 6.7. MERGER AND CONSOLIDATION. The Corporation shall not consolidate with or merge with or into, or convey, transfer, lease or sell all or substantially all its assets to, any Person, unless: (a) All outstanding shares of Series B Preferred Stock are purchased as a part of such transaction at a per share price of not less than the Liquidation Preference of each such share plus all accrued and unpaid dividends thereon through the date of such purchase; or (b) (i) the Corporation is the surviving corporation or, if the surviving corporation is not the Corporation, the resulting, surviving or transferee Person (the "SUCCESSOR CORPORATION") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and (x) the Successor Corporation (if not the Corporation) shall expressly assume, by an amendment to the Reorganization Agreement in form and substance satisfactory to the holders of at least 66-2/3% of all outstanding shares of Series B Preferred Stock as of the date of such assumption, all the obligations of the Corporation thereunder relating to the Series B Preferred Stock, and (y) the Series B Preferred Stock shall be converted or exchanged for and shall become shares of such Successor Corporation, having in respect of such Successor Corporation the same powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereto, that the Series B Preferred Stock had immediately prior to such transaction; (ii) immediately after giving effect to such transaction, no Default or Event of Default (as defined in the Senior Secured Notes Indenture) exists and no Event of Noncompliance shall have occurred and be continuing; (iii) the Corporation or Successor Corporation, as the case may be, will (x) at the time of the 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 of the Senior Secured Notes Indenture and (y) will have a Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Corporation immediately preceding the transaction; and (iv) the Corporation shall have delivered to the holders of the Series B Preferred Stock an Officers' Certificate stating that such consolidation, merger, transfer or lease complies with this Section 6.7. The Successor Corporation shall succeed to, and be substituted for, and may exercise every right and power of, the Corporation to the extent set forth in the Reorganization Agreement, but in the case of a lease of all or substantially all its assets, the Corporation shall not be released from its obligations with respect to the Series B Preferred Stock. Notwithstanding clauses (ii) and (iii): (1) any Subsidiary of the Corporation may consolidate with, merge into or transfer all or part of its properties and assets to the Corporation and (2) the Corporation may merge with an Affiliate incorporated solely for the purpose of reincorporating the Corporation in another jurisdiction to realize tax or other benefits. 6.8. NOTIFICATION OF CERTAIN EVENTS. The Corporation shall mail to each holder of record of the Series B Preferred Stock, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of (i) the occurrence of any Event of Noncompliance, (ii) any failure by the Corporation to observe any covenant specified herein or any covenant in the Reorganization Agreement that relates to the Preferred Stock and (iii) any event which requires the Corporation to provide notification to the holders of the Series A Preferred Stock; PROVIDED, HOWEVER that the holders of the Series B Preferred Stock shall protect, preserve and maintain in strict confidence all such information disclosed to them and shall not use, divulge, furnish, make accessible or disclose such information to any third party, except as such holder may be required to do so by law. 6.9. DISTRIBUTIONS OF JUNIOR STOCK. Except as otherwise provided for in Section 6.1(b), for so long as the Common Stock of the Corporation is not registered pursuant to Section 12 or 15 of the Exchange Act, any dividends, distributions or other payments made on or in respect of Junior Stock shall be held by holders of Junior Stock in trust for the benefit of the holders of Series B Preferred Stock and shall be remitted to the holders of Series B Preferred Stock, on a pro-rata basis, until each holder of Series B Preferred Stock has received an amount equal to the per share Liquidation Preference plus all accrued and unpaid dividends; PROVIDED, HOWEVER, that the provisions of this Section 6.9 shall be subject in all respects to the preferences of the Series A Preferred Stock as in effect on the Closing Date including, without limitation, the right of the holders of Series A Preferred Stock to receive distributions or other payments made in respect of Junior Stock. SECTION 7. REDEMPTION. (a) On and after the Issue Date, to the extent that the Corporation shall have funds legally available therefor, the Corporation shall have the right, at its sole option and election, to redeem, at any time or from time to time, in whole or in part, the outstanding shares of Series B Preferred Stock by paying therefor in cash an amount per share equal to the Liquidation Preference plus all accrued and unpaid dividends with respect thereto. (b) To the extent permitted under the terms of Existing Indebtedness and the Series A Preferred Stock, the Corporation shall redeem the Series B Preferred Stock in accordance with the terms of Section 7(a) in the event of (i) the consummation of any transaction that results in International owning, directly or indirectly, immediately after the consummation of such transaction, less than two-thirds of the Common Stock of the Corporation currently held by International, (ii) the sale by Berry of all or substantially all of its assets to unrelated third party, (iii) the consummation of a registered public offering, or a series of such public offerings, of Common Stock of the Corporation or Berry under the Securities Act of 1933, as amended, which result in aggregate net cash proceeds to the Corporation or Berry of $50,000,000 or greater during any one-year period, or (iv) the redemption in full of the Series A Preferred Stock and payment in full of all dividends payable with respect thereto. (c) Notice of any redemption of shares of Series B Preferred Stock pursuant to this Section 7 shall be mailed not less than ten (10) Business Days nor more than sixty (60) days prior to the Redemption Date to each holder of shares of Series B Preferred Stock to be redeemed, at such holder's address as it appears on the transfer books of the Corporation. Each such notice shall state: (A) the Redemption Date, (B) the place or places where the redemption price will be paid (if other than the principal executive offices of the Corporation), (C) if less than all the shares held by any holder are to be redeemed pursuant to paragraph (a), the number of shares to be redeemed from such holder and (D) that dividends on the shares of Series B Preferred Stock to be redeemed will cease to accrue on the Redemption Date. In order to facilitate the redemption of shares of Series B Preferred Stock, the Board of Directors may fix a record date for the determination of shares of Series B Preferred Stock to be redeemed, not more than sixty (60) days nor less than thirty (30) days prior to the applicable Redemption Date. In the case of the redemption of less than all the outstanding shares of Series B Preferred Stock pursuant to paragraph (a), (I) the shares to be redeemed shall be selected PRO RATA, and there shall be redeemed from each holder, as nearly as practicable to the nearest whole share, that proportion of all the shares to be redeemed which the number of shares held of record by such holder bears to the total number of shares of Series B Preferred Stock at the time outstanding; PROVIDED, HOWEVER, that if any holder of Series B Preferred Stock holds of record (or following such redemption would hold of record) less than 100 shares in the aggregate, then the Corporation may elect to redeem all such shares held of record by such holder and there shall be redeemed from each other holder, as nearly as practicable to the nearest whole share, that proportion of all other shares to be redeemed which the number of shares held of record by such holder bears to the total number of other shares of Series B Preferred Stock at the time outstanding, and (II) if fewer than all shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (d) Notice having been mailed as specified in Section 7(c), and provided that on or before the Redemption Date specified in such notice all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the PRO RATA benefit of the holders of the shares so called for redemption, so as to be and to continue to be available therefor, then, from and after the Redemption Date, dividends on the shares of Series B Preferred Stock called for redemption shall cease to accrue and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof set forth herein and otherwise as stockholders of the Corporation (except the right to receive from the Corporation the redemption price in accordance with this Section 7) shall cease. SECTION 8. REACQUIRED SHARES. Any shares of Series B Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful redemption or purchase of such shares, the capital represented by such shares shall be reduced in accordance with the DGCL. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of another series of Preferred Stock (subject to any applicable limitations set forth herein). * * * * * IN WITNESS WHEREOF, I have executed and subscribed this Certificate of Designation, Preferences and Rights and do affirm the foregoing as true under the penalties of perjury this 29th day of August, 1997. /S/ MARTIN R. IMBLER ------------------------------ Martin R. Imbler President EX-10.1 4 AMENDED AND RESTATED FINANCING AND SECURITY AGREEM AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this 29th day of August, 1997, by and among BERRY PLASTICS CORPORATION, a corporation organized under the laws of the State of Delaware (the "Borrower"); NATIONSBANK, N.A., a national banking association ("NationsBank"), FLEET CAPITAL CORPORATION, a corporation organized and existing under the laws of the State of Rhode Island ("Fleet"), GENERAL ELECTRIC CAPITAL CORPORATION, a corporation organized and existing under the laws of the State of New York ("GE Capital"), and each other financial institution which is a party to this Agreement, whether by execution and delivery of this Agreement or otherwise pursuant to Section 9.5 hereof (collectively the "Lenders" and individually, a "Lender"); and NATIONSBANK, N.A., a national banking association, in its capacity as both collateral and administrative agent for the Lenders (the "Agent"). RECITALS A. The Borrower, the Agent and the Lenders are parties to that certain Financing and Security Agreement dated as of January 21, 1997 by and among the Borrower, the Agent and the Lender, as amended by (i) that certain First Amendment to Financing and Security Agreement dated as of April 1, 1997, (ii) that certain Second Amendment to Financing and Security Agreement dated as of May 13, 1997 and (iii) that certain Loan Restructuring Amendment dated as of June 13, 1997 (as amended, restated, supplemented or otherwise modified, the "Original Credit Agreement"). Pursuant to the provisions of the Original Credit Agreement, the Borrower applied to the Lenders for credit facilities consisting of (i) a revolving credit facility in the maximum principal amount of $30,000,000 (the "Total Revolving Credit Committed Amount"), (ii) a letter of credit facility in the maximum principal amount of $5,000,000, as part of that revolving credit facility, (iii) a term loan facility in the maximum principal amount of $31,980,000 ("Term Loan A"), and (iv) a standby letter of credit facility in the maximum principal amount of $12,000,000 (the "Bond Letter of Credit Committed Amount"), all to be used by the Borrower for the Permitted Uses described in this Agreement. B. The Borrower has advised the Agent and the Lenders that the Borrower has formed VABC Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Berry Venture") and that Berry Venture is a wholly-owned subsidiary of the Borrower. Contemporaneously with the execution and delivery of this Agreement, Berry Venture has acquired or intends to acquire all or substantially all of the stock ("Venture Stock") issued by Venture Packaging, Inc., a corporation organized and existing under the laws of the State of Delaware ("Venture Holdings") in accordance with the provisions of that certain Agreement and Plan of Reorganization dated as of August 29, 1997 (as amended, restated, supplemented or otherwise modified, the "Venture Packaging Purchase Agreement"). Venture Packaging Southeast, Inc., a corporation organized and existing under the laws of the State of South Carolina ("Venture Southeast") and Venture Packaging Midwest, Inc., a corporation organized and existing under the laws of the State of Ohio ("Venture Midwest") currently are wholly-owned subsidiaries of Venture Holdings. The Borrower has further advised the Agent and the Lenders that as part of the contemplated acquisition of the Venture Stock, Berry Venture shall be merged into Venture Holdings (the "Venture Merger"), with Venture Holdings being the survivor, and that one hundred percent (100%) of the capital stock issued by Venture Southeast and Venture Midwest may be transferred to the Borrower. Subsequent to the closing and consummation of the acquisition of the Venture Stock, the Venture Merger and the possible transfer to the Borrower of the stock of Venture Southeast and Venture Midwest, the Borrower may dissolve, liquidate or merge Venture Holdings, all as to and to the extent permitted by the terms of this Agreement. C. In connection with the consummation of the acquisition of the Venture Stock, the Borrower has requested that the Lenders agree (i) to increase the maximum principal amount of the Total Revolving Credit Committed Amount from $30,000,000 to $50,000,000, (ii) to amend and restructure Term Loan A such that as of the date of this Agreement, the maximum aggregate unpaid principal balance of Term Loan A shall be $31,000,000, (iii) to make an additional term loan to the Borrower in the maximum principal amount of $30,000,000 ("Term Loan B"), and (iv) to increase the maximum principal amount of the Bond Letter of Credit Committed Amount from $12,000,000 to $18,852,000. In addition, the Borrower has requested that (ii) the Agent and the Lenders consent and agree to (1) the acquisition of the Venture Stock in accordance with the terms and conditions of the Venture Packaging Purchase Agreement, (2) the merger of Berry Venture into Venture Holdings, (3) the transfer of one hundred percent (100%) of the capital stock of Venture Southeast and Venture Midwest to the Borrower, and (4) the dissolution, liquidation or merger of Berry Venture in accordance with the provisions of this Agreement. D. Accordingly, the Borrower, the Agent and the Lenders desire to amend and restate the Original Credit Agreement, as follows: ARTICLE 1 DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings: "Account" individually and "Accounts" collectively mean all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in, or a lease of, goods, all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of merchandise sold or leased, services rendered, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements or general interest in merchandise which gave rise to any or all of the foregoing, including all goods, all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including, without limitation, real property mortgages and deeds of trust) and letters of credit given by any Person with respect to any of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non-cash) of the foregoing. "Account Debtor" means any Person who is obligated on an Account and "Account Debtors" mean all Persons who are obligated on the Accounts. "AeroCon, Inc." means AeroCon, Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Affiliate" means, with respect to any designated Person, any other Person, (i) directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with the Person designated, (ii) directly or indirectly owning or holding ten percent (10%) or more of any equity interest in such designated Person, or (iii) ten percent (10%) or more of whose stock or other equity interest is directly or indirectly owned or held by such designated Person. For purposes of this definition, the term "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or other equity interests or by contract or otherwise. "Agency Fee" and "Agency Fees" have the meanings described in Section 8.9. "Agent" means the Person defined as the "Agent" in the preamble of this Agreement and shall also include any successor Agent appointed pursuant to Section 8.7. "Agent's Obligations" shall mean any and all Obligations payable solely to and for the exclusive benefit of the Agent by the Borrower under the terms of this Agreement and/or any of the other Financing Documents, including, without limitation, any and all Agency Fees, Letter of Credit Fronting Fees and/or Field Examination Fees. "Agreement" means this Financing and Security Agreement, as amended, restated, supplemented or otherwise modified in writing in accordance with the provisions of Section 9.2 of this Agreement. "Alternate Base Rate" means the sum of (i) the Base Rate PLUS (ii) the Applicable Margin. "Amortizing Iowa Bond Letter of Credit Obligations" has the meaning described in Section 2.5.5(b) (Payments of Bond Letters of Credit). "Applicable Interest Rate" means (i) the LIBOR Rate, or (ii) the Alternate Base Rate. "Applicable Margin" means the applicable rate per annum to be added to the LIBOR Base Rate or the Base Rate, as set forth in Section 2.7.1. "Asset Disposition" means the disposition of any or all of the Assets of the Borrower or any Subsidiary of the Borrower, whether by sale, lease, transfer or other disposition (including any such disposition effected by way of merger or consolidation) other than Permitted Asset Dispositions. "Assets" means at any date all assets that, in accordance with GAAP consistently applied, should be classified as assets on a consolidated balance sheet of the Borrower and its Subsidiaries. "Assignee" has the meaning set forth in Section 9.5 of this Agreement. "Assignment of Patents" means (i) that certain collateral assignment of patents as security dated as of the Closing Date from the Borrower to the Agent for the benefit of the Lenders ratably and the Agent, (ii) that certain collateral assignment of patents as security dated as of the Closing Date from BTP, BIC, Berry Sterling and PackerWare to the Agent for the benefit of the Lenders ratably and the Agent, and (iii) that certain collateral assignment of patents as security dated as of the date of this Agreement from Venture Southeast and Venture Midwest, as amended, restated, supplemented or otherwise modified in writing at any time and from time to time. "Assignment of Trademarks" means (i) that certain collateral assignment of trademarks as security dated as of the Closing Date from the Borrower to the Agent for the benefit of the Lenders ratably and the Agent, (ii) that certain collateral assignment of trademarks as security dated as of the Closing Date from PackerWare to the Agent for the benefit of the Lenders ratably and the Agent, and (iii) that certain collateral assignment of trademarks as security dated the date of this Agreement from Venture Southeast and Venture Midwest to the Agent for the benefit of the Lenders ratably and the Agent, as amended, restated, supplemented or otherwise modified in writing at any time and from time to time. "Base Rate" means the higher of (i) the Prime Rate, or (ii) the sum of (x) the Federal Funds Rate, plus (y) fifty (50) basis points. "Base Rate Loan" means any Loan for which interest is to be computed with reference to the Alternate Base Rate. "Berry Design" means Berry Plastics Design Corporation, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Berry Sterling" means Berry Sterling Corporation, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Berry Venture" shall have the meaning specified in the Recitals. "BIC" means Berry Iowa Corporation, a corporation organized and existing under the laws of the State of Delaware,and its successors and assigns. "BTP" means Berry Tri-Plas Corporation, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Bankruptcy Code" means the United States Bankruptcy Code, as amended from time to time, and any successor Laws. "Bond Letter of Credit Agreements" means the collective reference to the Iowa Bond Letter of Credit Agreement, the Nevada Bond Letter of Credit Agreement and the South Carolina Bond Letter of Credit Agreement. "Bond Letter of Credit Commitment" means the agreement of the Agent relating to the issuance of the Bond Letters of Credit, the repayment of the Bond Letter of Credit Obligations and the agreement of a Lender to purchase a participating interest in any Bond Letter of Credit Obligations with respect to such Bond Letters of Credit, all subject to and in accordance with the provisions of this Agreement; and "Bond Letter of Credit Commitments" means the collective reference to the Bond Letter of Credit Commitment of the Agent and each of the Lenders. "Bond Letter of Credit Committed Amount" has the meaning given such term in Section 2.5.1. "Bond Letter of Credit Facility" means the facility established pursuant to Section 2.5 (Bond Letter of Credit Facility) of this Agreement. "Bond Letter of Credit Fee" and "Bond Letter of Credit Fees" have the meanings described in Section 2.5.2 (Bond Letter of Credit Fees). "Bond Letter of Credit Fronting Fee" and "Bond Letter of Credit Fronting Fees" have the meanings described in Section 2.5.2 (Bond Letter of Credit Fees). "Bond Letter of Credit Obligations" means the collective reference to the Iowa Bond Letter of Credit Obligations, the Nevada Bond Letter of Credit Obligations and the South Carolina Bond Letter of Credit Obligations. "Bond Letter of Credit Agreement Documents" means the collective reference to the Iowa Bond Letter of Credit Agreement Documents - Bonds, the Iowa Bond Letter of Credit Agreement Documents - NB, the Nevada Bond Letter of Credit Agreement Documents - Bonds, the Nevada Bond Letter of Credit Agreement Documents - NB, the South Carolina Bond Letter of Credit Agreement Documents - Bonds, and the South Carolina Bond Letter of Credit Agreement Documents - NB. "Bond Letters of Credit" means the collective reference to the Iowa Bond Letter of Credit - NB, the Nevada Bond Letter of Credit - NB and the South Carolina Bond Letter of Credit - NB. "Bonds" means the collective reference to the Iowa Bonds, the Nevada Bonds and the South Carolina Bonds. "Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Deficiency" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Report" has the meaning described in Section 2.1.4 (Borrowing Base Report). "Borrowing Base Trigger Event" has the meaning described in Section 2.1.4 (Borrowing Base Report). "Business Day" means any day other than a Saturday, Sunday or other day on which (i) in the case of NationsBank (as Agent and Lender), commercial banks in the State are authorized or required to close and, (ii) in the case of the Lenders other than NationsBank, those Lenders are open for the transaction of business at the addresses stated after their names on the signature pages of this Agreement. "Capital Expenditure" means an expenditure which would be classified as such in accordance with GAAP (whether payable in cash or other property or accrued as a liability) for Fixed or Capital Assets, including, without limitation, the entering into of a Capital Lease. "Capital Lease" means with respect to any Person any lease of real or personal property, for which the related Lease Obligations have been or should be, in accordance with GAAP consistently applied, reflected as a liability on the balance sheet that Person. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit with maturities of one (1) year or less from the date of acquisition of, or money market accounts maintained with, the Agent, any Affiliate of the Agent, or any other domestic commercial bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic financial institutions or domestic brokerage houses to the extent disclosed to, and approved by, the Agent and (c) commercial paper of a domestic issuer rated at least either A-1 by Standard & Poor's Corporation (or its successor) or P-1 by Moody's Investors Service, Inc. (or its successor) with maturities of six (6) months or less from the date of acquisition. "Chattel Paper" means a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods; any returned, rejected or repossessed goods covered by any such writing or writings and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of the foregoing. "Closing Date" means January 21, 1997. "Collateral" means all property of the Borrower and each Subsidiary Guarantor subject from time to time to the Liens of this Agreement, any of the Security Documents and/or any of the other Financing Documents, together with any and all cash and non-cash proceeds and products thereof. "Collateral Account" has the meaning described in Section 2.1.8 (The Collateral Account). "Collateral Disclosure List" has the meaning described in Section 3.3 (Collateral Disclosure List). "Collection" means each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of the Accounts or otherwise with respect to any Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to an Account, and other proceeds of Collateral; and "Collections" means the collective reference to all of the foregoing. "Commitment" means with respect to each Lender, such Lender's Revolving Credit Commitment, Letter of Credit Commitment, Term Loan A Commitment, Term Loan B Commitment, or Bond Letter of Credit Commitment, as the case may be, and "Commitments" means the collective reference to the Revolving Credit Commitments, the Letter of Credit Commitments, the Term Loan A Commitments, Term Loan B Commitments, and the Bond Letter of Credit Commitments of all of the Lenders. "Committed Amount" means with respect to each Lender, such Lender's Revolving Credit Committed Amount, Letter of Credit Committed Amount, Term Loan A Committed Amount, Term Loan B Committed Amount, or the Bond Letter of Credit Committed Amount, as the case may be, and "Committed Amounts" means collectively the Revolving Loan Committed Amount, the Letter of Credit Committed Amount, Term Loan A Committed Amount, Term Loan B Committed Amount, and the Bond Letter of Credit Committed Amount of each of the Lenders. "Compliance Certificate" means a periodic Compliance Certificate described in Section 6.1.1(a) (Financial Statements). "Commonly Controlled Entity" means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code. "Container Purchase Agreement" means that certain asset purchase agreement dated as of January 17, 1997 by and among the Borrower, Container Industries, Inc. and the shareholders of Container Industries, Inc., as amended, restated, supplemented or otherwise modified. "Container Purchase Agreement Transaction" means the acquisition of all or substantially all of the assets of Container Industries, Inc. "Copyrights" means and includes, in each case whether now existing or hereafter arising, all of the Borrower's rights, title and interest in and to (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, copyright applications, and all renewals of any of the foregoing, (b) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, current or future infringements of any of the foregoing, (c) the right to sue for past, present and future infringements of any of the foregoing, and (d) all rights corresponding to any of the foregoing throughout the world. "Credit Facility" means with respect to each Lender, such Lender's Pro Rata Share of the Revolving Credit Facility, the Letter of Credit Facility, the Term Loan A Facility, the Term Loan B Facility, or the Bond Letter of Credit Facility, as the case may be, and "Credit Facilities" means collectively the Revolving Credit Facility, the Letter of Credit Facility, the Term Loan A Facility, the Term Loan B Facility, and the Bond Letter of Credit Facility, and any and all other credit facilities now or hereafter extended under or secured by this Agreement. "Current Bond Letter of Credit Obligations" has the meaning described in Section 2.5.5 hereof. "Current Letter of Credit Obligations" has the meaning described in Section 2.4.5 hereof. "Debt Service" means for any period of determination thereof an amount equal to the total of the aggregate amount of all payments of principal and interest with respect to Indebtedness for Borrowed Money of the Borrower and the Subsidiary Guarantors scheduled to be due and payable during such period, excluding, any Term Loan B Mandatory Prepayments with respect to Excess Cash Flow. For purposes of calculating "Debt Service", the Agent and the Lenders agree that (i) scheduled payments with respect to the Iowa Bond Letter of Credit Obligations shall reflect the permitted amortization of a portion of such Iowa Bond Letter of Credit Obligations pursuant to Section 2.5.5(b) of this Agreement, and (ii) Iowa Bond Rollover Payments shall not be included in the determination of Debt Service. "Debt Service Coverage Ratio" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for any period of determination thereof the ratio of (a) EBITDA to (b) Debt Service. "Deed of Trust - Anderson" means that certain deed of trust or mortgage dated as of the date of this Agreement from Venture Southeast to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Anderson grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property located in Anderson County, South Carolina, as further described therein. "Deed of Trust - Indian Trail" means that certain deed of trust or mortgage dated as of the Closing Date from BTP to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust -Indian Trail grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as Wesley Chapel-Stouts Road, Indian Trail, North Carolina 28079. "Deed of Trust - Evansville" means that certain deed of trust or mortgage dated as of the Closing Date from the Borrower to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Evansville grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as 101 Oakley Street, Evansville, Indiana 47710. "Deed of Trust - Henderson" means that certain deed of trust or mortgage dated as of the Closing Date from the Borrower to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Henderson grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a second priority Lien on that certain property known generally as 800 East Horizon Drive, Henderson, Nevada 89009. "Deed of Trust - Iowa Falls" means that certain deed of trust or mortgage dated as of the Closing Date from BIC to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust -Iowa Falls grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as 1036 Industrial Park Road, Iowa Falls, Iowa 50126. "Deed of Trust - Lawrence" means that certain deed of trust or mortgage dated as of the Closing Date from PackerWare to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Lawrence grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as 2330 Packer Road, Lawrence, Kansas 66044. "Deed of Trust - Monroeville" means that certain deed of trust or mortgage dated as of the date of this Agreement from Venture Midwest to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Anderson grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property located in Huron County, Ohio, as further described therein. "Deed of Trust - Suffolk" means that certain credit line deed of trust, assignment and security agreement dated May 13, 1997 from Berry Design to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - - Suffolk grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as 1401 Progress Road, Suffolk, Virginia. "Deed of Trust - Winchester" means that certain deed of trust or mortgage dated as of the Closing Date from Berry Sterling to or for the benefit of the Agent, as the same may from time to time be amended, restated, supplemented or modified, which Deed of Trust - Lawrence grants to the Agent for the benefit of the Lenders ratably and for the benefit of the Agent, a first priority Lien on that certain property known generally as 160 Industrial Drive, Winchester, Virginia. The Agent understands that Berry Sterling intends to close and consummate a sale of the property encumbered by the Deed of Trust - Winchester as soon as commercially practicable and that, accordingly, the Agent agrees that it shall not record or cause to be recorded the Deed of Trust - Winchester among any public land records office at any time prior to the date which is ninety (90) days after the Closing Date; unless on or before such date there exists a Default or an Event of Default. "Deeds of Trust" means the collective reference to the Deed of Trust - Anderson, the Deed of Trust - Indian Trail, the Deed of Trust - Evansville, the Deed of Trust - Henderson, the Deed of Trust - Iowa Falls, the Deed of Trust - Lawrence, the Deed of Trust - Monroeville, the Deed of Trust - Suffolk, and the Deed of Trust - Winchester. "Default" means an event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Agreement. "Distribution" means (i) the payment of any dividends or other distributions on capital stock of the Borrower (except distributions in any class of capital stock) and (ii) the redemption or acquisition of capital stock or Subordinated Indebtedness of the Borrower unless made contemporaneously from the Net Proceeds of the sale of capital stock or the issuance of Subordinated Indebtedness to the extent permitted by the provisions of this Agreement or otherwise consented to by the Agent. "Documents" means all documents of title, whether now existing or hereafter acquired or created, and all proceeds (cash and non-cash) of the foregoing. "Draw" has the meaning described in Section 2.5.5(b) (Payment of Bond Letters of Credit). "Early Termination Fee" has the meaning described in Section 2.1.11 (Early Termination Fee). "EBITDA" means as to the Borrower and the Subsidiary Guarantors, on a consolidated basis, as of any date or for any period of determination, the sum of (a) the net profit (or loss) determined in accordance with GAAP consistently applied, PLUS (b) interest expense and income Taxes or alternative minimum Taxes for such period to the extent deducted in the calculation of net income (or loss), PLUS (c) depreciation and amortization of Assets for such period, PLUS (d) unusual expenses associated with the write-off of the capitalized portion of financing costs, MINUS (e) non-cash gains from Asset sales other than sales of Inventory in the ordinary course of business, PLUS (f) non-cash losses from Asset sales other than sales of Inventory in the ordinary course of business, PLUS, (g) non-cash extraordinary losses, MINUS (h) extraordinary gains, MINUS (i) interest income, MINUS (j) any gain relating to the accumulated effect of any change in accounting method, PLUS (k) any loss relating to the accumulated effect of any change in accounting method, each item in clauses (a) through (k) calculated pursuant to GAAP for such period, PLUS, (l) any non-cash compensation expenses, MINUS, (m) any non-cash compensation gains. "Eligible Inventory" means the collective reference to all Inventory of the Borrower and each Subsidiary Guarantor held for sale, valued at the lowest of (i) the cost, (ii) any ceiling prices which may be established by any Law of any Governmental Authority or (iii) prevailing market value, all as reduced by the aggregate amount of all reserves, limits and deductions provided for in this definition or in Section 2.1.3 (Borrowing Base)); EXCLUDING, however, any Inventory which consists of: (a) any Inventory located outside of the United States, (b) any Inventory located outside of a state in which the Agent has properly perfected the Liens of the Agent and the Lenders under this Agreement, free and clear of all other Liens (other than Permitted Liens), (c) any Inventory not in the actual possession of the Borrower or a Subsidiary Guarantor, except to the extent provided in subsection (d) below, (d) any Inventory in the possession of a bailee, warehouseman, consignee or similar third party, except to the extent that either (1) such bailee, warehouseman, consignee or similar third party has entered into an agreement with the Agent in which such bailee, warehouseman, consignee or similar third party consents and agrees to the Lien of the Agent and the Lenders on such Inventory and to such other terms and conditions as may be reasonably required by the Agent, or (2) with respect to any Inventory in the possession of a bailee or warehouseman, the Agent has established a reserve for such Inventory in an amount not greater than three (3) months of any fees or other charges which would be due and payable to any such bailee and warehouseman under its agreements with the Borrower or Subsidiary Guarantor, as appropriate (the Agent agrees to so establish a reserve as of the Closing Date and at such times thereafter as shall be appropriate unless otherwise directed by the Borrower), (e) any Inventory located on premises leased or rented to the Borrower or a Subsidiary Guarantor or otherwise not owned by the Borrower or a Subsidiary Guarantor, unless either (1) the Agent has received a waiver and consent from the lessor, landlord and/or owner, in form and substance reasonably satisfactory to the Agent and from any mortgagee of such lessor, landlord or owner to the extent reasonably required by the Agent or (2) with respect to any such Inventory, the Agent has established a reserve for such Inventory in an amount not greater than three (3) months of any rents or other charges which would be due and payable to any such lessor, landlord or owner under its agreements with the Borrower or Subsidiary Guarantor, as appropriate (the Agent agrees to so establish a reserve as of the Closing Date and at such times thereafter as shall be appropriate unless otherwise directed by the Borrower), (f) any Inventory the sale or other disposition of which has given rise to an Account, (g) any Inventory which fails to meet all standards and requirements imposed by any Governmental Authority over such Inventory or its production, storage, use or sale to the extent that the failure to meet any such standards and/or requirements imposed by any Governmental Authority would entitle a purchaser of such Inventory to return the Inventory or otherwise cancel or rescind its purchase or shall otherwise materially impair the value of the Inventory or the ability of the Agent to realize upon the value of the Inventory, (h) work-in-process or supplies (the Agent acknowledges that based on its field examination of Inventory conducted prior to the Closing Date, no Inventory has been classified as work-in-process, except for certain Inventory of PackerWare as to which the Agent will advise the Borrower once the Agent has completed its review of the field examination and audit of PackerWare), (i) any Inventory as to which the Agent determines in the exercise of its sole and absolute discretion at any time and in good faith (i) is not in merchantable condition or is defective, post-seasonal, slow moving or obsolete and (ii) which the Agent determines in the exercise of its sole and absolute discretion is unlikely to be sold in the ordinary course of business within a reasonable period of time and on customary terms and conditions, without significant out of the ordinary course discounts or other concessions, (j) any Inventory which the Agent in the good faith exercise of its sole and absolute discretion has deemed to be ineligible because the Agent considers the collateral value to the Agent and the Lenders to be impaired in any material respect or its ability to realize such value to be insecure in any material respect, and (k) any Inventory of Venture Southeast or Venture Midwest until such time as the Agent completes, reviews and approves a satisfactory field examination and audit of the Assets and properties of Venture Southeast and Venture Midwest, at which time such Assets and properties shall be included in the Borrowing Base if the results of such field examination and audit are acceptable in all respects to the Agent in its reasonable discretion and such Assets and properties otherwise satisfy the eligibility criteria for inclusion in the Borrowing Base. In the event of any dispute under the foregoing criteria, as to whether Inventory is, or has ceased to be, Eligible Inventory, the decision of the Agent in the good faith exercise of its sole and absolute discretion shall control. "Eligible Receivable" and "Eligible Receivables" mean, at any time of determination thereof, the unpaid portion of each Account (net of any returns, discounts, claims asserted by Account Debtors or other obligors with respect to such Account, credits, charges, accrued rebates or other allowances, offsets, deductions, counterclaims, disputes or other defenses asserted by Account Debtors or other obligors with respect to such Account, and reduced by the aggregate amount of all reserves, limits and deductions expressly provided for in this Agreement), which shall be receivable in United States Dollars by the Borrower or any Subsidiary Guarantor, provided each Account conforms and continues to conform to the following criteria to the reasonable satisfaction of the Agent: (a) the Account arose in the ordinary course of business from a bona fide outright sale of Inventory or from services performed; (b) the Account is a valid, legally enforceable obligation of the Account Debtor; (c) if the Account arises from the sale of Inventory, the Inventory the sale of which gave rise to the account has been shipped or delivered to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding; (d) if the Account arises from the performance of services, such services have been fully rendered; (e) the Account is evidenced by an invoice or other documentation in form reasonably acceptable to the Agent, dated no later than two (2) Business Days after the date of shipment or performance and containing only terms normally offered by the Borrower or the Subsidiary Guarantor, as appropriate; (f) the amount shown on the books of the Borrower or the Subsidiary Guarantor, as appropriate, and on any invoice, certificate, schedule or statement delivered to the Agent is owing to the Borrower or the Subsidiary Guarantor, as appropriate, with any partial payment reducing the amount of the Eligible Receivable by such partial payment received; (g) the Account is not outstanding more than one hundred twenty (120) days from the date of the invoice therefor or past due more than thirty (30) days after its due date, which shall not be later than ninety (90) days after the invoice date; (h) the Account is not owing by any Account Debtor for which fifty percent (50%) or more of such Account Debtor's other Accounts (or any portion thereof) due to the Borrower or any Subsidiary Guarantor, individually, or the Borrower and each of the Subsidiary Guarantors collectively, are non- Eligible Receivables; (i) the Account is not owing by an Account Debtor or a group of affiliated Account Debtors whose then existing Accounts owing to the Borrower or any Subsidiary Guarantor, individually, exceed in the aggregate, fifteen percent (15%) of the total Eligible Receivables of the Borrower or the Subsidiary Guarantor, as appropriate, and is not owing by an Account Debtor or a group of affiliated Account Debtors whose then existing Accounts to the Borrower and each of the Subsidiary Guarantors collectively exceed, in the aggregate, fifteen percent (15%) of the total Eligible Receivables of the Borrower and all of the Subsidiary Guarantors, except that with respect to Accounts owing by those Account Debtors identified on Schedule 1.1 attached hereto, as updated with the Agent's consent at any time and from time, the Account is not owing by any Account Debtor so named on Schedule 1.1 whose then existing Accounts to the Borrower and/or any Subsidiary Guarantor, individually, exceed, in the aggregate, twenty-five percent (25%) of the total Eligible Receivables of the Borrower or any Subsidiary Guarantor, as appropriate, and is not owing by an Account Debtor so named on Schedule 1.1 whose then existing Accounts to the Borrower and each of the Subsidiary Guarantors, collectively, exceed, in the aggregate, twenty-five percent (25%) of the total Eligible Receivables of the Borrower and all of the Subsidiary Guarantors; (j) the Account Debtor has not returned, rejected or refused to retain, or otherwise notified the Borrower or any Subsidiary Guarantor of any dispute concerning, or claimed nonconformity of, any of the Inventory or services from the sale or furnishing of which the Account arose; (k) the Account Debtor is not a Subsidiary or Affiliate of the Borrower or any Subsidiary Guarantor or an employee, officer, director of shareholder of the Borrower or any Subsidiary Guarantor or any Subsidiary or Affiliate of the Borrower or any Subsidiary Guarantor (For purposes of calculating Eligible Receivables, the term Affiliate shall not include any Affiliate of any stockholder of the Parent); (l) the Account Debtor is not incorporated or organized in or primarily located in any jurisdiction outside of the United States of America or Canada, unless the Account Debtor's obligations with respect to such account are secured by a letter of credit, guaranty or banker's acceptance having terms and from such issuers and confirmation banks as are reasonably acceptable to the Agent in its commercially reasonable discretion (which letter of credit, guaranty or banker's acceptance is subject to the perfected Lien of the Agent for the benefit of the Lenders ratably and the Agent); (m) the Account Debtor with respect to such account is not insolvent or the subject of any bankruptcy or insolvency proceedings of any kind or of any other proceeding or action; (n) the Account Debtor is not a Governmental Authority, unless the Borrower or Subsidiary Guarantor, as appropriate, shall have complied to the Agent's satisfaction with the Assignment of Claims Act of 1940, as amended; (o) neither the Borrower nor any of the Subsidiary Guarantors is indebted in any manner to the Account Debtor (as creditor, lessor, supplier otherwise), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor; (p) the Account does not arise from services under or related to any warranty obligation of the Borrower or any Subsidiary Guarantor or out of service charges, finance charges or other fees for the time value of money; (q) the Account is not evidenced by Chattel Paper or an Instrument of any kind and is not secured by any letter of credit, except as permitted under subsection (l) above, unless the original of any such Chattel Paper and/or Instrument has been delivered to the Agent; (r) the title of the Borrower or the Subsidiary Guarantor, as appropriate, to the account is absolute and is not subject to any prior assignment, claim, Lien, or security interest, except Permitted Liens and Liens in favor of the Agent and/or the Lenders; (s) no bond or other undertaking by a guarantor or surety which is not reasonably acceptable to the Agent has been or is required to be obtained, supporting the Account and any of the Account Debtor's obligations in respect of the Account, other than as and to the extent permitted or required under the provisions of subsection (l) above; (t) the Borrower and each Subsidiary Guarantor, as appropriate, have the full and unqualified right and power to assign and grant a security interest in, and Lien on, the Account to the Agent as security and collateral for the payment of the Obligations; (u) the Account does not arise out of a contract with, or order from, an Account Debtor that, by its terms, forbids or makes void or unenforceable the assignment or grant of a Lien by the Borrower and each Subsidiary Guarantor, as appropriate, to the Agent, for the benefit of the Lenders ratably and the Agent, of the Account arising from such contract or order; (v) the Account is subject to a Lien in favor of the Agent, for the benefit of the Lenders ratably and the Agent, which Lien constitutes a first priority perfected security interest and Lien, subject only to Permitted Liens; (w) the Inventory giving rise to the Account was not, at the time of the sale thereof, subject to any Lien, except those in favor of the Agent, for the benefit of the Lenders ratably and the Agent and other Permitted Liens; (x) no part of the Account represents a progress billing or a retainage; (y) the Agent in the good faith exercise of its commercially reasonable discretion has not deemed the Account ineligible because of uncertainty in any material respect as to the creditworthiness of the Account Debtor or because the Agent otherwise considers the collateral value of such Account to the Agent and the Lenders to be impaired in any material respect or its ability to realize such value to be insecure in any material respect; and (z) until such time as the Agent completes, reviews and approves a satisfactory field examination and audit of the Assets and properties of Venture Southeast and Venture Midwest, no Account of Venture Southeast or Venture Midwest shall be included in the Borrowing Base; upon the completion, review and approval of a satisfactory field examination and audit of the Assets and properties of Venture Southeast and Venture Midwest, the Assets and properties of Venture Southeast and Venture Midwest may be eligible for inclusion in the Borrowing Base if the results of such field examination and audit are acceptable in all respects to the Agent in its reasonable discretion and such Assets and properties otherwise satisfy the eligibility criteria for inclusion in the Borrowing Base. In the event of any dispute, under the foregoing criteria, as to whether an account is, or has ceased to be, an Eligible Receivable, the decision of the Agent in the good faith exercise of its commercially reasonable discretion shall control. "Enforcement Costs" means all commercially reasonable expenses, charges, costs and fees whatsoever (including, without limitation, reasonable outside and allocated in-house counsel attorney's fees and expenses) of any nature whatsoever reasonably paid or incurred by or on behalf of the Agent and/or any of the Lenders in connection with (a) any or all of the Obligations, this Agreement and/or any of the other Financing Documents and (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, this Agreement or any of the other Financing Documents, including, without limitation, those costs and expenses more specifically enumerated in Section 3.8 (Costs) and Section 9.10 (Enforcement Costs). The Lenders agree that the Borrower shall have no obligation to reimburse any Lender, other than the Agent, for legal fees and expenses incurred by such Lender in connection with its review, execution and delivery of any of the Financing Documents, to the extent such legal fees and expenses exceed Five Thousand Dollars ($5,000). "Equipment" means all equipment, machinery, computers, chattels, tools, parts, machine tools, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, whether or not the same shall be deemed to be affixed to real property, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary or beneficial for the operation, use and/or disposition of such personal property, all licenses, warranties, franchises and general intangibles related thereto or necessary or beneficial for the operation, use and/or disposition of the same, together with all Accounts, Chattel Paper, Instruments and other consideration received by the Borrower or any Subsidiary Guarantor on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Business Day" means any Business Day on which dealings in United States Dollar deposits are carried out on the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London, England. "Eurodollar Lending Office" means with respect to the Agent such branch or office of the Agent as designated by the Agent, as applicable, from time to time as the branch or office at which the LIBOR Loans are to be made or maintained. "Event of Default" has the meaning described in Article 7. "Excess Cash Flow" means for any annual period of determination thereof, an amount equal to fifty percent (50%) of the sum of (i) EBITDA, less (ii) non-financed Capital Expenditures permitted by Section 6.2.6, less (iii) cash income Taxes and alternative minimum Taxes, less (iv) increases in working capital, plus (v) decreases in working capital, less (vi) Debt Service, as shown on the annual financial statements for such annual period, furnished to the Agent in accordance with Section 6.1.1; or in the event that the Borrower fails to deliver such financial statements to the Agent as and when required, the Agent shall estimate, in its sole, but commercially reasonable discretion, the amount of Excess Cash Flow for such period. "Federal Funds Rate" means for any day of determination, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day) by the Federal Reserve Bank for the next preceding Business Day) by the Federal Reserve Bank of Richmond or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent. "Fees" means the collective reference to each fee payable to the Agent, for its own account or for the ratable benefit of the Lenders, under the terms of this Agreement or under the terms of any of the other Financing Documents, including, without limitation, the Agency Fees, the Revolving Credit Unused Line Fees, the Letter of Credit Fees, the Letter of Credit Fronting Fees, the Bond Letter of Credit Fees, the Bond Letter of Credit Fronting Fees, the Early Termination Fee, the Term Loan B Fees, and the Field Examination Fees. "Field Examination Fee" and "Field Examination Fees" have the meanings described in Section 2.8.3 (Field Examination Fees). "Financing Documents" means at any time collectively this Agreement, the Notes, the Security Documents, the Letter of Credit Documents, the Bond Letter of Credit Agreement Documents, and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with this Agreement, any Note, any of the Security Documents, any of the Credit Facilities, and/or any of the Obligations, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Fixed or Capital Assets" of a Person at any date means all assets which would, in accordance with GAAP consistently applied, be classified on the balance sheet of such Person as property, plant or equipment at such date. "Fixed Charges" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for any period of determination, the scheduled payments of principal and cash interest on account of all Indebtedness for Borrowed Money and on account of all Capital Leases, plus cash Taxes, plus cash dividends declared or paid by the Borrower. For purposes of calculating "Fixed Charges", the Agent and the Lenders agree that scheduled payments with respect to the Iowa Bond Letter of Credit Obligations shall reflect the permitted amortization of a portion of such Iowa Bond Letter of Credit Obligations pursuant to Section 2.5.5(b) of this Agreement. "Fixed Charge Coverage Ratio" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for the period of any determination thereof, the ratio of (a) EBITDA, less the aggregate amount of all non-financed Capital Expenditures for such period, to (b) Fixed Charges. "Funded Debt" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, as of any date of determination, (i) the aggregate of all Indebtedness for Borrowed Money of the Borrower and each of the Subsidiary Guarantors, whether secured or unsecured (but excluding, without duplication, loans by the Borrower to one or more of the Subsidiary Guarantors), having a final maturity (or which by the terms thereof is renewable or extendible at the option of the obligor for a period ending) more than a year after that date, including current maturities of long-term Indebtedness for Borrowed Money (as determined in accordance with GAAP), less (ii) the aggregate amount of all cash balances and Cash Equivalents of the Borrower and/or any of the Subsidiary Guarantors. "GAAP" means generally accepted accounting principles in the United States of America in effect from time to time. "General Intangibles" means all general intangibles of every nature, whether presently existing or hereafter acquired or created, and without implying any limitation of the foregoing, further means all books and records, claims (including without limitation all claims for income tax and other refunds), choses in action, claims, causes of action in tort or equity, contract rights, judgments, customer lists, Patents, Trademarks, licensing agreements, rights in intellectual property, goodwill (including goodwill of the business of the Borrower or any Subsidiary Guarantor symbolized by and associated with any and all Trademarks, trademark licenses, Copyrights and/or service marks), royalty payments, licenses, rights as lessee under any lease of real or personal property, literary rights, Copyrights, service names, service marks, logos, trade secrets, amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures, general or limited partnerships, or limited liability companies or partnerships, rights in applications for any of the foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non- cash) of the foregoing. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any department, agency or instrumentality thereof. "Guarantor" means the Parent or any Subsidiary Guarantor or their respective successors and assigns, as the case may be; and "Guarantors" means the Parent, each and every Subsidiary Guarantor, and each of their respective successors and assigns. "Guaranty" means collectively each guaranty of payment for the benefit of the Lenders ratably and the Agent to the Lender from any or all of the Guarantors, as the same may from time to time be amended, restated, supplemented or otherwise modified. "Hazardous Materials" means (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (c) any substance the presence of which on any property now or hereafter owned, acquired or operated by the Borrower or any Subsidiary Guarantor is prohibited by any Law similar to those set forth in this definition; and (d) any other substance which by Law requires special handling in its collection, storage, treatment or disposal. "Hazardous Materials Contamination" means the contamination (whether presently existing or occurring after the date of this Agreement) by Hazardous Materials of any property owned, operated or controlled by the Borrower or any Subsidiary Guarantor or for which the Borrower or any Subsidiary Guarantor has responsibility, including, without limitation, improvements, facilities, soil, ground water, air or other elements on, or of, any property now or hereafter owned, acquired or operated by the Borrower or any Subsidiary Guarantor, and any other contamination by Hazardous Materials for which the Borrower or any Subsidiary Guarantor is, or is claimed to be, responsible. "Indebtedness" of a Person means at any date the total liabilities of such Person at such time determined in accordance with GAAP consistently applied. "Indebtedness for Borrowed Money" of a Person means at any time the sum at such time of (a) Indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker's or other acceptances or similar obligations issued or created for the account of such Person, (c) Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person's interest in such property, even though such Person has not assumed or become personally liable for the payment thereof, (e) obligations of third parties which are being guarantied or indemnified against by such Person or which are secured by the property of such Person; (f) any obligation of such Person or a Commonly Controlled Entity to a Multiemployer Plan; and (h) any obligations, liabilities or indebtedness, contingent or otherwise, under or in connection with, any interest rate or currency swap agreements, cap, floor, and collar agreements, currency spot, foreign exchange and forward contracts and other similar agreements and arrangements; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not more than thirty (30) days past due (as determined in accordance with customary trade practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP. "Indenture" means that certain indenture dated as of April 21, 1994 by and between the Borrower and the United States Trust Company of New York, as trustee, entered into in connection with the Subordinated Debt, as the same may be amended, restated supplemented or otherwise modified. "Installment Payment Date" means the first day of each February, May, August and November commencing on May 1, 1997. "Instrument" means a negotiable instrument (as defined under Article 3 of the Uniform Commercial Code), a "certificated security" (as defined under Article 8 of the Uniform Commercial Code), or any other writing which evidences a right to payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary indorsement. "Interest Coverage Ratio" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for any period of determination thereof the ratio of (a) EBITDA to (b) cash interest expense, all determined on a consolidated basis in accordance with GAAP consistently applied. "Interest Period" means as to any LIBOR Loan, the period commencing on and including the date such LIBOR Loan is made (or on the effective date of the Borrower's election to convert any Base Rate Loan to a LIBOR Loan in accordance with the provisions of this Agreement) and ending on and including the day which is 30, 60, 90 or 180 days thereafter, as selected by the Borrower in accordance with the provisions of this Agreement, and thereafter, each period commencing on the last day of the then preceding Interest Period for such LIBOR Loan and ending on and including the day which is 30, 60, 90 or 180 days thereafter, as selected by the Borrower in accordance with the provisions of this Agreement; provided, however that: (a) the first day of any Interest Period shall be a Eurodollar Business Day; (b) if any Interest Period would end on a day that shall not be a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless such next succeeding Eurodollar Business Day would fall in the next calendar month, in which case, such Interest Period shall end on the next preceding Eurodollar Business Day; and (c) no Interest Period shall extend beyond the Revolving Credit Termination Date or the scheduled maturity date of the Term Loans A or Term Loans B, as appropriate. "Interest Rate Election Notice" has the meaning described in Section 2.7.2(e). "Interest Rate Protection Agreement" means any interest rate or currency swap agreements, cap, floor, and collar agreements, currency spot, foreign exchange and forward contracts and other similar agreements and arrangements. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Income Tax Regulations issued and proposed to be issued thereunder. "Inventory" means all inventory of the Borrower and each Subsidiary Guarantor and all right, title and interest of the Borrower and each Subsidiary Guarantor in and to all of its and their now owned and hereafter acquired goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-progress, finished goods and materials and supplies of any kind, nature or description which are used or consumed in the business of the Borrower and any Subsidiary Guarantor, as appropriate, or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other licenses, warranties, franchises, general intangibles, personal property and all Documents or documents relating to the same and all proceeds (cash and non-cash) of the foregoing. "Iowa Bond Letter of Credit - NB" means (i) that certain irrevocable letter of credit issued by the Agent for the account of the Borrower or BIC to replace the Iowa Bond Letter of Credit and (ii) that certain standby credit line made available by the Agent to replace the Iowa Bond Standby Credit Agreement, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Letter of Credit" means that certain irrevocable letter of credit dated March 13, 1996, as amended by Amendment No. 1 dated March 13, 1996, issued by Fleet National Bank of Connecticut in the original amount of $6,025,810, for the account of BIC, for the benefit of State Street Bank and Trust Company, as trustee, and as security for the Iowa Bonds, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Letter of Credit Agreement" means that certain letter of credit reimbursement agreement by and between the Agent and the Borrower pursuant to which the Borrower will agree to reimburse the Agent for any amounts drawn under the Iowa Bond Letter of Credit - NB and to pay certain fees, interest and other amounts payable to the Agent with respect to the Iowa Bond Letter of Credit - NB, as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Letter of Credit Agreement Documents - Bonds" means all instruments, agreements or documents previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the Iowa Bond Letter of Credit, the Iowa Bond Standby Credit Agreement (prior to the date on which the Agent is a party thereto), and/or any or all of the Iowa Bonds, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Letter of Credit Agreement Documents - NB" means the Iowa Bond Letter of Credit Agreement and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the Iowa Bond Letter of Credit - NB, the Iowa Bond Standby Letter of Credit Agreement (but only after such date as the Agent is a party thereto) and/or any or all of the Iowa Bond Letter of Credit Obligations, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Letter of Credit Obligations" means the collective reference to all Obligations of the Borrower under and with respect to the Iowa Letter of Credit - NB, the Iowa Bond Letter of Credit Agreement, and/or any of the Iowa Bond Letter of Credit Agreement Documents. "Iowa Bond Rollover Payments" means the collective reference to payments made to the bondholders or to the Iowa Trustee pursuant to a Draw or a Conversion Drawing. "Iowa Bond Standby Credit Agreement" means that certain Standby Credit Agreement among BIC, The First National Bank of Boston, as prior Iowa Bond Trustee, and Barclays Bank, PLC, New York Branch, dated as of February 1, 1995; all of the obligations and rights of Barclays Bank PLC, New York Branch, having been assigned to and assumed by Fleet National Bank of Connecticut pursuant to an Amendment, Assignment and Assumption Agreement dated March 13, 1996, by and among BIC, Fleet Capital Corporation, Barclays Bank PLC, New York Branch, The First National Bank of Boston, as remarketing agent, and State Street Bank and Trust Company, as Iowa Bond Trustee, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. Subsequent to the Closing Date, the Agent has delivered a standby line of credit to replace the line of credit described in the Iowa Bond Standby Credit Agreement and a new Iowa Bond Standby Credit Agreement has been executed and delivered among the Agent, BIC and the Iowa Bond Trustee and other necessary persons, if any, and all references to the term Iowa Bond Standby Credit Agreement shall be to such replacement agreement to which the Agent is a party, as the same may be amended, restated, reissued, supplemented, replaced or otherwise modified at any time and from time to time. "Iowa Bond Trust Agreement" means that certain loan and trust agreement dated as of August 30, 1988 by and among the Iowa Bond Trustee, The City of Iowa Falls, Iowa, Genpak Corporation and Canadian Imperial Bank of Commerce (New York), relating to the Iowa Bonds, as supplemented by the Supplemental Agreement dated as of September 27, 1990, and as amended by the Amendment to Loan and Trust Agreement dated as of February 12, 1992, and the Second Amendment to Loan and Trust Agreement dated as of April 21, 1994, and as subsequently amended, restated, supplemented or otherwise modified at any time and from time to time. "Iowa Bond Trustee" means State Street Bank and Trust Company, and its successors and assigns, as trustee under the Iowa Bond Trust Agreement. "Iowa Bonds" means the City of Iowa Falls Flexible Mode Industrial Development Revenue Refunding Bonds (Berry Iowa Corporation Project), Series 1988, issued by the City of Iowa Falls, Iowa in the original aggregate principal amount of Five Million Four Hundred Thousand Dollars ($5,400,000). "Item of Payment" means each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of any Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to an Account, and other proceeds of Collateral; and "Items of Payment" means the collective reference to all of the foregoing. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority or political subdivision or agency thereof, or any court or similar entity established by any thereof. "Lease Obligations" of a Person means for any period the rental commitments of such Person for such period under leases for real and/or personal property. "Letter of Credit" and "Letters of Credit" shall have the meanings described in Section 2.4.1 hereof. "Letter of Credit Agreement" means the collective reference to each letter of credit application and agreement substantially in the form of the Agent's then standard form of application for letter of credit or such other form as may be approved by the Agent, executed and delivered by the Borrower in connection with the issuance of a Letter of Credit (other than any of the Bond Letters of Credit), as the same may from time to time be amended, restated, supplemented or modified; and "Letter of Credit Agreements" means all of the foregoing in effect at any time and from time to time. The Agent and the Lenders agree that if the provisions of any Letter of Credit Agreement conflict with the provisions of this Agreement, the provisions of this Agreement shall control. "Letter of Credit Commitment" means the agreement of the Agent relating to the issuance of the Letters of Credit and the agreement of a Lender to purchase a participating interest in any Letter of Credit Obligations with respect to such Letters of Credit, all subject to and in accordance with the provisions of this Agreement; and "Letter of Credit Commitments" means the collective reference to the Letter of Credit Commitment of the Agent and each of the Lenders. "Letter of Credit Committed Amount" has the meaning given such term in Section 2.4.1. "Letter of Credit Documents" means any and all drafts under or purporting to be under a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement executed and/or delivered by the Borrower or any other Person under, pursuant to or in connection with a Letter of Credit or any Letter of Credit Agreement. "Letter of Credit Facility" means the facility established pursuant to Section 2.4 (Letter of Credit Facility) of this Agreement. "Letter of Credit Fee" and "Letter of Credit Fees" have the meanings described in Section 2.4.2 hereof. "Letter of Credit Fronting Fee" and "Letter of Credit Fronting Fees" have the meanings described in Section 2.4.2 hereof. "Letter of Credit Obligations" means the collective reference to all Obligations of the Borrower with respect to the Letters of Credit and the Letter of Credit Agreements. "Liabilities" means at any date all liabilities that in accordance with GAAP consistently applied should be classified as liabilities on a consolidated balance sheet of the Borrower and its Subsidiaries. "LIBOR Base Rate" means for any Interest Period with respect to any LIBOR Loan, the rate per annum (rounded upward, if necessary, to the nearest next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in United States Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "LIBOR Base Rate" shall mean, for any LIBOR Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in United States Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day of such Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. For purposes of this definition, Telerate Page 3750 refers to the British Bankers Association Libor Rates (determined at approximately 11:00 a.m (London time)) that are published by Dow Jones Telerate, Inc. "LIBOR Loan" means any Loan for which interest is to be computed with reference to the LIBOR Rate. "LIBOR Rate" means for any Interest Period with respect to any LIBOR Loan, (i) the Applicable Margin, PLUS (ii) the per annum rate of interest calculated pursuant to the following formula: LIBOR BASE RATE 1.00 - Reserve Percentage "Lien" means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, lien, hypothecation, or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of any financing statement under the Uniform Commercial Code of any jurisdiction, excluding the precautionary filing of any financing statement by any lessor in a true lease transaction, by any bailor in a true bailment transaction or by any consignor in a true consignment transaction under the Uniform Commercial Code of any jurisdiction or the agreement to give any financing statement by any lessee in a true lease transaction, by any bailee in a true bailment transaction or by any consignee in a true consignment transaction. "Loan" means each of the Revolving Loan, a Term Loan A, or a Term Loan B, as the case may be, and "Loans" means the collective reference to the Revolving Loan, the Term Loans A, and the Term Loans B. "Loan Notice" has the meaning described in Section 2.1.2 (Procedure for Making Advances). "Lockbox" has the meaning described in Section 2.1.8 (The Collateral Account). "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Outstandings" of any Lender means, at any time, the sum of (a) all amounts paid by such Lender (other than pursuant to Section 8.5 (Indemnification)) to the Agent in respect to the Revolving Loan or otherwise under this Agreement, MINUS (b) all amounts paid by the Agent to such Lender which are received by the Agent and which, pursuant to this Agreement, are paid over to such Lender for application in reduction of the outstanding principal balance of the Revolving Loan. "Net Casualty Proceeds", when used with respect to any condemnation awards or insurance proceeds allocable to any Collateral, means the gross proceeds from any casualty or condemnation remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such gross proceeds. "Net Proceeds" means gross proceeds (cash and non-cash) or other consideration paid to, or received by, the Borrower or any Subsidiary of the Borrower from (i) any Asset Disposition (including, without limitation, issuance or assumption of Indebtedness or the issuance of Securities), net of customary and reasonable settlement costs, fees, expenses and Taxes payable in connection with such Asset Disposition or (ii) any sale, issuance or other offering of Indebtedness or Securities, net of customary and reasonable closing costs, fees and expenses. "Nevada Bond Letter of Credit - NB" means that certain irrevocable letter of credit issued by the Agent for the account of the Borrower to replace the Nevada Bond Letter of Credit, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "Nevada Bond Letter of Credit" means that certain irrevocable letter of credit dated April 21, 1995, issued by Barclays Bank PLC in the original stated amount of $6,271,233, for the account of the Borrower, for the benefit of the Manufacturers and Traders Trust Company, as Trustee, and as security for the Nevada Bonds, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "Nevada Bond Letter of Credit Agreement" means that certain letter of credit reimbursement agreement by and between the Agent and the Borrower pursuant to which the Borrower will agree to reimburse the Agent for any amounts drawn under the Nevada Bond Letter of Credit - NB and to pay certain fees, interest and other amounts payable to the Agent with respect to the Nevada Bond Letter of Credit - NB, as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Nevada Bond Letter of Credit Agreement Documents" means all instruments, agreements or documents previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the Nevada Bond Letter of Credit, and/or any or all of the Nevada Bonds, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Nevada Bond Letter of Credit Agreement Documents - NB" means the Nevada Bond Letter of Credit Agreement and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the Nevada Bond Letter of Credit - NB and/or any or all of the Nevada Bond Letter of Credit Obligations, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "Nevada Bond Letter of Credit Obligations" means the collective reference to all Obligations of the Borrower under and with respect to the Nevada Letter of Credit - NB, the Nevada Bond Letter of Credit Agreement, and/or any of the Nevada Bond Letter of Credit Agreements. "Nevada Bond Trust Agreement" means that certain trust indenture dated as of April 1, 1991 by and between the Nevada Trustee and The City of Henderson, Nevada Public Improvement Trust, relating to the Nevada Bonds, as amended, restated, supplemented or otherwise modified at any time and from time to time. "Nevada Bond Trustee" means Manufacturers and Traders Trust Company, and its successors and assigns, as trustee under the Nevada Bond Trust Agreement. "Nevada Bonds" means the City of Henderson, Nevada Public Improvement Trust Variable Rate Demand Refunding Bonds (Berry Plastics Corporation Project), Series 1991, issued by the City of Henderson Nevada Public Improvement Trust in the original aggregate principal amount of Eight Million Dollars ($8,000,000). "Non-Ratable Loan" means an advance under the Revolving Loan made by the Agent in accordance with the provisions of Section 2.9.3(c). "Note" means any Revolving Credit Note, any Term Loan A Note, any Term Loan B Note, as the case may be, and "Notes" means collectively each Revolving Credit Note, each Term Loan A Note, each Term Loan B Note, and any other promissory note which may from time to time evidence all or any portion of the Obligations. "Obligations" means and includes all present and future indebtedness, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of the Borrower to the Lenders and/or Agent under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, each Note, each Security Document, and/or any of the other Financing Documents, the Loans, and/or any of the Credit Facilities including, without limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter of credit fees or fees charged with respect to any guaranty of any letter of credit; also means and includes all other present and future indebtedness, liabilities and obligations, whether now existing or contemplated or hereafter arising, of the Borrower and/or any Subsidiary Guarantor to the Agent and/or to any Lender any/or any of its or their Affiliates under or in connection with, any Interest Rate Protection Agreements; and also means any and all renewals, extensions, substitutions, amendments, restatements and rearrangements of any such debts, obligations and liabilities. FOR PURPOSES OF THE INDENTURE, ALL OBLIGATIONS UNDER AND IN CONNECTION WITH THE CREDIT FACILITIES CONSTITUTE AND ARE HEREBY DEEMED "DESIGNATED SENIOR INDEBTEDNESS" AS DEFINED IN THE INDENTURE. "Outstanding Bond Letter of Credit Obligations" has the meaning described in Section 2.5.3 hereof. "Outstanding Letter of Credit Obligations" has the meaning described in Section 2.4.3 hereof. "PAC" means PackerWare Acquisition Corporation, a corporation organized and existing under the laws of the State of Kansas, and its successors and assigns. "PackerWare" means PackerWare Corporation, a corporation organized and existing under the laws of the State of Kansas, and its successors and assigns. "PackerWare Merger Agreement" means that certain Agreement and Plan of Reorganization dated as of January 14, 1997 by and among the Borrower, PAC, PackerWare and the shareholders of PackerWare immediately prior to consummation of the PackerWare Merger Transaction, as amended, restated, supplemented or otherwise modified. "PackerWare Merger Agreement Documents" means collectively the PackerWare Merger Agreement and any and all other agreements, documents or instruments (together with any and all amendments, modifications, and supplements thereto, restatements thereof, and substitutes therefor) previously, now or hereafter executed and delivered by the Borrower, PackerWare, PAC, or any other Person in connection with the PackerWare Merger Transaction. "PackerWare Merger Transaction" means the merger of PAC with and into PackerWare in accordance with the provisions of the PackerWare Merger Agreement. "Parent" means BPC Holding Corporation, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Patents" means and includes, in each case whether now existing or hereafter arising, all of the rights, title and interest of the Borrower and each Subsidiary Guarantor in and to (a) any and all patents and patent applications, (b) any and all inventions and improvements described and claimed in such patents and patent applications, (c) reissues, divisions, continuations, renewals, extensions and continuations-in-part of any patents and patent applications, (d) income, royalties, damages, claims and payments now or hereafter due and/or payable under and with respect to any patents or patent applications, including, without limitation, damages and payments for past and future infringements, (e) rights to sue for past, present and future infringements of patents, and (f) all rights corresponding to any of the foregoing throughout the world. "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Acquisition" means (A) the acquisition or purchase of, or investment in, any Person, any operating division or unit of any Person, or the stock or Assets of any Person or the combination with any Person (each individually, a "Subject Transaction") regardless of the structure of the Subject Transaction, engaged principally in the lines of business set forth in Section 6.1.7 or in a business reasonably related thereto; provided, however that: (i) the aggregate purchase price of, investment in, acquisition expenditures relating to (excluding customary and reasonable transaction costs), and assumed Liabilities in connection with, any such Subject Transaction shall not exceed the lesser of: (x) the product of (a) the actual EBITDA for the Borrower and each of the Subsidiary Guarantors, calculated on a consolidated basis, for the then preceding twelve (12) month period after giving effect to such Subject Transaction (subject to such proforma adjustments as shall be acceptable to the Agent in its sole and absolute discretion), and (b) five (5), or (y) Fifteen Million Dollars ($15,000,000), (ii) the aggregate purchase prices of, investments in, acquisition expenditures relating to (excluding customary and reasonable transaction costs), and assumed Liabilities in connection with, all Subject Transactions made on or after the Closing Date shall not exceed Thirty Million Dollars ($30,000,000), (iii) such Subject Transaction shall not otherwise constitute or give rise to a Default or an Event of Default, (iv) the Borrower shall have furnished financial projections in form and content reasonably acceptable to the Agent which give effect to such Subject Transaction and which project that such Subject Transaction would not cause a Default or Event of Default (provided that the Agent and the Lenders agree that such projections shall not constitute a guaranty of actual performance), (v) if requested by the Agent or the Requisite Lenders, a Phase I environmental assessment of any real property to be acquired or purchased or owned by any Person to be acquired or purchased or owned by any Person in which the Borrower or any Subsidiary intends to make an investment, has been performed by a reputable and recognized environmental consulting firm engaged by the Borrower and reasonably acceptable to the Agent and has revealed no material Hazardous Materials Contamination or material violations of any Environmental Laws, the non-remediation of or non-compliance with which would result in a material Liability not reflected in the purchase price, (vi) if and to the extent the Subject Transaction consists of the purchase or acquisition of a Person which is to be a Subsidiary of the Borrower or merged into a Subsidiary of the Borrower created for the express purpose of consummating the proposed acquisition: (1) the Borrower shall execute all documents and take such other actions as the Agent may reasonably require to grant to the Agent and the Lenders a first priority Lien on one hundred percent (100%) of the stock of such Subsidiary, and (2) such Subsidiary shall be designated and qualify immediately after the closing of the Subject Transaction as a Subsidiary Guarantor in accordance with the terms of Section 6.2.2, (vii) after giving effect to any borrowings under the Revolving Loan, if any, needed to finance the Subject Transaction, the Borrower and the Subsidiary Guarantors shall have availability under the Revolving Loan in an amount at least equal to Twenty Million Dollars ($20,000,000) and are reasonably expected to have such minimum availability for a period of ten (10) Business Days after closing and consummation of the Subject Transaction, (viii) all legal matters incident to the Subject Transaction shall be acceptable to the Agent in its reasonable discretion, (ix) the Agent shall have been given no less than thirty (30) days prior written notice of any proposed Subject Transaction and shall have been provided with all information which it may have reasonably requested in connection with such proposed Subject Transaction, (x) if requested by the Agent, the Agent shall have received, prior to or simultaneously with the closing of a Subject Transaction an opinion of counsel reasonably acceptable to the Agent in all respects covering the Borrower's or the relevant Subsidiary's, as the case may be, due incorporation, valid existence, good standing and power and authority to enter into the documents contemplated by this Agreement and the Subject Transaction and such other matters as may be reasonably requested by the Agent, (xi) unless otherwise agreed by the Requisite Lenders, no Subject Transaction shall be permitted by the terms of this Agreement if the Borrower and the Subsidiary Guarantors, on a consolidated basis and taken as a whole, have had, immediately prior to the date of the closing of such Subject Transaction, three (3) consecutive months of net operating losses, and (xii) the aggregate purchase price of, investment in, acquisition expenditures relating to (excluding customary and reasonable transaction costs), and assumed Liabilities in connection with, all Subject Transactions in any given fiscal year shall not exceed Seven Million Dollars ($7,000,000); and (B) the Venture Stock Purchase/Merger Transaction. The Borrower understands and agrees that the Agent shall have no obligation or commitment to include any of the assets or properties of any Person acquired in the Borrowing Base pursuant to a Subject Transaction. The Agent and the Lenders agree, however, that if after completion and review of a satisfactory field examination of the Assets and properties which constitute or are part of a Permitted Acquisition, such Assets and properties shall be included in the Borrowing Base if the results of such field examination and audit are reasonably acceptable in all respects to the Agent in its discretion and such Assets and properties otherwise satisfy the eligibility criteria for inclusion in the Borrowing Base. "Permitted Asset Disposition" means any one of the following Asset Dispositions; provided that no such Asset Disposition shall be permitted at any time following the occurrence of a Default or an Event of Default or if and to the extent any such Asset Disposition would give rise to a Default or an Event of Default, unless otherwise agreed in writing by the Requisite Lenders: (a) an Asset Disposition which satisfies the following conditions: (i) the sum of (i) the Net Proceeds to be paid to or received by the Borrower and/or any Subsidiary of the Borrower with respect to such Asset Disposition, plus (ii) the aggregate amount of all Net Proceeds paid to or received by the Borrower and/or any or all of its Subsidiaries, is less than or equal to Five Hundred Thousand Dollars ($500,000) during any fiscal year, and (ii) none of the Assets sold under this clause(a) constitute molds used in the business of the Borrower or any Subsidiary Guarantor. (b) the sale of the property owned by Berry Sterling located at 160 Industrial Drive, Winchester, Virginia; (c) sales of Inventory in the ordinary course of business, (d) the licensing of Patents, Trademarks and/or Copyrights, in the ordinary course of business, (e) dispositions of worn, used, surplus or obsolete Equipment in the ordinary course of business, (f) dispositions of Assets (including Net Casualty Proceeds) to the extent such Assets are replaced with Assets of similar kind and function, provided that the replacement Assets shall be purchased no later than ninety (90) days following the Asset Disposition, the replacement Assets (which shall constitute Collateral) shall be free and clear of Liens other than Permitted Liens that are not Liens securing purchase money or finance lease arrangements, and the Borrower or the Subsidiary Guarantor, as the case may be, shall give the Agent at least ten (10) days prior written notice of such Asset Disposition, except for an Asset Disposition which constitutes a casualty, (g) intercompany sales, leases or other dispositions of Assets among and between the Borrower and any and all Subsidiary Guarantors; provided, that any such Assets sold, leased or otherwise disposed of as between the Borrower and any and all Subsidiary Guarantors shall remain subject to the Liens of the Agent and the Lenders under this Agreement and under the other Financing Documents, (h) the sale of any Fixed or Capital Assetsacquired by the Borrower or any Subsidiary Guarantor and the leaseback of such Assets within thirty (30) days of acquisition, but only as contemplated and required as part of an intended Capital Lease transaction at the time of acquisition, (i) the sale of molds by the Borrower or any Subsidiary Guarantor; provided that the aggregate Net Proceeds of any and all such molds outside the ordinary course of business shall not exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year, (j) the termination of the lease for PackerWare's Reno, Nevada location; provided, that all Assets of PackerWare at such location are transferred to one or more locations of the Borrower and/or any Subsidiary Guarantor such that the Agent and the Lenders would have a properly perfected Lien on, and security interest in, such Assets, (k) the sale, transfer or other conveyance of the issued and outstanding capital stock of Venture Southeast and Venture Midwest to the Borrower, as contemplated by the Venture Stock Purchase/Merger Transaction, and (l) transfers made as part of the South Carolina IRB Lease Transfers. "Permitted Liens" means: (a) Liens for Taxes (x) which are not delinquent or (y) which (i) are being diligently contested in good faith and by appropriate proceedings, (ii) the Borrower or the Subsidiary Guarantor, as appropriate, has the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting the Borrower or the Subsidiary Guarantor, as appropriate, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or the passage of time, entitled to priority over any Lien of the Agent and/or the Lenders unless and to the extent that a reserve has been established against the Borrowing Base in an amount equal to the maximum liability under and in connection with such Taxes, which reserve shall be established by the Agent upon the Borrower's request; (b) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance in the ordinary course of business; (c) Liens securing the Obligations; (d) judgment Liens to the extent the entry of such judgment does not constitute an Event of Default under the terms of this Agreement or result in the sale or levy of, or execution on, any of the Collateral; (e) such other Liens, if any, as are set forth on SCHEDULE 4.1.22 attached hereto and made a part hereof; (f) deposits, liens or pledges to secure payments of unemployment and other insurance, old-age pensions or other social security obligations, or the performance of bids, tenders, leases, contracts, public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business; (g) statutory mechanics', workers', repairmen's, warehousemen's, vendors' or carriers' Liens or other similar statutory Liens arising in the ordinary course of business and securing sums which are not more than thirty (30) days past due, provided that such statutory Liens do not materially impair or affect the use or value of any of the Collateral; (h) statutory landlord's Liens under leases to which the Borrower or any of its Subsidiaries is a party; (i) zoning restrictions, easements, rights of way, licenses and restrictions on the use of real property or minor irregularities in title thereto which do not materially impair the use or value of any such real property; (j) "Permitted Encumbrances" (as defined in each of the Deeds of Trust); (k) Liens securing Indebtedness for Borrowed Money permitted by the provisions of Section 6.2.4(g); and (l) Liens securing obligations under Capital Leases to the extent such Capital Leases are permitted by the provisions of this Agreement. "Permitted Uses" means (i) the acquisition of one hundred percent (100%) of the capital stock of PackerWare through the PackerWare Merger Transaction by the Borrower, (ii) the acquisition of one hundred percent (100%) of the capital stock of Venture Holdings pursuant to the Venture Stock Purchase/Merger Transaction, (iii) the refinancing and payment of all obligations of the Borrower and/or any of the Subsidiary Guarantors to any lenders with respect to any Indebtedness for Borrowed Money existing as of the Closing Date, (iv) the refinancing and payment of all obligations of Venture Holdings, Venture Southeast and/or Venture Midwest to any lenders with respect to any Indebtedness for Borrowed Money existing as of the date of this Agreement, (v) the payment of all costs and expenses reasonably incurred in connection with the closing and consummation of the transactions contemplated by this Agreement, including the PackerWare Merger and/or the Venture Stock Purchase/Merger Transaction, (vi) the payment of expenses incurred in the ordinary course of business of the Borrower or any Subsidiary Guarantor, (vii) the acquisition of any Permitted Acquisition as and to the extent permitted by the provisions of this Agreement, (viii) the payment of all costs and expenses reasonably incurred in connection with the closing and consummation of a Permitted Acquisition, (ix) the repayment of a portion of the "Term Loans" (as defined in the Original Credit Agreement) and (ix) for general corporate purposes of the Borrower or any Subsidiary Guarantor. "Person" means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated association, a Governmental Authority, or any other organization or entity. "Plan" means any pension plan which is covered by Title IV of ERISA and in respect of which the Borrower, any Subsidiary of the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3 of ERISA. "Post-Default Rate" means with respect to the principal balance of any of the Obligations, the then applicable rate of interest on such Obligations, plus two percent (2%) per annum. "Post-Expiration Date Letter of Credit" and "Post-Expiration Date Letters of Credit" have the meanings described in Section 2.4.3 "Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving Loan Optional Prepayment, a Term Loan A Mandatory Prepayment, a Term Loan A Optional Prepayment, a Term Loan B Mandatory Prepayment, or a Term Loan B Optional Prepayment, as the case may be, and "Prepayments" mean collectively all Revolving Loan Mandatory Prepayments, all Revolving Loan Optional Prepayments, all Term Loan A Mandatory Prepayments, all Term Loan A Optional Prepayments, all Term Loan B Mandatory Prepayments and all Term Loan B Optional Prepayments. "Pricing Ratio" means as to the Borrower and the Subsidiary Guarantors, on a consolidated basis, the ratio of (i) Funded Debt to (ii) EBITDA. "Prime Rate" means the floating and fluctuating per annum prime commercial lending rate of interest of the Agent, as established by the Agent at any time or from time to time. The Prime Rate shall be adjusted automatically, without notice, as of the effective date of any change in such prime commercial lending rate. The Prime Rate does not necessarily represent the lowest rate of interest charged by the Agent to borrowers. "Proposed Assignee" has the meaning described in Section 9.5 (Assignments by Lenders). "Proforma Financial Projections" has the meaning described in Section 4.1.12 (Proforma Financial Statements) below. "Proforma Financial Statements" has the meaning described in Section 4.1.12 (Proforma Financial Statements) below. "Pro Rata Share" means at any time and as to any Lender, the percentage derived by dividing the unpaid principal amount of the Loans, Bond Letter of Credit Obligations and Letter of Credit Obligations owing to that Lender by the aggregate unpaid principal amount of all Loans, Bond Letter of Credit Obligations and Letter of Credit Obligations then outstanding; or if no Loans, Bond Letter of Credit Obligations or Letter of Credit Obligations are outstanding, by dividing the total amount of such Lender's Commitments by the total amount of the Commitments of the Agent and all of the Lenders. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder. "Responsible Officer" means for the Borrower, its chief executive officer, any vice president or president or, with respect to financial matters, its chief financial officer. "Requisite Lenders" means at any time of determination one or more of the Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the Commitments. "Reserve Percentage" means, at any time, the then current maximum rate for which reserves (including any basic, supplemental, marginal and emergency reserves) are required to be maintained by member banks of the Federal Reserve System under Regulation D of the Board of Governors of the Federal Reserve System against "Eurocurrency liabilities", as that term is defined in Regulation D. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. The Agent hereby advises the Borrower that as of the date of this Agreement, the Reserve Percentage is equal to zero. "Revolving Credit Commitment" means the agreement of a Lender relating to the making the Revolving Loan and advances thereunder subject to and in accordance with the provisions of this Agreement; and "Revolving Credit Commitments" means the collective reference to the Revolving Credit Commitment of each of the Lenders. "Revolving Credit Commitment Period" means the period of time from the Closing Date to the Business Day preceding the Revolving Credit Termination Date. "Revolving Credit Committed Amount" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Credit Facility" means the facility established by the Lenders pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement. "Revolving Credit Note" and "Revolving Credit Notes" have the meanings described in Section 2.1.5 (Revolving Credit Notes). "Revolving Credit Optional Reduction" and "Revolving Credit Optional Reductions" have the meanings described in Section 2.1.12. "Revolving Credit Pro Rata Share" has the meaning described in Section 2.1.1. "Revolving Credit Termination Date" means the earlier of (i) January 21, 2002, (ii) the repayment or prepayment of the Term Loan in full, (iii) the date on which the Revolving Credit Commitments are terminated pursuant to Section 7.2 or otherwise. "Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees" have the meanings described in Section 2.1.10 (Revolving Credit Unused Line Fee). "Revolving Loan" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Loan Account" has the meaning described in Section 2.1.9 (Revolving Loan Account). "Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory Prepayments" have the meanings described in Section 2.1.6 (Mandatory Prepayments). "Revolving Loan Optional Prepayment" and "Revolving Loan Optional Prepayments" have the meanings described in Section 2.1.7 (Revolving Loan Optional Prepayment). "Right of First Refusal Notice" has the meaning described in Section 9.5 (Assignments by Lenders). "Securities" means the collective reference to each and every certificated or uncertificated security which constitutes a "security" under the provisions of Title 8 of the Uniform Commercial Code, and all proceeds (cash and non-cash) of the foregoing and to each and every "investment property" under the provisions of Title 9 of the Uniform Commercial Code (if that definition is included in that Title), and all proceeds (cash and non-cash) of the foregoing. "Security Agreement" means (i) that certain security agreement dated as of the Closing Date from PackerWare, BIC, BTP, Berry Sterling and AeroCon, Inc. to the Agent for the benefit of the Lenders, ratably, and the Agent, (ii) that certain security agreement dated May 13, 1997 from Berry Design to the Agent for the benefit of the Lenders, ratably, and the Agent, and (iii) that certain security agreement dated the date hereof from Berry Venture, Venture Southeast and Venture Midwest, all as amended, restated, supplemented or otherwise modified in writing at any time and from time to time. "Security Documents" means collectively any assignment, pledge agreement, security agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, the Agent and/or the Lenders on any real or personal property of any Person to secure all or any portion of the Obligations, all as the same may from time to time be amended, restated, supplemented or otherwise modified, including, without limitation, this Agreement, the Guaranty, the Stock Pledge Agreement, the Deeds of Trust, the Security Agreement, the Assignment of Patents and the Assignment of Trademarks. "Security Procedures" means the rules, policies and procedures adopted and implemented by the Agent and its Affiliates at any time and from time to time with respect to security procedures and measures relating to electronic funds transfers, all as the same may be amended, restated, supplemented, terminated, or otherwise modified at any time and from time to time by the Agent in its sole and absolute discretion. "Seller" means all of the shareholders of PackerWare immediately prior to consummation of the PackerWare Merger and all of the shareholders of Venture Holdings immediately prior to consummation of the Venture Stock Purchase/Merger Transaction. "Settlement Date" means each Business Day after the Closing Date selected by the Agent in its sole discretion subject to and in accordance with the provisions of Section 2.9.3(a) as of which a Settlement Report is delivered by the Agent and on which settlement is to be made among the Lenders in accordance with the provisions of Section 2.9.3. "Settlement Report" means each report prepared by the Agent and delivered to each Lender and setting forth, among other things, as of the Settlement Date indicated thereon and as of the next preceding Settlement Date, the aggregate outstanding principal balance of the Revolving Loan, each Lender's Revolving Credit Pro Rata Share thereof, each Lender's Net Outstandings and all Non-Ratable Loans made, and all payments of principal, interest and Fees received by the Agent from the Borrower during the period beginning on such next preceding Settlement Date and ending on such Settlement Date. "South Carolina Bond Letter of Credit" means that certain irrevocable letter of credit dated April 20, 1995, issued by Bank One, Cleveland, NA in the original amount of $8,427,637, for the account of Venture Southeast, for the benefit of Bank One Trust Company, NA, as trustee, and as security for the South Carolina Bonds, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "South Carolina Bond Letter of Credit - NB" means that certain irrevocable letter of credit issued or to be issued by the Agent for the account of the Borrower or Venture Southeast as security for the South Carolina Bond Letter of Credit, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. Subsequent to the date hereof, but on or before the expiration date of the South Carolina Bond Letter of Credit, the Agent intends to issue an irrevocable letter of credit to replace the South Carolina Bond Letter of Credit, in which case the term "South Carolina Bond Letter of Credit - NB" shall mean such replacement letter of credit, as the same may be amended, restated, reissued, renewed, supplemented, replaced or otherwise modified at any time and from time to time. "South Carolina Bond Letter of Credit Agreement" means that certain letter of credit reimbursement agreement by and between the Agent and the Borrower pursuant to which the Borrower will agree to reimburse the Agent for any amounts drawn under the South Carolina Bond Letter of Credit - NB and to pay certain fees, interest and other amounts payable to the Agent with respect to the South Carolina Bond Letter of Credit - NB, as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "South Carolina Bond Letter of Credit Agreement Documents - Bonds" means all instruments, agreements or documents previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the South Carolina Bond Letter of Credit and/or any or all of the South Carolina Bonds, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "South Carolina Bond Letter of Credit Agreement Documents - NB" means the South Carolina Bond Letter of Credit Agreement and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with the South Carolina Bond Letter of Credit - NB and/or any or all of the South Carolina Bond Letter of Credit Obligations, all as the same may be amended, restated, supplemented, replaced or otherwise modified at any time and from time to time. "South Carolina Bond Letter of Credit Obligations" means the collective reference to all Obligations of the Borrower under and with respect to the South Carolina Letter of Credit - NB, the South Carolina Bond Letter of Credit Agreement, and/or any of the South Carolina Bond Letter of Credit Agreement Documents. "South Carolina Bond Trust Agreement" means that certain trust indenture dated as of April 1, 1995 by and among the South Carolina Bond Trustee and the South Carolina Jobs - Economic Development Authority relating to the South Carolina Bonds, as amended, restated, supplemented or otherwise modified at any time and from time to time. "South Carolina Bond Trustee" means Bank One Trust Company, NA, and its successors and assigns, as trustee under the South Carolina Bond Trust Agreement. "South Carolina Bonds" means the South Carolina Jobs -Economic Development Authority, Adjustable Rate Bonds, Series 1995 (Venture Packaging, Inc. Project) issued by the South Carolina Jobs - Economic Development Authority in the original aggregate principal amount of Eight Million Three Hundred Twenty-five Thousand Dollars ($8,325,000). "South Carolina IRB" means the Anderson County, South Carolina Industrial Revenue Bonds, Series 1995 (Venture Packaging Southeast, Inc. Project). "South Carolina IRB Lease Agreement" means that certain First Amended Lease Agreement dated as of January 18, 1996, between Anderson County, South Carolina and Venture Holdings. "South Carolina IRB Lease Purchase Option" means the option of Venture Southeast to purchase the assets subject to the South Carolina IRB Lease Agreement pursuant to Section 10.02 of the South Carolina IRB Lease Agreement. "South Carolina IRB Lease Transfers" means transfers of capital assets related to the real property covered by the Deed of Trust - Anderson and, pursuant to the terms of the South Carolina IRB Lease Agreement required to be transferred to the lessor and leased to the lessee under the South Carolina IRB Lease Agreement. "State" means the State of Maryland. "Stock Pledge Agreement" means (i) that certain stock pledge, assignment and security agreement dated as of the Closing Date from the Borrower to the Agent for the benefit of the Lenders ratably and the Agent, (ii) that certain stock pledge, assignment and security agreement dated May 13, 1997 from the Borrower to the Agent for the benefit of the Lenders ratably and the Agent, and (iii) that certain stock pledge, assignment and security agreement dated as of the date hereof from the Borrower to the Agent for the benefit of the Lenders ratably and the Agent, all as the same may from time to time be amended, restated, supplemented or otherwise modified, which Stock Pledge Agreement grants, pledges and assigns to the Agent for the benefit of the Lenders ratably and the Agent, a first priority pledge and assignment of one hundred percent (100%) of the capital stock of each Subsidiary Guarantor. "Senior Secured Debt - Parent" means that certain Indebtedness for Borrowed Money of the Parent (and all guarantees thereof by the Borrower and its Subsidiaries) in favor of First Trust of New York, National Association, as trustee for the holders of the 12-1/2% Series A Senior Secured Notes due 2006 and the 12-1/2% Series B Secured Notes due 2006 in a stated principal amount of One Hundred Five Million Dollars ($105,000,000). "Senior Secured Debt Loan Documents" means any and all promissory notes, agreements, documents or instruments now or at any time evidencing, securing, guarantying or otherwise executed and delivered in connection with the Senior Secured Debt - Parent, as the same may from time to time be amended, restated, supplemented or modified. "Stockholder's Equity" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for any date of determination thereof, the total of capital stock (except treasury stock and net of any note receivable received upon the issuance of any shares of capital stock) and contributed capital, as determined in accordance with GAAP consistently applied, after eliminating all intercompany items. "Subordinated Debt" means that certain Indebtedness for Borrowed Money of the Borrower (and all guarantees thereof by the Borrower and its Subsidiaries) in favor of United States Trust Company of New York, as trustee for the holders of the 12-1/4% Senior Subordinated Notes due 2004 in a stated principal amount of One Hundred Million Dollars ($100,000,000). "Subordinated Debt Loan Documents" means any and all promissory notes, agreements, documents or instruments now or at any time evidencing, securing, guarantying or otherwise executed and delivered in connection with the Subordinated Debt, as the same may from time to time be amended, restated, supplemented or modified. "Subordinated Indebtedness" means all Indebtedness, including, without limitation, the Subordinated Debt, incurred at any time by the Borrower as and to the extent permitted by the provisions of Section 6.2.4 of this Agreement, which is subordinated to the Obligations, as set forth in one or more written agreements, all in form and substance satisfactory to the Agent in its reasonable discretion. The Agent and the Lenders agree that Subordinated Indebtedness does not include the Senior Secured Debt - Parent. "Substitute Purchaser" has the meaning described in Section 9.5 (Assignments by Lenders). "Subsidiary" means any corporation the majority of the voting shares of which at the time are owned directly by the Borrower and/or by one or more Subsidiaries of the Borrower. "Subsidiary Guarantor" means BIC, BTP, AeroCon, Berry Sterling, Berry Design, Berry Venture, Venture Southeast, Venture Midwest or any other domestic Subsidiary of the Borrower or the Parent which is designated and qualifies as a Subsidiary Guarantor in accordance with the provisions of Section 6.2.2, or any of their respective successors and assigns, as the case may be; and, "Subsidiary Guarantors" means BIC, BTP, AeroCon, Berry Sterling, Berry Design, Berry Venture, Venture Southeast, Venture Midwest, and each other domestic Subsidiary of the Borrower designated and qualified as a "Subsidiary Guarantor" in accordance with the provisions of Section 6.2.2, and all of their respective successors and assigns. "Tangible Capital Funds" means as to the Borrower and each of the Subsidiary Guarantors, on a consolidated basis, for any date of determination thereof, the total of (i) all Stockholder's Equity, less (ii) all Assets which would be classified as intangible assets under GAAP consistently applied, plus (iii) Subordinated Indebtedness. "Taxes" means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time shall be assessed, levied, confirmed or imposed by any Governmental Authority on the Borrower, any Subsidiary Guarantor or any of its or their properties or Assets or any part thereof or in respect of any of its or their franchises, businesses, income or profits. "Term Loan A" and "Term Loans A" have the meanings described in Section 2.2. "Term Loan A Additional Advances" has the meaning described in Section 2.2. "Term Loan B" and "Term Loans B" have the meanings described in Section 2.3.1. "Term Loan A Commitment" and "Term Loan A Commitments" have the meanings described in Section 2.2. "Term Loan B Commitment" and "Term Loan B Commitments" have the meanings described in Section 2.3.1. "Term Loan A Committed Amount" has the meaning described in Section 2.2. "Term Loan B Committed Amount" has the meaning described in Section 2.3.1 "Term Loan A Facility" means the facility established by the Lenders pursuant to Section 2.2 (Term Loan A Facility) of this Agreement. "Term Loan B Facility" means the facility established by the Lenders pursuant to Section 2.3 (Term Loan B Facility) of this Agreement. "Term Loan B Fee" and "Term Loan B Fees" have the meaning described in Section 2.3.5 (Term Loan B Fees). "Term Loan A Mandatory Prepayment" and "Term Loan A Mandatory Prepayments" have the meanings described in Section 2.2.3. "Term Loan B Mandatory Prepayment" and "Term Loan B Mandatory Prepayments" have the meanings described in Section 2.3.3. "Term Loan A Optional Prepayment" and "Term Loan A Optional Prepayments" have the meanings described in Section 2.2.4. "Term Loan B Optional Prepayment" and "Term Loan B Optional Prepayments" have the meanings described in Section 2.3.4. "Term Loan A Pro Rata Share" has the meaning described in Section 2.2. "Term Loan B Pro Rata Share" has the meaning described in Section 2.3.1. "Term Loan A Note" and "Term Loan A Notes" have the meaning described in Section 2.2.2. "Term Loan B Note" and "Term Loan B Notes" have the meaning described in Section 2.3.2. "Term Loan" means either a Term Loan A or a Term Loan B; and "Term Loans" means each Term Loan A and Term Loan B. "Term Note" means a Term Loan A Note or a Term Loan B Note; "Term Notes" means each Term Loan A Note and each Term Loan B Note. "Total Revolving Credit Committed Amount" has the meaning described in Section 2.1.1. "Total Term Loan A Committed Amount" has the meaning described in Section 2.2. "Total Term Loan B Committed Amount" has the meaning described in Section 2.3. "Trademarks" means and includes in each case whether now existing or hereafter arising, all of the Borrower's rights, title and interest in and to (a) any and all trademarks (including service marks), trade names and trade styles, and applications for registration thereof and the goodwill of the business symbolized by any of the foregoing, (b) any and all licenses of trademarks, service marks, trade names and/or trade styles, whether as licensor or licensee, (c) any renewals of any and all trademarks, service marks, trade names, trade styles and/or licenses of any of the foregoing, (d) income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages, claims, and payments for past, present and future infringements thereof, (e) rights to sue for past, present and future infringements of any of the foregoing, including the right to settle suits involving claims and demands for royalties owing, and (f) all rights corresponding to any of the foregoing throughout the world. "Uniform Commercial Code" means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable. "Venture Holdings" has the meaning described in the Recitals. "Venture Midwest" has the meaning described in the Recitals. "Venture Southeast" has the meaning described in the Recitals. "Venture Stock" means all capital stock issued by Venture Holdings acquired or to be acquired by Berry Venture, all in accordance with the Venture Purchase Agreement Transaction, together with any and all proceeds and products thereof. "Venture Stock Purchase/Merger Agreement" means that certain Agreement and Plan of Merger dated as of August29, 1997 by and among the Borrower, Berry Venture, Venture Holdings, the Parent, Venture Southeast, Venture Midwest and the shareholders of Venture Holdings, as the same may from time to time be amended, restated, supplemented or modified, together with any and all exhibits and schedules thereto, amendments, modifications, and supplements thereto, restatements thereof, and substitutes therefor. "Venture Stock Purchase/Merger Documents" means collectively the Venture Stock Purchase Agreement and any and all other agreements, documents or instruments, previously, now or hereafter executed and delivered by Venture Holdings, Venture Southeast, Venture Midwest, Berry Venture, the Borrower, or any other Person in connection with the Venture Stock Purchase/Merger Transaction, as the same may from time to time be amended, restated, supplemented and modified. "Venture Stock Purchase/Merger Transaction" means (i) the acquisition of all issued and outstanding capital stock of Venture Holdings by Berry Venture through a merger, (ii) the merger of Venture Holdings into Berry Venture, (iii) the transfer to the Borrower of all issued and outstanding stock of Venture Southeast and/or Venture Midwest by Berry Venture and/or Venture Holdings, as contemplated by the Venture Stock Purchase/Merger Agreement, and (iv) the merger, consolidation, dissolution or liquidation of Berry Venture. "Virginia Design" means Virginia Design Packaging Corp., a corporation organized and existing under the laws of the Commonwealth of Virginia, and its successors and assigns. "Virginia Design NewCo" means Berry Plastics Design Corporation, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns. "Virginia Design Purchase Agreement" means that certain asset purchase agreement dated as of May 13, 1997 by and among the Borrower, Virginia Design NewCo, Virginia Design and the shareholders of Virginia Design, as the same may from time to time be amended, restated, supplemented or modified, together with any and all exhibits and schedules thereto, amendments, modifications, and supplements thereto, restatements thereof, and substitutes therefor. "Virginia Design Purchase Agreement Documents" means collectively the Virginia Design Purchase Agreement and any and all other agreements, documents or instruments, previously, now or hereafter executed and delivered by Virginia Design, Virginia Design NewCo, the Borrower, or any other Person in connection with the Virginia Design Purchase Agreement Transaction, as the same may from time to time be amended, restated, supplemented and modified. "Virginia Design Purchase Agreement Transaction" means the asset purchase transaction contemplated by the Virginia Design Purchase Agreement. "Wholly Owned Subsidiary" means any domestic United States Person all the shares of stock or other equity interests of all classes of which (other than directors' qualifying shares) at the time are owned directly or indirectly by the Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower. "Wire Transfer Procedures" means the rules, policies and procedures adopted and implemented by the Agent and its Affiliates at any time and from time to time with respect to electronic funds transfers, including, without limitation, the Security Procedures, all as the same may be amended, restated, supplemented, terminated or otherwise modified at any time and from time to time by the Agent upon notice to the Borrower in its reasonable discretion. SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under GAAP. Unless otherwise defined herein, all terms used herein which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. Notwithstanding the foregoing, the Agent and the Lenders agree that if GAAP at any time changes and such changes have an affect on the computation of any of the covenants contained in Section 6.1.13 of this Agreement, the Agent, the Lenders and the Borrower will negotiate in good faith to revise any such affected covenants so as to reverse the effect of such change in GAAP. ARTICLE 2 THE CREDIT FACILITIES SECTION 2.1 THE REVOLVING CREDIT FACILITY. 2.1.1 REVOLVING CREDIT FACILITY. Subject to and upon the terms of this Agreement, the Lenders collectively, but severally, establish a revolving credit facility in favor of the Borrower. The aggregate of all advances under the Revolving Credit Facility are sometimes referred to in this Agreement collectively as the "Revolving Loan". The amount set forth below opposite each Lender's name is herein called such Lender's "Revolving Credit Committed Amount" and the total of each Lender's Revolving Credit Committed Amount is herein called the "Total Revolving Credit Committed Amount". The proportionate share set forth below opposite each Lender's name is herein called such Lender's "Revolving Credit Pro Rata Share": Revolving Credit Revolving Credit LENDER COMMITTED AMOUNT PRO RATA SHARE Fleet $11,494,000 22.99% GE Capital $19,253,000 38.51% NationsBank $19,253,000 38.51% Total Revolving Credit Committed Amount: $50,000,000 100% Neither the Agent nor any of the Lenders shall be responsible for the Revolving Credit Commitment of any other Lender, nor will the failure of any Lender to perform its obligations under its Revolving Credit Commitment in any way relieve any other Lender from performing its obligations under its Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrower may request advances under the Revolving Credit Facility in accordance with the provisions of this Agreement; provided that after giving effect to the Borrower's request: (i) the outstanding principal balance of each Lender's Pro Rata Share of the Revolving Loan and of the Letter of Credit Obligations would not exceed the lesser of (a) such Lender's Pro Rata Share of the Revolving Loan and of the Letter of Credit Obligations or (b) such Lender's Pro Rata Share of the Borrowing Base; and, (ii) the aggregate outstanding principal balance of the Revolving Loan and all Letter of Credit Obligations would not exceed the lesser of (a) the Total Revolving Credit Committed Amount or (b) the Borrowing Base. 2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE REVOLVING LOAN. The Borrower may borrow under the Revolving Credit Facility on any Business Day. Advances under the Revolving Loan shall be deposited to a demand deposit account of the Borrower with the Agent or shall be otherwise applied as directed by the Borrower, which direction the Agent may require to be in writing. Not later than 11:00 a.m. (Baltimore City Time) on the date of the requested borrowing, the Borrower shall give the Agent oral or written notice (a "Loan Notice") of the amount and (if requested by the Agent) the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed in writing by the Borrower within three (3) Business Days after the making of the requested advance under the Revolving Loan. At any time within three (3) hours prior to funding, the Borrower may revoke a Loan Notice; provided, that the Borrower shall pay to each Lender, as the case may be, any amounts which may be due to such Lender under Section 2.7.4 by reason of such Lender having taken action in reliance on the Loan Notice. Upon receipt of any such Loan Notice, the Agent shall promptly notify each Lender of the amount of each advance to be made by such Lender on the requested borrowing date under such Lender's Revolving Credit Commitment. Not later than 1:00 p.m. (Baltimore City Time) on each requested borrowing date for the making of advances under the Revolving Loan, each Lender shall, if it has received timely notice from the Agent of the Borrower's request for such advances, make available to the Agent, in funds immediately available to the Agent at the Agent's office set forth in Section 9.1, such Lender's Pro Rata Share of the advances to be made on such date. In addition, the Borrower hereby irrevocably authorizes the Lenders at any time and from time to time, without further request from or notice to the Borrower, to make advances under the Revolving Loan which the Agent, in its sole and absolute discretion, deems necessary or appropriate to protect the interests of the Agent and/or any or all of the Lenders under this Agreement, including, without limitation, advances under the Revolving Loan made to cover debit balances in the Revolving Loan Account, to pay principal of, and/or interest on, any Loan, including any Term Loan, the Obligations (including any Letter of Credit Obligations and any Bond Letter of Credit Obligations), and/or Enforcement Costs, prior to, on, or after the termination of other advances under this Agreement, regardless of whether the outstanding principal amount of the Revolving Loan which the Lenders may advance hereunder exceeds the Total Revolving Credit Committed Amount. The Agent acknowledges and agrees that (i) the obligation of the Lenders to make advances to or for the account of the Borrower pursuant to this paragraph shall be subject to the provisions of Section 8.14 of this Agreement and (ii) no Lender shall have any obligation or commitment to make any advance to or for the account of the Borrower under the Revolving Loan (including any obligation or commitment to reimburse the Agent for advances made by the Agent to or for the account of the Borrower under this paragraph, except for advances made to cover Enforcement Costs for which the Agent has not been duly reimbursed by the Borrower) unless otherwise agreed in writing by such Lender, if and to the extent such Lender's Pro Rata Share of the Revolving Loan and of the Letter of Credit Obligations would exceed, with the making of such advance or reimbursement, such Lender's Revolving Credit Committed Amount. Each Lender, however, shall continue to be obligated to reimburse the Agent for any and all Enforcement Costs incurred by the Agent in accordance with the provisions of this Agreement if and to the extent the Borrower fails to reimburse the Agent for such Enforcement Costs. 2.1.3 BORROWING BASE. As used in this Agreement, the term "Borrowing Base" means at any time, an amount equal to the aggregate of (a) eighty-five percent (85%) of the amount of Eligible Receivables, plus (b) the lesser of (x) sixty-five percent (65%) of the amount of Eligible Inventory or (y) Twenty-five Million Dollars ($25,000,000). The Borrowing Base shall be computed based on the Borrowing Base Report most recently delivered to and accepted by the Agent in its reasonable discretion. In the event the Borrower fails to furnish a Borrowing Base Report required by Section 2.1.4 below, the Agent may, in its reasonable discretion exercised from time to time and without limiting other rights and remedies under this Agreement, direct the Lenders to suspend the making of or limit advances under the Revolving Loan. The Borrowing Base shall be reduced by all amounts credited to the Collateral Account (if and to the extent a Collateral Account is required by the terms of this Agreement) since the date of the most recent Borrowing Base Report and by the amount of any Account or any Inventory which was included in the Borrowing Base, but which the Agent determines fails to meet the respective criteria applicable from time to time for Eligible Receivables or Eligible Inventory. If at any time the total of the aggregate principal amount of the Revolving Loan and Outstanding Letter of Credit Obligations exceeds the Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, the Borrower, at the sole and absolute discretion of the Agent exercised from time to time, shall pay the Borrowing Base Deficiency ON DEMAND to the Agent for the benefit of the Lenders from time to time. Without implying any limitation on the Agent's discretion with respect to the Borrowing Base, the criteria for Eligible Receivables and for Eligible Inventory contained in the respective definitions of Eligible Receivables and of Eligible Inventory are in part based upon the business operations of the Borrower and the Subsidiary Guarantors existing on or about the date of this Agreement and upon information and records furnished to the Agent by the Borrower and the Subsidiary Guarantors. If at any time or from time to time hereafter, the business operations of the Borrower and/or any of the Subsidiary Guarantors change in any material respect or such information and records furnished to the Agent are materially incorrect or misleading, the Agent in its reasonable discretion, may at any time and from time to time during the duration of this Agreement change such criteria, add new criteria, make existing criteria less onerous, or remove existing criteria; provided, however, that any such change in, or addition or removal of criteria shall be effective only after notice thereof from the Agent to the Borrower. Except in emergency circumstances, the Agent agrees to use its commercially reasonable efforts to consult with the Borrower prior to the effective date of any addition to, or change in, eligibility criteria, but that the Agent shall have no obligation or duty to reach an agreement with the Borrower as a condition of, or prior to, imposing any changes in, or additions to, eligibility criteria. The Agent shall communicate such changed or additional criteria to the Borrower from time to time either orally or in writing. 2.1.4 BORROWING BASE REPORT. The Borrower will furnish to the Agent no less frequently than monthly, as soon as available, but in any event within twenty (20) days of the end of each fiscal month, and, upon the occurrence of an Event of Default or as otherwise provided in this Section 2.1.4, at such other times as may be requested by the Agent a report of the Borrowing Base in the form attached hereto as Exhibit A (each a "Borrowing Base Report"; collectively, the "Borrowing Base Reports") in the form required from time to time by the Agent, appropriately completed and duly signed. The Borrowing Base Report shall contain the amount and payments on the Accounts, the value of Inventory, and the calculations of the Borrowing Base, all in such detail, and accompanied by such supporting and other information, as the Agent may from time to time reasonably request. Upon the Agent's request and upon the creation of any Accounts, the Borrower will provide the Agent with (a) confirmatory assignment schedules; (b) copies of Account Debtor invoices; (c) evidence of shipment or delivery; and (d) such further schedules, documents and/or information regarding the Accounts and the Inventory as the Agent may reasonably require. The items to be provided under this subsection shall be in form reasonably satisfactory to the Agent, and certified as true and correct by a Responsible Officer, and delivered to the Agent from time to time solely for the Agent's convenience in maintaining records of the Collateral. The Borrower's failure to deliver any such items to the Agent shall not affect, terminate, modify, or otherwise limit the Liens of the Agent and the Lenders in the Collateral. Notwithstanding the foregoing, the Borrower acknowledges and agrees that the Agent, at its option, may require that the Borrower furnish to the Agent weekly and, if requested by the Agent, daily Borrowing Base Reports if any one of the following events occur (i) the Borrower's and Subsidiary Guarantors' collective aggregate availability under the Revolving Loan is at any times less than or equal to Fifteen Million Dollars ($15,000,000), (ii) the Borrower and the Subsidiary Guarantors, on a consolidated basis, incur three (3) consecutive months of net operating losses, or (iii) the occurrence of an Event of Default (each of the aforementioned events are herein called a "Borrowing Base Trigger Event"). The Agent agrees that it shall not be entitled to require that the Borrower furnish weekly or daily Borrowing Base Reports solely as the result of the occurrence of a Borrowing Base Trigger Event, if the Agent fails to so notify the Borrower within ninety (90) days of the date that the Borrower has cured the Borrowing Base Trigger Event to the reasonable satisfaction of the Agent. The foregoing sentence, however, shall not prevent the Agent from later requiring more frequent Borrowing Base Reports following the occurrence of any subsequent Borrowing Base Trigger Event; provided, that the Agent so notifies the Borrower within ninety (90) days of date that the Borrower has cured the Borrowing Base Trigger Event to the reasonable satisfaction of the Agent. 2.1.5 REVOLVING CREDIT NOTES. The obligation of the Borrower to pay each Lender's Pro Rata Share of the Revolving Loan, with interest, shall be evidenced by a series of promissory notes (as from time to time extended, amended, restated, supplemented or otherwise modified, collectively the "Revolving Credit Notes" and individually a "Revolving Credit Note"). Each Lender's Revolving Credit Note shall be dated as of the date of this Agreement, shall be payable to the order of such Lender at the times provided in the Revolving Credit Note, and shall be in the principal amount of such Lender's Revolving Credit Committed Amount. The Borrower acknowledges and agrees that, if the outstanding principal balance of the Revolving Loan outstanding from time to time exceeds the aggregate stated amount of the Revolving Credit Notes, the excess shall bear interest at the rates provided from time to time for advances under Revolving Loan evidenced by the Revolving Credit Notes and shall be payable, with accrued interest, ON DEMAND. The Revolving Credit Notes shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. 2.1.6 MANDATORY PREPAYMENTS OF REVOLVING LOAN. Subject to the provisions of Section 2.7.4 (Indemnity) and in addition to any mandatory prepayment required by the provisions of Section 2.2.3 (Term Loan Mandatory Prepayments), upon the request of the Agent pursuant to Section 2.1.3 (Borrowing Base), the Borrower shall make mandatory prepayments (each a "Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan Mandatory Prepayments") of the Revolving Loan at any time and from time to time in order to cover any Borrowing Base Deficiency. 2.1.7 OPTIONAL PREPAYMENTS OF REVOLVING LOAN. Subject to the provisions of Section 2.7.4 (Indemnity), the Borrower shall have the option at any time and from time to time prepay (each a "Revolving Loan Optional Prepayment" and collectively the "Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in part without premium or penalty. Revolving Loan Optional Prepayments shall be made following a timely and proper written notice to the Agent with respect thereto specifying the date and amount of any intended Revolving Loan Optional Prepayment. The amount to be prepaid shall be paid by the Borrower to the Agent on the date specified for such prepayment. Any amounts repaid or prepaid may be readvanced and reborrowed subject to the provisions of this Agreement. 2.1.8 THE COLLATERAL ACCOUNT. Upon demand by the Agent following a Borrowing Base Trigger Event, the Borrower will deposit, or cause to be deposited, all Items of Payment to a bank account designated by the Agent and from which the Agent alone has power of access and withdrawal (the "Collateral Account"). Each deposit shall be made not later than the next Business Day after the date of receipt of the Items of Payment. The Items of Payment shall be deposited in precisely the form received, except for the endorsements of the Borrower where necessary to permit the collection of any such Items of Payment, which endorsement the Borrower hereby agree to make. In the event the Borrower fails to do so, the Borrower hereby authorizes the Agent to make the endorsement in the name of the Borrower. Prior to such a deposit, the Borrower will not commingle any Items of Payment with the Borrower's other funds or property, but will hold them separate and apart in trust and for the account of the Agent for the benefit of the Lenders ratably and the Agent. The Agent agrees that it shall not demand that the Borrower deposit or cause to be deposited all Items of Deposit to the Collateral Account at any time prior to the occurrence of a Borrowing Base Trigger Event. Once the Agent has so made demand on the Borrower, unless otherwise agreed by the Agent in writing, the Borrower shall continue to so deposit or cause to be deposited all Items of Payment to the Collateral Account notwithstanding that subsequent to such demand the Borrowing Base Trigger Event has been cured, waived, otherwise remedied or is no longer applicable. In addition, if the Agent has so made demand, if so directed by the Agent, the Borrower shall direct the mailing of all Items of Payment from its Account Debtors to one or more post-office boxes designated by the Agent, or to such other additional or replacement post-office boxes pursuant to the request of the Agent from time to time (collectively, the "Lockbox"). The Agent shall have unrestricted and exclusive access to the Lockbox. Subject to the provisions of this Section, the Borrower hereby authorizes the Agent to inspect all Items of Payment, and deposit such Items of Payment in the Collateral Account. The Agent reserves the right, exercised in its reasonable discretion from time to time, to provide to the Collateral Account credit prior to final collection of an Item of Payment and to disallow credit for any Item of Payment prior to final collection which is reasonably unsatisfactory to the Agent. In the event Items of Payment are returned to the Agent for any reason whatsoever, the Agent may, in the exercise of its reasonable discretion from time to time, forward such Items of Payment a second time. Any returned Items of Payment shall be charged back to the Collateral Account, the Revolving Loan Account, or other account, as appropriate. The Agent will apply the whole or any part of the collected funds credited to the Collateral Account against the Revolving Loan (or with respect to Items for Payments which are not proceeds of Accounts or Inventory or after a Default or an Event of Default, against any of the Obligations) or credit such collected funds to a depository account of the Borrower with the Agent, the order and method of such application to be in the sole discretion of the Agent. Notwithstanding the foregoing, the Agent agrees that prior to the occurrence of an Event of Default, the Agent shall use its best efforts to apply collected funds credited to the Collateral Account to the Obligations so as to avoid or minimize any amounts which would be due under Section 2.7.4 by reason of any such application. Notwithstanding the foregoing, the Agent agrees that it shall not be entitled to require establishment of the Collateral Account and/or the Lockbox as the result of the occurrence of a Borrowing Base Trigger Event, if the Agent fails to so notify the Borrower within ninety (90) days of the date that the Borrower has cured the Borrowing Base Trigger Event to the reasonable satisfaction of the Agent. The foregoing sentence, however, shall not prevent the Agent from later requiring establishment of the Collateral Account and/or a Lockbox following the occurrence of any subsequent Borrowing Base Trigger Event; provided, that the Agent so notifies the Borrower within ninety (90) days of the date that the Borrower has cured the Borrowing Base Trigger Event to the reasonable satisfaction of the Agent. 2.1.9 REVOLVING LOAN ACCOUNT. The Agent will establish and maintain a loan account on its books (the "Revolving Loan Account") to which the Agent will (a) DEBIT (i) the principal amount of each advance under the Revolving Loan made by the Lenders hereunder as of the date made, (ii) the amount of any interest accrued on the Revolving Loan as and when due, and (iii) any other amounts due and payable by the Borrower to the Agent and/or the Lenders from time to time under the provisions of this Agreement in connection with the Revolving Loan, including, without limitation, Enforcement Costs, Fees, late charges, and service, collection and audit fees, as and when due and payable, and (b) CREDIT all payments made by the Borrower to the Agent on account of the Revolving Loan as of the date made including, without limitation, funds credited to the Revolving Loan Account from the Collateral Account. The Agent may debit the Revolving Loan Account for the amount of any Item of Payment which is returned to the Agent unpaid. All credit entries to the Revolving Loan Account are conditional and shall be readjusted as of the date made if final and indefeasible payment is not received by the Agent in cash or solvent credits. The Borrower hereby promises to pay to the order of the Agent for the ratable benefit of the Lenders, on the Revolving Credit Termination Date, an amount equal to the excess, if any, of all debit entries over all credit entries recorded in the Revolving Loan Account under the provisions of this Agreement. Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be presumed conclusively to be correct, and shall constitute an account stated between the Agent, the Lenders and the Borrower unless the Agent receives specific written objection thereto from the Borrower and/or any Lender within thirty (30) Business Days after such statement or reconciliation shall have been sent by the Agent. Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be final, binding and conclusive upon the Borrower in all respects, absent manifest error, unless the Agent receives specific written objection thereto from the Borrower within thirty (30) Business Days after such statement or reconciliation shall have been sent by the Agent. 2.1.10 REVOLVING CREDIT UNUSED LINE FEE. The Borrower shall pay to the Agent for the ratable benefit of the Lenders a quarterly Revolving Credit Facility fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a "Revolving Credit Unused Line Fee") in an amount equal to thirty (30) basis points per annum (calculated on the basis of actual number of days elapsed in a year of 360 days) and calculated on average daily unused and undisbursed portion of the Total Revolving Credit Committed Amount in effect from time to time accruing during each quarterly period. The accrued and unpaid Revolving Credit Unused Line Fee shall be paid by the Borrower to the Agent on the first day of each quarter, in arrears, commencing on the first such date following the date hereof, and on the Revolving Credit Termination Date. 2.1.11 EARLY TERMINATION FEE. In the event of the termination of the Revolving Credit Commitments, the Borrower shall pay a fee to the Agent for the benefit of the Lenders ratably (the "Early Termination Fee"), equal to following amount at the following times: PERIOD EARLY TERMINATION FEE Closing Date, through and 2% of the Total Revolving including, day preceding Committed Amount the first anniversary date of the Closing Date First anniversary date 1% of the Total Revolving of the Closing Date, Credit Committed Amount through and including, the day preceding the second anniversary date of the Closing Date Second anniversary date 1/2% of the Total Revolving of the Closing Date, Credit Committed Amount through and including, the day preceding the third anniversary date of the Closing Date In the event of a partial reduction of the Revolving Credit Commitments, the Borrower shall pay to the Agent for the benefit of the Lenders ratably, an Early Termination Fee equal to following amount at the following times: PERIOD EARLY TERMINATION FEE Closing Date, through and 2% of the amount of the including, day preceding Revolving Credit Optional the first anniversary date Reduction of the Closing Date First anniversary date 1% of the amount of the of the Closing Date, Revolving Credit Optional through and including, Reduction the day preceding the second anniversary date of the Closing Date Second anniversary date 1/2% of the amount of the of the Closing Date, Revolving Credit Optional through and including, Reduction the day preceding the third anniversary date In the event the Term Loans are refinanced or replaced with the proceeds of Indebtedness for Borrowed Money, in whole or in part, the Borrower shall pay to the Agent for the benefit of the Lenders ratably, an Early Termination Fee equal to following amount at the following times: PERIOD EARLY TERMINATION FEE Closing Date, through and 2% of the amount prepaid including, day preceding the first anniversary date of the Closing Date First anniversary date 1% of the amount prepaid of the Closing Date, through and including, the day preceding the second anniversary date of the Closing Date Second anniversary date 1/2% of the amount prepaid of the Closing Date, through and including, the day preceding the third anniversary date Notwithstanding the foregoing, the Borrower shall not be required to pay the Early Termination Fee in connection with such a refinancing or replacement of the Term Loans and the termination or partial reduction of the Revolving Credit Commitments from the proceeds of a public offering of Securities by the Borrower or the Parent. Nothing contained in this Section shall be deemed a waiver by the Agent or any Lender of any Default or Event of Default which results from any such public offering of Securities by the Borrower and/or the closing of a purchase, acquisition or investment otherwise prohibited by the provisions of this Agreement, which does not result in a prepayment of all Obligations and a termination of all Letters of Credit, all Bond Letters of Credit and Commitments. In addition, if the Borrower requests that the Requisite Lenders consent to the purchase or acquisition of, or investment in, any Person which would not otherwise be permitted by the provisions of this Agreement, and the Requisite Lenders refuse to agree and consent to any such purchase, acquisition or investment, the Borrower may, at its option, prepay all of the Obligations in full and terminate all of the Commitments and shall have no obligation to pay an Early Termination Fee in connection with any such prepayment and termination; provided, that (i) all Letters of Credit and all Bond Letters of Credit are terminated or otherwise secured by the issuance of one or more back-to-back letters of credit from an issuer and containing terms reasonably acceptable to the Agent, (ii) all Obligations are paid in full, (iii) all Commitments are terminated, and (iv) to the extent the Borrower intends to finance such purchase, acquisition or investment, any one of the Lenders have not agreed to provide such financing after having been first offered the opportunity by the Borrower to provide such financing substantially on the same terms and conditions as are actually proposed to the Borrower from another lender or financial institution. A Lender shall be deemed to have so declined to provide the requested financing for the proposed acquisition, purchase or other investment unless such Lender has otherwise notified the Borrower in writing within fifteen (15) days of its receipt of all proposed material terms and conditions of the proposed acquisition, purchase or investment and any requested financing that such Lender wishes to participate in such financing. The Lenders understand and agree that the Borrower shall be required only to furnish to the Agent and the Lenders a term sheet summarizing the proposed terms for such financing to be prepared by the Borrower based on actual terms proposed by such other lender or financial institution, and that neither the Borrower nor any such other lender or financial institution shall have any obligation to furnish to the Agent or the Lenders copies of actual commitments, proposals or correspondence from such other lender or financial institution or independent verification of any such proposed terms. Payment of all or any portion of the Obligations relating to the Revolving Loan and/or the Term Loans and/or termination or reduction of any of the Commitments, in whole or in part, by or on behalf of the Borrower, by court order or otherwise, following and as a result of the institution of any bankruptcy proceeding by or against the Borrower, shall be deemed to be a prepayment of the Revolving Loan and the Term Loans, and/or termination or reduction of the Commitments, as appropriate, subject to payment of the Early Termination Fee provided in this subsection if any or all of the Obligations are actually paid and/or any or all of the Commitments are terminated or reduced at any time during the periods set forth above. All Early Termination Fees shall be paid to the Agent for the ratable benefit of the Lenders. 2.1.12 OPTIONAL REDUCTION OF REVOLVING CREDIT COMMITTED AMOUNT. Subject to the provisions of Section 2.1.11 (Early Termination Fee), the Borrower shall have the right to reduce permanently (each a "Revolving Credit Optional Reduction" and collectively the "Revolving Credit Optional Reductions") the Total Revolving Credit Committed Amount in effect from time to time in the amount of any integral multiple of Five Hundred Thousand Dollars ($500,000), upon at least five (5) Business Days prior written notice to the Agent specifying the date and amount of such Revolving Credit Optional Reduction; provided, that no Revolving Credit Optional Reduction shall be permitted if, after giving effect thereto and to any Revolving Loan Optional Prepayment made on the effective date thereof, the then outstanding principal amount of the Revolving Loan and Outstanding Letter of Credit Obligations exceeds the Total Revolving Credit Committed Amount as so reduced. Such notice shall be irrevocable as to the amount and date of such Revolving Credit Optional Reduction. After each such Revolving Credit Optional Reduction, the Revolving Credit Unused Line Fee provided for in Section 2.1.10 hereof and the Early Termination Fee, if any, provided for in Section 2.1.11 shall be calculated with respect to the Revolving Credit Committed Amount as so reduced. Any Revolving Credit Optional Reduction shall be made to each Lender's Revolving Credit Commitment in accordance with its Pro Rata Share of such Revolving Credit Optional Reduction. SECTION 2.2 THE TERM LOAN A FACILITY. 2.2.1 TERM LOAN A COMMITMENTS. Subject to and upon the terms of this Agreement, each Lender severally agrees to make a loan (each a "Term Loan A"; and collectively, the "Term Loans A") to the Borrower in the principal amount set forth below opposite such Lender's name (herein called such Lender's "Term Loan A Committed Amount"). The total of each Lender's Term Loan A Committed Amount is herein called the "Total Term Loan A Committed Amount". The proportionate share set forth below opposite each Lender's name is herein called such Lender's "Term Loan A Pro Rata Share": Term Loan A Term Loan A LENDER COMMITTED AMOUNT PRO RATA SHARE Fleet $ 7,126,000 22.99% GE Capital $11,937,000 38.51% NationsBank $11,937,000 38.51% TOTAL TERM LOAN A COMMITTED AMOUNT: $31,000,000 100% The obligation of each Lender to make a Term Loan A is several and is limited to its Term Loan A Committed Amount, and such obligation of each Lender is herein called its "Term Loan A Commitment". The Term Loan A Commitment of each of the Lenders are herein collectively referred to as the "Term Loan A Commitments". The Agent shall not be responsible for the Term Loan A Commitment of any Lender; and similarly, none of the Lenders shall be responsible for the Term Loan A Commitment of any of the other Lenders; the failure, however, of any Lender to perform its Term Loan A Commitment shall not relieve any of the other Lenders from the performance of their respective Term Loan A Commitments. Pursuant to the Borrower's request, the Lenders reduced the outstanding principal amount of the Term Loans A in accordance with the provisions of this Agreement. As set forth in the Original Credit Agreement, the aggregate principal balance of the Term Loans A (referred to the "Term Loans" in the Original Credit Agreement) was $30,299,000. The Borrower acknowledges and agrees that a portion of the proceeds of Term Loan B or the Revolving Loans are to be used to repay and reduce the outstanding principal balance of the Term Loans A such that as of the date of this Agreement, the unpaid aggregate principal balance of the Term Loans A is $27,480,000. Up to and including October 31, 1997, the Borrower shall be entitled to obtain additional advances under Term Loans A (collectively, "Term Loan A Additional Advances") provided, however, that the aggregate amount of the additional advances shall not exceed the lesser of $3,520,000 or the aggregate of (i) seventy-five (75)% of the increase to the determination of the fair market value of the real property covered by the Deed of Trust -Henderson above the fair market value determined by the appraisal furnished in connection with the closing of the Original Credit Agreement, plus (ii) eighty percent (80%) of the orderly liquidation value of the Equipment of Venture Southeast and Venture Southeast, such values being determined by the Agent after the date of this Agreement pursuant appraisals which shall be performed by one or more appraisers satisfactory in all respects to the Agent and shall be in such form and content as may be required by the Agent and received by the Agent on or before October 1, 1997. 2.2.2 AMORTIZATION OF TERM LOANS A; THE TERM LOAN A NOTES. The unpaid principal balance of the Term Loans A shall be due and payable in quarterly installments of principal on each Installment Payment Date, each in the following amounts at the following times: DUE DATE AMOUNT February 1, 1998 $ 288,000 May 1, 1998 $ 288,000 August 1, 1998 $ 288,000 November 1, 1998 $ 288,000 February 1, 1999 $ 731,000 May 1, 1999 $ 731,000 August 1, 1999 $ 731,000 November 1, 1999 $ 731,000 February 1, 2000 $ 1,175,000 May 1, 2000 $ 1,175,000 August 1, 2000 $ 1,175,000 November 1, 2000 $ 1,175,000 February 1, 2001 $ 1,618,000 May 1, 2001 $ 1,618,000 August 1, 2001 $ 1,618,000 November 1, 2001 $ 1,618,000 January 21, 2002 $12,232,000 PROVIDED, HOWEVER, that each of the payments above shall be increased on a pro rata basis by the aggregate amount of the Term Loan A Additional Advances. Unless sooner paid, the unpaid principal balance of the Term Loans A, together with interest accrued and unpaid thereon, shall be due and payable in full on the Revolving Credit Termination Date. The obligation of the Borrower to pay the Term Loans A, with interest, shall be evidenced by a series of amended and restated promissory notes (each as from time to time extended, amended, restated, supplemented or otherwise modified, a "Term Loan A Note" and collectively, the "Term Loan A Notes"). Each Term Loan A Note shall be dated as the date hereof and shall be payable to the order of a Lender at the times provided in the Term Loan A Note, and shall be in the principal amount of such Lender's Term Loan A Committed Amount. 2.2.3 MANDATORY PREPAYMENTS OF TERM LOANS A. Subject to the provisions of Section 2.7.4 (Indemnity), the Borrower shall make the following mandatory prepayments (each a "Term Loan A Mandatory Prepayment" and collectively the "Term Loan A Mandatory Prepayments") of the Term Loans A to the Agent for the ratable benefit of the Lenders: (a) To the extent the Net Proceeds of any Asset Disposition (including the sale and issuance of any Securities, but excluding (i) the sale or transfer of all Securities issued by Venture Southeast and/or Venture Southwest to the Borrower and (ii) the merger, liquidation, consolidation or dissolution of Berry Venture, as contemplated by the Venture Stock Purchaser/Merger Transaction) by the Borrower or any Subsidiary Guarantor cause the aggregate of all such Asset Dispositions in any fiscal year to exceed Two Hundred Fifty Thousand Dollars ($250,000), all of such excess shall be paid to the Agent as a Term Loan A Mandatory Prepayment, or if the Term Loans A have been paid in full shall be paid to the Agent as a Term Loan B Mandatory Prepayment, or if the Term Loans B have been paid in full shall be paid to the Agent as a Revolving Loan Mandatory Prepayment. Notwithstanding the foregoing, the Borrower shall not be required to make a Term Loan A Mandatory Prepayment in connection with any public, private or Rule 144(a) offering of Securities which does not generate any proceeds (other than nominal proceeds), including, for example, the issuance or exercise of warrants with registration rights or the issuance of a resale prospectus for any existing shares of capital stock. In addition, the Borrower shall not be required to make a Term Loan A Mandatory Prepayment to the extent of any non-cash Net Proceeds which are Indebtedness for Borrowed Money received by the Borrower or any Subsidiary Guarantor in payment of the purchase price of an Asset which is the subject of a Permitted Asset Disposition; provided that, upon the Agent's demand, the Borrower and/or the Subsidiary Guarantor, as the case may, shall take all such actions as shall be reasonably requested by the Agent to grant to the Agent for its benefit and the ratable benefit of the Lenders a perfected Lien on any such Indebtedness for Borrowed Money and provided further that the principal amount of all such Indebtedness for Borrowed Money, together with the Indebtedness for Borrowed Money referenced in Section 2.3.3(a) below, shall not exceed at any time in the aggregate Five Hundred Thousand Dollars ($500,000). (b) Immediately upon closing and consummation of any public or private offering of Indebtedness by the Borrower or any Subsidiary Guarantor (excluding (i) the sale or transfer of all Securities issued by Venture Southeast and/or Venture Southwest to the Borrower and (ii) the merger, liquidation, consolidation or dissolution of Berry Venture, as contemplated by the Venture Stock Purchaser/Merger Transaction), except for Indebtedness for Borrowed Money permitted by Section 6.2.4, other than subsection (d) of Section 6.2.4, the Borrower shall make a Term Loan A Mandatory Prepayment in an amount equal to one hundred percent (100%) of the Net Proceeds of such public or private offering; provided that a Term Loan A Mandatory Prepayment shall not be required as the result of the issuance of Indebtedness by the Borrower or any Subsidiary Guarantor, if (i) such Indebtedness is issued pursuant to and is permitted by subsection (d) of Section 6.2.4 and such Indebtedness constitutes a "Refinancing Indebtedness" as defined in subsection (m) of Section 6.2.4, (ii) if the Net Proceeds of such Indebtedness are used, in whole, to finance a Permitted Acquisition or Capital Expenditures as and to the extent permitted by the provisions of this Agreement; and (iii) the aggregate amount of Indebtedness under subsections (i) and (ii) of this subsection (b) and the amount of Indebtedness under subsections (i) and (ii) of Section 2.3.3(b), do not exceed Twenty Million Dollars ($20,000,000). The Borrower shall pay to the Agent on the date of each required Term Loan A Mandatory Prepayment accrued interest to such date on the amount prepaid. Each partial Term Loan A Mandatory Prepayment shall be applied to all of the remaining principal installments due on account of the Term Loans A on a pro rata basis. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay an Early Termination Fee as the result of a Term Loan A Mandatory Prepayment. 2.2.4 OPTIONAL PREPAYMENTS OF TERM LOANS A. Subject to the provisions of Section 2.7.4 (Indemnity), the Borrower may, at its option, at any time and from time to time, prepay (each a "Term Loan A Optional Prepayment" and collectively the "Term Loan A Optional Prepayments") the Term Loans A, in whole or in part, upon five (5) Business Days prior written notice, specifying the date and amount of prepayment. The amount to be so prepaid, together with interest accrued thereon to date of prepayment if the amount is intended as a prepayment of the Term Loans A in whole, shall be paid by the Borrower to the Agent for the ratable benefit of the Lenders on the date specified for such prepayment. Partial Term Loan A Optional Prepayments shall be applied to all of the remaining principal installments due on account of the Term Loans A on a pro rata basis. SECTION 2.3 TERM LOAN B FACILITY. 2.3.1 TERM LOAN B COMMITMENTS. Subject to and upon the terms of this Agreement, each Lender severally agrees to make a loan (each a "Term Loan B"; and collectively, the "Term Loans B") to the Borrower in the principal amount set forth below opposite such Lender's name (herein called such Lender's "Term Loan B Committed Amount"). The total of each Lender's Term Loan B Committed Amount is herein called the "Total Term Loan B Committed Amount". The proportionate share set forth below opposite each Lender's name is herein called such Lender's "Term Loan B Pro Rata Share": Term Loan B Term Loan B LENDER COMMITTED AMOUNT PRO RATA SHARE Fleet $ 6,896,000 22.99% GE Capital $11,552,000 38.51% NationsBank $11,552,000 38.51% TOTAL LOAN B COMMITTED AMOUNT: $30,000,000 100% The obligation of each Lender to make a Term Loan B is several and is limited to its Term Loan B Committed Amount, and such obligation of each Lender is herein called its "Term Loan B Commitment". The Term Loan B Commitment of each of the Lenders are herein collectively referred to as the "Term Loan B Commitments". The Agent shall not be responsible for the Term Loan B Commitment of any Lender; and similarly, none of the Lenders shall be responsible for the Term Loan B Commitment of any of the other Lenders; the failure, however, of any Lender to perform its Term Loan B Commitment shall not relieve any of the other Lenders from the performance of their respective Term Loan B Commitments. 2.3.2 AMORTIZATION OF TERM LOANS B; THE TERM LOAN B NOTES. The unpaid principal balance of the Term Loans B shall be due and payable in quarterly installments of principal on each Installment Payment Date, each in the following amounts at the following times: DUE DATE AMOUNT December 31, 1997 $1,000,000 April 1, 1998 $ 500,000 July 1, 1998 $1,000,000 October 1, 1998 $2,500,000 January 1, 1999 $2,500,000 April 1, 1999 $2,500,000 July 1, 1999 $2,500,000 October 1, 1999 $2,500,000 January 1, 1999 $2,500,000 April 1, 2000 $2,500,000 July 1, 2000 $2,500,000 October 1, 2000 $2,500,000 January 1, 2000 $2,500,000 April 1, 2001 $2,500,000 Unless sooner paid, the unpaid principal balance of the Term Loans B, together with interest accrued and unpaid thereon, shall be due and payable in full on March 1, 2001. The obligation of the Borrower to pay the Term Loans B, with interest, shall be evidenced by a series of promissory notes (each as from time to time extended, amended, restated, supplemented or otherwise modified, the "Term Loan B Note" and collectively, the "Term Loan B Notes"). Each Term Loan B Note shall be dated as the date hereof and shall be payable to the order of a Lender at the times provided in the Term Loan B Note, and shall be in the principal amount of such Lender's Term Loan B Committed Amount. 2.3.3 MANDATORY PREPAYMENTS OF TERM LOAN B. Subject to the provisions of Section 2.7.4 (Indemnity), the Borrower shall make mandatory prepayments (each a "Term Loan B Mandatory Prepayment" and collectively the "Term Loan B Mandatory Prepayments") of the Term Loans B to the Agent for the ratable benefit of the Lenders annually. Each Term Loan B Mandatory Prepayment shall be in the amount of the Excess Cash Flow for the then preceding fiscal year and shall be payable on the date the Borrower shall furnish to the Agent the annual financial statements referred to in Section 6.1.1 of this Agreement. If, however, the Borrower fails to furnish such financial statements in any given year as and when required, the Borrower shall be required to pay the Term Loan B Mandatory Prepayment payable during such calendar year on the date which is ninety (90) days after the close of the Borrower's then preceding fiscal year. The Borrower shall pay to the Agent on the date of each required Term Loan B Mandatory Prepayment accrued interest to such date on the amount prepaid. Each partial Term Loan B Mandatory Prepayment shall be applied as follows: (i) fifty percent (50%) to principal against the principal installments of the Term Loans B in the inverse order of their maturities and (ii) fifty percent (50%) to all of the remaining principal installments due on account of the Term Loans B on a pro rata basis. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay an Early Termination Fee as the result of a Term Loan B Mandatory Prepayment. 2.3.4 OPTIONAL PREPAYMENTS OF TERM LOANS B. Subject to the provisions of Section 2.7.4 (Indemnity), the Borrower may, at its option, at any time and from time to time, prepay (each a "Term Loan B Optional Prepayment" and collectively the "Term Loan B Optional Prepayments") the Term Loans B, in whole or in part, upon five (5) Business Days prior written notice, specifying the date and amount of prepayment. The amount to be so prepaid, together with interest accrued thereon to date of prepayment if the amount is intended as a prepayment of the Term Loans B in whole, shall be paid by the Borrower to the Agent for the ratable benefit of the Lenders on the date specified for such prepayment. Partial Term Loan B Optional Prepayments shall be applied as follows: (i) fifty percent (50%) to principal against the principal installments of the Term Loans B in the inverse order of their maturities and (ii) fifty percent (50%) to all of the remaining principal installments due on account of the Term Loans B on a pro rata basis. 2.3.5 TERM LOAN B FEES. The Borrower shall pay to the Agent for the ratable benefit of the Lenders, a quarterly fee, in arrears commencing with the earlier of (i) any quarter in which an Event of Default existed or (ii) the quarter ending September 30, 1998, (collectively, the "Term Loan B Fees" and individually, a "Term Loan B Fee"), in an amount to be determined based on the Pricing Ratio and calculated on the average quarterly outstanding balance of the Term Loans B during such quarterly period, as follows: Per annum Quarterly Term Pricing Ratio Loan B Fee greater than or equal to 6.0 to 1.0 37.5 b.p. greater than or equal to 5.0 to 1.0, but 25 b.p. less than 5.99 to 1.0 greater than or equal to 4.50 to 1.0, but 12.5 b.p. less than 4.99 to 1.0 less than 4.50 to 1.0 0 b.p. Each accrued and unpaid Term Loan B Fee shall be paid by the Borrower to the Agent at the time the quarterly statements are furnished under Section 6.1.1(c) below, in arrears, commencing September 30, 1998, and on the maturity date of the Term Loans B; provided, however, in the event that the Borrower fails to deliver such financial statements to the Agent as and when required, the Agent may estimate, in its reasonable discretion and without waiving any Default or Event of Default, the amount of the Term Loan B Fee, which amount shall be due and payable ON DEMAND by the Agent. SECTION 2.4 THE LETTER OF CREDIT FACILITY. 2.4.1 LETTERS OF CREDIT. Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit Commitments, the Borrower may obtain standby or commercial letters of credit (as the same may from time to time be amended, supplemented or otherwise modified, each a "Letter of Credit" and collectively the "Letters of Credit") from the Agent from time to time from the Closing Date until the Business Day preceding the Revolving Credit Termination Date. The Borrower will not be entitled to obtain a Letter of Credit unless (a) the Borrower is then able to obtain a Revolving Loan from the Lenders in an amount not less than the proposed stated amount of the Letter of Credit requested by the Borrower, and (b) the sum of the then Outstanding Letter of Credit Obligations (including the amount of the requested Letter of Credit) does not exceed Five Million Dollars ($5,000,000) (the "Letter of Credit Committed Amount"). 2.4.2 LETTER OF CREDIT FEES. (a) The Borrower shall pay to the Agent, for its own account, an issuance fee of one-quarter of one percent (1/4%) per annum of the stated amount of the Letter of Credit without regard for provisions contained in the Letters of Credit which may give rise to a reduction in the stated amount thereof unless such reduction has actually occurred (each a "Letter of Credit Fronting Fee" and collectively, the "Letter of Credit Fronting Fees"). The Letter of Credit Fronting Fees shall be paid upon the opening of each Letter of Credit and upon each anniversary thereof, if any. In addition, the Borrower shall pay to the Agent all other reasonable and customary negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Letter of Credit Agreement. All Letter of Credit Fronting Fees and all such other additional fees are included in and are a part of the "Fees" payable by the Borrower under the provisions of this Agreement and are for the sole and exclusive benefit of the Agent and are a part of the Agent's Obligations. (b) In addition and in connection with each Letter of Credit, the Borrower shall pay to the Agent for the ratable benefit of the Lenders quarterly, in arrears, a letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an amount equal to one hundred seventy-five (175) basis points per annum (calculated on the basis of actual number of days elapsed in a year of 360 days) of the stated amount of each such Letter of Credit without regard for provisions contained in the Letters of Credit which may give rise to a reduction in the stated amount thereof unless such reduction has actually occurred. The accrued and unpaid portion of each Letter of Credit Fee shall be paid by the Borrower to the Agent on the first day of each February, May, August and November, commencing on the first such date following the date hereof, and on the expiration or termination date of the respective Letter of Credit. 2.4.3 TERMS OF LETTERS OF CREDIT; POST-EXPIRATION DATE LETTERS OF CREDIT. Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement and (b) expire on a date not later than the Business Day preceding the Revolving Credit Termination Date; provided, however, if any Letter of Credit does have an expiration date later than the Business Day preceding the Revolving Credit Termination Date (each a "Post- Expiration Date Letter of Credit" and collectively, the "Post-Expiration Date Letters of Credit"), effective as of the Business Day preceding the Revolving Credit Termination Date and without prior notice to or the consent of the Borrower, the Lenders shall make advances under the Revolving Loan for the account of the Borrower in the aggregate stated amount of all such Letters of Credit. The amount of each Lender's advance shall be equal to its Revolving Credit Pro Rata Share of the aggregate stated amount of all such Letters of Credit. The Agent shall deposit the proceeds of such advances into one or more non-interest bearing accounts with and in the name of the Agent and over which the Agent alone shall have exclusive power of access and withdrawal (collectively, the "Letter of Credit Cash Collateral Account"). The Letter of Credit Cash Collateral Account is to be held by the Agent, for the ratable benefit of the Lenders, as additional collateral and security for any Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit. The Borrower hereby assigns, pledges, grants and sets over to the Agent, for the ratable benefit of the Lenders, a first priority security interest in, and Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral Account, together with any and all proceeds (cash and non-cash) and products thereof as additional collateral and security for the Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit. The Borrower acknowledges and agrees that the Agent shall be entitled to fund any draw or draft on any Post-Expiration Date Letter of Credit from the monies on deposit in the Letter of Credit Cash Collateral Account without notice to or consent of the Borrower or any of the Lenders so long as the drawing request substantially complied with the requirements of any such Letter of Credit. The Borrower further acknowledges and agrees that the Agent's election to fund any draw or draft on any Post-Expiration Date Letter of Credit from the Letter of Credit Cash Collateral shall in no way limit, impair, lessen, reduce, release or otherwise adversely affect the Borrower's obligation to pay any unpaid Letter of Credit Obligations under or relating to the Post-Expiration Date Letters of Credit. At such time as all Post-Expiration Date Letters of Credit have expired and all Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit have been paid in full, the Agent agrees to apply the amount of any remaining funds on deposit in the Letter of Credit Cash Collateral Account to the then unpaid balance of the Obligations under the Revolving Credit Facility in such order and manner as the Agent shall determine in its reasonable discretion in accordance with the provisions of this Agreement. Each Letter of Credit shall be issued for the sole purpose of a Permitted Use. The aggregate stated amount of all Letters of Credit at any one time outstanding and issued by the Agent pursuant to the provisions of this Agreement, including, without limitation, any and all Post-Expiration Date Letters of Credit, plus the amount of any unpaid Letter of Credit Fees and Letter of Credit Fronting Fees accrued, and less the aggregate amount of all drafts issued under such Letters of Credit that have been paid by the Agent and for which the Agent has been reimbursed by the Borrower in full in accordance with Section 2.3.5 below and the Letter of Credit Agreements, and for which the Agent has no further obligation or commitment to restore all or any portion of the amounts drawn and reimbursed, is herein called the "Outstanding Letter of Credit Obligations". 2.4.4 PROCEDURES FOR LETTERS OF CREDIT. The Borrower shall give the Agent written notice at least five (5) Business Days prior to the date on which the Borrower desires the Agent to issue a Letter of Credit. Such notice shall be accompanied by a duly executed Letter of Credit Agreement specifying, among other things: (a) the name and address of the intended beneficiary of the Letter of Credit, (b) the requested stated amount of the Letter of Credit, (c) whether the Letter of Credit is to be revocable or irrevocable, (d) the Business Day on which the Letter of Credit is to be opened and the date on which the Letter of Credit is to expire, (e) the terms of payment of any draft or drafts which may be drawn under the Letter of Credit, and (f) any other terms or provisions the Borrower desire to be contained in the Letter of Credit. Such notice shall also be accompanied by such other information, certificates, confirmations, and other items as the Agent may reasonably require to assure that the Letter of Credit is to be issued in accordance with the provisions of this Agreement and a Letter of Credit Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of a Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless otherwise expressly provided in the Letter of Credit Agreement. Upon (i) receipt of such notice, (ii) payment of all Letter of Credit Fronting Fees and all other Fees payable in connection with the issuance of such Letter of Credit, and (iii) receipt of a duly executed Letter of Credit Agreement, the Agent shall process such notice and Letter of Credit Agreement in accordance with its customary procedures and open such Letter of Credit on the Business Day specified in such notice. 2.4.5 PAYMENTS OF LETTERS OF CREDIT. The Borrower hereby promises to pay to the Agent, ON DEMAND and in United States Dollars, the following which are herein collectively referred to as the "Current Letter of Credit Obligations": (a) the amount which the Agent has paid under each draft or draw on a Letter of Credit, whether such demand be in advance of the Agent's payment or for reimbursement for such payment; (b) any and all reasonable charges and expenses which the Agent may pay or incur relative to the Letter of Credit and/or such draws or drafts; and (c) interest on the amounts described in (a) and (b) not paid by the Borrower as and when due and payable under the provisions of (a) and (b) above from the day the same are due and payable until paid in full at a rate per annum equal to the then current highest rate of interest on the Revolving Loan. In addition, the Borrower hereby promises to pay any and all other Letter of Credit Obligations as and when due and payable in accordance with the provisions of this Agreement and the Letter of Credit Agreements. The obligation of the Borrower to pay Current Letter of Credit Obligations and all other Letter of Credit Obligations shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any other account party may have or have had against the beneficiary of such Letter of Credit, the Agent, any of the Lenders, or any other Person, including, without limitation, any defense based on the failure of any draft or draw to conform to the terms of such Letter of Credit, any draft or other document proving to be forged, fraudulent or invalid, or the legality, validity, regularity or enforceability of such Letter of Credit, any draft or other documents presented with any draft, any Letter of Credit Agreement, this Agreement, or any of the other Financing Documents, all whether or not the Agent or any of the Lenders had actual or constructive knowledge of the same, and irrespective of any Collateral, security or guarantee therefor or right of offset with respect thereto and irrespective of any other circumstances whatsoever which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for any Letter of Credit Obligations, in bankruptcy or otherwise; PROVIDED, HOWEVER, that the Borrower shall not be obligated to reimburse the Agent for any wrongful payment under such Letter of Credit made as a result of the Agent's willful misconduct or gross negligence. The obligation of the Borrower to pay the Letter of Credit Obligations shall not be conditioned or contingent upon the pursuit by the Agent or any other Person at any time of any right or remedy against any Person which may be or become liable in respect of all or any part of such obligation or against any Collateral, security or guarantee therefor or right of offset with respect thereto. The Letter of Credit Obligations shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any portion of the Letter of Credit Obligations is rescinded or must otherwise be restored or returned by the Agent or any of the Lenders upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Person, or upon or as a result of the appointment of a receiver, intervenor, or conservator of, or trustee or similar officer for, any Person, or any substantial part of such Person's property, all as though such payments had not been made. All payments by the Agent and the Lenders with respect to any of the Current Letter of Credit Obligations shall be deemed to be advances under the Revolving Loan contemporaneously as of the date any such Current Letter of Credit Obligations due and owing; the proceeds of each such advance shall be used to pay Current Letter of Credit Obligations in the amount of such advance. SECTION 2.5 THE BOND LETTER OF CREDIT FACILITY. 2.5.1 BOND LETTERS OF CREDIT. Subject to and upon the provisions of the Bond Letter of Credit Agreements, the Agent has agreed to issue the Bond Letters of Credit for the period commencing on the Closing Date and ending on the Revolving Credit Termination Date (the "Bond Letter of Credit Commitment"). The Agent shall have no obligation or commitment to issue a Bond Letter of Credit if the aggregate stated amount of all Bond Letters of Credit then outstanding or proposed to be issued exceeds Eighteen Million Eight Hundred Fifty-Two Thousand Dollars ($18,852,000) (the "Bond Letter of Credit Committed Amount"). 2.5.2 BOND LETTER OF CREDIT FEES. (a) The Borrower shall pay to the Agent, for its own account, an issuance fee of one-quarter of one percent (1/4%) per annum of the stated amount of each Bond Letter of Credit, without regard for provisions contained in the Bond Letter of Credit which may give rise to a reduction in the stated amount thereof unless such reduction has actually occurred (each a "Bond Letter of Credit Fronting Fee" and collectively, the "Bond Letter of Credit Fronting Fees"). The Bond Letter of Credit Fronting Fees shall be paid upon the issuance of each Bond Letter of Credit and upon each anniversary thereof, if any. In addition, the Borrower shall pay to the Agent all other reasonable and customary negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Bond Letter of Credit Agreement. All Bond Letter of Credit Fronting Fees and all such other additional fees are included in and are a part of the "Fees" payable by the Borrower under the provisions of this Agreement and are for the sole and exclusive benefit of the Agent and are a part of the Agent's Obligations. (b) In addition and in connection with each Bond Letter of Credit, the Borrower shall pay to the Agent for the ratable benefit of the Lenders quarterly, in arrears, a letter of credit fee (each a "Bond Letter of Credit Fee" and collectively the "Bond Letter of Credit Fees") in an amount equal to one hundred seventy-five (175) basis points per annum (calculated on the basis of actual number of days elapsed in a year of 360 days) of the stated amount of each such Bond Letter of Credit, without regard for provisions contained in the Bond Letter of Credit which may give rise to a reduction in the stated amount thereof unless such reduction has actually occurred. The accrued and unpaid portion of each Bond Letter of Credit Fee shall be paid by the Borrower to the Agent, for the ratable benefit of the Lenders, on the first day of each February, May, August and November, commencing on the first such date following the date hereof, and on the expiration or termination date of the respective Bond Letter of Credit. 2.5.3 TERMS OF BOND LETTERS OF CREDIT. Each Bond Letter of Credit shall (a) be issued pursuant to a Bond Letter of Credit Agreement and (b) expire on a date not later than the Business Day preceding the Revolving Credit Termination Date; provided, however, that (i) the initial Iowa Bond Letter of Credit - NB issued as security for the Iowa Bond Letter of Credit and the Iowa Bond Standby Credit Agreement shall expire on the expiry date of the Iowa Bond Letter of Credit and Iowa Bond Standby Credit Agreement, (ii) the initial Nevada Bond Letter of Credit -NB issued as security for the Nevada Bond Letter of Credit shall expire on the expiry date of the Nevada Bond Letter of Credit and (iii) the initial South Carolina Bond Letter of Credit - NB issued as security for the South Carolina Bond Letter of Credit shall expire on the expiry date of the South Carolina Bond Letter of Credit. Each Bond Letter of Credit shall be issued for the sole purpose of providing collateral for the Iowa Bonds, the Nevada Bonds, the South Carolina Bonds, the Iowa Bond Letter of Credit, the Nevada Bond Letter of Credit or the South Carolina Bond Letter of Credit or for any other purposes required by the Nevada Bonds, the Iowa Bonds or the South Carolina Bonds. The aggregate stated amount of all Bond Letters of Credit at any one time outstanding and issued by the Agent pursuant to the provisions of this Agreement, plus the amount of any unpaid Bond Letter of Credit Fees and Bond Letter of Credit Fronting Fees accrued or scheduled to accrue thereon, and less the aggregate amount of all drafts drawn under or purporting to have been drawn under such Bond Letters of Credit that have been paid by the Agent and for which the Agent has been reimbursed by the Borrower in full in accordance with Section 2.5.5 below and the Bond Letter of Credit Agreements, and for which the Agent has no further obligation or commitment to restore all or any portion of the amounts drawn and reimbursed, is herein called the "Outstanding Bond Letter of Credit Obligations". 2.5.4 PROCEDURES FOR BOND LETTERS OF CREDIT. The Borrower shall give the Agent written notice at least five (5) Business Days prior to the date on which the Borrower desires the Agent to issue a Bond Letter of Credit. Such notice shall be accompanied by a duly executed Bond Letter of Credit Agreement specifying, among other things: (a) the name and address of the intended beneficiary of the Bond Letter of Credit, (b) the requested stated amount of the Bond Letter of Credit, (c) that the Bond Letter of Credit is to be irrevocable, (d) the Business Day on which the Bond Letter of Credit is to be issued and the date on which the Bond Letter of Credit is to expire, (e) the terms of payment of any draft or drafts which may be drawn under the Bond Letter of Credit, and (f) any other terms or provisions the Borrower desire to be contained in the Bond Letter of Credit. Such notice shall also be accompanied by such other information, certificates, confirmations, and other items as the Agent may reasonably require to assure that the Bond Letter of Credit is to be issued in accordance with the provisions of this Agreement and a Bond Letter of Credit Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of a Bond Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless otherwise expressly provided in the Bond Letter of Credit Agreement. Upon (i) receipt of such notice, (ii) payment of all Bond Letter of Credit Fronting Fees and all other Fees payable in connection with the issuance of such Bond Letter of Credit, and (iii) receipt of a duly executed Bond Letter of Credit Agreement, the Agent shall process such notice and Bond Letter of Credit Agreement in accordance with its customary procedures and issue such Bond Letter of Credit on the Business Day specified in such notice, subject to compliance by all parties with the requirements of the Iowa Bond Trust Agreement, the Nevada Bond Trust Agreement and the South Carolina Bond Trust Agreement, pertaining to the replacement of credit enhancement and liquidity facilities relating to the Iowa Bonds, the Nevada Bonds, and the South Carolina Bonds, respectively. 2.5.5 PAYMENTS OF BOND LETTERS OF CREDIT. (a) Subject to the provisions of paragraph (b) below, the Borrower hereby promises to pay to the Agent, ON DEMAND and in United States Dollars, the following which are herein collectively referred to as the "Current Bond Letter of Credit Obligations": (i) the amount which the Agent has paid under each draft or draw on a Bond Letter of Credit, whether such demand be in advance of the Agent's payment or for reimbursement for such payment; (ii) any and all reasonable charges and expenses which the Agent may pay or incur relative to the Bond Letter of Credit and/or such draws or drafts; and (iii) interest on the amounts described in (i) and (ii) not paid by the Borrower as and when due and payable under the provisions of (i) and (ii) above from the day the same are due and payable until paid in full at a rate per annum equal to the then current highest rate of interest on the Revolving Loan. (b) Notwithstanding the provisions of paragraph (a) above, as long as no Event of Default has occurred, any drawing under the Iowa Bond Letter of Credit - NB to redeem Iowa Bonds purchased with a drawing under the Iowa Bond Standby Credit Agreement, any drawing under the Nevada Bond Letter of Credit - NB to purchase Nevada Bonds, and any drawing under the South Carolina Bond Letter of Credit - NB to purchase South Carolina Bonds, in each case relating to Bonds which were tendered for purchase by the holders thereof and which were not remarketed in a timely fashion (each referred to herein as a "Conversion Drawing"), are not required to be reimbursed to the Agent ON DEMAND; provided that BIC or the Borrower, as appropriate, make payments of interest to the Agent at the rates, at the times and otherwise subject to the provisions for interest on the Loans under Section 2.7, and the principal amount of each such Conversion Drawing is repaid in equal quarterly payments (i) over the remaining term to expiry of the Bond Letter of Credit Facility with respect to the Nevada Bond Letter of Credit - NB and/or the South Carolina Bond Letter of Credit - NB and (ii) over a period of ten (10) years with respect to the Iowa Bond Letter of Credit - NB; final payment of all outstanding amounts relating to the Nevada Bond Letter of Credit - NB and/or the South Carolina Bond Letter of Credit - NB to be made no later than expiry of the Bond Letter of Credit Facility or the Revolving Credit Termination Date, whichever is earlier, and final payment of all outstanding amounts relating to the Iowa Bond Letter of Credit - NB to be made no later than the date which is ten (10) years after the date of any Conversion Drawing under the Iowa Bond Letter of Credit - NB or the Revolving Credit Termination Date, whichever is earlier. In addition, the Agent and the Lenders agree that in the event the Iowa Bond Trustee draws on the Iowa Bond Letter of Credit on or about the business day preceding the expiration or termination of the Iowa Bond Letter of Credit, as contemplated by Section 505 of the Iowa Bond Trust Agreement (the "Draw"), the Iowa Bond Letter of Credit Obligations resulting from the Draw, shall not be payable ON DEMAND as would otherwise be required by this Section 2.5.5, but shall be repaid by the Borrower in equal consecutive quarterly installments over a period of ten (10) years, commencing with the first day following the first full quarterly period after the Draw and continuing on the first day of each quarterly period thereafter (the "Amortizing Iowa Bond Letter of Credit Obligations"); provided, that (i) there does not exist a Default or an Event of Default, (ii) the Draw is not the result of an acceleration of the Iowa Bonds pursuant to Section 1102 of the Iowa Bond Trust Agreement and (iii) the Draw is not the result of the occurrence of a "Determination of Taxability" (as defined in the Iowa Bond Trust Agreement). Interest shall be payable on the Amortizing Iowa Bond Letter of Credit Obligations to the Agent at the rates, at the times and otherwise subject to the provisions for interest on the Loans under Section 2.7, with a final payment of all outstanding amounts relating to the Iowa Bond Letter of Credit - NB to be made no later than the date which is ten (10) years after the date of the Draw or the Revolving Credit Termination Date, whichever is earlier. In the event that any of the payments required by this paragraph (b) are not made when due or an Event of Default occurs, all of the foregoing amounts shall be immediately due and payable ON DEMAND. (c) In addition, the Borrower hereby promises to pay any and all other Bond Letter of Credit Obligations as and when due and payable in accordance with the provisions of this Agreement and the Bond Letter of Credit Agreements. The obligation of the Borrower to pay Current Bond Letter of Credit Obligations and all other Bond Letter of Credit Obligations shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any other account party may have or have had against the beneficiary of such Bond Letter of Credit, the Agent, any of the Lenders, or any other Person, including, without limitation, any defense based on the failure of any draft or draw to conform to the terms of such Bond Letter of Credit, any draft or other document proving to be forged, fraudulent or invalid, or the legality, validity, regularity or enforceability of such Bond Letter of Credit, any draft or other documents presented with any draft, any Bond Letter of Credit Agreement, this Agreement, any of the Bond Letter of Credit Agreement Documents, or any of the other Financing Documents, all whether or not the Agent or any of the Lenders had actual or constructive knowledge of the same, and irrespective of any Collateral, security or guarantee therefor or right of offset with respect thereto and irrespective of any other circumstances whatsoever which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for any Bond Letter of Credit Obligations, in bankruptcy or otherwise; PROVIDED, HOWEVER, that the Borrower shall not be obligated to reimburse the Agent for any wrongful payment under such Bond Letter of Credit made as a result of the Agent's willful misconduct or gross negligence. The obligation of the Borrower to pay the Bond Letter of Credit Obligations shall not be conditioned or contingent upon the pursuit by the Agent or any other Person at any time of any right or remedy against any Person which may be or become liable in respect of all or any part of such obligation or against any Collateral, security or guarantee therefor or right of offset with respect thereto. The Bond Letter of Credit Obligations shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any portion of the Bond Letter of Credit Obligations is rescinded or must otherwise be restored or returned by the Agent or any of the Lenders upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Person, or upon or as a result of the appointment of a receiver, intervenor, or conservator of, or trustee or similar officer for, any Person, or any substantial part of such Person's property, all as though such payments had not been made. SECTION 2.6 GENERAL LETTER OF CREDIT PROVISIONS. 2.6.1 PROCEDURES FOR LETTERS OF CREDIT AND BOND LETTERS OF CREDIT. If any change after the Closing Date in any law or regulation or in the interpretation thereof by any court or other Governmental Authority charged with the administration thereof shall either (a) impose, modify or deem applicable any reserve, special deposit or similar requirement against Letters of Credit or Bond Letters of Credit issued by the Agent, or (b) impose on the Agent or any of the Lenders any other condition regarding this Agreement, any Letter of Credit or any Bond Letter of Credit, and the result of any event referred to in clauses (a) or (b) above shall be to increase the cost to the Agent of issuing, maintaining or extending the Letter of Credit or the Bond Letter of Credit or the cost to any of the Lenders of funding any obligation under or in connection with the Letter of Credit or the Bond Letter of Credit (which increase in cost shall be the result of the Agent's reasonable allocation of the aggregate of such cost increases resulting from such events), then, upon demand by the Agent, the Borrower shall immediately pay to the Agent from time to time as specified by the Agent, additional amounts which shall be sufficient to compensate the Agent and the Lenders for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the then highest current rate of interest on the Revolving Loan. A certificate as to such increased cost incurred by the Agent and/or any of the Lenders, submitted by the Agent to the Borrower, shall be conclusive, absent manifest error. 2.6.2 GENERAL LETTER OF CREDIT PROVISIONS. The Borrower hereby instructs the Agent to pay any draft complying with the terms of any Letter of Credit or any Bond Letter of Credit irrespective of any instructions of the Borrower to the contrary. The Borrower assume all risks of the acts and omissions of the beneficiary and other users of any Letter of Credit or any Bond Letter of Credit. The Agent, the Lenders and their respective branches, Affiliates and/or correspondents shall not be responsible for and the Borrower hereby indemnifies and holds the Agent, the Lenders and their respective branches, Affiliates and/or correspondents harmless from and against all liability, loss and expense (including reasonable attorney's fees and costs) incurred by the Agent, the Lenders and/or their respective branches, Affiliates and/or correspondents relative to and/or as a consequence of (a) any failure by the Borrower to perform the agreements hereunder and under any Letter of Credit Agreement or under any Bond Letter of Credit Agreement, (b) any Letter of Credit Agreement, any Bond Letter of Credit Agreement, this Agreement, any Letter of Credit, any Bond Letter of Credit and any draft, draw and/or acceptance under or purported to be under any Letter of Credit or any Bond Letter of Credit, (c) any action taken or omitted by the Agent, any of the Lenders and/or any of their respective branches, Affiliates and/or correspondents at the request of the Borrower, other than acts of willful misconduct and gross negligence, (d) any failure or inability to perform in accordance with the terms of any Letter of Credit or any Bond Letter of Credit by reason of any control or restriction rightfully or wrongfully exercised by any DE FACTO or DE JURE Governmental Authority, group or individual asserting or exercising governmental or paramount powers, and/or (e) any consequences arising from causes beyond the control of the Agent, any of the Lenders and/or any of their respective branches, Affiliates and/or correspondents. Except for willful misconduct and gross negligence, the Agent, the Lenders and their respective branches, Affiliates and/or correspondents, shall not be liable or responsible in any respect for any (a) error, omission, interruption or delay in transmission, dispatch or delivery of any one or more messages or advices in connection with any Letter of Credit or any Bond Letter of Credit, whether transmitted by cable, telegraph, mail or otherwise and despite any cipher or code which may be employed, and/or (b) action, inaction or omission which may be taken or suffered by it or them in good faith or through inadvertence in identifying or failing to identify any beneficiary or otherwise in connection with any Letter of Credit or any Bond Letter of Credit. Any Letter of Credit or any Bond Letter of Credit may be amended, modified or revoked only upon the receipt by the Agent from the Borrower and the beneficiary (including any transferee and/or assignee of the original beneficiary), of a written consent and request therefor. If any Laws, order of court and/or ruling or regulation of any Governmental Authority of the United States (or any state thereof) and/or any country other than the United States permits a beneficiary under a Letter of Credit or a Bond Letter of Credit to require the Agent, the Lenders and/or any of their respective branches, Affiliates and/or correspondents to pay drafts under or purporting to be under a Letter of Credit or a Bond Letter of Credit after the expiration date of the Letter of Credit or the Bond Letter of Credit, respectively, the Borrower shall reimburse the Agent and the Lenders, as appropriate, for any such payment pursuant to provisions of Section 2.4.5 or 2.5.5, as appropriate. Except as may otherwise be specifically provided in a Letter of Credit, a Bond Letter of Credit, a Letter of Credit Agreement or a Bond Letter of Credit Agreement, the laws of the State of Maryland and the Uniform Customs and Practice for Documentary Credits, 1995 Revision, International Chamber of Commerce Publication No. 500 shall govern the Letters of Credit and the Bond Letters of Credit. The Laws, rules, provisions and regulations of the Uniform Customs and Practice for Documentary Credits are hereby incorporated by reference. In the event of a conflict between the Uniform Customs and Practice for Documentary Credits and the laws of the State of Maryland, the Uniform Customs and Practice for Documentary Credits shall prevail. 2.6.3 PARTICIPATIONS IN THE LETTERS OF CREDIT AND THE BOND LETTERS OF CREDIT. Each Lender hereby irrevocably authorizes the Agent to issue Letters of Credit and the Bond Letters of Credit in accordance with the provisions of this Agreement. As of the date each Letter of Credit or each Bond Letter of Credit is opened or issued by the Agent pursuant to the provisions of this Agreement, each Lender shall have an undivided participating interest in (i) the rights and obligations of the Agent under each such Letter of Credit and each such Bond Letter of Credit, and (ii) the Outstanding Letter of Credit Obligations and the Outstanding Bond Letter of Credit Obligations of the Borrower with respect to such Letter of Credit and Bond Letter of Credit, as appropriate, in an amount equal to each Lender's Pro Rata Share of such Outstanding Letter of Credit Obligations and Outstanding Bond Letter of Credit Obligations. 2.6.4 PAYMENTS BY THE LENDERS TO THE AGENT. If the Borrower fails to pay to the Agent any Current Letter of Credit Obligations or any Current Bond Letter of Credit Obligations as and when due and payable, the Agent shall promptly notify each of the Lenders and shall demand payment from each of the Lenders such Lender's Revolving Credit Pro Rata Share of such unpaid Current Letter of Credit Obligations and unpaid Current Bond Letter of Credit Obligations, as appropriate. In addition, if any amount paid to the Agent on account of Current Letter of Credit Obligations or any Current Bond Letter of Credit Obligations is rescinded or required to be restored or turned over by the Agent upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor, trustee, conservator or similar officer for the Borrower, or is otherwise not indefeasibly covered by an advance under the Revolving Loan, the Agent shall promptly notify each of the Lenders and shall demand payment from each of the Lenders of its Revolving Credit Pro Rata Share of its portion of the Current Letter of Credit Obligations and/or Current Bond Letter of Credit Obligations to be remitted to the Borrower. Each of the Lenders irrevocably and unconditionally agrees to honor any such demands for payment under this Section and promises to pay to the Agent's account on the same Business Day as demanded the amount of its Revolving Credit Pro Rata Share of the Current Letter of Credit Obligations and Current Bond Letter of Credit Obligations, as appropriate, in immediately available funds, without any setoff, counterclaim or deduction of any kind. Any payment by a Lender hereunder shall in no way release, discharge or lessen the obligation of the Borrower to pay Current Letter of Credit Obligations or to pay Current Bond Letter of Credit Obligations to the Agent in accordance with the provisions of this Agreement. The obligation of each of the Lenders to remit the amounts of its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations and Current Bond Letter of Credit Obligations for the account of the Agent pursuant to this Section shall be unconditional and irrevocable under any and all circumstances and may not be terminated, suspended or delayed for any reason whatsoever, provided that all payments of such amounts by each of the Lenders shall be without prejudice to the rights of each of the Lenders with respect to the Agent's alleged willful misconduct. Any claim any Lender may have against the Agent as a result of the Agent's alleged willful misconduct may be brought by such Lender in a separate action against the Agent but may not be used as a defense to payment under the provisions of this Section. No failure of any Lender to remit the amount of its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations and/or Current Bond Letter of Credit Obligations to the Agent pursuant to this Section shall affect the obligations of the Agent under any Letter of Credit or under any Bond Letter of Credit, and if any Lender does not remit to the Agent the amount of its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations and/or Current Bond Letter of Credit Obligations on the same day as demanded, then without limiting such Lender's obligation to transmit funds on the same Business Day as demanded, such Lender shall be obligated to pay, on demand of the Agent and without setoff, counterclaim or deduction of any kind whatsoever interest on the unpaid amount at the Federal Funds Rate for each day from the date such amount shall be due and payable to the Agent until the date such amount shall have been paid in full to the Agent by such Lender. No Lender shall have any obligation to pay to the Agent such Lender's Pro Rata Share of unpaid Current Letter of Credit Obligations and/or unpaid Current Bond Letter of Credit Obligations, if the Borrower shall not be obligated to reimburse the Agent for such unpaid Current Letter of Credit Obligations and/or unpaid Current Bond Letter of Credit Obligations, respectively, because of the Agent's wrongful payment of a Letter of Credit and/or Bond Letter of Credit made as a result of the Agent's willful misconduct or gross negligence. SECTION 2.7 INTEREST. 2.7.1 APPLICABLE INTEREST RATES. (a) Each Loan shall bear interest until maturity (whether by acceleration, declaration, extension or otherwise) at either the Alternate Base Rate or the LIBOR Rate, as selected and specified by the Borrower in an Interest Rate Election Notice furnished to the Agent in accordance with the provisions of Section 2.7.2(e), or as otherwise determined in accordance with the provisions of this Section 2.7, and as may be adjusted from time to time in accordance with the provisions of Section 2.7.3. (b) Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, at the option of the Agent, all Loans and all other Obligations shall bear interest at the Post-Default Rate. (c) The Applicable Margin for (i) LIBOR Loans shall be two hundred (200) basis points per annum, and (ii) Base Rate Loans shall be fifty (50) basis points per annum unless and until a change is required by the operation of Section 2.7.1(d). (d) Subsequent to the Agent's receipt of the Borrower's quarterly financial statements for the period ending June 30, 1998 to be furnished to the Agent pursuant to Section 6.1.1(c) of this Agreement, changes in the Applicable Margin may be made, but not more frequently than one such change per quarter based on the Borrower's Pricing Ratio, tested as of the end of each fiscal quarter and the end of each fiscal year, determined by the Agent based on the annual and quarterly financial statements required by Section 6.1.1 (a) and (c), as appropriate. Any change in the Applicable Margin shall be effective as of the test date of the Pricing Ratio, as appropriate. The Applicable Margin shall vary depending upon the Borrower's Pricing Ratio, as follows:
Applicable Margin for Applicable Margin for Pricing Ratio LIBOR Loans Base Rate Loans greater than or equal to 5.5 to 1.0 250 b.p. 100 b.p. greater than or equal to 5.0 to 1.0, but 225 b.p. 75 b.p. less than 5.5 to 1.0 greater than or equal to 3.5 to 1.0, but 200 b.p. 50 b.p. less than 5.0 to 1.0 greater than or equal to 2.75 to 1.0, but 175 b.p. 25 b.p. less than 3.5 to 1.0 less than 2.75 to 1.0 150 b.p. 0 b.p.
2.7.2 SELECTION OF INTEREST RATES. (a) The Borrower may select the initial Applicable Interest Rate or Applicable Interest Rates to be charged on the Loans. (b) From time to time after the date of this Agreement as provided in this Section, by a proper and timely Interest Rate Election Notice furnished to the Agent in accordance with the provisions of Section 2.7.2(e), the Borrower may select an initial Applicable Interest Rate or Applicable Interest Rates for any Loans or may convert the Applicable Interest Rate and, when applicable, the Interest Period, for any existing Loan to any other Applicable Interest Rate or, when applicable, any other Interest Period. (c) The Borrower's selection of an Applicable Interest Rate and/or an Interest Period, the Borrower's election to convert an Applicable Interest Rate and/or an Interest Period to another Applicable Interest Rate or Interest Period, and any other adjustments in an interest rate are subject to the following limitations: (i) the Borrower shall not at any time select or change to an Interest Period that extends beyond the Revolving Credit Termination Date in the case of the Revolving Loan or beyond the scheduled maturity of the Term Loan in the case of the Term Loan, (ii) no change from the LIBOR Rate to the Alternate Base Rate shall become effective on a day other than a Business Day and so long as the Lenders receive any compensation payable pursuant to Section 2.7.4, on a day which is the last day of the then current Interest Period, no change of an Interest Period shall become effective on a day other than the last day of the then current Interest Period, and no change from the Alternate Base Rate to the LIBOR Rate shall become effective on a day other than a day which is a Eurodollar Business Day. (iii) any Applicable Interest Rate change for any Loan to be effective on a date on which any principal payment on account of such Loan is scheduled to be paid shall be made only after such payment shall have been made, (iv) no more than three (3) different LIBOR Rates may be outstanding at any time and from time to time with respect to the Revolving Loan, (v) no more than two (2) different LIBOR Rates may be outstanding at any time and from time to time with respect to the Term Loan, (vi) the first day of each Interest Period shall be a Eurodollar Business Day, (vii) as of the effective date of a selection, there shall not exist a Default or an Event of Default, and (viii) the minimum principal amount of a LIBOR Loan shall be One Million Dollars ($1,000,000). (d) If a request for an advance under the Loans is not accompanied by an Interest Rate Election Notice or does not otherwise include a selection of an Applicable Interest Rate and, if applicable, an Interest Period, or if, after having made a selection of an Applicable Interest Rate and, if applicable, an Interest Period, the Borrower fails or is not otherwise entitled under the provisions of this Agreement to continue such Applicable Interest Rate or Interest Period, the Borrower shall be deemed to have selected the Alternate Base Rate as the Applicable Interest Rate until such time as the Borrower shall have selected a different Applicable Interest Rate and specified an Interest Period in accordance with, and subject to, the provisions of this Section. (e) The Lenders will not be obligated to make Loans, to convert the Applicable Interest Rate on Loans to another Interest Rate, or to change Interest Periods, unless the Agent shall have received an irrevocable written or telephonic notice (an "Interest Rate Election Notice") from the Borrower specifying the following information: (i) the amount to be borrowed or converted, (ii) a selection of the Alternate Base Rate or the LIBOR Rate, (iii) the length of the Interest Period if the Applicable Interest Rate selected is the LIBOR Rate, and (iv) the requested date on which such election is to be effective. Any telephonic notice must be confirmed in writing within three (3) Business Days. Each Interest Rate Election Notice must be received by the Agent not later than 10:00 a.m. (Baltimore City Time) on the Business Day of any requested borrowing or conversion in the case of a selection of the Alternate Base Rate and not later than 10:00 a.m. (Baltimore City Time) on the third Business Day before the effective date of any requested borrowing or conversion in the case of a selection of the LIBOR Rate. 2.7.3 INABILITY TO DETERMINE LIBOR BASE RATE. In the event that (i) the Agent shall have determined that, by reason of circumstances affecting the London interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR Base Rate for any requested Interest Period with respect to a Loan the Borrower shall have requested to be made or to be converted to a LIBOR Loan or (ii) the Agent shall determine that the LIBOR Base Rate for any requested Interest Period with respect to a Loan the Borrower shall have requested to be made or to be converted to a LIBOR Loan does not adequately and fairly reflect the cost to the Lenders of funding or converting such Loan, the Agent shall give telephonic or written notice of such determination to the Borrower at least one (1) day prior to the proposed date for funding or converting such Loan. If such notice is given, any request for a LIBOR Loan shall be made or converted to a Alternate Base Rate Loan. Until such notice has been withdrawn by the Agent, the Borrower will not request that any Loan be made or converted to a LIBOR Loan. 2.7.4 INDEMNITY. The Borrower agrees to indemnify and reimburse the Lenders and to hold the Lenders harmless from any loss, cost (including administrative costs) or expense which any one or more of the Agent or the Lenders may sustain or incur as a consequence of (a) a default by the Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (b) the failure of the Borrower to make, or convert the Applicable Interest Rate of, a LIBOR Loan after the Borrower has given a Loan Notice or an Interest Rate Election Notice, (c) the failure of the Borrower to make any prepayment of a LIBOR Loan after the Borrower have given notice of such intention to make such a prepayment, and/or (d) the making by the Borrower of a prepayment of a LIBOR Loan on a day which is not the last day of the Interest Period for such LIBOR Loan, calculated as provided in the following paragraph, including, without limitation, any such loss or expense arising from the reemployment of funds obtained by the Agent and/or any of the Lenders to maintain any LIBOR Loan or from fees payable to terminate the deposits from which such funds were obtained. This agreement and covenant of the Borrower shall survive termination or expiration of this Agreement and payment of the other Obligations. Contemporaneously with any prepayment of principal of a LIBOR Loan, a prepayment fee shall be due and payable to the Lenders in an amount equal to any loss or expense (other than loss of anticipated profits) arising from the reemployment of funds obtained by any Lender to fund or maintain any LIBOR Loan or from fees payable to terminate the deposits from which such funds were obtained. The Agent and the Lender shall not be obligated to accept any prepayment of principal unless it is accompanied by the prepayment fee, if any, due in connection therewith as calculated pursuant to the provisions of this paragraph. No prepayment fee payable in connection herewith shall in any event or under any circumstances be deemed or construed as a penalty. 2.7.5 PAYMENT OF INTEREST. (a) Unpaid and accrued interest on any Base Rate Loan shall be paid monthly, in arrears, on the first day of each calendar month, commencing on the first such date after the date of this Agreement, and on the first day of each calendar month thereafter, and at maturity (whether by acceleration, declaration, extension or otherwise). (b) Notwithstanding the foregoing, any and all unpaid and accrued interest on any Base Rate Loan converted to a LIBOR Loan or prepaid shall be paid immediately upon such conversion and/or prepayment, as appropriate. (c) Unpaid and accrued interest on any LIBOR Loan shall be paid monthly, in arrears, on the first day of each calendar month, commencing on the first such date after the date of this Agreement, and on the first day of each calendar month thereafter, and at maturity (whether by acceleration, declaration, extension or otherwise). Notwithstanding anything to the contrary contained herein, the Agent agrees that the Borrower shall have no obligation to make any payment pursuant to the provisions of Section 2.7.4 resulting solely from the payment of accrued interest on a date other than the expiration date of an Interest Period. SECTION 2.8 GENERAL FINANCING PROVISIONS. 2.8.1 BORROWER'S REPRESENTATIVES. (a) The Borrower hereby represents and warrants to the Agent and the Lenders that the Borrower and each Subsidiary Guarantor will derive benefits, directly and indirectly, from each Letter of Credit, from each Bond Letter of Credit and from each Loan, both in their separate capacity and as a member of the integrated group to which the Borrower and each Subsidiary Guarantor belongs and because (i) the successful operation of the integrated group is dependent upon the continued successful performance of the functions of the integrated group as a whole, (ii) this financing enabled the PackerWare Merger Transaction and is enabling the Venture Stock Purchase/Merger Transaction, (iii) the terms of the consolidated financing provided under this Agreement are more favorable than would otherwise would be obtainable by the Borrower and any Subsidiary Guarantor individually, and (iv) the Borrower's additional administrative and other costs and reduced flexibility associated with individual financing arrangements which would otherwise be required if obtainable would substantially reduce the value to the Borrower of such financings. (b) The Borrower hereby irrevocably authorizes each of the Lenders to make Loans to the Borrower, and hereby irrevocably authorizes the Agent to issue Letters of Credit and Bond Letters of Credit for the account of the Borrower, pursuant to the provisions of this Agreement upon the written, oral or telephone request of any one of the Persons who is from time to time a Responsible Officer of the Borrower under the provisions of the most recent certificate of corporate resolutions of the Borrower on file with the Agent and also upon the written, oral or telephone request of any one of the Persons who is from time to time a Responsible Officer of the Borrower under the provisions of the most recent certificate of corporate resolutions and/or incumbency for the Borrower on file with the Agent. (c) Neither the Agent nor any of the Lenders assumes any responsibility or liability for any errors, mistakes, and/or discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Agent and the Borrower or the Agent and any of the Lenders in connection with the Credit Facilities, any Loan, any Letter of Credit, any Bond Letter of Credit or any other transaction in connection with the provisions of this Agreement, except for acts of willful misconduct and gross negligence. 2.8.2 USE OF PROCEEDS OF THE LOANS. The proceeds of each Loan shall be used by the Borrower and the Subsidiary Guarantors for Permitted Uses, and for no other purposes except as may otherwise be agreed by the Requisite Lenders in writing. 2.8.3 FIELD EXAMINATION FEES. The Borrower shall pay to the Agent for the exclusive benefit of the Agent an annual field examination fee (the "Field Examination Fee"), which Field Examination Fee shall be payable quarterly in advance on the Closing Date and on the first day of each February, May, August and November of each year commencing on the first such date following the Closing Date, and continuing until the last such date prior to which all Obligations arising out of, or under, the Credit Facilities then outstanding have been paid in full. The Field Examination Fee shall be in the amount of Forty Thousand Dollars ($40,000) per annum. The Agent agrees that the initial portion of the Field Examination Fee payable on the Closing Date shall be pro rated for the actual number of days for the period commencing on the Closing Date and ending on January 31, 1997. 2.8.4 COMPUTATION OF INTEREST AND FEES. All applicable Fees and interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Any change in the interest rate on any of the Obligations resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate is announced. 2.8.5 PAYMENTS. All payments of the Obligations, including, without limitation, principal, interest, Prepayments, and Fees, shall be paid by the Borrower without setoff or counterclaim to the Agent (except as otherwise provided herein) at the Agent's office specified in Section 9.1 in immediately available funds not later than 2:00 p.m. (Baltimore City Time) on the due date of such payment. All payments received by the Agent after such time shall be deemed to have been received by the Agent for purposes of computing interest and Fees and otherwise as of the next Business Day. Payments shall not be considered received by the Agent until such payments are paid to the Agent in immediately available funds. 2.8.6 LIENS; SETOFF. The Borrower hereby grants to the Agent and to the Lenders a continuing Lien for all of the Obligations (including, without limitation, the Agent's Obligations) upon any and all monies, securities, and other cash deposits of the Borrower and the proceeds thereof, now or hereafter held or received by or in transit to, the Agent, any of the Lenders, and/or any Affiliate of the Agent and/or any of the Lenders, from or for the Borrower, and also upon any and all deposit accounts (general or special) and credits of the Borrower, if any, with the Agent, any of the Lenders or any Affiliate of the Agent or any of the Lenders, at any time existing, excluding any deposit accounts held by the Borrower in its capacity as trustee for Persons who are not Affiliates or Subsidiaries of the Borrower. Without implying any limitation on any other rights the Agent and/or the Lenders may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, the Agent is hereby authorized by the Borrower at any time and from time to time, without notice to the Borrower, to set off, appropriate and apply any or all items hereinabove referred to against all Obligations (including, without limitation, the Agent's Obligations) then outstanding (whether or not then due), all in such order and manner as shall be determined by the Agent in its sole and absolute discretion. 2.8.7 REQUIREMENTS OF LAW. In the event that any Lender shall have determined in good faith that (a) the adoption of any Laws after the Closing Date regarding capital adequacy, or (b) any change in or in the interpretation or application of any Laws, or (c) compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender, as a consequence of the obligations of the such Lender hereunder to a level below that which such Lender or any corporation controlling such Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender and the corporation controlling such Lender, with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower of a written request therefor and a statement of the basis for such determination, the Borrower shall pay to such Lender such additional amount or amounts in order to compensate for such reduction. The Agent and the Lenders agree that the Borrower shall be entitled, at its option, to require that any Lender which demands payment of any amounts under this Section 2.8.7 assign one hundred percent (100%) of its Commitments and Obligations to one or more other lenders or financial institutions as shall be acceptable to the Borrower and the Agent; provided that any such assignment is effected in accordance with the provisions of Section 9.5. 2.8.8 FUNDS TRANSFER SERVICES. (a) The Borrower acknowledges that the Agent has made available to the Borrower the Agent's Wire Transfer Procedures a copy of which is attached to this Agreement as EXHIBIT B and which includes a description of security procedures regarding funds transfers executed by the Agent or an Affiliate bank at the request of the Borrower (the "Security Procedures"). The Borrower and the Agent agree that the Security Procedures are commercially reasonable. The Borrower further acknowledges that the full scope of the Security Procedures which the Agent or such Affiliate bank offers and strongly recommends is available only if the Borrower communicates directly with the Agent or such Affiliate bank as applicable in accordance with said procedures. If the Borrower attempts to communicate by any other method or otherwise not in accordance with the Security Procedures, the Agent or such Affiliate bank, as applicable, shall not be required to execute such instructions, but if the Agent or such Affiliate bank, as applicable, does so, the Borrower will be deemed to have refused the Security Procedures that the Agent or such Affiliate bank as applicable offers and strongly recommends, and the Borrower will be bound by any funds transfer, whether or not authorized, which is issued in the Borrower's name and accepted by the Agent or such Affiliate bank, as applicable, in good faith. The Agent or such Affiliate bank, as applicable, may modify Wire Transfer Procedures upon notice to the Borrower, including, without limitation, the Security Procedures at such time or times and in such manner as the Agent or such Affiliate bank, as applicable, in its reasonable discretion, deems appropriate to meet prevailing standards of good banking practice. By continuing to use the Agent's or such Affiliate bank's, as applicable, wire transfer services after receipt of any modification of the Wire Transfer procedures including, without limitation, the Security Procedures, the Borrower agrees that the Security Procedures, as modified, are likewise commercially reasonable. Neither the Agent nor any Affiliate bank is responsible for detecting any error in payment order sent by the Borrower to the Agent or any of the Lenders unless due to the willful misconduct or gross negligence of the Agent or any such Affiliate bank. (b) The Agent or such Affiliate bank, as applicable, will generally use the Fedwire funds transfer system for domestic funds transfers, and the funds transfer system operated by the Society for Worldwide International Financial Telecommunication (SWIFT) for international funds transfers. International funds transfers may also be initiated through the Clearing House InterBank Payment System (CHIPs) or international cable. However, the Agent or such Affiliate bank, as applicable, may use any means and routes that the Agent or such Affiliate bank, as applicable, in its reasonable discretion, may consider suitable for the transmission of funds. Each payment order, or cancellation thereof, carried out through a funds transfer system or a clearinghouse will be governed by all applicable funds transfer system rules and clearing house rules and clearing arrangements, whether or not the Agent or such Affiliate bank, as applicable, is a member of the system, clearinghouse or arrangement and the Borrower acknowledges that the Agent's or such Affiliate bank's, as applicable, right to reverse, adjust, stop payment or delay posting of an executed payment order is subject to the laws, regulations, rules, circulars and arrangements described herein. SECTION 2.9 SETTLEMENT AMONG LENDERS. 2.9.1 TERM LOANS. The Agent shall pay to each Lender on each date on which a payment of principal and/or interest on the Loans, such Lender's ratable share of all payments received by the Agent in immediately available funds on account of the Term Loans, net of any amounts payable by such Lender to the Agent, by wire transfer of same day funds; the amount payable to each Lender shall be based on the principal amount of the Term Loans owing to such Lender. 2.9.2 REVOLVING LOAN. It is agreed that each Lender's Net Outstandings are intended by the Lenders to be equal at all times to such Lender's Revolving Credit Pro Rata Share of the aggregate outstanding principal amount of the Revolving Loan outstanding. Notwithstanding such agreement, the several and not joint obligation of each Lender to fund the Revolving Loan made in accordance with the terms of this Agreement ratably in accordance with such Lender's Revolving Credit Pro Rata Share and each Lender's right to receive its ratable share of principal payments on the Revolving Loan in accordance with its Revolving Credit Pro Rata Share, the Lenders agree that in order to facilitate the administration of this Agreement and the Financing Documents that settlement among them may take place on a periodic basis in accordance with the provisions of this Section 2.9. 2.9.3 SETTLEMENT PROCEDURES AS TO REVOLVING LOAN. (a) IN GENERAL. To the extent and in the manner hereinafter provided in this Section 2.9.3, settlement among the Lenders as to the Revolving Loan may occur periodically on Settlement Dates determined from time to time by the Agent, which may occur before or after the occurrence or during the continuance of a Default or Event of Default and whether or not all of the conditions set forth in Section 5.2 have been met. On each Settlement Date payments shall be made by or to the Lenders in the manner provided in this Section 2.9.3 in accordance with the Settlement Report delivered by the Agent pursuant to the provisions of this Section 2.9.3 in respect of such Settlement Date so that as of each Settlement Date, and after giving effect to the transactions to take place on such Settlement Date, each Lender's Net Outstandings shall equal such Lender's Revolving Credit Pro Rata Share of the Revolving Loan outstanding. (b) SELECTION OF SETTLEMENT DATES. If the Agent elects, in its discretion, but subject to the consent of NationsBank, to settle accounts among the Lenders with respect to principal amounts of Revolving Loan less frequently than each Business Day, then the Agent shall designate periodic Settlement Dates which may occur on any Business Day after the Closing Date; provided, however, that the Agent shall designate as a Settlement Date any Business Day which is payment date; and provided further, that a Settlement Date shall occur at least once during each seven-day period. The Agent shall designate a Settlement Date by delivering to each Lender a Settlement Report not later than 12:00 noon (Baltimore City Time) on the proposed Settlement Date, which Settlement Report shall be with respect to the period beginning on the next preceding Settlement Date and ending on such designated Settlement Date. (c) NON-RATABLE LOANS AND PAYMENTS. Between Settlement Dates, the Agent shall request and NationsBank may (but shall not be obligated to) advance to the Borrower out of NationsBank's own funds, the entire principal amount of any advance under the Revolving Loan requested or deemed requested pursuant to Section 2.1.2 (any such advance under the Revolving Loan being referred to as a "Non-Ratable Loan"). The making of each Non-Ratable Loan by NationsBank shall be deemed to be a purchase by NationsBank of a 100% participation in each other Lender's Revolving Credit Pro Rata Share of the amount of such Non- Ratable Loan. All payments of principal, interest and any other amount with respect to such Non-Ratable Loan shall be payable to and received by the Agent for the account of NationsBank. Upon demand by NationsBank, with notice to the Agent, each other Lender shall pay to NationsBank, as the repurchase of such participation, an amount equal to 100% of such Lender's Revolving Credit Pro Rata Share of the principal amount of such Non-Ratable Loan. Any payments received by the Agent between Settlement Dates which in accordance with the terms of this Agreement are to be applied to the reduction of the outstanding principal balance of Revolving Loan, shall be paid over to and retained by NationsBank for such application, and such payment to and retention by NationsBank shall be deemed, to the extent of each other Lender's Revolving Credit Pro Rata Share of such payment, to be a purchase by each such other Lender of a participation in the advance under the Revolving Loan (including the repurchase of participations in Non-Ratable Loans) made by NationsBank. Upon demand by another Lender, with notice thereof to the Agent, NationsBank shall pay to the Agent, for the account of such other Lender, as a repurchase of such participation, an amount equal to such other Lender's Revolving Credit Pro Rata Share of any such amounts (after application thereof to the repurchase of any participations of NationsBank in such other Lender's Revolving Credit Pro Rata Share of any Non-Ratable Loans) paid only to NationsBank by the Agent. (d) NET DECREASE IN OUTSTANDINGS. If on any Settlement Date the increase, if any, in the dollar amount of any Lender's Net Outstandings which is required to comply with the first sentence of Section 2.9.2 is less than such Lender's Revolving Credit Pro Rata Share of amounts received by the Agent but paid only to NationsBank since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's Revolving Credit Pro Rata Share of such amounts to the increase in such Lender's Net Outstandings, and NationsBank shall pay to the Agent, for the account of such Lender, the excess allocable to such Lender. (e) NET INCREASE IN OUTSTANDINGS. If on any Settlement Date the increase, if any, in the dollar amount of any Lender's Net Outstandings which is required to comply with the first sentence of Section 2.9.2 exceeds such Lender's Revolving Credit Pro Rata Share of amounts received by the Agent but paid only to NationsBank since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's Revolving Credit Pro Rata Share of such amounts to the increase in such Lender's Net Outstandings, and such Lender shall pay to the Agent, for the account of NationsBank, any excess. (f) NO CHANGE IN OUTSTANDINGS. If a Settlement Report indicates that no advance under the Revolving Loan has been made during the period since the next preceding Settlement Date, then such Lender's Revolving Credit Pro Rata Share of any amounts received by the Agent but paid only to NationsBank shall be paid by NationsBank to the Agent, for the account of such Lender. If a Settlement Report indicates that the increase in the dollar amount of a Lender's Net Outstandings which is required to comply with the first sentence of Section 2.9.2 is exactly equal to such Lender's Revolving Credit Pro Rata Share of amounts received by the Agent but paid only to NationsBank since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's Revolving Credit Pro Rata Share of such amounts to the increase in such Lender's Net Outstandings. (g) RETURN OF PAYMENTS. If any amounts received by NationsBank in respect of the Obligations are later required to be returned or repaid by NationsBank to the Borrower or any other obligor or their respective representatives or successors in interest, whether by court order, settlement or otherwise, in excess of the NationsBank's Revolving Credit Pro Rata Share of all such amounts required to be returned by all Lenders, each other Lender shall, upon demand by NationsBank with notice to the Agent, pay to the Agent for the account of NationsBank, an amount equal to the excess of such Lender's Revolving Credit Pro Rata Share of all such amounts required to be returned by all Lenders over the amount, if any, returned directly by such Lender. (h) PAYMENTS TO AGENT, LENDERS. (i) Payment by any Lender to the Agent shall be made not later than 12:00 p.m. noon (Baltimore City Time) on the Business Day such payment is due, provided that if such payment is due on demand by another Lender, such demand is made on the paying Lender not later than 10:00 a.m. (Baltimore City Time) on such Business Day. Payment by the Agent to any Lender shall be made by wire transfer, promptly following the Agent's receipt of funds for the account of such Lender and in the type of funds received by the Agent, provided that if the Agent receives such funds at or prior to 12:00 p.m. noon (Baltimore City Time), the Agent shall pay such funds to such Lender by 2:00 p.m. (Baltimore City Time) on such Business Day. If a demand for payment is made after the applicable time set forth above, the payment due shall be made by 2:00 p.m. (Baltimore City Time) on the first Business Day following the date of such demand. (ii) If a Lender shall, at any time, fail to make any payment to the Agent required hereunder, the Agent may, but shall not be required to, retain payments that would otherwise be made to such Lender hereunder and apply such payments to such Lender's defaulted obligations hereunder, at such time, and in such order, as the Agent may elect in its sole discretion. In addition, if a Lender shall default in its obligation to fund its Pro Rata Share of any requested advance of the Revolving Loan and the Agent elects not to fund such defaulting Lender's Pro Rata Share of that advance, then the defaulting Lender, at the Agent's option, shall not be entitled to receive any payments of principal of or interest on its Pro Rata Share of any of the Obligations or its Pro Rata Share of any Fees, unless and until (x) all of the Obligations have been paid in full or (y) the defaulting Lender cures its default by funding its Pro Rata Share of the requested Revolving Loan advance. Interest and Fees which would be payable to the defaulting Lender except for the provisions of this subsection, instead shall be payable to the other Lenders in accordance with their respective Pro Rata Shares. In addition, for so long as the defaulting Lender shall remain in default under its obligations under this Agreement, for purposes of voting on matters with respect to this Agreement and/or any of the Financing Documents, such defaulting Lender shall be deemed not to be a "Lender" and such Lender's Pro Rata Share of the Commitments and the Obligations shall be deemed to be zero. No Commitment of any Lender shall be increased or otherwise affected by the default of any other Lender nor shall the Agent have any obligation to fund any amounts not funded by a defaulting Lender. (iii) With respect to the payment of any funds under this Section 2.9.3, whether from the Agent to a Lender or from a Lender to the Agent, the party failing to make full payment when due pursuant to the terms hereof shall, upon demand by the other party, pay such amount together with interest on such amount at the Federal Funds Rate. 2.9.4 SETTLEMENT OF OTHER OBLIGATIONS. All other amounts received by the Agent on account of, or applied by the Agent to the payment of, any Obligation owed to the Lenders (including, without limitation, Fees payable to the Lenders and proceeds from the sale of, or other realization upon, all or any part of the Collateral following an Event of Default) that are received by the Agent not later than 11:00 a.m. (Baltimore City Time) on a Business Day will be paid by the Agent to each Lender on the same Business Day, and any such amounts that are received by the Agent after 11:00 a.m. (Baltimore City Time) will be paid by the Agent to each Lender on the following Business Day. Unless otherwise stated herein, the Agent shall distribute Fees payable to the Lenders ratably to the Lenders based on each Lender's Revolving Credit Pro Rata Share and shall distribute proceeds from the sale of, or other realization upon, all or any part of the Collateral following an Event of Default ratably to the Lenders based on the amount of the Obligations then owing to each Lender. 2.9.5 PRESUMPTION OF PAYMENT. (a) Unless the Agent shall have received notice from a Lender prior to 12:00 p.m. noon (Baltimore City Time) on the date of the requested date for the making of advances under the Revolving Loan that such Lender will not make available to the Agent, such Lender's Revolving Credit Pro Rata Share of the advances to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on such date in accordance with this Section 2.9, and the Agent, in its sole discretion may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount on behalf of such Lender. (b) If and to the extent such Lender shall not have so made available to the Agent its Revolving Credit Pro Rata Share of the advances under the Revolving Loan made on such date, and the Agent shall have so made available to the Borrower a corresponding amount on behalf of such Lender, such Lender shall, on demand, pay to the Agent such corresponding amount, together with interest thereon, at the Federal Funds Rate, for each day from the date such corresponding amount shall have been so available by the Agent to the Borrower until the date such amount shall have been repaid to the Agent. Such Lender shall not be entitled to payment of any interest which accrues on the amount made available by the Agent to the Borrower for the account of such Lender until such time as such Lender reimburses the Agent for such amount, together with interest thereon, as provided in this Section 2.9.5. (c) A certificate of the Agent submitted to any Lender with respect to any amounts owing to the Agent by such Lender under this Section 2.9 shall be conclusive and binding on such Lender, absent manifest error. If such Lender does not pay such amounts to the Agent promptly upon the Agent's demand, the Agent shall promptly notify the Borrower of such Lender's failure to make payment, and the Borrower shall immediately repay such amounts to the Agent, together with accrued interest thereon at the applicable rate on the Revolving Loan, all without prejudice to the rights and remedies of the Agent against any defaulting Lender. Any and all amounts due and payable to the Agent by the Borrower under this Section 2.9 constitute and shall be part of the Agent's Obligations. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Agent that the Borrower will not make such payment in full, the Agent may assume that the Borrower have made such payment in full to the Agent on such date and the Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent and the Agent shall have distributed to any Lender all or any portion of such amount, such Lender shall repay to the Agent on demand the amount so distributed to such Lender, together with interest thereon at the Federal Funds Rate, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent. ARTICLE 3 THE COLLATERAL SECTION 3.1 DEBT AND OBLIGATIONS SECURED. All property and Liens assigned, pledged or otherwise granted under or in connection with this Agreement (including, without limitation, those under Section 3.2 (Grant of Liens) below) or any of the Financing Documents shall, subject to the terms, conditions and limitations, if any, set forth in this Agreement or in any of the Financing Documents, secure (a) the payment of all of the Obligations, including, without limitation, any and all Outstanding Letter of Credit Obligations, all Outstanding Bond Letter of Credit Obligations and any and all Agent's Obligations, and (b) the performance, compliance with and observance by the Borrower of the provisions of this Agreement and all of the other Financing Documents or otherwise under the Obligations. The security interest and Lien of each Lender in such property shall rank equally in priority with the interest of each other Lender, but the security interest and Lien of the Agent with respect to the Agent's Obligations shall be superior and paramount to the security interest and Lien of the Lenders. Notwithstanding the foregoing, the security interest and Lien of the Agent and/or any Lender with respect to any Obligations under or in connection with, any interest rate or currency swap agreements, cap, floor, and collar agreements, currency spot, foreign exchange and forward contracts and other similar agreements and arrangements permitted by the provisions of this Agreement shall be junior and subordinate to the security interest and Lien of the Agent with respect to the Agent's Obligations and junior and subordinate to the security interest and Lien of the Lender with respect to all other Obligations. SECTION 3.2 GRANT OF LIENS. The Borrower hereby assigns, pledges and grants to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, and agrees that the Agent and the Lenders shall have a perfected and continuing security interest in, and Lien on, (a) all of the Borrower's Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment, Securities, and General Intangibles, whether now owned or existing or hereafter acquired or arising, (b) all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an Account or Chattel Paper, (c) all insurance policies relating to the foregoing, (d) all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and (e) all cash and non-cash proceeds and products of the foregoing. The Borrower further agrees that the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, shall have in respect thereof all of the rights and remedies of a secured party under the Uniform Commercial Code as well as those provided in this Agreement, under each of the other Financing Documents and under applicable Laws. Notwithstanding anything to the contrary contained herein, the Collateral shall not include any rights of the Borrower under any Capital Leases of Equipment or any other agreements if and to the extent any such Capital Leases or other agreements prohibit the collateral assignment or pledge of the Borrower's interest therein, and such prohibition has not been waived by the respective Person. Without implying any limitation to the foregoing, as additional Collateral and security for the Obligations, the Borrower hereby assigns to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, all of its rights, title and interest in, to, and under, the PackerWare Merger Agreement, the Virginia Design Purchase Agreement, the Venture Stock Purchase/Merger Agreement, all of the PackerWare Merger Agreement Documents, all of the Virginia Design Purchase Agreement Documents, and the Venture Stock Purchase/Merger Documents, including, without limitation, all of the benefits of any representations and warranties provided by the PackerWare Seller, Virginia Design and the Seller, respectively, and any and all rights of the Borrower to indemnification from the Seller or any other Person contained therein. The Borrower agrees that neither the assignment to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, nor any other provision contained in this Agreement or any of the other Financing Documents shall impose on the Agent or any of the Lenders any obligation or liability of the Borrower under the PackerWare Merger Agreement, under the Virginia Design Purchase Agreement, under the Venture Stock Purchase/Merger Agreement, under any of the PackerWare Merger Agreement Documents, under any of the Virginia Design Purchase Agreement Documents, and/or under any of the other Venture Stock Purchase/Merger Documents. The Borrower hereby agrees to indemnify the Agent and each of the Lenders and hold the Agent and each of the Lenders harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees, obligations and liabilities which may be incurred by or imposed upon the Agent and/or any of the Lenders by virtue of the assignment of and Lien on each of the Borrower's rights, title and interest in, to, and under the PackerWare Merger Agreement, Virginia Design Purchase Agreement, the Venture Stock Purchase/Merger Agreement, the PackerWare Merger Agreement Documents, the Virginia Design Purchase Agreement Documents and the Venture Stock Purchase/Merger Documents, unless due to the gross negligence or willful misconduct of the Agent and/or any of the Lenders. The Borrower further acknowledges and agrees that following the occurrence of an Event of Default, the Agent, with the consent of the Requisite Lenders, shall be entitled to enforce any and all rights and remedies available to the Borrower under the PackerWare Merger Agreement, under the Virginia Design Purchase Agreement, under the Venture Stock Purchase/Merger Agreement, under any or all of the PackerWare Merger Agreement Documents, under any or all of the Virginia Design Purchase Agreement Documents, under any or all of the Venture Stock Purchase/Merger Documents, and under applicable Laws with respect to the PackerWare Merger Transaction, Virginia Design Purchase Agreement Transaction, and/or the Venture Stock Purchase/Merger Transaction. SECTION 3.3 COLLATERAL DISCLOSURE LIST. On or prior to the date of this Agreement, the Borrower shall deliver to the Agent one or more lists (collectively, the "Collateral Disclosure List") which shall contain such information with respect to the business and real and personal property of the Borrower and each Subsidiary Guarantor as the Agent may require and shall be certified by a Responsible Officer of the Borrower and each Subsidiary Guarantor, as appropriate, all in the form provided to the Borrower by the Agent. Promptly after demand by the Agent, the Borrower shall furnish and shall cause each Subsidiary Guarantor to furnish to the Agent an update of the information contained in the Collateral Disclosure List at any time and from time to time as may be requested by the Agent. SECTION 3.4 PERSONAL PROPERTY. The Borrower acknowledges and agrees that it is the intention of the parties to this Agreement that the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, except as otherwise expressly provided in Section 3.2 of this Agreement, shall have a first priority, perfected Lien (except that the Agent acknowledges and agrees that the Lien on the Fixed and Capital Assets of the Borrower located in the State of Nevada, including, without limitation, the real property owned by the Borrower in the State of Nevada shall be a second priority Lien, subject to first priority Liens as set forth in Schedule 4.1.22), in form and substance reasonably satisfactory to the Agent and its counsel, on all of the personal property of the Borrower and of each Subsidiary Guarantor of any kind and nature whatsoever, whether now owned or hereafter acquired, subject only to the Permitted Liens, if any. In furtherance of the foregoing: 3.4.1 SECURITIES, CHATTEL PAPER, PROMISSORY NOTES, ETC. (a) As of the date of this Agreement and without implying any limitation on the scope of Section 3.2 (Grant of Liens) above, the Borrower shall deliver and shall cause each Subsidiary Guarantor to deliver (or shall have delivered or caused to be delivered) to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, all originals of all of letters of credit, Securities, Chattel Paper, Documents and Instruments owned or held by the Borrower and/or any Subsidiary Guarantor, and, if the Agent so requires, shall execute and deliver and, shall cause each Subsidiary Guarantor to execute and deliver (or shall have executed and delivered or caused to be delivered), a separate pledge, assignment and security agreement in form and content acceptable to the Agent, which pledge, assignment and security agreement shall assign, pledge and grant a Lien to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations on all of the letters of credit, Securities, Chattel Paper, Documents and Instruments of the Borrower and each Subsidiary Guarantor, as the case may be. In addition, the Borrower agrees to endorse to the order of the Agent any and all Instruments which constitute or evidence all or any portion of the Collateral. (b) In the event that the Borrower or any Subsidiary Guarantor shall acquire (or have acquired) after the Closing Date any letters of credit, Securities, Chattel Paper, Documents or Instruments, the Borrower shall promptly so notify the Agent and deliver the originals of all of the foregoing to the Agent promptly and in any event within thirty (30) days of each acquisition. (c) All letters of credit, Securities, Chattel Paper, Documents and Instruments to be delivered hereunder shall be delivered to the Agent endorsed and/or assigned as required by the pledge, assignment and security agreement and/or as the Agent may require and, if applicable, shall be accompanied by blank irrevocable and unconditional stock or bond powers. 3.4.2 PATENTS, COPYRIGHTS AND OTHER PROPERTY REQUIRING ADDITIONAL STEPS TO PERFECT. As of the date of this Agreement and without implying any limitation on the scope of Section 3.2 above, the Borrower shall execute and deliver and, shall cause each Subsidiary Guarantor, as appropriate, to execute and deliver (or shall have executed and delivered or caused to be executed and delivered), all Financing Documents and take all actions requested by the Agent in order to perfect a first priority assignment of Patents, Copyrights, Trademarks, customer lists or any other type or kind of intellectual property acquired by the Borrower or any Subsidiary Guarantor after the Closing Date. SECTION 3.5 RECORD SEARCHES. As of the Closing Date and thereafter, as determined by the Agent, at the time any Financing Document is executed and delivered by the Borrower or any Subsidiary Guarantor pursuant to this Article 3 or any other Section of this Agreement, the Agent shall, in its reasonable discretion and if requested, have received, in form and substance satisfactory to the Agent, such Lien or record searches with respect to the Borrower, each Subsidiary Guarantor and/or any other Person who may be an obligor or pledgor with respect to any of the Obligations, as appropriate, and the property covered by such Financing Document showing that the Lien of such Financing Document will be a perfected first priority Lien on the property covered by such Financing Document subject only to Permitted Liens or to such other Liens or matters as the Agent may approve. Notwithstanding the foregoing, the Agent acknowledges and agrees that the Borrower shall be obligated to reimburse the Agent only for actual out- of-pocket costs and expenses relating to Lien and record searches and only to the extent ordered by the Agent (i) one-time only after the Closing Date to confirm the due filing and Lien priority of the Agent and the Lenders, (ii) not more frequently than once in any given calendar year after the Closing Date prior to the occurrence of a Default or an Event of Default, and (iii) in addition, at any time following the occurrence of a Default or an Event of Default. SECTION 3.6 REAL PROPERTY. The Borrower acknowledges and agrees that it is the intention of the parties to this Agreement that the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, shall have a first priority, perfected Lien, in form and substance satisfactory to the Agent and its counsel, on all real property of any kind and nature whatsoever, whether now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor, subject only to the Permitted Liens, if any, and subject to the provisions of Section 3.7 below, excluding, however, any real property leased by the Borrower or any Subsidiary Guarantor. With respect to each parcel of real property now owned by the Borrower and/or a Subsidiary Guarantor (other than the real property located at 160 Industrial Drive, Winchester, Virginia), the Borrower shall execute and deliver and, subject to the terms of Section 3.7 below, shall cause each Subsidiary Guarantor, as appropriate, to execute and deliver (or to have executed and delivered), as of the date of this Agreement, a deed of trust or a mortgage or other document, as appropriate, which deed of trust, mortgage and/or other document shall be included among the Financing Documents. With respect to real property acquired in fee by the Borrower or any Subsidiary Guarantor after the Closing Date (whether by merger or otherwise), the Borrower shall grant and, subject to the terms of Section 3.7 below, shall cause each Subsidiary Guarantor, as appropriate, to grant (or shall have granted or caused to be granted), promptly after acquisition thereof, a Lien covering such real property to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, under the provisions of a mortgage, deed of trust or other document, as appropriate. Each Financing Document to be executed and delivered pursuant hereto shall: (a) be in form and substance reasonably satisfactory to the Agent; (b) create a first priority Lien in such real property in favor of the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, subject only to Permitted Liens, zoning ordinances, and such other matters as the Agent may approve; (c) be accompanied by a current survey reasonably satisfactory in all respects to the Agent of the subject real property, prepared by a registered land surveyor or engineer reasonably satisfactory to the Agent; (d) be accompanied by evidence reasonably satisfactory to the Agent regarding the current and past pollution control practices at such real property in connection with the discharge, emission, handling, disposal or existence of Hazardous Materials, which may include, at the Agent's request, an environmental audit of such real property prepared by a person or firm reasonably acceptable to the Agent; (e) be accompanied by a mortgagee's title insurance policy or marked-up commitment or binder for such insurance in form and substance reasonably satisfactory to the Agent and issued by a title insurance company reasonably satisfactory to the Agent; and (f) upon request of the Agent, be accompanied by a signed opinion of counsel addressed to the Agent and each of the Lenders, in form and substance reasonably satisfactory to the Agent. SECTION 3.7 SUBSIDIARY GUARANTOR ASSETS. The Borrower agrees that all Obligations are and shall continue to be fully and unconditionally and jointly and severally guaranteed by each Subsidiary Guarantor and that the joint and several obligations of each Subsidiary Guarantor under the Guaranty are and shall continue to be secured by a first priority Lien (subject only to Permitted Liens) on all Assets and properties of each Subsidiary Guarantor. SECTION 3.8 COSTS. The Borrower agrees to pay, as part of the Enforcement Costs and to the fullest extent permitted by applicable Laws, on demand all reasonable costs, fees and expenses incurred by the Agent and/or any of the Lenders in connection with the taking, perfection, preservation, protection and/or release of a Lien on the Collateral, including, without limitation, with respect to all actions required to effect any of the provisions of Section 3.7 above, and any of the following: (a) customary reasonable fees and expenses incurred by the Agent and/or any of the Lenders in preparing, reviewing, negotiating and finalizing the Financing Documents from time to time (including, without limitation, reasonable attorneys' fees incurred in connection with preparing, reviewing, negotiating, and finalizing any of the Financing Documents, including, any amendments and supplements thereto); (b) all filing and/or recording taxes or fees; (c) all title insurance premiums and costs; (d) all costs of Lien and record searches; (e) reasonable attorneys' fees in connection with all legal opinions required; (f) appraisal and/or survey costs; and (g) all related reasonable costs, fees and expenses. SECTION 3.9 RELEASE. Upon the payment and performance of all Obligations of the Borrower and all obligations and liabilities of each other Subsidiary Guarantor, under this Agreement and/or under any or all other Financing Documents, the termination and/or expiration of all of the Commitments, all Letters of Credit, all Bond Letters of Credit, all Outstanding Bond Letter of Credit Obligations, and all Outstanding Letter of Credit Obligations, upon the Borrower's request and at the Borrower's sole cost and expense, the Agent shall release and/or terminate the Liens of any and all of the Financing Documents. SECTION 3.10 INCONSISTENT PROVISIONS. In the event that the provisions of any Financing Document directly conflict with any provision of this Agreement, the provisions of this Agreement shall govern. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Lenders, as follows: 4.1.1 SUBSIDIARIES. The Borrower owns the Subsidiaries listed on the Collateral Disclosure List attached hereto and made a part hereof and no others, as updated from time to time pursuant to the provisions of this Agreement. Each of the Subsidiaries is a Wholly Owned Subsidiary except as shown on the Collateral Disclosure List, as updated from time to time pursuant to the provisions of this Agreement, which correctly indicates the nature and amount of the Borrower's ownership interests therein. 4.1.2 GOOD STANDING. Each of the Borrower and its Subsidiaries (a) is a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has the corporate power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary or where such non- qualification would have a materially adverse effect on the Borrower and its Subsidiaries taken as a whole or would otherwise impair the ability of the Agent to collect or realize upon any of the Collateral. 4.1.3 POWER AND AUTHORITY. Each of the Borrower and its Subsidiaries has full corporate power and authority to execute and deliver this Agreement, the other Financing Documents, the Venture Stock Purchase/Merger Documents to which it is a party, to make the borrowings and request Letters of Credit and Bond Letters of Credit under this Agreement, to close and consummate each aspect of the Venture Stock Purchase/Merger Transaction, as appropriate and to incur and perform the Obligations whether under this Agreement, the other Financing Documents, the Venture Stock Purchase/Merger Documents, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders or any creditors of the Borrower or any Subsidiary of the Borrower, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of the Borrower or any Subsidiary of the Borrower, is required as a condition to the execution, delivery, validity or enforceability of this Agreement, the other Financing Documents, any of the Venture Stock Purchase/Merger Documents, the performance by the Borrower of the Obligations or the closing and consummation of the Venture Stock Purchase/Merger Transaction, in each case, if required, the same has been duly obtained. 4.1.4 BINDING AGREEMENTS. This Agreement and the other Financing Documents executed and delivered by the Borrower and/or any of its Subsidiaries have been properly executed and delivered and constitute the valid and legally binding obligations of the Borrower and its Subsidiaries, respectively, and are fully enforceable against the Borrower and its Subsidiaries in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applications affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law. 4.1.5 NO CONFLICTS. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by the Borrower or any of its Subsidiaries nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) the charter or bylaws of the Borrower or any of its Subsidiaries, (b) any existing mortgage, indenture, contract or agreement binding on the Borrower or any of its Subsidiaries or affecting any of its or their property, or (c) any Laws. 4.1.6 NO DEFAULTS, VIOLATIONS. As of the date of this Agreement: (a) No Default or Event of Default has occurred and is continuing. (b) Neither the Borrower nor any of its Subsidiaries is in material default under any existing mortgage, indenture, contract or agreement binding on it or them or affecting its or their property in any respect which would be materially adverse to the business, operations, property or financial condition of the Borrower and its Subsidiaries, taken as a whole, or which would materially adversely affect the ability of the Borrower and its Subsidiaries, taken as a whole to perform their obligations under this Agreement or under any of the other Financing Documents to which the Borrower and/or any of its Subsidiaries is a party. 4.1.7 COMPLIANCE WITH LAWS. Neither the Borrower nor any of its Subsidiaries is in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental Authority affecting the Borrower, any of its Subsidiaries or any of its or their properties, the violation of which, considered in the aggregate, would materially adversely affect the business, operations or properties of the Borrower and/or any of its Subsidiaries taken as a whole. 4.1.8 MARGIN STOCK. None of the proceeds of the Loans will be used, directly or indirectly, by the Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System or for any other purpose which would make the transactions contemplated in this Agreement a "purpose credit" within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes. 4.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES. Neither the Borrower nor any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company within the meaning of said Act. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System. 4.1.10 LITIGATION. Except as otherwise disclosed on SCHEDULE 4.1.10 attached to and made a part of this Agreement, there are no proceedings, actions or investigations pending or, so far as the Borrower knows, threatened before or by any court, arbitrator any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of the Borrower or any Subsidiary, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower or any of its Subsidiaries taken as a whole. 4.1.11 FINANCIAL CONDITION. The consolidated financial statements of the Borrower and its Subsidiaries dated as of September 30, 1996, are complete and correct and fairly present the financial position of the Borrower and its Subsidiaries and the results of their operations as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved. There are no material liabilities, direct or indirect, fixed or contingent, of the Borrower or any Subsidiary as of the date of such financial statements which are not reflected therein. There has been no materially adverse change in the financial condition or operations of the Borrower or any Subsidiary since the date of such financial statements and to the Borrower's knowledge no such materially adverse change is pending. Except as permitted by the provisions of Section 6.2.5, neither the Borrower nor any Subsidiary has guaranteed the obligations of, or made any investment in or advances to, any Person (other than the Borrower or any Subsidiary Guarantor), except as disclosed in such financial statements and except that the Borrower and/or any or all of the Subsidiary Guarantors may have guaranteed one or more leases under which the Borrower and/or a Subsidiary Guarantor is a tenant or lessee, as of the date of this Agreement. 4.1.12 PROFORMA FINANCIAL STATEMENTS. The Borrower has furnished to the Agent a proforma consolidated balance sheet of the Borrower and its Subsidiaries as of immediately after consummation of the Venture Stock Purchase/Merger Transaction and the transactions incident thereto (the "Proforma Balance Sheet") together with proforma financial projections of the Parent for the five-year period subsequent to the Venture Stock Purchase/Merger Transaction (the "Proforma Financial Projections"). A copy of the Proforma Balance Sheet and the Proforma Financial Projections are attached hereto as Exhibits C-1 and C-2, respectively. The Proforma Balance Sheet is correct and complete, has been prepared in accordance with GAAP, and fairly presents the consolidated financial condition of the Borrower and its Subsidiaries as of immediately after consummation of the Venture Stock Purchase/Merger Transaction and the transactions incident thereto. The Proforma Financial Projections represent the best estimate of the future operations of the Parent and are based on reasonable and conservative assumptions, but do not constitute a guaranty of actual performance. 4.1.13 FULL DISCLOSURE. The financial statements referred to in Section 4.1.11 (Financial Condition) of this Agreement and the statements, reports or certificates furnished by the Borrower in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to the Borrower which the Borrower has not disclosed to the Agent and the Lenders in writing prior to the date of this Agreement with respect to the transactions contemplated by the Financing Documents which materially and adversely affects or in the future would, in the reasonable opinion of the Borrower materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of the Borrower and its Subsidiaries, taken as a whole. 4.1.14 INDEBTEDNESS FOR BORROWED MONEY. As of the date of this Agreement, except for the Obligations and except as set forth in SCHEDULE 4.1.14 attached to and made a part of this Agreement, the Borrower has no Indebtedness for Borrowed Money. The Agent has received photocopies of all promissory notes evidencing any Indebtedness for Borrowed Money set forth in SCHEDULE 4.1.14, together with any and all material subordination agreements, other agreements, documents, or instruments securing, evidencing, guarantying or otherwise executed and delivered in connection therewith. 4.1.15 SUBORDINATED DEBT; SENIOR SECURED DEBT. None of the Subordinated Debt Loan Documents nor any of the Senior Secured Debt Loan Documents in effect prior to the date of this Agreement have been amended, supplemented, restated or otherwise modified except as otherwise disclosed to the Agent in writing on or before the date of this Agreement. In addition, the Borrower has furnished copies of each amendment, supplement, restatement or other modification to any of the Subordinated Debt Loan Documents executed on or before the date of this Agreement. In addition, there does not exist any default or any event which upon notice or lapse of time or both would constitute a default under the terms of any of the Subordinated Debt Loan Documents or any of the Senior Secured Debt Loan Documents. 4.1.16 TAXES. The Borrower and its Subsidiaries have filed all returns, reports and forms for all material Taxes which, to the knowledge of the Borrower, are required to be filed, and have paid all such Taxes as shown on such returns or on any assessment received by it, to the extent that such Taxes have become due, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by the Borrower, such Taxes are not the subject of any Liens other than Permitted Liens, and adequate reserves therefor have been established as required under GAAP. All tax liabilities of the Borrower and its Subsidiaries were as of the date of audited financial statements referred to in Section 4.1.11 (Financial Condition) above, and are now, adequately provided for on the books of the Borrower and its Subsidiaries, as appropriate. No tax liability has been asserted by the Internal Revenue Service or any state or local authority against the Borrower or any of its Subsidiaries for Taxes in excess of those already paid, except that the Agent and the Lenders understand that PackerWare is to be the subject of an audit by the Internal Revenue Service, but that such audit, to the Borrower's knowledge, is not the result of any claimed or actual non-compliance with any Laws. 4.1.17 ERISA. With respect to any "pension plan" as defined in SECTION 3(2) of ERISA, which plan is now or previously has been maintained or contributed to by the Borrower and/or any of its Subsidiaries and/or by any commonly controlled entity: (a) no "accumulated funding deficiency" as defined in Code
412 or ERISA
302 has occurred, whether or not that accumulated funding deficiency has been waived; (b) no Reportable Event has occurred; (c) no termination of any plan subject to Title IV of ERISA has occurred; (d) no Borrower, Subsidiary nor any commonly controlled entity (as defined under ERISA) has incurred a "complete withdrawal" within the meaning of ERISA
4203 from any Multiemployer Plan; (e) no Borrower, Subsidiary nor any commonly controlled entity has incurred a "partial withdrawal" within the meaning of ERISA
4205 with respect to any Multiemployer Plan; (f) no Multiemployer Plan to which the Borrower, any of its Subsidiaries or any commonly controlled entity has an obligation to contribute is in "reorganization" within the meaning of ERISA
4241 nor has notice been received by the Borrower, any of its Subsidiaries or any commonly controlled entity that such a Multiemployer Plan will be placed in "reorganization". 4.1.18 TITLE TO PROPERTIES. Each of the Borrower and its Subsidiaries has good title to all of its and their respective properties, including, without limitation, the Collateral and the properties and assets reflected in the balance sheets described in Section 4.1.11 (Financial Condition) above, subject to any minor imperfections in title which do not significantly detract from the use thereof. The Borrower and each of its Subsidiaries have legal, enforceable and uncontested rights to use freely such property and assets. 4.1.19 PATENTS, TRADEMARKS, ETC. Each of the Borrower and its Subsidiaries owns, possesses, or has the right to use all necessary Patents, licenses, Trademarks, Copyrights, permits and franchises to own its properties and to conduct its business as now conducted, without known conflict with the rights of any other Person. Any and all obligations to pay royalties or other charges with respect to such properties and assets are properly reflected on the financial statements described in Section 4.1.11 (Financial Condition) above. 4.1.20 EMPLOYEE RELATIONS. Except as disclosed on Schedule 4.1.20 attached hereto and made a part hereof, as updated from time to time, (a) no Borrower nor any Subsidiary thereof nor the Borrower's or Subsidiary's employees is subject to any collective bargaining agreement, (b) to the Borrower's knowledge, no petition for certification or union election is pending with respect to the employees of the Borrower or any Subsidiary and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of the Borrower, and (c) as of the date of this Agreement, there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of the Borrower after due inquiry, threatened between the Borrower and its employees. Hours worked and payments made to the employees of any one or more of the Borrower have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Borrower or any of its Subsidiaries or for which any claim may be made against the Borrower or any of its Subsidiaries, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on its or their books, as appropriate. 4.1.21 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS CONTAMINATION. To the best of the Borrower's knowledge and except as disclosed in writing to the Agent in Schedule 4.1.21 hereof with respect to any matters existing as of the date of this Agreement and except as hereafter disclosed in writing to the Agent with respect to any matters arising after the date of this Agreement, (a) no Hazardous Materials are located on any real property owned, controlled or operated by the Borrower or any of its Subsidiaries or for which the Borrower or any of its Subsidiaries is, or is claimed to be, responsible, except for reasonable quantities of necessary supplies for use by the Borrower and/or its Subsidiaries any of their respective tenants in the ordinary course of its or their current lines of business and stored, used and disposed in accordance with applicable Laws; and (b) no property owned, controlled or operated by the Borrower or any of its Subsidiaries or for which the Borrower or any of its Subsidiaries has, or is claimed to have, responsibility is affected by any material Hazardous Materials Contamination at any other property. In addition, as of the date of this Agreement, the Borrower represents and warrants that it has no existing monitoring or observation wells located at Lawrence, Kansas (including Aeroquip); Evansville, Indiana; Indian Trail, North Carolina; and Reno, Nevada properties from which groundwater can be sampled and analyzed. 4.1.22 PERFECTION AND PRIORITY OF COLLATERAL. The Agent and the Lenders have, or upon execution and recording of UCC-1 financing statements and possession of Securities, Documents, Instruments, Chattel Paper and Instruments will have, and will continue to have as security for the Obligations (subject to the terms of Section 3.7), a valid and perfected Lien on and security interest in all Collateral, free of all other Liens, claims and rights of third parties whatsoever except Permitted Liens, including, without limitation, those described on SCHEDULE 4.1.22. 4.1.23 PLACES OF BUSINESS AND LOCATION OF COLLATERAL. The information contained in the Collateral Disclosure List, as updated annually and at such other times as shall be determined by the Borrower at any time prior to the occurrence of a Default or an Event of Default and as shall be determined by the Agent at any time following the occurrence of a Default or an Event of Default, is complete and correct in all material respects. The Collateral Disclosure List completely and accurately identifies the address of (a) the chief executive office of the Borrower and each of the Subsidiary Guarantors, (b) any and each other place of business of the Borrower or any of the Subsidiary Guarantors, (c) the location of all books and records pertaining to the Collateral, and (d) each location, other than the foregoing, where any of the Collateral is located. The legally required places to file financing statements with respect to the Collateral within the meaning of the Uniform Commercial Code are the filing offices for those jurisdictions in which the Borrower and/or any Subsidiary Guarantor, as appropriate, maintains a place of business as identified on the Collateral Disclosure List. 4.1.24 BUSINESS NAMES AND ADDRESSES. Except as set forth in Schedule 4.1.24 attached hereto and made a part hereof, in the five (5) years preceding the date hereof, neither the Borrower nor any of its Subsidiaries (other than PAC) has changed its name, identity or corporate structure, has conducted business under any name other than its current name, and has conducted its business in any jurisdiction other than those disclosed on the Collateral Disclosure List. 4.1.25 EQUIPMENT. No equipment is held by the Borrower or any Subsidiary Guarantor on a sale on approval basis. 4.1.26 INVENTORY. All material portions of the Inventory of the Borrower and each Subsidiary Guarantor included in the Borrowing Base, conform to the eligibility criteria set forth in the definition of Eligible Inventory. Except as disclosed in the Collateral Disclosure List, no goods offered for sale by the Borrower or any Subsidiary are consigned to or held on sale or return terms by the Borrower or any Subsidiary. 4.1.27 ACCOUNTS. All material portions of the Accounts included in the Borrowing Base conform to the eligibility criteria set forth in the definition of Eligible Receivables 4.1.28 PACKERWARE MERGER TRANSACTION. The Agent has received true and correct photocopies of the PackerWare Merger Agreement and each of the other PackerWare Merger Agreement Documents, executed, delivered and/or furnished on or before the Closing Date in connection with the PackerWare Merger Transaction. Neither the PackerWare Merger Agreement nor any of the other PackerWare Merger Agreement Documents have been modified, changed, supplemented, canceled, amended or otherwise altered, except as otherwise disclosed to the Agent in writing on or before the Closing Date. The PackerWare Merger Transaction has been effected, closed and consummated pursuant to, and in accordance with, the terms and conditions of the PackerWare Merger Agreement and with all applicable Laws. 4.1.29 VENTURE STOCK PURCHASE/MERGER TRANSACTION. The Agent has received true and correct photocopies of the Venture Stock Purchase/Merger Agreement and each of the other Venture Stock Purchase/Merger Documents, executed, delivered and/or furnished on or before the date of this Agreement in connection with the Venture Stock Purchase/Merger Transaction. Neither the Venture Stock Purchase/Merger Agreement nor any of the other Venture Stock Purchase/Merger Documents have been modified, changed, supplemented, canceled, amended or otherwise altered, except as otherwise disclosed to the Agent in writing on or before the date of this Agreement. The Venture Stock Purchase/Merger Transaction has been effected, closed and consummated pursuant to, and in accordance with, the terms and conditions of the Venture Stock Purchase/Merger Agreement and with all applicable Laws. As of the date of this Agreement, Venture Southeast and Venture Midwest are Wholly-Owned Subsidiaries of the Borrower. 4.1.30 HART-SCOTT-RODINO. The Borrower, the Seller and all other necessary Persons, as appropriate, have made such filings as may be required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and have provided such supplemental information that may be required by such Act, with respect to the sales contemplated by the PackerWare Merger Transaction and the Venture Stock Purchase/Merger Transaction and/or the Container Purchase Agreement Transaction. The waiting periods under such Act have terminated or expired. 4.1.31 INCREASE IN TOTAL REVOLVING CREDIT COMMITTED AMOUNT AND TERM LOANS PERMITTED UNDER INDENTURE. The Borrower hereby represents and warrants that neither the increase in the Total Revolving Credit Committed Amount from $30,000,000 to $50,000,000 nor the obligations of the Borrower and the Guarantors under and with respect to the Term Loans are in violation of or otherwise constitute a default under the provisions of the Indenture. In particular, the Term Loans constitute "Senior Indebtedness" under the provisions of the Indenture. SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the date of this Agreement, the making of any advance under the Loans and extension of credit made hereunder, and the incurring of any other Obligations and shall be deemed to have been made at the time of the making of each advance under the Loans or the issuance of each Letter of Credit and/or each Bond Letter of Credit, except that (i) representations and warranties which relate to a specific date need only be true and correct as of such date, and (ii) the representations and warranties which relate to financial statements which are referred to in Section 4.1.11, shall also be deemed to cover financial statements furnished from time to time to the Agent and the Lenders pursuant to Section 6.1.1 (Financial Statements) of this Agreement. The Borrower shall have the right from time to time to modify or supplement any of the Schedules and/or the Collateral Disclosure List referred to in this Article IV, and following any such modification or supplement the representations in this Article shall be deemed to refer to such Schedules and Collateral Disclosure List as so modified or supplemented; provided, that the Borrower will be deemed to have represented at the time of delivery of any such modification or supplement that the modifications of and supplements to such Schedules and/or Collateral Disclosure List after the date of this Agreement do not relate to events or circumstances which individually or in the aggregate have resulted in a material adverse change in the business or operations of the Borrower and its Subsidiaries taken as a whole or which would otherwise constitute a Default or an Event of Default. ARTICLE 5 CONDITIONS PRECEDENT SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL LETTER OF CREDIT. The making of the initial advance under the Loans and the issuance of the initial Letter of Credit and the initial Bond Letter of Credit are subject to the fulfillment on or before the date of this Agreement of the following conditions precedent in a manner reasonably satisfactory in form and substance to the Agent and its counsel: 5.1.1 ORGANIZATIONAL DOCUMENTS - BORROWER. The Agent shall have received for the Borrower: (a) a certificate of good standing certified by the Secretary of State, or other appropriate Governmental Authority, of the state of incorporation of the Borrower; (b) a certificate of qualification to do business for the Borrower certified by the Secretary of State or other Governmental Authority of each state in which the Borrower conducts business; (c) a certificate dated as of the date of this Agreement by the Secretary or an Assistant Secretary of the Borrower covering: (i) true and complete copies of that Borrower's corporate charter, bylaws, and all amendments thereto; (ii) true and complete copies of the resolutions of its Board of Directors authorizing (i) the execution, delivery and performance of the Financing Documents and the Venture Stock Purchase/Merger Documents to which it is a party, (ii) the borrowings hereunder, (iii) the granting of the Liens contemplated by this Agreement and the Financing Documents to which the Borrower is a party, and (iv) the Venture Stock Purchase/Merger Transaction; (iii) the incumbency, authority and signatures of the officers of the Borrower authorized to sign this Agreement and the other Financing Documents to which the Borrower is a party; and (iv) the identity of the Borrower's current directors, common stock holders and other equity holders, as well as their respective percentage ownership interests. 5.1.2 OPINION OF BORROWER'S COUNSEL. The Agent shall have received the favorable opinion of counsel for the Borrower and its Subsidiaries addressed to the Agent and the Lenders in form satisfactory to the Agent. The Agent agrees that local counsel opinions shall be required only for the States of Nevada, North Carolina, Kansas, Indiana, Iowa, South Carolina and Ohio. 5.1.3 ORGANIZATIONAL DOCUMENTS - SUBSIDIARY GUARANTOR. The Agent shall have received for each Subsidiary Guarantor: (a) a certificate of good standing certified by the Secretary of State, or other appropriate Governmental Authority, of the state of incorporation; (b) a certificate of qualification to do business certified by the Secretary of State or other Governmental Authority of each state in which each Subsidiary Guarantor conducts business; (c) a certificate dated as of the date of this Agreement by the Secretary or an Assistant Secretary of each Corporate Guarantor covering: (i) true and complete copies of the its corporate charter, bylaws, and all amendments thereto; (ii) true and complete copies of the resolutions of it's Board of Directors authorizing the execution, delivery and performance of the Financing Documents to which it is a party and the granting of the Liens contemplated by any of the Financing Documents to which it is a party; (iii) the incumbency, authority and signatures of its officers to sign the Guaranty and all other Financing Documents to which it is a party; (iv) the identity of it's current directors, common stock holders and other equity holders, as well as their respective percentage ownership interests; (d) the favorable opinion of counsel for the Subsidiary Guarantors addressed to the Agent and the Lenders and in form satisfactory to the Agent. 5.1.4 CONSENTS, LICENSES, APPROVALS, ETC.The Agent shall have received copies of all consents, licenses and approvals, required in connection with the execution, delivery, performance, validity and enforceability of the Financing Documents, and the Venture Stock Purchase/Merger Documents, and such consents, licenses and approvals shall be in full force and effect. 5.1.5 NOTES. The Agent shall have received for delivery to each of the Lenders the Term Notes and the Revolving Credit Notes, each conforming to the requirements hereof and executed by a Responsible Officer of the Borrower and attested by a duly authorized representative of the Borrower. 5.1.6 FINANCING DOCUMENTS AND COLLATERAL. The Borrower and each Subsidiary Guarantor shall have executed and delivered the Financing Documents to be executed by it, and shall have delivered original Chattel Paper, Instruments, Securities, and related Collateral and all opinions, title insurance, and other documents contemplated by Article 3 hereof. 5.1.7 OTHER FINANCING DOCUMENTS. In addition to the Financing Documents to be delivered by the Borrower, the Agent shall have received the Financing Documents duly executed and delivered by Persons other than the Borrower. 5.1.8 OTHER DOCUMENTS, ETC. The Agent shall have received such other certificates, opinions, documents and instruments confirmatory of or otherwise relating to the transactions contemplated hereby as may have been reasonably requested by the Agent. 5.1.9 PAYMENT OF FEES. The Agent and the Lenders shall have received payment of any Fees due on or before the date of this Agreement. 5.1.10 COLLATERAL DISCLOSURE LIST. The Borrower shall have delivered the Collateral Disclosure List required under the provisions of Section 3.3 (Collateral Disclosure List) hereof duly executed by a Responsible Officer of the Borrower and each Subsidiary Guarantor, as appropriate. The Agent and the Lenders acknowledge and agree that the Borrower previously delivered a Collateral Disclosure List to the Agent on the Closing Date and an additional Collateral Disclosure List relating to Berry Design on or about May 13, 1997, and that, accordingly, the Borrower shall not be required to furnish to the Agent a new Collateral Disclosure List, but shall be required only to update the information contained in the previous Collateral Disclosure Lists furnished to the Agent to the extent such information has changed in any material respect. 5.1.11 RECORDINGS AND FILINGS. The Borrower and each Subsidiary Guarantor, as appropriate, shall have: (a) executed and delivered all Financing Documents (including, without limitation, UCC-1 and UCC-3 statements) required to be filed, registered or recorded in order to create, in favor of the Agent and the Lenders, a perfected Lien in the Collateral (subject only to the Permitted Liens) in form and in sufficient number for filing, registration, and recording in each office in each jurisdiction in which such filings, registrations and recordations are required, and (b) delivered such evidence as the Agent may deem satisfactory that all necessary filing fees and all recording and other similar fees, and all Taxes and other expenses related to such filings, registrations and recordings will be or have been paid in full. 5.1.12 INSURANCE CERTIFICATE. The Agent shall have received an insurance certificate in accordance with the provisions of Section 6.1.8 (Insurance) and Section 6.1.17 (Insurance With Respect to Equipment and Inventory) of this Agreement. The Agent and the Lenders acknowledge and agree that a series of insurance certificates acceptable to the Agent were furnished to the Agent on or about the Closing Date and again on May 13, 1997 and that additional insurance certificates will not be required except with respect to the insurance coverages of Berry Venture, Venture Southeast and Venture Midwest. 5.1.13 LANDLORD'S WAIVERS. Unless otherwise agreed by the Agent, the Agent shall have received a landlord's waiver from each landlord of each and every business premise leased by the Borrower and/or any Subsidiary Guarantor and on which any of the Collateral is or may hereafter be located, which landlords' waivers must be reasonably acceptable to the Agent and its counsel in their sole and absolute discretion. 5.1.14 BAILEE ACKNOWLEDGEMENTS. Unless otherwise agreed by the Agent, the Agent shall have received an agreement acknowledging the Liens of the Agent and the Lender from each bailee, warehouseman, consignee or similar third party which has possession of any of the Collateral, which agreements must be reasonably acceptable to the Agent and its counsel in their sole and absolute discretion. 5.1.15 FIELD EXAMINATION. The Agent shall have completed a field examination and audit of the business, operations and income of the Borrower and each Subsidiary Guarantor, the results of which field examination and audit shall be in all respects acceptable to the Agent in its sole and absolute discretion and shall include reference discussions with key customers and vendors. The Agent acknowledges and agrees that a field examination and audit has not yet been completed for Berry Venture, Venture Southeast and Venture Midwest and that such field examination and audit will be completed as soon as commercially possible after the date of this Agreement and that pending such completion the Assets and properties of Berry Venture, Venture Southeast and Venture Midwest shall not be eligible for inclusion in the Borrowing Base, but that the Borrower shall be permitted to continue to obtain advances of the Revolving Loan, subject to the provisions of this Agreement. 5.1.16 APPRAISAL. The Agent shall have received appraisals of all real and personal property owned by the Borrower and/or each Subsidiary Guarantor, all of which appraisals shall be performed by one or more appraisers satisfactory in all respects to the Agent, shall be in such form and content as may be required by the Agent. 5.1.17 PROFORMA BALANCE SHEET AND PROJECTIONS. The Agent shall have received and approved the Borrower's Proforma Balance Sheet and Proforma Financial Projections, which Proforma Balance Sheet and Proforma Financial Projections must be in form and content acceptable to the Agent in its sole and absolute discretion. 5.1.18 STOCK CERTIFICATES AND STOCK POWERS. The Agent shall have received all of the original stock certificates of each Subsidiary Guarantor and fully executed irrevocable stock powers from the holders of all such stock certificates. 5.1.19 VENTURE STOCK PURCHASE/MERGER AGREEMENT TRANSACTION. (a) The Venture Stock Purchase/Merger Transaction shall have been completed and closed prior to or simultaneously herewith upon terms and conditions reasonably satisfactory to the Agent, in accordance with the Venture Stock Purchase/Merger Agreement and all applicable Laws. (b) The Agent shall have received photocopies of all Venture Stock Purchase/Merger Documents executed, delivered and/or furnished in connection with the Venture Stock Purchase/Merger Transaction, together with a certificate signed by a Responsible Officer of the Borrower certifying that the Venture Stock Purchase/Merger Agreement and the other Venture Stock Purchase/Merger Documents furnished to the Agent are true, correct, in full force and effect and the provisions thereof have not been in any way modified, amended or waived, except as otherwise disclosed in writing to the Agent on or before the date of this Agreement. 5.1.20 ENVIRONMENTAL REPORTS. The Agent shall have received and reviewed a Phase I environmental assessment for each parcel of real property owned or leased by the Borrower or any Subsidiary Guarantor, each of which environmental assessment has been performed by a reputable and recognized environmental consulting firm acceptable to the Agent and has revealed no material Hazardous Materials Contamination or material violations of any Environmental Laws, and shall otherwise be in all respects acceptable to the Agent. 5.1.21 FINANCIAL STATEMENTS. The Agent shall have received and reviewed copies of the annual audited financial statements in reasonable detail satisfactory to the Agent relating to the Borrower and its Subsidiaries for the fiscal years 1993, 1994 and 1995, prepared in accordance with GAAP, which financial statements shall include a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of each such fiscal year and consolidated and consolidating statements of income, cash flows and changes in shareholders equity of the Borrower and its Subsidiaries for each such fiscal year, except that the 1993 and 1994 financial statements include only consolidated information. In addition, the Agent shall have received and reviewed copies of the most recent interim monthly financial statements for the Borrower and its Subsidiaries for fiscal years 1995 and 1996, all prepared in accordance with GAAP. SECTION 5.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all advances under the Loans and the issuance of all Letters of Credit and all Bond Letters of Credit is subject to the fulfillment of the following conditions precedent in a manner reasonably satisfactory in form and substance to the Agent: 5.2.1 DEFAULT. There shall exist no Event of Default or Default hereunder. 5.2.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Borrower contained among the provisions of this Agreement shall be true and with the same effect as though such representations and warranties had been made at the time of the making of, and of the request for, each advance under the Loans or the issuance of each Letter of Credit or Bond Letter of Credit, except that (i) the representations and warranties which relate to a specific date need only be true and correct as of such date and (ii) the representations and warranties which relate to financial statements which are referred to in Section 4.1.11, shall also be deemed to cover financial statements furnished from time to time to the Agent pursuant to Section 6.1.1 (Financial Statements) of this Agreement. 5.2.3 ADVERSE CHANGE. No material adverse change shall have occurred in the condition (financial or otherwise), operations or business of the Borrower or any Subsidiary Guarantor which would, in the good faith judgment of the Agent, materially impair the ability of the Borrower or any Subsidiary Guarantor to pay or perform any of the Obligations. 5.2.4 LEGAL MATTERS. All legal documents incident to each advance under the Loans and each of the Letters of Credit and Bond Letters of Credit shall be reasonably satisfactory to the Agent. ARTICLE 6 COVENANTS OF THE BORROWER SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations (or any the Commitments therefor) shall be outstanding hereunder, the Borrower agrees jointly and severally with the Agent and the Lenders as follows: 6.1.1 FINANCIAL STATEMENTS. The Borrower shall furnish to the Agent for distribution to the Lenders: (a) ANNUAL STATEMENTS AND CERTIFICATES. The Borrower shall furnish to the Agent for distribution to the Lenders as soon as available, but in no event more than ninety (90) days after the close of the Borrower's fiscal years, (i) a copy of the annual consolidated and consolidating financial statements in reasonable detail satisfactory to the Agent relating to the Borrower and its Subsidiaries, prepared in accordance with GAAP and examined and certified by independent certified public accountants satisfactory to the Agent, which financial statements shall include a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and consolidated and consolidating statements of income, cash flows and changes in shareholders equity of the Borrower and its Subsidiaries for such fiscal year, and (ii) a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT D, containing a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, a certification that no change has occurred to the information contained in the Collateral Disclosure List (except as set forth any schedule attached to the certification) and (iii) a management letter in the form prepared by the Borrower's independent certified public accountants, but only if and to the extent customarily obtained by the Borrower. The Agent agrees that any one of the "Big 6" accounting firms is satisfactory to the Agent for purposes of this Section 6.1.1(a), except to the extent the Agent in its reasonable discretion and based on good faith and legitimate concerns determines that any such accounting firm would be unacceptable because of any conflict of interest or any material adverse change affecting such firm's reliability or financial viability. (b) ANNUAL OPINION OF ACCOUNTANT. The Borrower shall furnish to the Agent for distribution to the Lenders as soon as available, but in no event more than ninety (90) days after the close of the Borrower's fiscal years, a letter or opinion of the accounting firm which examined and certified the annual financial statement relating to the Borrower and its Subsidiaries stating whether anything in such accounting firm's examination has revealed the occurrence of a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (c) QUARTERLY STATEMENTS AND CERTIFICATES. The Borrower shall furnish to the Agent for distribution to the Lenders as soon as available, but in no event more than forty-five (45) days after the close of the Borrower's fiscal quarters (other than the final fiscal quarter), consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the close of such period, consolidated and consolidating income, cash flows and changes in shareholders equity statements for such period, and a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT D, containing a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, each prepared by a Responsible Officer of or on behalf of the Borrower in a format acceptable to the Agent, all as prepared and certified by a Responsible Officer of the Borrower and accompanied by a certificate of that officer stating whether any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (d) MONTHLY STATEMENTS AND CERTIFICATES. The Borrower shall furnish to the Agent for distribution to the Lenders as soon as available, but in no event more than thirty-five (35) days after the close of the Borrower's fiscal months, consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the close of such period, consolidated and consolidating income, cash flows and changes in shareholders equity statements for such period, and a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, all as prepared and certified by a Responsible Officer of the Borrower and accompanied by a certificate of that officer stating whether any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (e) MONTHLY REPORTS. As part of the Borrowing Base Certificate, the Borrower shall furnish to the Agent for distribution to the Lenders within twenty (20) days after the end of each fiscal month, a report containing the following information: (i) a detailed aging schedule of all Accounts for the Borrower and each Subsidiary Guarantor by Account Debtor, in such detail, and accompanied by such supporting information, as the Agent may from time to time reasonably request; (ii) a detailed aging of all accounts payable by supplier, in such detail, and accompanied by such supporting information, as the Agent may from time to time reasonably request; and (iii) a listing of all Inventory of the Borrower and each Subsidiary Guarantor by component, category and location, in such detail, and accompanied by such supporting information as the Agent may from time to time reasonably request. (f) ANNUAL BUDGET AND PROJECTIONS. Commencing with fiscal year 1997, the Borrower shall furnish to the Lender as soon as available, but in no event later than the 10th day before the end of each fiscal year: (i) a consolidated and consolidating budget and pro forma financial statements on a month-to-month basis for the following fiscal year, and (ii) three-year financial projections or financial projections for such lesser or greater period to the extent routinely prepared by the Borrower in the ordinary course of its business, which projections shall include both consolidated and consolidating projections with respect to the Borrower and its Subsidiaries. (g) AMENDMENTS TO SUBORDINATED DEBT LOAN DOCUMENTS. The Borrower will furnish copies of each amendment, supplement, restatement or other modification to any of the Subordinated Debt Loan Documents executed at any time after the Closing Date on or before the effective date of such amendment, supplement, restatement or other modification. (h) ADDITIONAL REPORTS AND INFORMATION. The Borrower shall furnish to the Agent for distribution to the Lenders promptly, such additional information, reports or statements as the Agent and/or any of the Lenders may from time to time reasonably request. 6.1.2 REPORTS TO SEC AND TO STOCKHOLDERS. The Borrower will furnish to the Agent for distribution to the Lenders, promptly upon the filing or making thereof, at least one (1) copy of all reports, notices and proxy statements sent by the Parent, the Borrower or any of their respective Subsidiaries to its stockholders, and of all regular and other reports filed by the Parent, the Borrower or any of their respective Subsidiaries with the Securities and Exchange Commission. 6.1.3 RECORDKEEPING, RIGHTS OF INSPECTION, FIELD EXAMINATION, ETC. (a) The Borrower shall, and shall cause each of the Subsidiary Guarantors to, maintain (i) a standard system of accounting in accordance with GAAP, and (ii) proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its properties, business and activities. (b) The Borrower shall, and shall cause each of its Subsidiaries to, permit authorized representatives of the Agent and any of the Lenders to visit and inspect the properties of the Borrower and its Subsidiaries, to review, audit, check and inspect the Collateral at any time with reasonable prior notice prior to the occurrence of an Event of Default, and without notice at any time on or after the occurrence of an Event of Default, to review, audit, check and inspect the other books of record of the Borrower and its Subsidiaries at any time with or without notice and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries, with the officers, directors, employees and other representatives of the Borrower and its Subsidiaries and their respective accountants, all at such times during normal business hours and other reasonable times and as often as the Agent and/or any of the Lenders may reasonably request. (c) The Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by the Borrower and/or any of its Subsidiaries at any time prior to the repayment in full of the Obligations to exhibit and deliver to the Agent for distribution to the Lenders copies of any and all of the financial statements, trial balances, management letters, or other accounting records of any nature of the Borrower and/or any or all of its Subsidiaries in the accountant's or auditor's possession, and to disclose to the Agent and any of the Lenders any information they may have concerning the financial status and business operations of the Borrower and/or any or all of its Subsidiaries. Further, the Borrower hereby authorizes all Governmental Authorities to furnish to the Agent for distribution to the Lenders copies of reports or examinations relating to the Borrower and/or any or all Subsidiaries, whether made by the Borrower or otherwise. The Agent agrees that it shall not request any of the foregoing items directly from any accountants or auditors employed by the Borrower or any Subsidiary at any time prior to the occurrence of an Event of Default unless (i) the Agent shall have first requested such items from the Borrower and the Borrower shall have failed or is unable to furnish the requested items promptly and (ii) the Agent shall have notified the Borrower and/or the respective Subsidiary, as appropriate. Upon the Borrower's request, the Agent will furnish copies of all items obtained by the Agent from any accountants or auditors for the Borrower unless the Agent is legally prohibited from so doing. (d) All reasonable costs and expenses incurred by, or on behalf of, the Agent in connection with the conduct of any of the foregoing shall be part of the Enforcement Costs and shall be payable to the Agent upon demand. The Borrower acknowledges and agrees that such expenses may include, but shall not be limited to, any and all out-of- pocket costs and expenses of the Agent's employees and agents in, and when, travelling to any of the facilities of the Borrower or any Subsidiary Guarantor. 6.1.4 CORPORATE EXISTENCE. Except in connection with consummation of those transactions permitted by Section 6.2.1, the Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, its corporate existence in good standing in the jurisdiction in which it is incorporated and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction would have a material adverse effect (i) on the ability of the Borrower or any Subsidiary Guarantor to perform the Obligations, (ii) on the conduct of the operations of the Borrower and the Subsidiary Guarantors, taken as a whole, (iii) on the consolidated financial condition of the Borrower and its Subsidiaries, taken as a whole, or (iv) on the value of, or the ability of the Agent and the Lenders to realize upon, any of the Collateral. 6.1.5 COMPLIANCE WITH LAWS. The Borrower shall comply, and shall cause each of its Subsidiaries to comply, with all applicable Laws and observe the valid requirements of all Governmental Authorities, the noncompliance with or the nonobservance of which would have a material adverse effect (i) on the ability of the Borrower or any Subsidiary Guarantor to perform the Obligations, (ii) on the conduct of the operations of the Borrower and the Subsidiary Guarantors, taken as a whole, (iii) on the consolidated financial condition of the Borrower and its Subsidiaries, taken as a whole, or (iv) on the value of, or the ability of the Agent and the Lenders to realize upon, any of the Collateral. 6.1.6 PRESERVATION OF PROPERTIES. Except as otherwise expressly permitted by the provisions of this Agreement, the Borrower will, and will cause each of its Subsidiaries to, at all times (a) maintain, preserve, protect and keep its material properties, whether owned or leased, in good operating condition, working order and repair (ordinary wear and tear excepted), and from time to time will make all proper repairs, maintenance, replacements, additions and improvements thereto needed to maintain such properties in good operating condition, working order and repair, and (b) do or cause to be done all things necessary to preserve and to keep in full force and effect its material franchises, leases of real and personal property, trade names, patents, trademarks and permits which are necessary for the orderly continuance of its business. 6.1.7 LINE OF BUSINESS. The Borrower will continue and, will cause its Subsidiaries to continue, to engage substantially only in the business of manufacturing, marketing, selling and distributing plastic products. 6.1.8 INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, at all times maintain with "A" or better rated insurance companies such insurance as is required by applicable Laws and such other insurance, in such amounts, of such types and against such risks, hazards, liabilities, casualties and contingencies as are usually insured against in the same geographic areas by business entities engaged in the same or similar business. Without limiting the generality of the foregoing, the Borrower will, and will cause each of its Subsidiaries to, keep adequately insured all of its property against loss or damage resulting from fire or other risks insured against by extended coverage and maintain public liability insurance against claims for personal injury, death or property damage occurring upon, in or about any properties occupied or controlled by it, or arising in any manner out of the businesses carried on by it. The Borrower shall deliver to the Agent on the Closing Date (and thereafter on each date there is a material change in the insurance coverage) a certificate of a Responsible Officer of the Borrower containing a detailed list of the insurance then in effect and stating the names of the insurance companies, the types, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. 6.1.9 TAXES. Except to the extent that the validity or amount thereof is being contested in good faith and by appropriate proceedings, the Borrower will, and will cause each of its Subsidiaries, to pay and discharge all Taxes prior to the date when the failure to pay such Taxes will give rise to a Default or an Event of Default. The Borrower shall furnish to the Agent at such times as the Agent may require proof satisfactory to the Agent of the making of payments or deposits required by applicable Laws including, without limitation, payments or deposits with respect to amounts withheld by the Borrower and/or any Subsidiary Guarantor from wages and salaries of employees and amounts contributed by the Borrower and/or any Subsidiary Guarantor on account of federal and other income or wage taxes and amounts due under the Federal Insurance Contributions Act, as amended. 6.1.10 ERISA. The Borrower will, and will cause each of its Subsidiaries and Affiliates to, comply with the funding requirements of ERISA with respect to employee pension benefit plans for its respective employees. The Borrower will not permit, and will not allow any Subsidiary to permit, with respect to any employee benefit plan or plans covered by Title IV of ERISA (a) any prohibited transaction or transactions under ERISA or the Internal Revenue Code, which results, or would result, in any material liability of the Borrower and/or any of its Subsidiaries and Affiliates, or (b) any Reportable Event if, upon termination of the plan or plans with respect to which one or more such Reportable Events shall have occurred, there is or would be any material liability of the Borrower and/or any of its Subsidiaries and Affiliates to the PBGC. Upon the Agent's request, the Borrower will deliver to the Agent a copy of the most recent actuarial report, financial statements and annual report completed with respect to any "defined benefit plan", as defined in ERISA. 6.1.11 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS. The Borrower shall promptly notify the Agent and the Lenders upon obtaining knowledge of the occurrence of: (a) any Event of Default; (b) any Default; (c) any litigation instituted or threatened against the Borrower or any of its Subsidiaries and of the entry of any judgment or Lien (other than any Permitted Liens) against any of the assets or properties of the Borrower or any Subsidiary where the claims against the Borrower or any Subsidiary exceed One Million Dollars ($1,000,000) and are not covered by insurance; (d) the receipt by the Borrower or any Subsidiary Guarantor of any notice, claim or demand from any Governmental Authority which alleges that the Borrower or any Subsidiary Guarantor is in material violation of any of the terms of, or has failed to comply with any applicable material Laws regulating its operation and business, including, but not limited to, the Occupational Safety and Health Act and the Environmental Protection Act, the noncompliance with which would have a materially adverse effect on the Borrower and the Subsidiary Guarantors, taken as a whole; (e) any other development in the business or affairs of the Borrower or any of its Subsidiaries which is materially adverse to the Borrower and its Subsidiaries taken as a whole; in each case describing in detail satisfactory to the Agent the nature thereof and the action the Borrower or any Subsidiary, as the case may be, proposes to take, if any, with respect thereto. 6.1.12 HAZARDOUS MATERIALS; CONTAMINATION. The Borrower agrees to: (a) give notice to the Agent immediately upon acquiring knowledge of the presence of any Hazardous Materials or any Hazardous Materials Contamination on any property owned, operated or controlled by the Borrower or any Subsidiary Guarantor or for which the Borrower or any Subsidiary Guarantor is, or is claimed to be, responsible (provided that such notice shall not be required for Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course (including, without limitation, quantity) of the line of business expressly described in this Agreement or as described in any Phase I environmental assessments expressly referenced herein or in any schedule attached hereto), with a full description thereof; (b) promptly comply with any Laws, the noncompliance with which would have a materially adverse effect on the Borrower and the Subsidiary Guarantors, taken as a whole or on the value of any material portion of the Collateral or the ability of the Agent to realize upon the value of any such Collateral requiring the removal, treatment or disposal of Hazardous Materials or Hazardous Materials Contamination and provide the Agent with reasonably satisfactory evidence of such compliance; (c) as part of the Obligations, defend, indemnify and hold harmless the Agent, each of the Lenders and each of their respective agents, employees, trustees, successors and assigns from any and all claims which may now or in the future (whether before or after the termination of this Agreement) be asserted as a result of the presence of any Hazardous Materials or any Hazardous Materials Contamination on any property owned, operated or controlled by the Borrower or any Subsidiary Guarantor for which the Borrower or any Subsidiary Guarantor is, or is claimed to be, responsible which claims relate to the financing and/or Liens contemplated by this Agreement, but which claims do not arise out of the gross negligence or willful misconduct of the Agent or any of the Lenders. The Borrower acknowledges and agrees that this indemnification shall survive the termination of this Agreement and the Commitments and the payment and performance of all of the other Obligations. (d) Within two (2) months of the Closing Date, (i) use its commercially reasonable efforts to cause the removal of a sump pump at the Aeroquip facility, located at Lawrence, Kansas; and (ii) furnish to the Agent such reports and other information as shall be available to the Borrower regarding the removal of impacted contaminated soils located at the Evansville, Indiana property at the drum storage pad and waste oil tank area based on a delineation of the scope and extent of contamination; and (e) Within nine (9) months of the Closing Date produce a report from a qualified environmental consultant, who is reasonably acceptable to the Agent and who certifies as to the removal of impacted soils from the Reno, Nevada location (as identified in Geraghty & Miller, Inc.'s Phase II Environmental Site Assessment, dated January 13, 1997) exhibiting TPH concentrations that exceed the State of Nevada action level of 100 mg/kg. 6.1.13 FINANCIAL COVENANTS. (a) TANGIBLE CAPITAL FUNDS. The Borrower and each of the Subsidiary Guarantors, on a consolidated basis, will attain a Tangible Capital Funds of not less than the following amounts as of the following dates: DATE AMOUNT December 31, 1997 $32,000,000 March 31, 1998 $33,000,000 June 30, 1998 $33,000,000 September 30, 1998 $33,500,000 December 31, 1998 $33,000,000 March 31, 1999 $33,500,000 June 30, 1999 $35,000,000 September 30, 1999 $37,000,000 December 31, 1999 $41,000,000 March 31, 2000 $41,500,000 June 30, 2000 $44,000,000 September 30, 2000 $50,000,000 December 31, 2000 $55,000,000 March 31, 2001 $57,000,000 June 30, 2001 $60,000,000 September 30, 2001 $65,000,000 December 31, 2001 $73,000,000 (b) FUNDED DEBT TO EBITDA . The Borrower and each Subsidiary Guarantor, on a consolidated basis, will not at any time permit the ratio of (x) Funded Debt to (y) EBITDA, for the prior twelve (12) month period, to be greater than the following amounts as of the following dates: DATE RATIO December 31, 1997 6.00 to 1.00 March 31, 1998 6.00 to 1.00 June 30, 1998 5.00 to 1.00 September 30, 1998 4.50 to 1.00 December 31, 1998 4.00 to 1.00 March 31, 1999 4.00 to 1.00 June 30, 1999 3.75 to 1.00 September 30, 1999 3.75 to 1.00 December 31, 1999 3.50 to 1.00 March 31, 2000 3.50 to 1.00 June 30, 2000 3.25 to 1.00 September 30, 2000 3.25 to 1.00 December 31, 2000 3.00 to 1.00 March 31, 2001 3.00 to 1.00 June 30, 2001 3.00 to 1.00 September 30, 2001 3.00 to 1.00 December 31, 2001 3.00 to 1.00 (c) INTEREST COVERAGE RATIO. The Borrower and each Subsidiary Guarantor will maintain, on a consolidated basis and tested as of the last day of each fiscal quarter in each fiscal year for the three (3), six (6), nine (9) or twelve (12) month period of such fiscal year, as appropriate, ending on that date, an Interest Coverage Ratio of not less than the following amounts as of the following dates: December 31, 1997 1.90 to 1.00 March 31, 1998 1.90 to 1.00 June 30, 1998 2.00 to 1.00 September 30, 1998 2.00 to 1.00 December 31, 1998 2.00 to 1.00 March 31, 1999 2.00 to 1.00 June 30, 1999 2.00 to 1.00 September 30, 1999 2.00 to 1.00 December 31, 1999 2.50 to 1.00 March 31, 2000 2.50 to 1.00 June 30, 2000 2.50 to 1.00 September 30, 2000 2.50 to 1.00 December 31, 2000 2.50 to 1.00 March 31, 2001 2.50 to 1.00 June 30, 2001 2.50 to 1.00 September 30, 2001 2.50 to 1.00 December 31, 2001 2.50 to 1.00 (d) FIXED CHARGE COVERAGE RATIO. The Borrower and each of the Subsidiary Guarantor will maintain, on a consolidated basis and tested as of the last day of each fiscal year, a Fixed Charge Coverage Ratio of not less than the following amounts as of the following dates: PERIOD RATIO December 31, 1997 0.90 to 1.00 December 31, 1998 1.00 to 1.00 December 31, 1999 1.00 to 1.00 December 31, 2000 1.00 to 1.00 December 31, 2001 1.00 to 1.00 (e) DEBT SERVICE COVERAGE RATIO. The Borrower and each Subsidiary Guarantor will maintain, on a consolidated basis and tested as of the last day of each fiscal quarter in each fiscal year for the three (3), six (6), nine (9) or twelve (12) month period of such fiscal year, as appropriate, ending on that date, a Debt Service Coverage Ratio of not less than 1.50 to 1.0. 6.1.14 COLLECTION OF ACCOUNTS. Until the occurrence of an Event of Default, the Borrower and its Subsidiaries shall at their own expense have the privilege for the account of, and in trust for, the Agent and the Lenders of collecting their Accounts and receiving in respect thereto all Items of Payment and shall otherwise completely service all of the Accounts including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the taking of such action with respect to the Accounts as each of the Borrower and each of the Subsidiaries may deem advisable; and (c) the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to an Account and may take such other actions relating to the settling of any Account Debtor's claim as may be commercially reasonable. The Agent may, at its option, at any time or from time to time after and during the continuance of an Event of Default hereunder, revoke the collection privilege given in this Agreement to the Borrower and its Subsidiaries by either giving notice of its assignment of, and Lien on the Collateral to the Account Debtors or giving notice of such revocation to the Borrower. The Agent shall not have any duty to, and the Borrower hereby releases the Agent and the Lenders from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Accounts or to preserve any rights against any other party with an interest in the Collateral, unless due to the gross negligence or willful misconduct of the Agent and/or any of the Lenders. 6.1.15 GOVERNMENT ACCOUNTS. The Borrower will immediately notify the Agent if any of the Accounts arise out of contracts with the United States or with any other Governmental Authority, which Accounts, individually or in the aggregate, exceed One Hundred Thousand Dollars ($100,000) and, as appropriate, execute and, cause each Subsidiary Guarantor to execute, any Financing Documents and take any steps required by the Agent in order to comply with the Federal Assignment of Claims Act or any other applicable Laws. 6.1.16 INVENTORY. With respect to the Inventory, the Borrower and its Subsidiaries will keep correct and accurate records itemizing and describing the kind, type, and quantity of Inventory, the Borrower's and Subsidiaries' cost therefor and the selling price thereof, all of which records shall be available to the officers, employees or agents of the Agent upon demand for inspection and copying thereof. The Borrower and its Subsidiaries shall be permitted to sell Inventory in the ordinary course of business until such time as the Agent notifies the Borrower to the contrary following the occurrence of an Event of Default. 6.1.17 INSURANCE WITH RESPECT TO EQUIPMENT AND INVENTORY. The Borrower will (a) maintain and cause each of its Subsidiaries to maintain hazard insurance with fire and extended coverage and naming the Agent as an additional insured with loss payable to the Agent as its respective interest may appear on the Equipment and Inventory in an amount at least equal to the fair market value of the Equipment and Inventory (but in any event sufficient to avoid any co-insurance obligations) and with a specific endorsement to each such insurance policy pursuant to which the insurer agrees to give the Agent at least thirty (30) days written notice before any alteration or cancellation of such insurance policy and that no act or default of the Borrower or any Subsidiary shall affect the right of the Agent to recover under such policy in the event of loss or damage; and (b) file, and cause each of its Subsidiaries to file, with the Agent, upon its request, a detailed list of the insurance then in effect and stating the names of the insurance companies, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. 6.1.18 MAINTENANCE OF THE COLLATERAL. Except as permitted by Section 6.2.1, the Borrower will maintain, and will cause each of the Subsidiary Guarantors to maintain, the Collateral in good working order, saving and excepting ordinary wear and tear. 6.1.19 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense, the Borrower will defend the title to the Collateral (and any part thereof), and will immediately execute, acknowledge and deliver and, cause each Subsidiary Guarantor to execute, acknowledge and deliver, any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate or other document which the Agent may require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien or security interest granted or required to be granted to the Agent, for the benefit of the Lenders ratably and the Agent, under the terms of this Agreement and/or under any of the other Financing Documents and the first priority of that Lien, subject only to the Permitted Liens. The Borrower will from time to time do, and, will cause each of the Subsidiary Guarantors to do, whatever the Agent may reasonably require by way of obtaining, executing, delivering, and/or filing financing statements, landlords' or mortgagees' waivers, notices of assignment and other notices and amendments and renewals thereof and the Borrower will take and, will cause each of the Subsidiary Guarantors to take, any and all steps and observe such formalities as the Agent may require, in order to create and maintain a valid Lien upon, pledge of, or paramount security interest in (subject only to Permitted Liens), the Collateral (including as and to the extent required to comply with the provisions of Section 3.7 of this Agreement), subject only to the Permitted Liens. The Agent understands and will require that the Borrower only use commercially reasonable efforts to obtain landlord's and mortgagee's waivers requested by the Agent. The Borrower shall pay to the Agent on demand all taxes, costs and expenses incurred by the Agent in connection with the preparation, execution, recording and filing of any such document or instrument. To the extent that the proceeds of any of the Accounts are expected to become subject to the control of, or in the possession of, a party other than the Borrower or a Subsidiary Guarantor or the Agent, the Borrower shall use commercially reasonable efforts to cause all such parties to execute and deliver security documents, financing statements or other documents as requested by the Agent and as may be necessary to evidence and/or perfect the security interest of the Agent, for the benefit of the Lenders ratably and the Agent in those proceeds. The Borrower agrees that a copy of a fully executed security agreement and/or financing statement shall be sufficient to satisfy for all purposes the requirements of a financing statement as set forth in Article 9 of the applicable Uniform Commercial Code. The Borrower hereby irrevocably appoints the Agent as the Borrower's attorney-in-fact, with power of substitution, in the name of the Agent or in the name of the Borrower or otherwise, for the use and benefit of the Agent for itself and the Lenders, but at the cost and expense of the Borrower and without notice to the Borrower, to execute and deliver any and all of the instruments and other documents and take any action which the Lender may require pursuant to the foregoing provisions of this Section 6.1.19. 6.1.20 BUSINESS NAMES; LOCATIONS. The Borrower will notify and cause each of the Subsidiary Guarantors to notify the Agent not less than thirty (30) days prior to (a) any change in the name under which the Borrower or the applicable Subsidiary Guarantor conducts its business, (b) any change of the location of the chief executive office of the applicable Borrower or Subsidiary Guarantor, and (c) the opening of any new place of business, and (d) any change in the location of the places where the Collateral, or any part thereof, or the books and records, or any part thereof, are kept to the extent any such change in location would in and of itself then or with the passage of time result in any Lien of the Agent and the Lenders not being perfected unless action is taken by the Agent and/or any other Person to continue, extend or effect the perfection of such Lien. 6.1.21 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS. In the event that the Borrower or any Subsidiary Guarantor shall transfer its principal place of business or the office where it keeps its records pertaining to the Collateral, upon the Agent's reasonable request the Borrower will provide to the Agent a subsequent opinion of counsel as to the filing, recording and other requirements with which the Borrower and the Subsidiary Guarantors have complied to maintain the Lien and security interest in favor of the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, in the Collateral. 6.1.22 USE OF PREMISES AND EQUIPMENT. The Borrower agrees that until the Obligations are fully paid and all of the Commitments and the Letters of Credit and Bond Letters of Credit have been terminated or have expired, the Agent (a) after and during the continuance of a Default or an Event of Default, may use the Borrower's owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (b) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through the Borrower's owned or leased property. 6.1.23 PROTECTION OF COLLATERAL. The Borrower agrees that the Agent may at any time following an Event of Default take such steps as the Agent deems reasonably necessary to protect the interest of the Agent and the Lenders in, and to preserve the Collateral, including, the hiring of such security guards or the placing of other security protection measures as the Agent deems appropriate, may employ and maintain at the Borrower's premises a custodian who shall have full authority to do all acts necessary to protect the interests of the Agent and the Lenders in the Collateral. The Borrower agrees to cooperate fully with the Agent's efforts to preserve the Collateral and will take such actions to preserve the Collateral as the Agent may reasonably direct. All of the Agent's reasonable expenses of preserving the Collateral, including any reasonable expenses relating to the compensation and bonding of a custodian, shall part of the Enforcement Costs. 6.1.24 APPLICATION OF NET CASUALTY PROCEEDS. The Borrower agrees that Net Casualty Proceeds with respect to any Assets of the Borrower and/or any Subsidiary Guarantor must be applied to either (a) the payment of the Obligations or (b) the repair, replacement and/or restoration of the Assets affected, and without the prior written consent of the Agent for no other purpose. The Agent shall determine, in its sole discretion, the manner in which Net Casualty Proceeds are to be applied if the amount of the Net Casualty Proceeds exceeds, individually or in the aggregate, One Million Dollars ($1,000,000) or if there exists a Default or an Event of Default. SECTION 6.2 NEGATIVE COVENANTS. So long as any of the Obligations or the Commitments or Letters of Credit or Bond Letters of Credit shall be outstanding, the Borrower agrees with the Agent and the Lenders that: 6.2.1 CAPITAL STRUCTURE, MERGER, ACQUISITION OR SALE OF ASSETS. Except as otherwise permitted by the provisions of Section 6.2.3, the Borrower will not alter or amend, or permit any Subsidiary Guarantor to alter or amend, its capital structure, authorize any additional class of equity, issue any stock or equity of any class, enter into any merger or consolidation or amalgamation, windup or dissolve themselves (or suffer any liquidation or dissolution) or acquire all or substantially all the Assets of any Person, or sell, lease or otherwise dispose of any of its Assets; except that prior to the occurrence of a Default or an Event of Default, the following shall be permitted: (a) Permitted Acquisitions; (b) Permitted Asset Dispositions; (c) mergers or consolidations (i) among and between the Borrower and/or any Subsidiary Guarantor and (ii) among and between any Subsidiaries of the Borrower other than Subsidiary Guarantors; provided, that after closing and consummation of any such merger or consolidation involving the Borrower or any Subsidiary Guarantor (x) the Borrower is the surviving entity if the Borrower is a party to such merger or consolidation, (y) the Agent and the Lenders retain a first priority Lien on, and assignment of, one hundred percent (100%) of the capital stock of all surviving Subsidiary Guarantors, subject only to Permitted Liens, and a first priority Lien on all of the Assets of the Borrower and of each surviving Subsidiary Guarantor which had been pledged or required to be pledged under the provisions of this Agreement prior to such merger or consolidation, subject only to Permitted Liens, and (z) in any merger or consolidation involving only Subsidiary Guarantors, the surviving entity qualifies or continues to qualify as a Subsidiary Guarantor in accordance with the provisions of Section 6.2.2 of this Agreement; (d) investments as and to the extent permitted by the provisions of Section 6.2.5 of this Agreement, including, without limitation, the issuance of equity by any Subsidiary to the Borrower or another Subsidiary; (e) the use and disposition of Net CasualtyProceeds, but only as and to the extent permitted by the provisions of Section 6.1.24 of this Agreement; (f) the sale and transfer of all issued and outstanding capital stock of Venture Southeast and Venture Midwest to the Borrower and the merger, consolidation, liquidation or dissolution of Berry Venture, all as contemplated by the Venture Stock Purchase/Merger Transaction; and (h) South Carolina IRB Lease Transfers. Any consent of the Agent to an Asset disposition which does not constitute a Permitted Asset Disposition may be conditioned on a specified use of the Net Proceeds generated by such Asset Disposition, provided, however, that the Agent and the Lenders (i) acknowledge that in the case of a disposition of assets subject to the South Carolina IRB Lease Agreement, the proceeds must be first applied to repay the South Carolina IRB, but (ii) reserve all rights and remedies (including, without limitation, those arising under Section 6.1.19 and comparable provisions of the Security Agreement) in the right of the Borrower or any one or more of the Guarantors to receive the proceeds of such repayment as a holder of the South Carolina Bond or otherwise. 6.2.2 SUBSIDIARIES. The Borrower will not create or acquire, or permit any Subsidiary to create or acquire, any Subsidiaries other than (i) the Subsidiaries identified on the Collateral Disclosure List, as updated through the date of this Agreement and (ii) the creation or acquisition of Subsidiary Guarantors. In order to qualify, after the Closing Date, as a Subsidiary Guarantor under the provisions of this Agreement, a Subsidiary must (i) be an acquisition permitted by the provisions of this Agreement or be created solely to consummate an acquisition permitted by the provisions of this Agreement, (ii) execute and deliver to the Agent a guaranty agreement substantially in the form of the Guaranty, (iii) grant to the Agent and the Lenders a first priority Lien on all Assets and property of such Subsidiary, subject only to Permitted Liens, all in accordance with the terms of one or more Financing Documents as and to the extent reasonably required by the Agent, and (iv) be a domestic Subsidiary. 6.2.3 PURCHASE OR REDEMPTION OF SECURITIES, DIVIDEND RESTRICTIONS. The Borrower will not (i) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of the Borrower's capital stock or warrants now or hereafter outstanding, (ii) declare or pay any Distributions (other than stock dividends) or set aside any funds therefor, or (iii) apply any of its property or Assets to the purchase, redemption or other retirement of, set apart any sum for the payment of any Distributions on, or for the purchase, redemption, or other retirement of, make any Distributions by reduction of capital or otherwise in respect of, any shares of any class of capital stock or warrants of the Borrower, except for (i) Distributions by the Borrower to the Parent pursuant to a certain Tax Sharing Agreement dated as of April 21, 1994 by and between the Borrower and the Parent, as amended through the Closing Date, and as the same may be further amended from time to time in a manner that is not materially adverse to the Borrower, (ii) Distributions by the Borrower to the Parent to enable the Parent to pay its operating and administrative expenses, including, without limitation, directors fees, legal and audit expenses, Securities and Exchange Commission compliance expenses and corporate franchise and other Taxes, not to exceed in any fiscal year Five Hundred Thousand Dollars ($500,000), (iii) Distributions by the Borrower to the Parent to pay management fees not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) in any fiscal year of the Borrower, (iv) Distributions to the Parent to enable the Parent to repurchase any capital stock owned by any Person employed by the Parent and/or the Borrower if such Person is no longer so employed, provided, that the aggregate amount of Distributions for this purpose shall not exceed One Million Dollars ($1,000,000) per annum, and (v) so long as the same may be effected with the payment of nominal consideration, the redemption of the South Carolina IRB in conjunction with the exercise of the South Carolina IRB Lease Purchase Option. 6.2.4 INDEBTEDNESS. The Borrower will not create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Indebtedness for Borrowed Money, except: (a) the Obligations; (b) current accounts payable arising in the ordinary course; (c) Indebtedness secured by Permitted Liens; (d) Subordinated Indebtedness; provided that the principal amount of all such Subordinated Indebtedness shall not at any time exceed, in the aggregate, Twenty Million Dollars ($20,000,000); (e) Indebtedness of the Borrower and/or any Subsidiary existing on the date hereof and reflected on the financial statements furnished pursuant to Section 4.1.11 (Financial Condition); (f) Unsecured letters of credit, bankers' acceptances and/or (1) secured Interest Rate Protection Agreements between the Borrower or a Subsidiary Guarantor and NationsBank and/or (2) unsecured Interest Rate Protection Agreements between the Borrower or a Subsidiary Guarantor and any other financial institution, providing for the transfer or mitigation of foreign exchange risks or interest rate risks either generally or under specific contingencies; (g) Indebtedness for Borrowed Money incurred by the Borrower or any Subsidiary Guarantor incurred after the Closing Date; provided, that (i) such Indebtedness for Borrowed Money is incurred on account of purchase money or finance lease arrangements of Assets (other than real property) acquired by the Borrower or a Subsidiary Guarantor after the Closing Date, (ii) each such purchase money or finance lease arrangement does not exceed the cost of the Assets acquired or leased, (iii) any Lien securing such purchase money or finance lease arrangement does not extend to any Assets or property other than that purchased or leased, and (iv) the aggregate amount of Indebtedness for Borrowed Money under and in connection with all such purchase money and/or finance lease arrangements shall not exceed, in the aggregate, the sum of Five Hundred Thousand Dollars ($500,000); (h) Capital Leases; (i) Indebtedness for Borrowed Money of the Borrower to any Guarantor or of any Guarantor to the Borrower or any other Guarantor; (j) Indebtedness for Borrowed Money as set forth on Schedule 4.1.14 of this Agreement; (k) Other unsecured Indebtedness for Borrowed Money in aggregate principal amount not to exceed at any time One Million Dollars ($1,000,000); and (l) Indebtedness permitted under the provisions of Section 6.2.5. (m) any refinancing, replacement, repurchase, defeasance, redemption or refunding of any existing Indebtedness for Borrowed Money permitted by the provisions of this Agreement; provided, that (1) the principal amount of any Indebtedness for Borrowed Money used to refinance, replace, repurchase, defease, redeem or refund such existing Indebtedness for Borrowed Money (each a "Refinancing Indebtedness") does not exceed the then outstanding principal balance of the Indebtedness for Borrowed Money so refinanced, replaced, repurchased, defeased, redeemed or refunded, (2) the Weighted Average Life to Maturity of any Refinancing Indebtedness is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness for Borrowed Money being so refinanced, replaced, repurchased, defeased, redeemed or refunded by the Refinancing Indebtedness, (3) the terms of the Refinancing Indebtedness are not materially more restrictive or limiting on the Borrower or any Subsidiary Guarantor, as the case may be, than the terms of the Indebtedness for Borrowed Money being refinanced, replaced, repurchased, defeased, redeemed or refunded, as determined by the Agent in its reasonable discretion, and (4) if and to the extent the Refinancing Indebtedness is intended to refinance, replace, repurchase, defeasance, redemption or refund Subordinated Indebtedness, then the Refinancing Indebtedness is subordinated in right of payment to the Obligations on terms at least as favorable to the Agent and the Lenders as those then governing the Subordinated Indebtedness to be refinanced, replaced, repurchased, defeased, redeemed or refunded. As used herein, the term "Weighted Average Life to Maturity" when applied to any Indebtedness for Borrowed Money (including any Refinancing Indebtedness) means 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 payment 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 each such date and the making of each such payment, by (b) the then outstanding principal amount of such Indebtedness for Borrowed Money. Notwithstanding the foregoing, neither the Borrower nor any Subsidiary Guarantor shall be permitted to create, incur, assume or suffer to exist any additional Indebtedness for Borrower Money at any time after the occurrence of a Default or an Event of Default or if and to the extent any such additional Indebtedness for Borrowed Money would give rise to a Default or an Event of Default. 6.2.5 INVESTMENTS,LOANS AND OTHER TRANSACTIONS. Except as otherwise provided in this Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, (a) make, assume, acquire or continue to hold any investment in any real property (unless used in connection with their business) or any Person, whether by stock purchase, capital contribution, acquisition of Indebtedness of such Person or otherwise (including, without limitation, investments in any joint venture or partnership), except for (i) Permitted Acquisitions, (ii) replacements of Assets which are the subject of a Permitted Asset Disposition made pursuant to clause (f) of the definition of Permitted Asset Disposition, (iii) those investments existing as of the Closing Date and reflected on the financial statements furnished pursuant to Section 4.1.11 (Financial Condition), (iv) any investments in Cash Equivalents, which, if requested by the Agent, are pledged to the Agent, for the ratable benefit of the Lenders and for the benefit of the Agent with respect to the Agent's Obligations, as collateral and security for the Obligations (v) those investments more particularly set forth in Schedule 6.2.5 attached hereto and made a part hereof (the "Permitted Investments"), (vi) the Borrower's acquisition, creation or ownership of any Subsidiary Guarantor, including, the Borrower's existing or additional capital contributions in any such Subsidiary Guarantor, (vii) the receipt of Indebtedness for Borrowed Money by the Borrower or any Subsidiary Guarantor which represents payment to the Borrower or a Subsidiary Guarantor, as the case may be, of a portion of the purchase price payable to the Borrower in connection with a Permitted Asset Disposition; provided that, upon the Agent's demand, the Borrower and/or the Subsidiary Guarantor, as the case may, shall take all such actions as shall be reasonably requested by the Agent to grant to the Agent for its benefit and the ratable benefit of the Lenders a perfected Lien on any such Indebtedness for Borrowed Money and provided further that the principal amount of all such Indebtedness for Borrowed Money shall not exceed at any time in the aggregate Five Hundred Thousand Dollars ($500,000), (vii) investments permitted by Section 6.2.1, an (viii) the sale and transfer of all issued and outstanding capital stock of Venture Southeast and Venture Midwest to the Borrower and the merger, consolidation, liquidation or dissolution of Berry Venture, all as contemplated by the Venture Stock Purchase/Merger Transaction, (b) guaranty or otherwise become contingently liable for the Indebtedness or obligations of any Person, except that the Borrower and any Subsidiary Guarantor shall be permitted to guaranty (1) any Indebtedness for Borrowed Money of the Borrower or any Subsidiary Guarantor otherwise permitted by the provisions of Section 6.2.4 of this Agreement, (2) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (3) the obligations of the Borrower under the Subordinated Debt and the Senior Secured Debt, and (4) the Obligations, or (c) make any loans or advances, or otherwise extend credit to any Person, except (1) any advance to an officer or employee of the Borrower or any Subsidiary for travel or other business expenses in the ordinary course of business, provided that the aggregate amount of all such advances by all of the Borrower and its Subsidiaries (taken as a whole) outstanding at any time shall not exceed Five Hundred Thousand Dollars ($500,000), (2) trade credit extended to customers in the ordinary course of business, (3) ordinary course advances to customers in connection with the production of molds and related materials, (4) South Carolina IRB Lease Transfers, and (5) ordinary course working capital advances and loans to and from the Borrower to any Guarantor and to and from any Guarantor to the Borrower or any other Guarantor. 6.2.6 CAPITAL EXPENDITURES. Except for Permitted Acquisitions and permitted reinvestments of Permitted Asset Dispositions, the Borrower will not, and will not permit any Subsidiary to, directly or indirectly, make any Capital Expenditures in the aggregate for the Borrower and its Subsidiaries (taken as a whole) in amount which exceed the following amounts at any time during the following fiscal years (for each fiscal year, the "Capital Expenditure Ceiling"): FISCAL YEAR CAPITAL EXPENDITURE CEILING 1997 $19,000,000 1998 $23,000,000 1999 $26,000,000 2000 $27,000,000 2001 $29,000,000 If in any given fiscal year, the total Capital Expenditures of the Borrower and its Subsidiaries, taken as a whole, are less than the applicable Capital Expenditure Ceiling for that fiscal year, the unused portion of the amount permitted for Capital Expenditures (the "Carry Forward Amount') may be used to increase the applicable Capital Expenditure Ceiling for the then next succeeding fiscal year. The Carry Forward Amount for any given fiscal year cannot be carried forward for more than one (1) fiscal year. 6.2.7 STOCK OF SUBSIDIARIES. The Borrower will not sell or otherwise dispose of any shares of capital stock of any Subsidiary (except as necessary or incident to any transaction permitted by Sections 6.2.1 or 6.2.6 above) or permit any Subsidiary to issue any additional shares of its capital stock except PRO RATA to its stockholders. 6.2.8 SUBORDINATED INDEBTEDNESS. The Borrower will not, and will not permit any Subsidiary to make: (a) (i) any payment on account of the Subordinated Debt in violation of the subordination provisions relating to such Subordinated Debt, or (ii) any payment on account of any other Subordinated Indebtedness in violation of the subordination provisions relating to such Subordinated Indebtedness; (b) any amendment or modification of to the documents evidencing or securing the Subordinated Indebtedness; and (c) any payment of principal or interest on the Subordinated Indebtedness other than when due, except that Subordinated Indebtedness may be prepaid, redeemed, repurchased, refinanced, replaced, refunded or defeased from the proceeds of any offering of Securities or Indebtedness by the Parent or the Borrower; provided that at the time of such prepayment there does not exist a Default or an Event of Default and provided that such offering of Securities or Indebtedness is otherwise permitted by the provisions of this Agreement. 6.2.9 LIENS. The Borrower agrees that it (a) will not create, incur, assume or suffer to exist any Lien upon any of its properties or Assets, whether now owned or hereafter acquired, or permit any Subsidiary so to do, except for (i) Liens securing the Obligations and (ii) Permitted Liens, (b) will not allow or suffer to exist any Permitted Liens to be superior to Liens securing the Obligations, or permit any Subsidiary so to do, except for (i) statutory landlord's Liens with respect to which the Agent has not obtained a landlord's waiver and subordination, (ii) existing Liens securing Indebtedness for Borrowed Money under and in connection with the Bonds, and (iii) Liens which have priority as a matter of law and which do not otherwise constitute or give rise to a Default or an Event of Default and for which the Agent has established a reserve against the Borrowing Base in an amount to be determined by the Agent in its reasonable discretion, (c) except as otherwise permitted by the provisions of this Agreement, will not enter into any contracts for the consignment of goods, will not execute or suffer the filing of any financing statements or the posting of any signs giving notice of consignments, and will not, as a material part of its business, engage in the sale of goods belonging to others, or permit any Subsidiary so to do, and (d) will not allow or suffer to exist the failure of any Lien described in the Security Documents to attach to, and/or remain at all times perfected on, any of the property described in the Security Documents, except with respect to any Assets disposed of as part of a Permitted Asset Disposition. 6.2.10 TRANSACTIONS WITH AFFILIATES. Neither the Borrower nor any of its Subsidiaries will enter into any transaction with any Affiliate except in the ordinary course of business, in each case, upon terms no less favorable to the Borrower or any Subsidiary then would be obtained in an arms-length, third party transaction. The foregoing provision shall not restrict (i) any employment agreement entered into by the Borrower or any of its Subsidiaries in the ordinary course of business and consistent with the past practices of the Borrower and/or any such Subsidiary, (ii) transactions between or among the Borrower and/or the Subsidiary Guarantors, (iii) transactions between First Atlantic Capital, Ltd. ("First Atlantic"), pursuant to the Second Amended and Restated Management Agreement dated as of June 18, 1996, as amended to the date hereof or otherwise amended with the Agent's prior written consent (solely for purposes of this Section 6.2.10, between the Borrower and First Atlantic, (iv) the payment of Distributions permitted by Section 6.2.3, and (v) any transaction fee payable to First Atlantic not to exceed $1,250,000 per transaction. 6.2.11 ERISA COMPLIANCE. Neither the Borrower nor any Commonly Controlled Entity shall: (a) engage in or permit any "prohibited transaction" (as defined in ERISA); (b) cause any "accumulated funding deficiency" as defined in ERISA and/or the Internal Revenue Code; (c) terminate any pension plan in a manner which could result in the imposition of a lien on the property of the Borrower pursuant to ERISA; (d) terminate or consent to the termination of any Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect to any Multiemployer Plan. 6.2.12 PROHIBITION ON HAZARDOUS MATERIALS. The Borrower shall not place, manufacture or store or permit to be placed, manufactured or stored any Hazardous Materials on any property owned, operated or controlled by the Borrower or for which the Borrower is responsible other than Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course of the Borrower's or any tenant's business expressly described in this Agreement, or permit any Subsidiary to do so. 6.2.13 AMENDMENTS. The Borrower will not amend or agree to amend any of the Subordinated Debt Loan Documents, any of the Senior Secured Debt Loan Documents, any of the PackerWare Merger Agreement Documents and/or any of the Venture Stock Purchase/Merger Documents, other than in the normal course of business. 6.2.14 METHOD OF ACCOUNTING; FISCAL YEAR. The Borrower agrees that: (a) it shall not change, or permit any Subsidiary to change, the method of accounting employed in the preparation of any financial statements furnished to the Agent under the provisions of Section 6.1.1 (Financial Statements) of this Agreement, unless required to conform to GAAP and on the condition that the Borrower's accountants shall furnish such information as the Agent may request to reconcile the changes with the Borrower's prior financial statements. (b) it will not change or permit any Subsidiary to change, its fiscal year from a year ending on or about December 31. 6.2.15 TRANSFER OF COLLATERAL. Neither the Borrower nor any of its Subsidiaries will transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral, except (i) for transfers among the Borrower and the Subsidiary Guarantors, if and to the extent the first priority Lien (subject to Permitted Liens) of the Agent and the Lenders would be unaffected by any such transfers or (ii) transfers of Inventory in the ordinary course of business to bailees, warehousemen, consignees or similar third parties if and to the extent that either (1) such bailees, warehousemen, consignees or similar third parties have entered into an agreement with the Agent in which such bailees, warehousemen, consignees or similar third parties consent and agree to the superior Lien of the Agent and the Lenders on such Inventory and to such other terms and conditions as may be reasonably required by the Agent or (2) the Agent has established reserves against the Borrowing Base with respect to any such Inventory so transferred in accordance with the provisions set forth in the definition of Eligible Inventory, which reserves the Agent shall establish upon the Borrower's request. 6.2.16 SALE AND LEASEBACK. The Borrower nor any of the Subsidiaries will directly or indirectly enter into any arrangement to sell or transfer all or any substantial part of its fixed assets and thereupon or within one year thereafter rent or lease the assets so sold or transferred, except as contemplated by subsection (h) or subsection (m) of the definition of Permitted Asset Disposition. ARTICLE 7 DEFAULT AND RIGHTS AND REMEDIES SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement: 7.1.1 FAILURE TO PAY. The failure of the Borrower to pay any of the Obligations within three (3) days of the date as and when due and payable in accordance with the provisions of this Agreement, the Notes and/or any of the other Financing Documents; 7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or warranty made in this Agreement, in any of the other Financing Documents, or in any report, statement, schedule, certificate, opinion, financial statement or other document furnished in connection with this Agreement, any of the other Financing Documents, or the Obligations, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. 7.1.3 FAILURE TO COMPLY WITH CERTAIN COVENANTS. The failure of the Borrower to perform, observe or comply, or to cause any Subsidiary Guarantor to perform, observe or comply, as appropriate, with any covenant, condition or agreement contained in Sections 6.1.1 (Financial Statements), Section 6.1.3(a) (Bookkeeping, Rights of Inspection, Field Examination, Etc.) with respect to inspection rights only, Section 6.1.8 (Insurance), Section 6.1.13 (Financial Covenants), Section 6.1.17 (Insurance with Respect to Equipment), Section 6.1.19 (Defense of Title and Further Assurances), Section 6.1.19 (Business Names; Locations), or Section 6.2 (Negative Covenants). 7.1.4 FAILURE TO COMPLY WITH OTHER COVENANTS. The failure of the Borrower to perform, observe or comply, or to cause any Subsidiary Guarantor to perform, observe or comply, as appropriate, with any covenant, condition or agreement contained in this Agreement other than those set forth in Section 7.1.1, 7.1.2 or 7.1.3 above, which failure shall remain unremedied for a period of thirty (30) days after written notice thereof to the Borrower by the Agent. 7.1.5 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR OBLIGATIONS. The failure of the Borrower and/or any other Person (other than the Agent or any of the Lenders) which is a party to any of the Financing Documents, to perform, observe or comply with any covenant, condition or agreement contained in any such Financing Documents which is not otherwise covered by any other Section of this Article 7, which failure shall remain unremedied for a period of thirty (30) days after written notice thereof to the Borrower by the Agent or the occurrence of an Event of Default under any of the other Financing Documents as defined therein. 7.1.6 RECEIVER; BANKRUPTCY. The Borrower or any Guarantor shall (a) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (b) admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (f) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (g) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of all or substantially all of the Borrower's or any Guarantor's business or the use or disposition of all or substantially all of the Borrower's or any Guarantor's assets. 7.1.7 INVOLUNTARY BANKRUPTCY, ETC. (a) An order for relief shall be entered in any involuntary case brought against the Borrower or any Guarantor under the Bankruptcy Code, or (b) any such case shall be commenced against the Borrower or any Guarantor and shall not be dismissed within sixty (60) days after the filing of the petition, or (c) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than the Borrower or any Guarantor (i) adjudicating the Borrower, or any Guarantor bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of the Borrower or of any Guarantor, or of a material portion of the Borrower's or any Guarantor's assets, or (iii) enjoining, prohibiting or otherwise limiting the operation of all or substantially all of the Borrower's or any Guarantor's business or the use or disposition of all or substantially all of the Borrower's or any Guarantor's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. 7.1.8 JUDGMENT. Unless adequately insured in the reasonable opinion of the Agent, the entry of a final judgment for the payment of money involving more than $1,000,000 (individually and in the aggregate) against the Borrower and/or any or all of the Guarantors, and the failure by the Borrower or such Guarantor to discharge the same, or cause it to be discharged, within sixty (60) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. 7.1.9 EXECUTION; ATTACHMENT. Any execution or attachment shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within sixty (60) days after the same shall have been levied. 7.1.10 DEFAULT UNDER OTHER BORROWINGS. An event of default shall be made with respect to any Indebtedness for Borrowed Money in a principal amount in excess of Two Million Dollars ($2,000,000), either individually or in the aggregate, of the Borrower and/or any or all of the Guarantors, other than the Loans, if such Indebtedness for Borrowed Money was not paid when due, after giving effect to any applicable notice and cure period, or if the effect of such event of default is to accelerate the maturity of such Indebtedness for Borrowed Money or to permit the holder or obligee thereof or other party thereto to cause such Indebtedness for Borrowed Money to become due prior to its stated maturity. 7.1.11 CHALLENGE TO AGREEMENTS. The Borrower or any Guarantor shall challenge the validity and binding effect of any provision of any of the Financing Documents or any of the Financing Documents shall for any reason (except to the extent permitted by its express terms) cease to be effective or to create a valid and perfected first priority Lien (except for Permitted Liens, certain of which Permitted Liens, to the extent expressly permitted by the provisions of this Agreement, may constitute superior and prior Liens) on, or security interest in, any of the Collateral purported to be covered thereby, unless due to the gross negligence or willful misconduct of the Agent. 7.1.12 MATERIAL ADVERSE CHANGE. The Requisite Lenders, in their sole discretion, determine in good faith that a material adverse change has occurred in the financial condition of the Borrower and/or the Subsidiary Guarantors, taken as a whole. 7.1.13 CHANGE IN OWNERSHIP. (1) The Borrower shall cease to own and control, beneficially and of record, directly or indirectly, at least one hundred percent (100%) of the issued and outstanding capital stock of each Subsidiary Guarantor (except pursuant to any transaction permitted by Section 6.2.1 or Section 6.2.2), (2) the Parent shall cease to own and control, beneficially and of record, directly or indirectly, at least one hundred percent (100%) of the issued and outstanding capital stock of the Borrower, or (3) Atlantic Equity Partners International II, L.P. ("AEP"), Chase Capital Partners, and their respective Affiliates shall cease to own and control, beneficially and of record, at least fifty-one percent (51%) or more of the issued and outstanding voting capital stock of the Parent. 7.1.14 LIQUIDATION, TERMINATION, DISSOLUTION, CHANGE IN MANAGEMENT, ETC. The Borrower or any Guarantor shall liquidate, dissolve or terminate its existence, except as otherwise expressly permitted by the provisions of Section 6.2 of this Agreement. 7.1.15 PARENT LINE OF BUSINESS. At any time the Parent engages in any business other than the ownership of capital stock of the Borrower or any other Wholly-Owned Subsidiary or such other business as shall be mandatory under the provisions of applicable Laws. SECTION 7.2 REMEDIES. Upon the occurrence of any Event of Default, the Agent may, in the exercise of its sole and absolute discretion from time to time, and shall, at the direction of the Requisite Lenders, at any time thereafter exercise any one or more of the following rights, powers or remedies: 7.2.1 ACCELERATION. The Agent may declare any or all of the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which the Borrower hereby waives. 7.2.2 FURTHER ADVANCES. The Agent may from time to time without notice to the Borrower suspend, terminate or limit any further advances, loans or other extensions of credit under the Commitment, under this Agreement and/or under any of the other Financing Documents. Further, upon the occurrence of an Event of Default specified in Sections 7.1.6 (Receiver; Bankruptcy) or 7.1.7 (Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitments, the Letter of Credit Commitments, the Bond Letter of Credit Commitments and any agreement in any of the Financing Documents to provide additional credit and/or to issue Letters of Credit and/or Bond Letters of Credit shall immediately and automatically terminate and the unpaid principal amount of the Notes (with accrued interest thereon) and all other Obligations then outstanding, shall immediately become due and payable without further action of any kind and without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower. 7.2.3 UNIFORM COMMERCIAL CODE. The Agent shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by the Agent, the Borrower shall assemble the Collateral and make it available to the Agent, at a place designated by the Agent. The Agent or its agents may without notice from time to time enter upon the Borrower's premises to take possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it. Any written notice of the sale, disposition or other intended action by the Agent with respect to the Collateral which is sent by regular mail, postage prepaid, to the Borrower at the address set forth in Section 9.1 of this Agreement, or such other address of the Borrower which may from time to time be shown on the Agent's records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to the Borrower. The Agent may alternatively or additionally give such notice in any other commercially reasonable manner. If any consent, approval, or authorization of any state, municipal or other Governmental Authority or of any other Person or of any Person having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, the Borrower agrees to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization. The Borrower recognizes that the Agent may be unable to effect a public sale of all or a part of the Collateral consisting of Securities by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable Federal and state Laws. The Agent may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of the Agent that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. The Borrower covenants and agrees to do or cause to be done promptly all such acts and things as the Agent may request from time to time and as may be necessary to offer and/or sell the Securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, the Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold. 7.2.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, the Agent may (but shall be under no obligation to), without notice to the Borrower, and upon the occurrence of an Event of Default the Borrower hereby irrevocably appoints the Agent as its attorney-in-fact, with power of substitution, in the name of the Agent and/or any or all of the Lenders and/or in the name of the Borrower or otherwise, for the use and benefit of the Agent and the Lenders, but at the cost and expense of the Borrower: (a) request any Account Debtor obligated on any of the Accounts to make payments thereon directly to the Agent, with the Agent taking control of the cash and non-cash proceeds thereof; (b) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable,; (c) make exchanges, substitutions or surrenders of all or any part of the Collateral; (d) copy, transcribe, or remove from any place of business of the Borrower or any Subsidiary all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to the Agent or the Lenders, make such use of the Borrower's or any Subsidiary's place(s) of business as may be reasonably necessary to administer, control and collect the Collateral; (e) repair, alter or supply goods if necessary to fulfill in whole or in part the purchase order of any Account Debtor; (f) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral; (g) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral; (h) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof; (i) endorse or sign the name of the Borrower upon any items of payment, certificates of title, instruments, securities, stock powers, documents, documents of title, financing statements, assignments, notices or other writing relating to or part of the Collateral and on any proof of claim in bankruptcy against an Account Debtor; (j) notify the Post Office authorities to change the address for the delivery of mail to the Borrower to such address or Post Office Box as the Agent may designate and receive and open all mail addressed to the Borrower; and (k) take any other action necessary or beneficial to realize upon or dispose of the Collateral or to carry out the terms of this Agreement. 7.2.5 APPLICATION OF PROCEEDS. Unless otherwise required by applicable Laws, any proceeds of sale or other disposition of the Collateral will be applied by the Agent to the payment first of any and all Agent's Obligations, then to any and all Enforcement Costs, and any balance of such proceeds will be remitted to the Lenders in like currency and funds received ratably in accordance with their respective Pro Rata Shares of such balance. Each Lender shall apply any such proceeds received from the Agent to its Obligations in such order and manner as such Lender shall determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, the Borrower shall remain liable to the Agent and the Lenders for any deficiency. 7.2.6 PERFORMANCE BY AGENT. If the Borrower shall fail to pay the Obligations or otherwise fail to perform, observe or comply with any of the conditions, covenants, terms, stipulations or agreements contained in this Agreement or any of the other Financing Documents, the Agent without notice to or demand upon the Borrower and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Borrower, and may enter upon the premises of the Borrower for that purpose and take all such action thereon as the Agent may consider necessary or appropriate for such purpose and each of the Borrower hereby irrevocably appoints the Agent as its attorney-in-fact upon the occurrence of an Event of Default to do so, with power of substitution, in the name of the Agent, in the name of any or all of the Lenders, or in the name of the Borrower or otherwise, for the use and benefit of the Agent, but at the cost and expense of the Borrower and without notice to the Borrower. All sums so paid or advanced by the Agent together with interest thereon from the date of payment, advance or incurring until paid in full at the Post- Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by the Borrower to the Agent on demand, and shall constitute and become a part of the Agent's Obligations. 7.2.7 OTHER REMEDIES. The Agent may from time to time proceed to protect or enforce the rights of the Agent and/or any of the Lenders by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. The Agent and each of the Lenders is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of the Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, the Agent, any of the Lenders or any Affiliate of the Agent or any of the Lenders. ARTICLE 8 THE AGENT SECTION 8.1 APPOINTMENT. Each Lender hereby designates and appoints NationsBank as its agent under this Agreement and the Financing Documents, and each Lender hereby irrevocably authorizes the Agent to take such action or to refrain from taking such action on its behalf under the provisions of this Agreement and the Financing Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such on the express conditions contained in this Article 8. The provisions of this Article 8 are solely for the benefit of the Agent and the Lenders and neither the Borrower nor any Person shall have any rights as a third party beneficiary of any of the provisions hereof, except for those rights expressly granted to the Borrower pursuant to Sections 8.7.1, 8.8, 8.12 and 8.13. In performing its functions and duties under this Agreement, the Agent shall act solely as an administrative representative of the Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for the Lenders, the Borrower or any Person. The Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents or employees. SECTION 8.2 NATURE OF DUTIES. 8.2.1 IN GENERAL. The Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement or in the Financing Documents. The duties of the Agent shall be mechanical and administrative in nature. The Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Each Lender shall make its own independent investigation of the financial condition and affairs of the Borrower in connection with the extension of credit hereunder and shall make its own appraisal of the credit worthiness of the Borrower, and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the Closing Date or at any time or times thereafter. If the Agent seeks the consent or approval of any of the Lenders to the taking or refraining from taking of any action hereunder, then the Agent shall send notice thereof to each Lender. The Agent shall promptly notify each Lender any time that the applicable percentage of the Lenders have instructed the Agent to act or refrain from acting pursuant hereto. 8.2.2 EXPRESS AUTHORIZATION. The Agent is hereby expressly and irrevocably authorized by each of the Lenders, as agent on behalf of itself and the other Lenders: (a) To receive on behalf of each of the Lenders any payment or collection on account of the Obligations and to distribute to each Lender its Pro Rata Share of all such payments and collections so received as provided in this Agreement; (b) To receive all documents and items to be furnished to the Lenders under the Financing Documents; (c) To act or refrain from acting in this Agreement and in the other Financing Documents with respect to those matters so designated for the Agent; (d) To act as nominee for and on behalf of the Lenders in and under this Agreement and the other Financing Documents; (e) To arrange for the means whereby the funds of the Lenders are to be made available to the Borrower; (f) To distribute promptly to the Lenders, if required by the terms of this Agreement, all written information, requests, notices, Loan Notices, payments, Prepayments, documents and other items received from the Borrower or other Person; (g) To amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of the Lenders subject to the requirements that all or certain of the Lenders' consent be obtained in certain instances as provided in Section 8.13 and 9.2; (h) To deliver to the Borrower and other Persons, all requests, demands, approvals, notices, and consents received from any of the Lenders; (i) To exercise on behalf of each Lender all rights and remedies of the Lenders upon the occurrence of any Event of Default and/or Default specified in this Agreement and/or in any of the other Financing Documents or applicable Laws; (j) To execute any of the Security Documents and any other documents on behalf of the Lenders as the secured party for the benefit of the Agent and the Lenders; and (k) To take such other actions as may be requested by the Requisite Lenders. SECTION 8.3 RIGHTS, EXCULPATION, ETC. Neither the Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Financing Documents, or in connection herewith or therewith, except that the Agent shall be obligated on the terms set forth herein for performance of its express obligations hereunder, and except that the Agent shall be liable with respect to its own gross negligence or willful misconduct. The Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other the Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). The Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectible, or sufficiency of this Agreement or any of the Financing Documents or the transactions contemplated thereby, or for the financial condition of any Person. The Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Financing Documents or the financial condition of any Person, or the existence or possible existence of any Default or Event of Default. The Agent agrees to use its reasonable efforts to notify the Lenders as to the occurrence of any material Event of Default promptly upon obtaining actual knowledge thereof, provided, however, that the failure in good faith of the Agent to so notify any Lender shall not give rise to any liability on the part of the Agent nor shall it waive, discharge or otherwise adversely affect the Agent's ability to exercise and enforce any rights or remedies resulting from such Event of Default. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Financing Documents the Agent is permitted or required to take or to grant, and the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing Documents until it shall have received such instructions from the applicable percentage of the Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of the applicable percentage of the Lenders and notwithstanding the instructions of the Lenders, the Agent shall have no obligation to take any action if it, in good faith believes that such action exposes the Agent to any liability. SECTION 8.4 RELIANCE. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, telex, telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Financing Documents and its duties hereunder or thereunder, upon advice of counsel selected by it. The Agent may deem and treat the original Lenders as the owners of the respective Notes for all purposes until receipt by the Agent of a written notice of assignment, negotiation or transfer of any interest therein by the Lenders in accordance with the terms of this Agreement. Any interest, authority or consent of any holder of any of the Notes shall be conclusive and binding on any subsequent holder, transferee, or assignee of such Notes. The Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by the Agent in its sole discretion. SECTION 8.5 INDEMNIFICATION. Each Lender, severally, agrees to reimburse and indemnify the Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements including, without limitation, Enforcement Costs, of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any of the Financing Documents or any action taken or omitted by the Agent under this Agreement for any of the Financing Documents, in proportion to each Lender's Pro Rata Share, all of the foregoing as they may arise, be asserted or be imposed from time to time; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from the Agent's gross negligence or willful misconduct. The obligations of the Lenders under this Section 8.5 shall survive the payment in full of the Obligations and the termination of this Agreement. SECTION 8.6 NATIONSBANK INDIVIDUALLY. With respect to its Commitments and the Loans made by it, and the Notes issued to it, NationsBank shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "the Lenders" or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include NationsBank in its individual capacity as a Lender or one of the Requisite Lenders. NationsBank and its Affiliates may lend money to, accept deposits from and generally engage in any kind of banking, trust or other business with the Borrower, any Affiliate of the Borrower, or any other Person or any of their officers, directors and employees as if NationsBank were not acting as the Agent pursuant hereto and the Agent may accept fees and other consideration from the Borrower, any Affiliate of the Borrower or any of their officers, directors and employees (in addition to the Agency Fees or other arrangements or fees heretofore agreed to between the Borrower and the Agent) for services in connection with this Agreement or otherwise without having to account for or share the same with the Lenders. SECTION 8.7 SUCCESSOR AGENT. 8.7.1 RESIGNATION. The Agent may resign from the performance of all its functions and duties hereunder at any time by giving at least thirty (30) Business Days' prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 8.7.2 below or as otherwise provided below. 8.7.2 APPOINTMENT OF SUCCESSOR. Upon any such notice of resignation pursuant to Section 8.7.1 above, the Requisite Lenders, with the consent of NationsBank and the Borrower, shall appoint a successor to the Agent. If a successor to the Agent shall not have been so appointed within said thirty (30) Business Day period, the Agent retiring, upon notice to the Borrower, shall then appoint a successor Agent who shall serve as the Agent until such time, as the Requisite Lenders appoint a successor the Agent as provided above. 8.7.3 SUCCESSOR AGENT. Upon the acceptance of any appointment as the Agent under the Financing Documents by a successor Agent, such successor to the Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the Agent retiring, and the Agent retiring shall be discharged from its duties and obligations under the Financing Documents. After any Agent's resignation as the Agent under the Financing Documents, the provisions of this Article 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under the Financing Documents. SECTION 8.8 COLLATERAL MATTERS. 8.8.1 RELEASE OF COLLATERAL. The Lenders hereby irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any property covered by this Agreement or the Financing Documents: (i) upon termination of the Commitments and payment and satisfaction of all Obligations and expiration or termination of all Letters of Credit and all Bond Letters of Credit; (ii) constituting property being sold or disposed of if the Borrower or a Subsidiary Guarantor certifies to the Agent that the sale or disposition is made in compliance with the provisions of this Agreement (and the Agent may rely in good faith conclusively on any such certificate, without further inquiry); (iii) constituting property leased to the Borrower or any Subsidiary under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or the Subsidiary to be, renewed or extended; or (iv) constituting property covered by Permitted Liens with lien priority superior to those Liens in favor or for the benefit of the Lenders. In addition during any fiscal year of the Borrower (x) the Agent may release Collateral having a book value of not more than 5% of the book value of all Collateral, (y) the Agent, with the consent of Requisite Lenders, may release Collateral having a book value of not more than 25% of the book value of all Collateral and (z) the Agent, with the consent of the Lenders having 90% of (i) the Commitments and (ii) Loans, may release all the Collateral. 8.8.2 CONFIRMATION OF AUTHORITY, EXECUTION OF RELEASES. Without in any manner limiting the Agent's authority to act without any specific or further authorization or consent by the Lenders as set forth in Section 8.8.1, each Lender agrees to confirm in writing the authority to release any property covered by this Agreement or the Financing Documents conferred upon the Agent under Section 8.8.1. So long as no Event of Default is then continuing, upon receipt by the Agent of confirmation from the requisite percentage of the Lenders, of its authority to release any particular item or types of property covered by this Agreement or the Financing Documents, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Lenders herein or pursuant hereto upon such Collateral; PROVIDED, HOWEVER, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of any Person, in respect of), all interests retained by any Person, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the property covered by this Agreement or the Financing Documents. 8.8.3 ABSENCE OF DUTY. The Agent shall have no obligation whatsoever to any Lender, the Borrower or any other Person to assure that the property covered by this Agreement or the Financing Documents exists or is owned by the Borrower or any Subsidiary Guarantor or is cared for, protected or insured or has been encumbered or that the Liens granted to the Agent on behalf of the Lenders herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent in this Section 8.8.3 or in any of the Financing Documents, it being understood and agreed that in respect of the property covered by this Agreement or the Financing Documents or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its discretion, given the Agent's own interest in property covered by this Agreement or the Financing Documents as one of the Lenders and that the Agent shall have no duty or liability whatsoever to any of the other the Lenders. SECTION 8.9 AGENCY FEE. The Borrower shall pay to the Agent, an annual loan administration and agency fee (collectively, the "Agency Fees" and individually, an "Agency Fee"), in the aggregate amount of Eighty Thousand Dollars ($80,000), payable quarterly in arrears in installments of $20,000 each. The initial Agency Fee shall be payable in advance on the date of this Agreement, and each Agency Fee thereafter shall be payable in advance on the first day of each quarterly period, commencing with the first such day following the date hereof. Each Agency Fee shall be fully earned and non-refundable upon the date paid. The Agent shall retain all of the Agency Fees for its own account and shall have no obligation to remit or pay any portion thereof to any of the Lenders. SECTION 8.10 AGENCY FOR PERFECTION. Each Lender hereby appoints the Agent and each other Lender as agent for the purpose of perfecting the Lenders' Liens in Collateral which, in accordance with Article 9 of the Uniform Commercial Code in any applicable jurisdiction or otherwise, can be perfected only by possession. Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agent's request therefor, shall deliver such Collateral to the Agent or in accordance with the Agent's instructions. SECTION 8.11 EXERCISE OF REMEDIES. Each Lender agrees that it will not have any right individually to enforce or seek to enforce this Agreement or any Financing Document or to realize upon any collateral security for the Loans, it being understood and agreed that such rights and remedies may be exercised only by the Agent. SECTION 8.12 CONSENTS. (a) In the event the Agent requests the consent of a Lender and does not receive a written denial thereof, or a written notice from a Lender that due cause consideration of the request requires additional time, in each case, within ten (10) Business Days after such Lender's receipt of such request, then such Lender will be deemed to have given such consent. (b) In the event the Agent or the Borrower requests the consent of a Lender and such consent is denied, then NationsBank or the Borrower may, at its option, require such Lender to assign its interest in the Loans to NationsBank or such other lender as shall be acceptable to the Borrower and the Agent, for a price equal to the then outstanding principal amount thereof, PLUS accrued and unpaid interest, fees and costs and expenses due such Lender under the Financing Documents, which principal, interest, fees and costs and expenses will be paid on the date of such assignment. In the event that NationsBank or the Borrower elects to require any Lender to assign its interest to NationsBank or such other lender as shall be acceptable to the Borrower and the Agent, NationsBank will so notify such Lender in writing within thirty (30) days following such Lender's denial, and such Lender will assign its interest to NationsBank or such other lender as shall be acceptable to the Borrower and the Agent, no later than five (5) days following receipt of such notice. (c) The Lenders each hereby authorize the Agent on their behalf to execute any and all amendments to this Agreement and any of the other Financing Documents as may be necessary to remedy and correct any clerical errors, omissions or inconsistencies. The Agent agrees to give copies of any and all such executed amendments to each of the Lenders. SECTION 8.13 CIRCUMSTANCES WHERE CONSENT OF ALL OF THE LENDERS IS REQUIRED. Notwithstanding anything to the contrary contained herein, no amendment, modification, change or waiver shall be effective without the consent of all of the Lenders to: (a) increase the principal amount of any of the Commitments; (b) extend the maturity or due date of payment of principal, interest or Fees on account of the Obligations; (c) reduce the principal amount of any Obligations, the rate of interest on any of the Obligations or any Fees payable, except as expressly permitted therein; (d) change the method of calculation utilized in connection with the computation of interest and Fees; (e) change the manner of pro rata application by the Agent of payments made by the Borrower, or any other payments required hereunder or under the other Financing Documents; (f) modify this Section or the definition of "Requisite Lenders"; (g) release any material portion of any Collateral, any Guarantor or any Financing Document (except to the extent provided herein or therein); and (h) increase the advance rates for any component of the Borrowing Base. SECTION 8.14 DISSEMINATION OF INFORMATION. The Agent will provide the Lenders with any information received by the Agent from the Borrower which is required to be provided to the Agent or to the Lenders hereunder; PROVIDED, HOWEVER, that the Agent shall not be liable to any one or more the Lenders for any failure to do so, except to the extent that such failure is attributable to the Agent's gross negligence or willful misconduct. SECTION 8.15 DISCRETIONARY ADVANCES. The Agent may, in its sole discretion, make, for the account of the Lenders on a pro rata basis, advances under the Revolving Loan of up to 10% in excess of the Borrowing Base but not in excess of the limitation set forth in aggregate Revolving Credit Commitments for a period of not more than thirty (30) consecutive days or, following an Event of Default, for such longer period as the Requisite Lenders may elect. ARTICLE 9 MISCELLANEOUS SECTION 9.1 NOTICES. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Borrower: BERRY PLASTICS CORPORATION 101 Oakley Street P.O. Box 959 Evansville, Indiana 47710-0959 Attention: President with a copy to: Lawrence G. Graev, Esquire O'Sullivan, Graev & Karabell 30 Rockefeller Center 41st Floor New York, New York 10112 with a copy to: Joseph S. Levy Vice President First Atlantic Capital, Ltd. 135 East 57th Street, 29th Floor New York, New York 10022 Agent: NATIONSBANK, N.A. NationsBank Business Credit 100 S. Charles Street Baltimore, Maryland 21201 Attention: Vickie Tillman with a copy to: Shaun F. Carrick, Esquire Miles & Stockbridge, P.A. 10 Light Street Baltimore, Maryland 21202 NationsBank: NationsBank, N.A. NationsBank Business Credit 100 S. Charles Street Baltimore, Maryland 21201 Attn: Ms. Vickie Tillman GE Capital: General Electric Capital Corporation 201 High Ridge Road Stamford, Connecticut 06927 Attn: Account Manager - Berry Plastics Fleet: Fleet Capital Corporation 200 Glastonbury Boulevard Glastonbury, Connecticut 06033 Attn: Mr. Robert M. Dailey By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. SECTION 9.2 AMENDMENTS; WAIVERS. This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Requisite Lenders and the Borrower, and to the extent provided in Section 8.13 by an agreement in writing signed by all of the Lenders and the Borrower. In addition, any agreement which directly or indirectly affects any rights, duties, obligations, liabilities or remedies of the Agent under this Agreement, under any of other Financing Documents or otherwise must be approved and signed by the Agent. No waiver of any provision of this Agreement or of any of the other Financing Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing. No course of dealing between the Borrower and the Agent and/or any of the Lenders and no act or failure to act from time to time on the part of the Agent and/or any of the Lenders shall constitute a waiver, amendment or modification of any provision of this Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing, and subject to the provisions of Section 8.13: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as the Agent may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in the same, similar or other circumstance. (d) No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude the Agent from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, the Agent shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a Default or an Event of Default for failure to effect such prompt payment of any such other amount. SECTION 9.3 CUMULATIVE REMEDIES. The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Agent shall determine, subject to the provisions of this Agreement, and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle the Agent to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing and subject to the terms of this Agreement, the Agent may: (a) proceed against the Borrower with or without proceeding against any other Person (including, without limitation, any one or more of the Guarantors) who may be liable (by endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations; (b) proceed against the Borrower with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of the Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; (d) without reducing or impairing the obligations of the Borrower and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral, (ii) approve the making of advances under the Revolving Loan under this Agreement, (iii) waive any provision of this Agreement or the other Financing Documents, (iv) exercise or fail to exercise rights of set-off or other rights, or (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. SECTION 9.4 SEVERABILITY. In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. SECTION 9.5 ASSIGNMENTS BY LENDERS. Any Lender may, with the prior written consent of the Agent and the Borrower, but without notice to or consent of any other Lender, which consent shall not be unreasonably withheld, delayed or conditioned, assign to any Person (each an "Assignee" and collectively, the "Assignees") all or a portion of such Lender's Commitments; provided that (i) the amount assigned by such Lender must be at least equal to Five Million Dollars ($5,000,000), (ii) after giving effect to such assignment, such Lender must continue to hold a Pro Rata Share of the Commitments at least equal to Ten Million Dollars ($10,000,000), unless such Lender has assigned one hundred percent (100%) of such Lender's Commitments, and (iii) any amount assigned shall be divided pro rata among such Lenders' Pro Rata Share of the Commitments and Obligations. NationsBank agrees that if at any time NationsBank sells one hundred percent (100%) of all of its Commitments, NationsBank shall resign as Agent and the remaining Lenders shall select a replacement Agent in accordance with the provisions of this Agreement. In addition, NationsBank agrees that for so long as NationsBank is the Agent, unless otherwise agreed by the Lenders, NationsBank shall continue to hold a Pro Rata Share of the Commitments at least equal to the Pro Rata Share of the Lender (other than NationsBank) having the highest Pro Rata Share of the Commitments. Any Lender which elects to make such an assignment shall pay to the Agent, for the exclusive benefit of the Agent, an administrative fee for processing each such assignment in the amount of Three Thousand Five Hundred Dollars ($3,500). Such Lender and its Assignee shall notify the Agent and the Borrower in writing of the date on which the assignment is to be effective (the "Adjustment Date"). On or before the Adjustment Date, the assigning Lender, the Agent, the Borrower and the respective Assignee shall execute and deliver a written assignment agreement in a form acceptable to the Agent, which shall constitute an amendment to this Agreement to the extent necessary to reflect such assignment. Upon the request of any assigning Lender following an assignment made in accordance with this Section 9.5, the Borrower shall issue new Notes to the assigning Lender and its Assignee reflecting such assignment, in exchange for the existing Notes held by the assigning Lender. In addition to the foregoing assignments permitted by this Section 9.5, without the prior written consent of the Borrower, but with the consent of the Agent, which consent shall not be unreasonably withheld, delayed or conditioned, any Lender may assign all or any portion of such Lender's Commitments (a) to NationsBank, Fleet, or GE Capital at any time regardless of the occurrence or non-occurrence of an Event of Default and (b) to any other Person at any time after the occurrence of an Event of Default; provided that with respect to any such proposed assignment under either (a) or (b) (i) the amount to be assigned by such assigning Lender must be at least equal to Five Million Dollars ($5,000,000), (ii) after giving effect to such assignment, such assigning Lender must continue to hold a Pro Rata Share of the Commitments at least equal to Ten Million Dollars ($10,000,000), unless such Lender has assigned one hundred percent (100%) of such Lender's Commitments, (iii) any amount to be assigned shall be divided pro rata among such Lender's Pro Rata Share of the Commitments and the Obligations, and (iv) prior to closing and consummating the proposed assignment (the "Proposed Assignee"), the Lender shall have first given the Borrower notice of the proposed assignment (the "Right of First Refusal Notice") to permit the Borrower an opportunity to locate another Person acceptable to the Agent (the "Substitute Purchaser") to close and consummate the proposed assignment on the same terms and conditions available to the Proposed Assignee and the Substitute Purchaser shall in fact close and consummate the proposed assignment within thirty (30) days after the Right of First Refusal Notice. If the Borrower fails to locate a Substitute Purchaser or if the Substitute Purchaser fails to close and consummate the proposed assignment within such thirty (30) day period, the assigning Lender shall be entitled to close and consummate the proposed assignment to the Proposed Assignee without further notice or obligation to the Borrower. In addition, notwithstanding the foregoing, any Lender may at any time pledge all or any portion of such Lender's rights under this Agreement, any of the Commitments or any of the Obligations to a Federal Reserve Bank. SECTION 9.6 PARTICIPATIONS BY LENDERS. Any Lender may at any time sell to one or more financial institutions participating interests in any of such Lender's Obligations or Commitments; provided, however, that (a) no such participation shall relieve such Lender from its obligations under this Agreement or under any of the other Financing Documents to which it is a party, (b) such Lender shall remain solely responsible for the performance of its obligations under this Agreement and under all of the other Financing Documents to which it is a party, (c) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Financing Documents, and (d) no such participant shall be granted voting rights with respect to any matters reserved for the Lenders under the provisions of this Agreement. SECTION 9.7 DISCLOSURE OF INFORMATION BY LENDERS. (a) In connection with any sale, transfer, assignment or participation by any Lender in accordance with Section 9.5 or 9.6 above, each Lender shall have the right to disclose to any actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and/or any of the other Financing Documents or otherwise, provided that such actual or potential purchaser shall agree to keep confidential any non-public information delivered or made available to such Lender. (b) Each of the Lenders and the Agent hereby agree to exercise reasonable efforts to keep any non-public information delivered or made available to it pursuant to this Agreement or any of the Financing Documents, confidential from any other Person except (a) Persons employed or retained by such Lender or Agent who are or are expected to become engaged in evaluating, approving, structuring or administering the Obligations, (b) with the prior written consent of Borrower, (c) as required in connection with the exercise of any remedy under this Agreement or any of the Financing Documents or (e) as may be required by Law, provided that in the event that any Lender, the Agent or any of its or their representatives are requested or compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any of the non-public information delivered or made available to any Lender or the Agent pursuant to this Agreement or any of the Financing Documents, the Lenders, the Agent and its or their representatives, as appropriate, agree to provide Borrower with prompt notice of such request(s). SECTION 9.8 SUCCESSORS AND ASSIGNS. This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of the Borrower, the Agent and the Lenders and their respective heirs, personal representatives, successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Agent and the Requisite Lenders. SECTION 9.9 CONTINUING AGREEMENTS. All covenants, agreements, representations and warranties made by the Borrower in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by the Lenders of the Loans, the issuance of Letters of Credit by the Agent and the execution and delivery of the Notes, shall be binding upon the Borrower regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon the Agent's request, and as a condition of the release of any one or more of the Security Documents, the Borrower and other Persons obligated with respect to the Obligations shall provide the Agent with such acknowledgments and agreements as the Agent may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the Agent, any or all of the Lenders, and/or any of its or their agents and others, or to the extent there are, the same are waived and released. SECTION 9.10 ENFORCEMENT COSTS. The Borrower agrees to pay to the Agent on demand all Enforcement Costs (including expenses and fees incurred by any Lender to the extent included in the definition of Enforcement Costs), together with interest thereon from the date following demand until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due and payable at the time advanced or incurred, whichever is earlier. Without implying any limitation on the foregoing, the Borrower agrees, as part of the Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save the Agent and the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement. SECTION 9.11 APPLICABLE LAW; JURISDICTION. 9.11.1 As a material inducement to the Agent and the Lenders to enter into this Agreement, the Borrower acknowledges and agrees that the Financing Documents, including, this Agreement, shall be governed by the Laws of the State, as if each of the Financing Documents and this Agreement had each been executed, delivered, administered and performed solely within the State even though for the convenience and at the request of the Borrower, one or more of the Financing Documents may be executed elsewhere. The Agent and the Lenders acknowledge, however, that remedies under certain of the Financing Documents which relate to property outside the State may be subject to the laws of the state in which the property is located. 9.11.2 The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the 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. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction, by a suit upon such judgment, PROVIDED that service of process is effected upon the Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws. 9.11.3 The Borrower hereby irrevocably designates and appoints The Corporation Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202, as the Borrower's authorized agent to receive on the Borrower's behalf service of any and all process that may be served in any suit, action or proceeding of the nature referred to in this Section in any state or federal court sitting in the State. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the State satisfactory to the Agent and shall promptly deliver to the Agent evidence in writing of such other agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. 9.11.4 The Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (i) the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the Borrower at the Borrower's address designated in or pursuant to Section 9.1 hereof, and (ii) serving a copy thereof upon the agent, if any, designated and appointed by the Borrower as the Borrower's agent for service of process by or pursuant to this Section. The Borrower irrevocably agrees that such service (i) shall be deemed in every respect effective service of process upon the Borrower in any such suit, action or proceeding, and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon the Borrower. Nothing in this Section shall affect the right of the Agent to serve process in any manner otherwise permitted by law or limit the right of the Agent otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions. SECTION 9.12 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. SECTION 9.13 HEADINGS. The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. SECTION 9.14 NO AGENCY. Nothing herein contained shall be construed to constitute the Borrower as the agent of the Agent or any of the Lenders for any purpose whatsoever or to permit the Borrower to pledge any of the credit of the Agent or any of the Lenders. Neither the Agent nor any of the Lenders shall be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. Neither the Agent nor any of the Lenders shall, by anything herein or in any of the Financing Documents or otherwise, assume any of the Borrower's obligations under any contract or agreement assigned to the Agent and/or the Lenders, and neither the Agent nor any of the Lenders shall be responsible in any way for the performance by the Borrower of any of the terms and conditions thereof. SECTION 9.15 WAIVER OF TRIAL BY JURY. THE BORROWER, THE AGENT AND THE LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER, THE AGENT AND/OR ANY OR ALL OF THE LENDERS MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. This waiver is knowingly, willingly and voluntarily made by the Borrower, the Agent and the Lenders, and the Borrower, the Agent and the Lenders hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower, the Agent and the Lenders further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. SECTION 9.16 LIABILITY OF THE AGENT AND THE LENDERS. The Borrower hereby agrees that neither the Agent nor any of the Lenders shall be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by the Agent and/or any of the Lenders in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations, except for acts of gross negligence and willful misconduct. By inspecting the Collateral or any other properties of the Borrower or by accepting or approving anything required to be observed, performed or fulfilled by the Borrower or to be given to the Agent and/or any of the Lenders pursuant to this Agreement or any of the other Financing Documents, neither the Agent nor any of the Lenders shall be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by the Agent and/or the Lenders. SECTION 9.17 ENTIRE AGREEMENT. THIS AGREEMENT IS INTENDED BY THE AGENT, THE LENDERS AND THE BORROWER TO BE A COMPLETE, EXCLUSIVE AND FINAL EXPRESSION OF THE AGREEMENTS CONTAINED HEREIN. NEITHER THE AGENT, THE LENDERS NOR THE BORROWER SHALL HEREAFTER HAVE ANY RIGHTS UNDER ANY PRIOR AGREEMENTS PERTAINING TO THE MATTERS ADDRESSED BY THIS AGREEMENT BUT SHALL LOOK SOLELY TO THIS AGREEMENT FOR DEFINITION AND DETERMINATION OF ALL OF THEIR RESPECTIVE RIGHTS, LIABILITIES AND RESPONSIBILITIES UNDER THIS AGREEMENT. IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this Agreement under their respective seals as of the day and year first written above. WITNESS OR ATTEST: BERRY PLASTICS CORPORATION /S/ By:/S/ JAMES M. KRATOCHVIL (Seal) - ------------------------- ------------------------------ James M. Kratochvil Vice President WITNESS: NATIONSBANK, N.A., in its capacity as Agent /S/ By:/S/ VICKIE L. TILLMAN (Seal) - ------------------------- ------------------------------ Vickie L. Tillman Vice President WITNESS: NATIONSBANK, N.A. in its capacity as a Lender /S/ By:/S/ VICKIE L. TILLMAN (Seal) - ------------------------- ------------------------------ Vickie L. Tillman Vice President WITNESS: GENERAL ELECTRIC CAPITAL CORPORATION in its capacity as a Lender /S/ By:/S/ PEGGY ERLENCOTTER (Seal) - ------------------------- ------------------------------ Peggy Erlencotter Senior Vice President WITNESS: FLEET CAPITAL CORPORATION in its capacity as a Lender /S/ By:/S/ ROBERT M. DAILEY (Seal) - ------------------------- ------------------------------ Robert M. Dailey Vice President LIST OF EXHIBITS A. Form of Borrowing Base Report B. Wire Transfer Procedures C-1. Pro Forma Financial Statements C-2 Pro Forma Balance Sheets D. Form of Compliance Certificate LIST OF SCHEDULES SCHEDULE 1.1 List of Account Debtors (concentrations) SCHEDULE 4.1.10 Litigation SCHEDULE 4.1.14 Scheduled Indebtedness for Borrowed Money SCHEDULE 4.1.20 Employee Relations Disclosures SCHEDULE 4.1.21 Hazardous Materials Disclosures SCHEDULE 4.1.22 Scheduled Permitted Liens SCHEDULE 4.1.24 Information on Names, Addresses and Locations SCHEDULE 6.2.5 Permitted Investments EXHIBIT B NATIONSBANK BUSINESS CREDIT WIRE TRANSFER PROCEDURES The transfer of funds by means of wire may be made by NationsBank (lender) at the request of its customer (borrower). Such wire transfers are categorized by lender as either repetitive or non-repetitive. REPETITIVE: Repetitive wire transfers may vary in amount, but are consistent in terms of the payee, the location to which funds are wired, the bank name, account number and the routing transit number. Either borrower or lender may initiate a repetitive wire transfer. The borrower may identify the repetitive nature of transfers and request they be established as such via the "Repetitive Wire Transfer Authorization Form" (copy attached). Lender, after observing numerous transfers to the same recipient and destination, may initiate the repetitive process by faxing or mailing the "Repetitive Wire Authorization Form" to the borrower for completion and return. Although a first request for a repetitive wire transfer may be honored from a faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the form containing an original signature must be received from the borrower. All transfer authorization forms must be approved by and contain the signature of a person authorized by the borrower to advance funds from borrower's line of credit with the lender. After receipt of the original "Repetitive Wire Transfer Authorization Form" by the lender, subsequent wire transfers to the recipient named thereon may be initiated by telephone request, provided the requesting party is identified by the lender as a person authorized by borrower to advance funds from the borrower's line of credit with lender. NON-REPETITIVE: Non-Repetitive wire transfers are directed to recipients on a one-time or infrequent basis or are directed to varied destinations. Non-repetitive wire transfers require that written notification be provided to lender by borrower, showing payee, location, account number, routing transit number and name and location of bank into which funds are to be transferred. Such written notification may be provided by means of a "Non-Repetitive Wire Transfer Authorization Form" (copy attached). Required information may be faxed to lender in order to expedite the transfer; however, a copy of the transfer authorization form with an original signature(s) must be received by lender from borrower. The transfer authorization form must be approved by and contain the signature of a person authorized by the borrower to advance funds from borrower's line of credit with the lender. For any non-repetitive wire transfer, Lender may, at its discretion, perform a telephone verification with an authorized representative (the original signer or another authorized representative) of borrower prior to initiating the transfer. EXHIBIT D FINANCING AGREEMENT COMPLIANCE CERTIFICATE THIS CERTIFICATE is made as of __________________, 199_ , by BERRY PLASTICS CORPORATION, a corporation organized under the laws of the State of Delaware, (the "Borrower"), to NATIONSBANK, N.A., a national banking association (the "Agent"), pursuant to Section 6.1.1 of the Financing and Security Agreement dated ______________, 199_, (as amended, modified, restated, substituted, EX-10.30 5 WARRANT TO PURCHASE WARRANT THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF JUNE 18, 1996 (THE "STOCKHOLDERS AGREEMENT"), BY AND AMONG BPC HOLDING CORPORATION, ATLANTIC EQUITY PARTNERS INTERNATIONAL II, L.P. AND CERTAIN MEMBERS OF MANAGEMENT OF BERRY PLASTICS CORPORATION, AS SUCH STOCKHOLDERS AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE STOCKHOLDERS AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THOSE PROVISIONS OF THE STOCKHOLDERS AGREEMENT WHICH APPLY TO THIS WARRANT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND ACCORDINGLY, MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. August 29, 1997 No. of Stock Units: 7,443 Warrant No. B-1 WARRANT to Purchase Class B Non-Voting Common Stock of BPC HOLDING CORPORATION THIS IS TO CERTIFY THAT WILLARD J. RATHBUN, or his registered assigns, is entitled to purchase in whole or in part from time to time from BPC Holding Corporation, a Delaware corporation (the "ISSUER"), at any time on and after the Closing Date (as hereinafter defined), but not later than 5:00 p.m., New York time, on August 29, 2007 (the "EXPIRATION DATE"), 7,443 Stock Units (as hereinafter defined and subject to adjustment as provided herein) at a purchase price of $108.00 per Stock Unit (the "EXERCISE PRICE"), subject to the terms and conditions provided herein and in the Reorganization Agreement (as hereinafter defined). This Warrant is issued pursuant to the Agreement and Plan of Reorganization dated as of August 29, 1997 (as modified and supplemented and in effect from time to time, the "REORGANIZATION AGREEMENT") among the Issuer, Berry Plastics Corporation, VABC Acquisition Corp., Venture Packaging, Inc. ("Venture"), the subsidiaries of Venture and the shareholders of Venture. SECTION 1. CERTAIN DEFINITIONS. (a) Each capitalized term used herein without definition shall have the meaning assigned thereto (or incorporated by reference) in the Reorganization Agreement and in the Exhibits thereto. (b) As used herein, the following terms shall have the following meanings (all terms defined in this Section 1 or in other provisions of this Warrant in the singular to have the same meanings when used in the plural and vice versa): "BOARD" shall mean the Board of Directors of the Issuer. "BUSINESS DAY" shall mean any day on which commercial banks are not authorized or required to close in New York City. "CLASS B COMMON STOCK" means the Issuer's Class B Non-Voting Common Stock, $.01 par value per share, or any other common stock or other securities receivable thereon, or into which the Class B Non-Voting Common Stock is convertible or exchangeable, as a result of any recapitalization, reclassification, merger or consolidation of, or deposition of assets by, the Issuer. "CLOSING DATE" shall mean the date set forth on the first page of this Warrant. "COMMON STOCK" shall mean the Common Stock of the Issuer, of any class or series whatsoever including, without limitation, the Class B Common Stock, or any other common stock or other securities receivable thereon, or into which the Common Stock is convertible or exchangeable, as a result of any recapitalization, reclassification, merger or consolidation of, or disposition of assets by, the Issuer. "CURRENT MARKET PRICE" shall mean, with respect to a share of Common Stock as of any date (a) for a period of 30 Business Days after the date of the IPO, the offering price of such Common Stock or (b) in any other case (i) the fair market value per share of such Common Stock, as reasonably determined in good faith by the Board, using an appropriate valuation method, assuming an arms-length sale to an independent party of all of the Common Stock of the Issuer, without giving regard to the lack of liquidity of such Common Stock due to any restrictions contained in the Stockholders Agreement, the Reorganization Agreement or otherwise or any discount for minority interests and assuming the conversion or exchange of all securities then outstanding which are convertible into or exchangeable for such Common Stock and the exercise of all rights and warrants (including the Warrants) then outstanding and exercisable to purchase shares of such Common Stock or securities convertible into or exchangeable for shares of such Common Stock, or (ii) if there shall be a public market for such Common Stock, the average of the daily market prices for each day during the 30 consecutive trading days commencing 45 Business Days before such date as of which such a price can be established in the manner set forth below. The market price for each such Business Day shall be the last sale price on such day as reported in the Consolidated Last Sale Reporting System or as quoted on the Nasdaq Stock Market, or if such last sale price is not available, the average of the closing bid and asked prices as reported in either such system, or in any other case the higher bid price quoted for such day as reported by The Wall Street Journal and the National Quotation Bureau pink sheets. "EXERCISE NOTICE" shall have the meaning assigned to such term in Section 2 hereof "EXERCISE PRICE" shall have the meaning assigned to such term in the first paragraph of this Warrant. "EXPIRATION DATE" shall have the meaning assigned to such term in the first paragraph of this Warrant. "HOLDER" shall mean the registered holder of this Warrant. "INCLUDE" and "INCLUDING" shall be construed as if followed by the phrase ", without being limited to," "IPO" shall mean the Issuer's first firm commitment underwritten public offering involving the sale of Common Stock of the Issuer, pursuant to an effective registration statement under the Securities Act. "ISSUER" shall have the meaning assigned to such term in the first paragraph of this Warrant. "JOINDER AGREEMENT" means the Joinder Agreement dated as of the date hereof pursuant to which the Holder became a party to the Stockholders Agreement on the terms set forth in the Joinder Agreement. "PERSON" means any individual, corporation, general or limited partnership, joint venture, association, limited liability company, joint stock company, trust, business trust, bank, trust company, estate (including any beneficiaries thereof), unincorporated organization, cooperative, association or governmental branch, authority, agency or political subdivision thereof. "REORGANIZATION AGREEMENT" shall have the meaning assigned to such term in the second paragraph of this Warrant. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "STOCKHOLDER" shall mean any Person who directly or indirectly owns any shares of Common Stock (including Warrant Stock). "STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders Agreement dated as of June 18, 1996, among the Issuer, Atlantic Equity Partners International II, L.P. and certain members of management of Berry Plastics Corporation. "STOCK UNIT" shall mean one share of Class B Common Stock, as such Class B Common Stock is constituted on the date hereof, and thereafter shall mean such number of shares (including any fractional shares) of Class B Common Stock and other securities, cash or other property as shall result from the adjustments specified in Section 4 hereof. "WARRANT HOLDER" shall mean any Person who acquires Warrants or Warrant Stock pursuant to the provisions of the Reorganization Agreement, including any transferees of Warrants or Warrant Stock. "WARRANT STOCK" shall mean all shares of Class B Common Stock issuable from time to time upon exercise of the Warrants. "WARRANTS" shall mean the warrants originally issued by the Issuer pursuant to the Reorganization Agreement (of which this Warrant is one), evidencing rights to purchase up to the aggregate amount of Stock Units set forth therein, and all Warrants issued upon transfer, division, or combination of, or in substitution for, such Warrants. SECTION 2. EXERCISE OF WARRANT. On and after the Closing Date and until 5:00 p.m., New York time, on the Expiration Date, the Holder may exercise this Warrant, on one or more occasions, on any Business Day, in whole or in part, by delivering to the Issuer, at its office maintained for such purpose pursuant to Section 5.01 hereof, (a) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased (the "EXERCISE NOTICE"), (b) payment of the Exercise Price (payable as set forth below) for the number of Stock Units as to which this Warrant is being exercised, and (c) this Warrant. At the option of the Holder, the Exercise Price shall be payable (a) in cash or by certified or official bank check payable to the order of the Issuer or by wire transfer of immediately available funds to the account of the Issuer or (b) by delivery of this Warrant Certificate to the Issuer for cancellation in accordance with the following formula: in exchange for each share of Class B Common Stock issuable on exercise of each Warrant represented by this Warrant Certificate that is being exercised, such Holder shall receive such number of shares of Class B Common Stock as is equal to the product of (i) the number of shares of Class B Common Stock issuable upon exercise of the Warrants being exercised at such time multiplied by (ii) a fraction, the numerator of which is the Current Market Price per share of Class B Common Stock at such time minus the Exercise Price per share of Class B Common Stock at such time, and the denominator of which is the Current Market Price per share of Class B Common Stock at such time. Upon receipt thereof, the Issuer shall, as promptly as practicable and in any event within 5 Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to the Holder, at the cost and expense of the Issuer, a stock certificate or certificates representing the aggregate number of shares of Warrant Stock and other securities issuable upon such exercise and any other property to which such Holder is entitled. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in the Exercise Notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such Exercise Notice. Such stock certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to consent or to receive notice as a Stockholder, as of the date on which the last of the Exercise Notice, payment of the Exercise Price and this Warrant is received by the Issuer as aforesaid. If this Warrant shall have been exercised only in part, the Issuer shall, at the time of delivery of the certificate or certificates representing Warrant Stock and other securities, execute and deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. All shares of Class B Common Stock issuable upon the exercise of this Warrant shall, upon payment therefor in accordance herewith, be duly and validly issued, fully paid and nonassessable and free and clear of any liens, charges or other encumbrances of any nature. The Issuer shall not be required to issue a fractional share of Class B Common Stock upon exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Issuer shall pay (at the time this Warrant is exercised for all shares of Class B Common Stock remaining subject hereto) a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price per share of Class B Common Stock on the date of exercise. SECTION 3. TRANSFER, DIVISION AND COMBINATION. (a) Transfer of this Warrant and the rights of the Holder hereunder are subject to the terms of the Joinder Agreement and the Stockholders Agreement. (b) This Warrant may be exchanged for other Warrants of the same series upon presentation to the Issuer, together with a written notice specifying the denominations in which new Warrants are to be issued, signed by the Holder hereof. The Issuer shall execute and deliver a new Warrant or Warrants to the holder in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (including transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of the Warrants, including any transfer or exchange thereof. (c) The Issuer shall maintain books for the registration and transfer of the Warrants, and shall allow each holder of Warrants to inspect such books at such reasonable times as such holder shall request. SECTION 4. ADJUSTMENTS. (a) SUBDIVISIONS AND COMBINATIONS. If at any time the Issuer shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a Common Stock dividend or other distribution of Common Stock; (ii) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock; or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; then immediately after the occurrence of any such event the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted so as to equal the number of shares of Warrant Stock which such holder would have been entitled to receive if such holder had exercised the Warrant immediately prior to the occurrence of such event. (b) DIVIDENDS AND DISTRIBUTIONS. If at any time the Issuer shall pay any dividend or make any other distribution to holders of its Common Stock of any cash, evidence of indebtedness or other property of any nature whatsoever (other than as provided in subsections (a), (c)(i)(A) and (d)(i)(A) hereof), then immediately after the occurrence of any such event the Exercise Price per Stock Unit shall be reduced by the amount of such dividend paid on each share of Common Stock. For purposes of this Section 4(b), the value of any dividend, paid in a manner other than cash, shall be the fair value thereof as reasonably determined in good faith by the Board. (c) ISSUANCE OF COMMON STOCK. In case at any time the Issuer (i) (A) shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase shares of any class or series of Common Stock or (B) shall otherwise sell or issue any such securities and (ii) the consideration per share of Common Stock to be paid upon such issuance or subscription is less than the Current Market Price per share of Common Stock on such record date, then the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to such record date by a fraction (not to be less than one) (i) the numerator of which shall be equal to the product of (A) the number of shares of Common Stock outstanding after giving effect to such issuance, distribution, subscription or purchase and (B) the Current Market Price per share of Common Stock determined immediately before such record date and (ii) the denominator of which shall be equal to the sum of (A) the product of (1) the number of shares of Common Stock outstanding immediately before such record date and (2) the Current Market Price per share of Common Stock determined immediately before such record date and (B) the aggregate consideration to be received by the Issuer for the total number of shares of Common Stock to be issued, distributed, subscribed for or purchased. Aggregate consideration for purposes of the preceding clause (B) shall be determined as follows: In case any shares of Common Stock shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer therefor. In case any shares of Common Stock shall be issued or sold for a consideration other than cash payable to the Issuer, the consideration received therefor shall be deemed to be the fair value of such consideration as determined by the Board. In case any shares of Common Stock shall be issued in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair value as determined by the Board of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such shares of Common Stock. (d) ISSUANCE OF OTHER SECURITIES, RIGHTS OR OBLIGATIONS. In case at any time the Issuer (i)(A) shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase options to purchase or rights to subscribe for Common Stock or securities directly or indirectly convertible into or exchangeable for Common Stock (or options or rights with respect to such securities) or (B) shall otherwise issue or sell any such options, rights or securities and (ii) the consideration per share for which Common Stock is deliverable upon exercise of such options or rights or conversion or exchange of such securities (determined by dividing (x) the total amount received or receivable by the Issuer in consideration of the issuance of or subscription for such options, rights or securities, plus the minimum aggregate amount of premiums (if any) payable to the Issuer upon such exercise, conversion or exchange, by (y) the total maximum number of shares of Common Stock necessary to effect the exercise, conversion or exchange of all such options, rights or securities) shall be less than the Current Market Price per share of Common Stock on such record date or sale or issuance date, as the case may be, then the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to such date by a fraction (not to be less than one) (i) the numerator of which shall be equal to the product of (A) the total maximum number of shares of Common Stock outstanding after giving effect to the assumed exercise or conversion of all such options, rights or securities and (B) the Current Market Price per share of Common Stock determined immediately before such date and (ii) the denominator of which shall be equal to the sum of (A) the product of (1) the number of shares of Common Stock outstanding immediately before such date and (2) the Current Market Price per share of the Common Stock determined immediately before such date and (B) the aggregate consideration per share (determined as set forth in subsection (ii) (x) and (y) above) for which Common Stock is deliverable upon exercise, conversion or exchange of such options, rights or securities. Aggregate consideration for purposes of the preceding clause (B) shall be determined as follows: In case any options, rights or convertible or exchangeable securities (or options or rights with respect thereto) shall be issued or sold, or exercisable, convertible or exchangeable for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer (determined as set forth in subsection (ii) (x) and (y) above) therefor. In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable for a consideration other than cash payable to the Issuer, the consideration received therefor (determined as set forth in subsection (ii) (x) and (y) above) shall be deemed to be the fair value of such consideration as determined by the Board, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Issuer in connection therewith. In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair value as determined by the Board of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such options, rights or securities. (e) SUPERSEDING ADJUSTMENT. If, at any time after any adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall have been made on the basis of the issuance of any options or rights, or convertible or exchangeable securities (or options or rights with respect to such securities) pursuant to subsection (d) hereof: (i) the options or rights shall expire prior to exercise or the right to convert or exchange any such securities shall terminate; or (ii) the consideration per share for which shares of Common Stock are issuable pursuant to the terms of such options or rights or convertible or exchangeable securities shall be increased or decreased, other than under or by reason of provisions designed to protect against dilution; such previous adjustment shall be rescinded and annulled. Thereupon, a recomputation shall be made of the effect of such options or rights or convertible or exchangeable securities with respect to shares of Common Stock on the basis of: (A) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise, conversion or exchange of such options, rights or securities as having been issued on the date or dates of such exercise, conversion or exchange and for the consideration actually received and receivable therefore, and (B) treating any such options, rights or securities which then remain outstanding as having been granted or issued immediately after the time of such increase or decrease for the consideration per share for which shares of Common Stock are issuable upon exercise, conversion or exchange of such options, rights or securities. To the extent called for by the foregoing provisions of this Section 4(e) on the basis aforesaid, a new adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall be made, determined using the Current Market Price used at the time of the original determination, which new adjustment shall supersede the previous adjustment so rescinded and annulled. If the exercise, conversion or exchange price provided for in any such option, right or security shall decrease at any time under or by reason of provisions designed to protect against dilution, then in the case of the delivery of shares of Common Stock upon the exercise, conversion or exchange of any such option, right or security, the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be adjusted in the manner which would have obtained had the adjustment made upon issuance of such option, right or security been made upon the basis of the issuance of (and the aggregate consideration received for) the Shares of Common Stock delivered as aforesaid. (f) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The following provisions shall be applicable to the making of adjustments of the number of shares of Warrant Stock comprising a Stock Unit: (i) The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed to be an issuance thereof for purposes of this Section. (ii) In computing adjustments under this Section, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (iii) If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (g) MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. If the Issuer shall merge or consolidate with another corporation, or shall sell, transfer or otherwise dispose of all or substantially all of its assets to another corporation and pursuant to the terms of such merger, consolidation or disposition of assets, cash, shares of common stock or other securities of the successor or acquiring corporation, or property of any nature is to be received by or distributed to the holders of Common Stock of the Issuer, then each holder of Warrants which are by their terms then exercisable shall, at such holder's election, have the right to receive (whether or not such holder exercises such Warrants) the amount it would have been entitled to receive if such holder had exercised such Warrants immediately prior to the occurrence of such merger, consolidation or disposition of assets, net of the exercise price of such Warrants, and after such election is made, this Warrant shall be null and void. In case of any such merger, consolidation or disposition of assets in which the foregoing election is not made, the successor or acquiring corporation (and any affiliate thereof issuing securities) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Issuer and all of the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board and reasonably acceptable to the holders of a majority in interest of the Warrants) in order to provide for adjustments of Stock Units which shall be as nearly equivalent as practicable to the adjustments provided for in this Section. The foregoing provisions shall similarly apply to successive mergers, consolidations and dispositions of assets. (h) NOTICE OF ADJUSTMENTS. Whenever the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this Agreement, the Issuer shall forthwith obtain a certificate signed by a firm of independent accountants of recognized national standing selected by the Issuer, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated and specifying the number of shares of Warrant Stock comprising a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly cause a signed copy of such certificate to be delivered to each holder of Warrants. The Issuer shall keep at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any holder of Warrants or any prospective purchaser of Warrants designated by the registered holder hereof. (i) NOTICE OF CERTAIN CORPORATE ACTION. If the Issuer shall propose (i) to pay any dividend to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock; (ii) to offer to the holders of its Common Stock rights to subscribe for or to purchase any additional shares of Common Stock (or options or rights with respect thereto); (iii) to effect any reclassification of its Common Stock; (iv) to effect any capital reorganization; (v) to effect any consolidation or merger involving the Issuer or sale, transfer or other disposition of all or substantially all of its assets; or (vi) to effect the liquidation, dissolution or winding up of the Issuer, then, in each such case, the Issuer shall give to each holder of Warrants a notice of such proposed action, which shall specify the date on which a record is to be taken for the purposes of such dividend, distribution or rights offer, or the date or anticipated date on which such reclassification, issuance, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date or anticipated date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock, and the number of shares of Warrant Stock which will comprise a Stock Unit after giving effect to any adjustment which will be required as a result of such action, if any. Such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Common Stock for purposes of such action, and in the case of any other such action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. (j) NO ADJUSTMENT NECESSARY. Anything to the contrary herein notwithstanding, no adjustment to the number of shares of Warrant Stock comprising a Stock Unit shall be made as a result of, or in connection with, the issuance of shares of Common Stock, or options or warrants to purchase shares of Common Stock, to management in connection with the performance of services at fair market value (as determined by the Board in its reasonable judgment). SECTION 5. MISCELLANEOUS. 5.01 OFFICE OF ISSUER. So long as any of the Warrants remains outstanding, the Issuer shall maintain an office in the continental United States of America where the Warrants may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at c/o 101 Oakley Street, Evansville, Indiana 47710, unless and until the Issuer shall designate and maintain some other office for such purposes and give notice thereof to all Warrant Holders. 5.02 NOTICES GENERALLY. Any notices and other communications pursuant to the provisions hereof shall be sent in accordance with the provisions of Section 11.7 of the Reorganization Agreement. 5.03 GOVERNING LAW. The corporate law of the State of Delaware shall govern all issues concerning the relative rights of the Issuer and its Stockholders. All other issues hereunder shall be governed by and construed in accordance with the procedural and substantive laws of the State of New York without regard for its conflicts of laws rules. The Issuer agrees that it may be served with process in State of New York and any action for breach of this Warrant may be prosecuted against it in the courts of that State. 5.04 LIMITATION OF LIABILITY. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Class B Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a Stockholder of the Issuer, whether such liability is asserted by the Issuer, by any creditor of the Issuer or any other Person. 5.06 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Corporation shall, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), at its expense, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 5.07 JOINDER TO STOCKHOLDER AGREEMENT. Simultaneously with the receipt of this Warrant, the Holder shall execute and deliver a Joinder Agreement whereby the Holder shall agree to be bound by the terms of the Stockholders Agreement, as set forth in such Joinder Agreement. IN WITNESS WHEREOF, the Issuer has duly executed this Warrant as of the date first written above. BPC HOLDING CORPORATION By: /S/ JAMES M. KRATOCHVIL ----------------------------- James M. Kratochvil Vice President EX-10.31 6 WARRANT TO PURCHASE WARRANT THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF JUNE 18, 1996 (THE "STOCKHOLDERS AGREEMENT"), BY AND AMONG BPC HOLDING CORPORATION, ATLANTIC EQUITY PARTNERS INTERNATIONAL II, L.P. AND CERTAIN MEMBERS OF MANAGEMENT OF BERRY PLASTICS CORPORATION, AS SUCH STOCKHOLDERS AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE STOCKHOLDERS AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THOSE PROVISIONS OF THE STOCKHOLDERS AGREEMENT WHICH APPLY TO THIS WARRANT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND ACCORDINGLY, MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. August 29, 1997 No. of Stock Units: 2,481 Warrant No. B-2 WARRANT to Purchase Class B Non-Voting Common Stock of BPC HOLDING CORPORATION THIS IS TO CERTIFY THAT D. CRAIG RATHBUN, or his registered assigns, is entitled to purchase in whole or in part from time to time from BPC Holding Corporation, a Delaware corporation (the "ISSUER"), at any time on and after the Closing Date (as hereinafter defined), but not later than 5:00 p.m., New York time, on August 29, 2007 (the "EXPIRATION DATE"), 2,481 Stock Units (as hereinafter defined and subject to adjustment as provided herein) at a purchase price of $108.00 per Stock Unit (the "EXERCISE PRICE"), subject to the terms and conditions provided herein and in the Reorganization Agreement (as hereinafter defined). This Warrant is issued pursuant to the Agreement and Plan of Reorganization dated as of August 29, 1997 (as modified and supplemented and in effect from time to time, the "REORGANIZATION AGREEMENT") among the Issuer, Berry Plastics Corporation, VABC Acquisition Corp., Venture Packaging, Inc. ("Venture"), the subsidiaries of Venture and the shareholders of Venture. SECTION 1. CERTAIN DEFINITIONS. (a) Each capitalized term used herein without definition shall have the meaning assigned thereto (or incorporated by reference) in the Reorganization Agreement and in the Exhibits thereto. (b) As used herein, the following terms shall have the following meanings (all terms defined in this Section 1 or in other provisions of this Warrant in the singular to have the same meanings when used in the plural and vice versa): "BOARD" shall mean the Board of Directors of the Issuer. "BUSINESS DAY" shall mean any day on which commercial banks are not authorized or required to close in New York City. "CLASS B COMMON STOCK" means the Issuer's Class B Non-Voting Common Stock, $.01 par value per share, or any other common stock or other securities receivable thereon, or into which the Class B Non-Voting Common Stock is convertible or exchangeable, as a result of any recapitalization, reclassification, merger or consolidation of, or deposition of assets by, the Issuer. "CLOSING DATE" shall mean the date set forth on the first page of this Warrant. "COMMON STOCK" shall mean the Common Stock of the Issuer, of any class or series whatsoever including, without limitation, the Class B Common Stock, or any other common stock or other securities receivable thereon, or into which the Common Stock is convertible or exchangeable, as a result of any recapitalization, reclassification, merger or consolidation of, or disposition of assets by, the Issuer. "CURRENT MARKET PRICE" shall mean, with respect to a share of Common Stock as of any date (a) for a period of 30 Business Days after the date of the IPO, the offering price of such Common Stock or (b) in any other case (i) the fair market value per share of such Common Stock, as reasonably determined in good faith by the Board, using an appropriate valuation method, assuming an arms-length sale to an independent party of all of the Common Stock of the Issuer, without giving regard to the lack of liquidity of such Common Stock due to any restrictions contained in the Stockholders Agreement, the Reorganization Agreement or otherwise or any discount for minority interests and assuming the conversion or exchange of all securities then outstanding which are convertible into or exchangeable for such Common Stock and the exercise of all rights and warrants (including the Warrants) then outstanding and exercisable to purchase shares of such Common Stock or securities convertible into or exchangeable for shares of such Common Stock, or (ii) if there shall be a public market for such Common Stock, the average of the daily market prices for each day during the 30 consecutive trading days commencing 45 Business Days before such date as of which such a price can be established in the manner set forth below. The market price for each such Business Day shall be the last sale price on such day as reported in the Consolidated Last Sale Reporting System or as quoted on the Nasdaq Stock Market, or if such last sale price is not available, the average of the closing bid and asked prices as reported in either such system, or in any other case the higher bid price quoted for such day as reported by The Wall Street Journal and the National Quotation Bureau pink sheets. "EXERCISE NOTICE" shall have the meaning assigned to such term in Section 2 hereof. "EXERCISE PRICE" shall have the meaning assigned to such term in the first paragraph of this Warrant. "EXPIRATION DATE" shall have the meaning assigned to such term in the first paragraph of this Warrant. "HOLDER" shall mean the registered holder of this Warrant. "INCLUDE" and "INCLUDING" shall be construed as if followed by the phrase ", without being limited to," "IPO" shall mean the Issuer's first firm commitment underwritten public offering involving the sale of Common Stock of the Issuer, pursuant to an effective registration statement under the Securities Act. "ISSUER" shall have the meaning assigned to such term in the first paragraph of this Warrant. "JOINDER AGREEMENT" means the Joinder Agreement dated as of the date hereof pursuant to which the Holder became a party to the Stockholders Agreement on the terms set forth in the Joinder Agreement. "PERSON" means any individual, corporation, general or limited partnership, joint venture, association, limited liability company, joint stock company, trust, business trust, bank, trust company, estate (including any beneficiaries thereof), unincorporated organization, cooperative, association or governmental branch, authority, agency or political subdivision thereof. "REORGANIZATION AGREEMENT" shall have the meaning assigned to such term in the second paragraph of this Warrant. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "STOCKHOLDER" shall mean any Person who directly or indirectly owns any shares of Common Stock (including Warrant Stock). "STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders Agreement dated as of June 18, 1996, among the Issuer, Atlantic Equity Partners International II, L.P. and certain members of management of Berry Plastics Corporation. "STOCK UNIT" shall mean one share of Class B Common Stock, as such Class B Common Stock is constituted on the date hereof, and thereafter shall mean such number of shares (including any fractional shares) of Class B Common Stock and other securities, cash or other property as shall result from the adjustments specified in Section 4 hereof. "WARRANT HOLDER" shall mean any Person who acquires Warrants or Warrant Stock pursuant to the provisions of the Reorganization Agreement, including any transferees of Warrants or Warrant Stock. "WARRANT STOCK" shall mean all shares of Class B Common Stock issuable from time to time upon exercise of the Warrants. "WARRANTS" shall mean the warrants originally issued by the Issuer pursuant to the Reorganization Agreement (of which this Warrant is one), evidencing rights to purchase up to the aggregate amount of Stock Units set forth therein, and all Warrants issued upon transfer, division, or combination of, or in substitution for, such Warrants. SECTION 2. EXERCISE OF WARRANT. On and after the Closing Date and until 5:00 p.m., New York time, on the Expiration Date, the Holder may exercise this Warrant, on one or more occasions, on any Business Day, in whole or in part, by delivering to the Issuer, at its office maintained for such purpose pursuant to Section 5.01 hereof, (a) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased (the "EXERCISE NOTICE"), (b) payment of the Exercise Price (payable as set forth below) for the number of Stock Units as to which this Warrant is being exercised, and (c) this Warrant. At the option of the Holder, the Exercise Price shall be payable (a) in cash or by certified or official bank check payable to the order of the Issuer or by wire transfer of immediately available funds to the account of the Issuer or (b) by delivery of this Warrant Certificate to the Issuer for cancellation in accordance with the following formula: in exchange for each share of Class B Common Stock issuable on exercise of each Warrant represented by this Warrant Certificate that is being exercised, such Holder shall receive such number of shares of Class B Common Stock as is equal to the product of (i) the number of shares of Class B Common Stock issuable upon exercise of the Warrants being exercised at such time multiplied by (ii) a fraction, the numerator of which is the Current Market Price per share of Class B Common Stock at such time minus the Exercise Price per share of Class B Common Stock at such time, and the denominator of which is the Current Market Price per share of Class B Common Stock at such time. Upon receipt thereof, the Issuer shall, as promptly as practicable and in any event within 5 Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to the Holder, at the cost and expense of the Issuer, a stock certificate or certificates representing the aggregate number of shares of Warrant Stock and other securities issuable upon such exercise and any other property to which such Holder is entitled. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in the Exercise Notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such Exercise Notice. Such stock certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to consent or to receive notice as a Stockholder, as of the date on which the last of the Exercise Notice, payment of the Exercise Price and this Warrant is received by the Issuer as aforesaid. If this Warrant shall have been exercised only in part, the Issuer shall, at the time of delivery of the certificate or certificates representing Warrant Stock and other securities, execute and deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. All shares of Class B Common Stock issuable upon the exercise of this Warrant shall, upon payment therefor in accordance herewith, be duly and validly issued, fully paid and nonassessable and free and clear of any liens, charges or other encumbrances of any nature. The Issuer shall not be required to issue a fractional share of Class B Common Stock upon exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Issuer shall pay (at the time this Warrant is exercised for all shares of Class B Common Stock remaining subject hereto) a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price per share of Class B Common Stock on the date of exercise. SECTION 3. TRANSFER, DIVISION AND COMBINATION. (a) Transfer of this Warrant and the rights of the Holder hereunder are subject to the terms of the Joinder Agreement and the Stockholders Agreement. (b) This Warrant may be exchanged for other Warrants of the same series upon presentation to the Issuer, together with a written notice specifying the denominations in which new Warrants are to be issued, signed by the Holder hereof. The Issuer shall execute and deliver a new Warrant or Warrants to the holder in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (including transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of the Warrants, including any transfer or exchange thereof. (c) The Issuer shall maintain books for the registration and transfer of the Warrants, and shall allow each holder of Warrants to inspect such books at such reasonable times as such holder shall request. SECTION 4. ADJUSTMENTS. (a) SUBDIVISIONS AND COMBINATIONS. If at any time the Issuer shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a Common Stock dividend or other distribution of Common Stock; (ii) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock; or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; then immediately after the occurrence of any such event the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted so as to equal the number of shares of Warrant Stock which such holder would have been entitled to receive if such holder had exercised the Warrant immediately prior to the occurrence of such event. (b) DIVIDENDS AND DISTRIBUTIONS. If at any time the Issuer shall pay any dividend or make any other distribution to holders of its Common Stock of any cash, evidence of indebtedness or other property of any nature whatsoever (other than as provided in subsections (a), (c)(i)(A) and (d)(i)(A) hereof), then immediately after the occurrence of any such event the Exercise Price per Stock Unit shall be reduced by the amount of such dividend paid on each share of Common Stock. For purposes of this Section 4(b), the value of any dividend, paid in a manner other than cash, shall be the fair value thereof as reasonably determined in good faith by the Board. (c) ISSUANCE OF COMMON STOCK. In case at any time the Issuer (i) (A) shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase shares of any class or series of Common Stock or (B) shall otherwise sell or issue any such securities and (ii) the consideration per share of Common Stock to be paid upon such issuance or subscription is less than the Current Market Price per share of Common Stock on such record date, then the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to such record date by a fraction (not to be less than one) (i) the numerator of which shall be equal to the product of (A) the number of shares of Common Stock outstanding after giving effect to such issuance, distribution, subscription or purchase and (B) the Current Market Price per share of Common Stock determined immediately before such record date and (ii) the denominator of which shall be equal to the sum of (A) the product of (1) the number of shares of Common Stock outstanding immediately before such record date and (2) the Current Market Price per share of Common Stock determined immediately before such record date and (B) the aggregate consideration to be received by the Issuer for the total number of shares of Common Stock to be issued, distributed, subscribed for or purchased. Aggregate consideration for purposes of the preceding clause (B) shall be determined as follows: In case any shares of Common Stock shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer therefor. In case any shares of Common Stock shall be issued or sold for a consideration other than cash payable to the Issuer, the consideration received therefor shall be deemed to be the fair value of such consideration as determined by the Board. In case any shares of Common Stock shall be issued in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair value as determined by the Board of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such shares of Common Stock. (d) ISSUANCE OF OTHER SECURITIES, RIGHTS OR OBLIGATIONS. In case at any time the Issuer (i)(A) shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase options to purchase or rights to subscribe for Common Stock or securities directly or indirectly convertible into or exchangeable for Common Stock (or options or rights with respect to such securities) or (B) shall otherwise issue or sell any such options, rights or securities and (ii) the consideration per share for which Common Stock is deliverable upon exercise of such options or rights or conversion or exchange of such securities (determined by dividing (x) the total amount received or receivable by the Issuer in consideration of the issuance of or subscription for such options, rights or securities, plus the minimum aggregate amount of premiums (if any) payable to the Issuer upon such exercise, conversion or exchange, by (y) the total maximum number of shares of Common Stock necessary to effect the exercise, conversion or exchange of all such options, rights or securities) shall be less than the Current Market Price per share of Common Stock on such record date or sale or issuance date, as the case may be, then the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to such date by a fraction (not to be less than one) (i) the numerator of which shall be equal to the product of (A) the total maximum number of shares of Common Stock outstanding after giving effect to the assumed exercise or conversion of all such options, rights or securities and (B) the Current Market Price per share of Common Stock determined immediately before such date and (ii) the denominator of which shall be equal to the sum of (A) the product of (1) the number of shares of Common Stock outstanding immediately before such date and (2) the Current Market Price per share of the Common Stock determined immediately before such date and (B) the aggregate consideration per share (determined as set forth in subsection (ii) (x) and (y) above) for which Common Stock is deliverable upon exercise, conversion or exchange of such options, rights or securities. Aggregate consideration for purposes of the preceding clause (B) shall be determined as follows: In case any options, rights or convertible or exchangeable securities (or options or rights with respect thereto) shall be issued or sold, or exercisable, convertible or exchangeable for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer (determined as set forth in subsection (ii) (x) and (y) above) therefor. In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable for a consideration other than cash payable to the Issuer, the consideration received therefor (determined as set forth in subsection (ii) (x) and (y) above) shall be deemed to be the fair value of such consideration as determined by the Board, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Issuer in connection therewith. In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair value as determined by the Board of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such options, rights or securities. (e) SUPERSEDING ADJUSTMENT. If, at any time after any adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall have been made on the basis of the issuance of any options or rights, or convertible or exchangeable securities (or options or rights with respect to such securities) pursuant to subsection (d) hereof: (i) the options or rights shall expire prior to exercise or the right to convert or exchange any such securities shall terminate; or (ii) the consideration per share for which shares of Common Stock are issuable pursuant to the terms of such options or rights or convertible or exchangeable securities shall be increased or decreased, other than under or by reason of provisions designed to protect against dilution; such previous adjustment shall be rescinded and annulled. Thereupon, a recomputation shall be made of the effect of such options or rights or convertible or exchangeable securities with respect to shares of Common Stock on the basis of: (A) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise, conversion or exchange of such options, rights or securities as having been issued on the date or dates of such exercise, conversion or exchange and for the consideration actually received and receivable therefore, and (B) treating any such options, rights or securities which then remain outstanding as having been granted or issued immediately after the time of such increase or decrease for the consideration per share for which shares of Common Stock are issuable upon exercise, conversion or exchange of such options, rights or securities. To the extent called for by the foregoing provisions of this Section 4(e) on the basis aforesaid, a new adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall be made, determined using the Current Market Price used at the time of the original determination, which new adjustment shall supersede the previous adjustment so rescinded and annulled. If the exercise, conversion or exchange price provided for in any such option, right or security shall decrease at any time under or by reason of provisions designed to protect against dilution, then in the case of the delivery of shares of Common Stock upon the exercise, conversion or exchange of any such option, right or security, the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be adjusted in the manner which would have obtained had the adjustment made upon issuance of such option, right or security been made upon the basis of the issuance of (and the aggregate consideration received for) the Shares of Common Stock delivered as aforesaid. (f) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The following provisions shall be applicable to the making of adjustments of the number of shares of Warrant Stock comprising a Stock Unit: (i) The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed to be an issuance thereof for purposes of this Section. (ii) In computing adjustments under this Section, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (iii) If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (g) MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. If the Issuer shall merge or consolidate with another corporation, or shall sell, transfer or otherwise dispose of all or substantially all of its assets to another corporation and pursuant to the terms of such merger, consolidation or disposition of assets, cash, shares of common stock or other securities of the successor or acquiring corporation, or property of any nature is to be received by or distributed to the holders of Common Stock of the Issuer, then each holder of Warrants which are by their terms then exercisable shall, at such holder's election, have the right to receive (whether or not such holder exercises such Warrants) the amount it would have been entitled to receive if such holder had exercised such Warrants immediately prior to the occurrence of such merger, consolidation or disposition of assets, net of the exercise price of such Warrants, and after such election is made, this Warrant shall be null and void. In case of any such merger, consolidation or disposition of assets in which the foregoing election is not made, the successor or acquiring corporation (and any affiliate thereof issuing securities) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Issuer and all of the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board and reasonably acceptable to the holders of a majority in interest of the Warrants) in order to provide for adjustments of Stock Units which shall be as nearly equivalent as practicable to the adjustments provided for in this Section. The foregoing provisions shall similarly apply to successive mergers, consolidations and dispositions of assets. (h) NOTICE OF ADJUSTMENTS. Whenever the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this Agreement, the Issuer shall forthwith obtain a certificate signed by a firm of independent accountants of recognized national standing selected by the Issuer, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated and specifying the number of shares of Warrant Stock comprising a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly cause a signed copy of such certificate to be delivered to each holder of Warrants. The Issuer shall keep at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any holder of Warrants or any prospective purchaser of Warrants designated by the registered holder hereof. (i) NOTICE OF CERTAIN CORPORATE ACTION. If the Issuer shall propose (i) to pay any dividend to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock; (ii) to offer to the holders of its Common Stock rights to subscribe for or to purchase any additional shares of Common Stock (or options or rights with respect thereto); (iii) to effect any reclassification of its Common Stock; (iv) to effect any capital reorganization; (v) to effect any consolidation or merger involving the Issuer or sale, transfer or other disposition of all or substantially all of its assets; or (vi) to effect the liquidation, dissolution or winding up of the Issuer, then, in each such case, the Issuer shall give to each holder of Warrants a notice of such proposed action, which shall specify the date on which a record is to be taken for the purposes of such dividend, distribution or rights offer, or the date or anticipated date on which such reclassification, issuance, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date or anticipated date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock, and the number of shares of Warrant Stock which will comprise a Stock Unit after giving effect to any adjustment which will be required as a result of such action, if any. Such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Common Stock for purposes of such action, and in the case of any other such action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. (j) NO ADJUSTMENT NECESSARY. Anything to the contrary herein notwithstanding, no adjustment to the number of shares of Warrant Stock comprising a Stock Unit shall be made as a result of, or in connection with, the issuance of shares of Common Stock, or options or warrants to purchase shares of Common Stock, to management in connection with the performance of services at fair market value (as determined by the Board in its reasonable judgment). SECTION 5. MISCELLANEOUS. 5.01 OFFICE OF ISSUER. So long as any of the Warrants remains outstanding, the Issuer shall maintain an office in the continental United States of America where the Warrants may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at c/o 101 Oakley Street, Evansville, Indiana 47710, unless and until the Issuer shall designate and maintain some other office for such purposes and give notice thereof to all Warrant Holders. 5.02 NOTICES GENERALLY. Any notices and other communications pursuant to the provisions hereof shall be sent in accordance with the provisions of Section 11.7 of the Reorganization Agreement. 5.03 GOVERNING LAW. The corporate law of the State of Delaware shall govern all issues concerning the relative rights of the Issuer and its Stockholders. All other issues hereunder shall be governed by and construed in accordance with the procedural and substantive laws of the State of New York without regard for its conflicts of laws rules. The Issuer agrees that it may be served with process in State of New York and any action for breach of this Warrant may be prosecuted against it in the courts of that State. 5.04 LIMITATION OF LIABILITY. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Class B Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a Stockholder of the Issuer, whether such liability is asserted by the Issuer, by any creditor of the Issuer or any other Person. 5.06 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Corporation shall, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), at its expense, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 5.07 JOINDER TO STOCKHOLDER AGREEMENT. Simultaneously with the receipt of this Warrant, the Holder shall execute and deliver a Joinder Agreement whereby the Holder shall agree to be bound by the terms of the Stockholders Agreement, as set forth in such Joinder Agreement. IN WITNESS WHEREOF, the Issuer has duly executed this Warrant as of the date first written above. BPC HOLDING CORPORATION By: /S/ JAMES M. KRATOCHVIL ------------------------------ James M. Kratochvil Vice President EX-21 7 LIST OF SUBSIDIARIES EXHIBIT 21 LIST OF SUBSIDIARIES
SUBSIDIARY STATE OF INCORPORATION Subsidiary of BPC Holding Berry Plastics Corporation Delaware SUBSIDIARIES OF BERRY PLASTICS CORPORATION Berry Iowa Corporation Delaware Berry Sterling Corporation Delaware Berry Tri-Plas Corporation Delaware AeroCon, Inc. Delaware PackerWare Corporation Kansas Berry Design Corporation Delaware Venture Packaging, Inc. Delaware Venture Packaging Midwest, Inc. Ohio Venture Packaging Southeast, Inc. South Carolina
EX-27 8 FINANCIAL DATA SCHEDULE
5 1000 YEAR DEC-27-1997 DEC-27-1997 2688 0 29423 1038 29458 63532 174291 66073 239444 42669 306335 0 16509 6 (125490) 239444 226953 0 180249 210754 226 325 32237 (14273) 138 (14411) 0 0 0 (14411) 0 0
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